UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 001-34504 ADDUS HOMECARE CORPORATION (Exact name of registrant as specified in its charter) Delaware 20-5340172 (State or other jurisdiction of ...

Part I [Business](index=5&type=section&id=Item%201.%20Business) Addus HomeCare provides in-home services across personal care, hospice, and home health, serving 66,000 consumers in 22 states - As of December 31, 2022, the company provided services in 22 states through approximately 202 offices, serving around **66,000 consumers**[12](index=12&type=chunk) Financial Highlights by Segment (2022 vs 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | | :--- | :--- | :--- | | **Net Service Revenue** | | | | Personal care | $706,507 | $685,854 | | Hospice | $201,772 | $152,253 | | Home health | $42,841 | $26,392 | | **Total Net Service Revenue** | **$951,120** | **$864,499** | | **Net Income** | $46,025 | $45,126 | | **Total Assets** | $937,994 | $947,585 | [Overview](index=5&type=section&id=Overview) Addus provides home care services across three segments, primarily to 'dual eligible' consumers, reducing healthcare costs - The company operates three segments: personal care, hospice, and home health, with consumers being predominantly 'dual eligible' for Medicare and Medicaid[12](index=12&type=chunk) - The company's model is designed to lower healthcare costs by providing care in the home, which can delay or eliminate the need for more expensive institutional care and facilitate early intervention[14](index=14&type=chunk) [Our Market and Opportunity](index=5&type=section&id=Our%20Market%20and%20Opportunity) The company operates in a growing, fragmented home and community-based services market, driven by aging population and consolidation - Demand for Home and Community-Based Services (HCBS) is expected to grow due to the aging U.S. population and the preference for home-based care as an alternative to institutional care[17](index=17&type=chunk) - The home-based services industry is highly fragmented, and the company expects ongoing consolidation driven by payor desire to narrow provider networks and increasing regulatory and operational complexity[18](index=18&type=chunk) [Our Growth Strategy](index=6&type=section&id=Our%20Growth%20Strategy) Addus's growth strategy focuses on quality care, organic expansion, managed care marketing, and strategic acquisitions - The company's growth strategy includes driving organic growth, marketing to managed care organizations, and growing through acquisitions[25](index=25&type=chunk)[26](index=26&type=chunk)[27](index=27&type=chunk) - In 2022, the company completed two acquisitions: JourneyCare Inc. and Apple Home Healthcare, LTD, which contributed **$48.7 million** in net service revenues for the year[27](index=27&type=chunk) [Our Services](index=7&type=section&id=Our%20Services) The company offers personal care (non-medical), hospice (palliative), and home health (skilled medical) services - Personal Care: Provides non-medical assistance with activities of daily living (e.g., bathing, grooming, meal preparation)[30](index=30&type=chunk) - Hospice: Provides palliative nursing care, social work, and spiritual counseling for terminally ill patients with a life expectancy of six months or less[31](index=31&type=chunk) - Home Health: Provides skilled medical services such as nursing, physical, occupational, and speech therapy, typically on a short-term basis[32](index=32&type=chunk) [Human Capital](index=11&type=section&id=Human%20Capital) As of December 31, 2022, Addus employed 33,182 people, with 51.4% represented by labor unions Employee Breakdown (as of Dec 31, 2022) | Category | Full-time | Part-time | Total | | :--- | :--- | :--- | :--- | | Caregivers and agency staff | 5,835 | 26,892 | 32,727 | | Corporate support centers | 449 | 6 | 455 | | **Total** | **6,284** | **26,898** | **33,182** | - Approximately **51.4%** of the company's total employees are represented by labor unions, primarily the Service Employees International Union (SEIU)[56](index=56&type=chunk) [Government Regulation](index=13&type=section&id=Government%20Regulation) Addus operates in a heavily regulated industry, subject to extensive federal and state healthcare laws and audits - The business is subject to extensive regulation, and failure to comply can result in penalties, loss of licenses, and exclusion from federal or state programs[67](index=67&type=chunk) - Key fraud and abuse laws applicable to the company include the federal Anti-Kickback Statute, the Stark Law, and the False Claims Act (FCA)[77](index=77&type=chunk)[78](index=78&type=chunk) - The company is subject to payment integrity audits from third-party contractors like Recovery Audit Contractors (RACs) and Unified Program Integrity Contractors (UPICs) to detect and correct improper payments[81](index=81&type=chunk) - Compliance with the Health Insurance Portability and Accountability Act (HIPAA) is required, which regulates the use, disclosure, and security of protected health information[84](index=84&type=chunk) [Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including macroeconomic pressures, government payor dependence, labor shortages, and cybersecurity - Macroeconomic conditions, including inflation and higher interest rates, have increased operating and financing costs, which may continue to have an unfavorable impact on financial results[91](index=91&type=chunk) - A significant portion of revenue comes from government programs (Medicare and Medicaid), making the company vulnerable to reimbursement reductions or changes in these programs[108](index=108&type=chunk) - The company has significant revenue concentration in a few states, particularly Illinois, which accounted for **20.7%** of revenue in 2022 from the Illinois Department on Aging[101](index=101&type=chunk) - The business is exposed to cybersecurity risks, and a security breach could lead to loss of confidential data, remediation expenses, litigation, and reputational damage[126](index=126&type=chunk) - The company faces risks related to attracting and retaining qualified personnel, especially caregivers, due to a tight labor market, which could increase labor costs and hinder service delivery[127](index=127&type=chunk) [Properties](index=32&type=section&id=Item%202.%20Properties) The company leases all its administrative offices and two main support centers in Illinois and Texas, with portions subleased - The company leases all its properties, including support centers in Frisco, TX (**106,000 sq. ft.**) and Downers Grove, IL (**59,000 sq. ft.**)[134](index=134&type=chunk) [Legal Proceedings](index=32&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings, including a $6.5 million Medicare repayment request with indemnification rights - The company is involved in a legal proceeding regarding a **$6.5 million** Request for Repayment from a Medicare contractor related to its Ambercare subsidiary. The company is appealing and has a contractual right to full indemnification from the seller of Ambercare[428](index=428&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=33&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Addus common stock trades on Nasdaq, and the company retains earnings for growth, with no plans for future dividends - Common stock is listed on The Nasdaq Global Market under the symbol 'ADUS'[138](index=138&type=chunk) - The company has never paid dividends and does not plan to, retaining earnings for growth. The credit facility also restricts dividend payments[140](index=140&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net service revenues grew 10.0% to $951.1 million in 2022, driven by acquisitions and organic growth, improving gross profit and liquidity Consolidated Financial Summary (2022 vs 2021) | Metric | 2022 (in thousands) | 2021 (in thousands) | % Change | | :--- | :--- | :--- | :--- | | Net service revenues | $951,120 | $864,499 | 10.0% | | Gross profit | $299,739 | $269,848 | 11.1% | | Operating income | $68,737 | $65,936 | 4.2% | | Net income | $46,025 | $45,126 | 2.0% | - Managed care revenues accounted for **36.0%** of total revenue in 2022, down from 37.2% in 2021[143](index=143&type=chunk) - Adjusted EBITDA increased to **$101.5 million** in 2022 from $97.7 million in 2021[144](index=144&type=chunk)[211](index=211&type=chunk) [Results of Operations](index=40&type=section&id=Results%20of%20Operations) Net service revenues increased 10.0% in 2022 to $951.1 million, driven by hospice and home health growth, improving gross profit margin - Net service revenue increased by **10.0%** in 2022, driven by growth across all three segments: personal care (**+3.0%**), hospice (**+32.5%**), and home health (**+62.3%**)[180](index=180&type=chunk)[188](index=188&type=chunk)[195](index=195&type=chunk) - Gross profit as a percentage of revenue increased to **31.5%** in 2022 from 31.2% in 2021, mainly due to the full-year effect of higher-margin hospice acquisitions[181](index=181&type=chunk) - General and administrative expenses increased by **$27.5 million**, primarily due to a **$18.0 million** increase in administrative employee costs from acquisitions[182](index=182&type=chunk) [Liquidity and Capital Resources](index=49&type=section&id=Liquidity%20and%20Capital%20Resources) The company's liquidity is strong, with $80.0 million cash, $237.2 million credit facility availability, and improved DSO Cash Flow Summary (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $105,110 | $39,488 | | Net cash used in investing activities | ($106,590) | ($42,015) | | Net cash (used in) provided by financing activities | ($87,454) | $26,344 | - At Dec 31, 2022, the company had **$80.0 million** in cash and **$237.2 million** available for borrowing under its credit facility[212](index=212&type=chunk)[213](index=213&type=chunk) - Days Sales Outstanding (DSO) improved to **45 days** at the end of 2022, compared to 54 days at the end of 2021[233](index=233&type=chunk) [Critical Accounting Policies and Estimates](index=52&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Key accounting policies involve significant estimates for revenue recognition and annual impairment testing of goodwill and intangible assets - Revenue recognition requires estimating implicit price concessions based on historical collection experience, which involves complex and subjective judgments[237](index=237&type=chunk)[238](index=238&type=chunk) - Goodwill and intangible assets are tested for impairment annually as of October 1. The quantitative test uses discounted cash flow and market multiple approaches, which rely on estimates of future cash flows and profitability[241](index=241&type=chunk)[242](index=242&type=chunk) - For the fiscal year 2022 impairment tests, the fair value of the reporting units exceeded their carrying values by at least **100%** for personal care, **75%** for home health, and **67%** for hospice[243](index=243&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=56&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company's primary market risk is interest rate fluctuations on variable-rate debt, with a 1% increase impacting 2022 net income by $1.6 million - The company's primary market risk is interest rate risk on its **$134.9 million** of variable-rate debt[253](index=253&type=chunk) - A **100 basis point** increase in interest rates would have reduced 2022 net income by an estimated **$1.6 million**[253](index=253&type=chunk) [Financial Statements and Supplementary Data](index=56&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements and the independent auditor's report from PricewaterhouseCoopers LLP [Report of Independent Registered Public Accounting Firm](index=69&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) PricewaterhouseCoopers LLP issued an unqualified opinion on financial statements and internal controls, identifying accounts receivable valuation as a critical audit matter - The auditor, PricewaterhouseCoopers LLP, issued an unqualified opinion on both the financial statements and the effectiveness of internal control over financial reporting[289](index=289&type=chunk) - The valuation of accounts receivable, net of allowances for implicit price concessions, was identified as a Critical Audit Matter[297](index=297&type=chunk)[298](index=298&type=chunk) [Consolidated Financial Statements](index=71&type=section&id=Consolidated%20Financial%20Statements) The consolidated financial statements show total assets of $938.0 million, total liabilities of $304.5 million, and net income of $46.0 million for 2022 Consolidated Balance Sheet Highlights (As of Dec 31, 2022) | Account | Amount (in thousands) | | :--- | :--- | | Total current assets | $222,807 | | Goodwill | $582,837 | | **Total assets** | **$937,994** | | Total current liabilities | $131,146 | | Long-term debt, net | $131,772 | | **Total liabilities** | **$304,454** | | **Total stockholders' equity** | **$633,540** | Consolidated Income Statement Highlights (Year Ended Dec 31, 2022) | Account | Amount (in thousands) | | :--- | :--- | | Net service revenues | $951,120 | | Gross profit | $299,739 | | Operating income | $68,737 | | **Net income** | **$46,025** | | **Diluted EPS** | **$2.84** | [Controls and Procedures](index=56&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022 - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[256](index=256&type=chunk) - Management concluded that internal control over financial reporting was effective as of December 31, 2022, based on the COSO framework. This assessment excluded the 2022 acquisitions of JourneyCare and Apple Home[257](index=257&type=chunk)[259](index=259&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=58&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the 2023 Proxy Statement - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2023 Proxy Statement[264](index=264&type=chunk) [Executive Compensation](index=58&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's 2023 Proxy Statement - Information regarding executive compensation is incorporated by reference from the 2023 Proxy Statement[266](index=266&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=58&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership is incorporated by reference from the company's 2023 Proxy Statement - Information regarding security ownership is incorporated by reference from the 2023 Proxy Statement[268](index=268&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=58&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related transactions and director independence is incorporated by reference from the company's 2023 Proxy Statement - Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the 2023 Proxy Statement[269](index=269&type=chunk) [Principal Accounting Fees and Services](index=58&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the company's 2023 Proxy Statement - Information regarding principal accounting fees and services is incorporated by reference from the 2023 Proxy Statement[270](index=270&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=59&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements and all exhibits filed with the Form 10-K, including certifications - This section contains the index to financial statements and a list of all exhibits filed with the report[271](index=271&type=chunk)[272](index=272&type=chunk) [Form 10-K Summary](index=66&type=section&id=Item%2016.%20Form%2010-K%20Summary) No Form 10-K summary is provided in this report - No Form 10-K summary is provided[283](index=283&type=chunk)

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides unaudited financial statements and management's analysis of Addus HomeCare Corporation's financial performance and condition [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Addus HomeCare Corporation's unaudited condensed consolidated financial statements, including balance sheets, income, equity, and cash flow statements, along with detailed notes on operations and accounting policies [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides the company's condensed consolidated balance sheets as of March 31, 2021, and December 31, 2020 | Metric | March 31, 2021 (Thousands) | December 31, 2020 (Thousands) | | :----------------------------------- | :------------------------- | :---------------------------- | | **Assets** | | | | Total current assets | $275,140 | $287,697 | | Total assets | $877,577 | $892,582 | | **Liabilities & Equity** | | | | Total current liabilities | $118,088 | $143,901 | | Total long-term liabilities | $229,579 | $230,005 | | Total liabilities | $347,667 | $373,906 | | Total stockholders' equity | $529,910 | $518,676 | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) This section presents the company's condensed consolidated statements of income for the three months ended March 31, 2021, and 2020 | Metric | Three Months Ended March 31, 2021 (Thousands) | Three Months Ended March 31, 2020 (Thousands) | | :----------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net service revenues | $205,302 | $190,216 | | Cost of service revenues | $144,105 | $134,381 | | Gross profit | $61,197 | $55,835 | | General and administrative expenses | $45,426 | $42,287 | | Operating income | $12,170 | $10,661 | | Net income | $8,894 | $8,658 | | Basic income per share | $0.57 | $0.56 | | Diluted income per share | $0.55 | $0.54 | [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section details changes in stockholders' equity for Addus HomeCare Corporation from January 1, 2021, to March 31, 2021 | Metric | Balance at Jan 1, 2021 (Thousands) | Balance at Mar 31, 2021 (Thousands) | | :----------------------------------- | :--------------------------------- | :-------------------------------- | | Common Shares | 15,826 | 15,903 | | Stock Amount | $16 | $16 | | Additional Paid-in Capital | $369,495 | $371,835 | | Retained Earnings | $149,165 | $158,059 | | Total Stockholders' Equity | $518,676 | $529,910 | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the company's cash flow activities for the three months ended March 31, 2021, and 2020 | Metric | Three Months Ended March 31, 2021 (Thousands) | Three Months Ended March 31, 2020 (Thousands) | | :----------------------------------- | :------------------------------------------ | :------------------------------------------ | | Net cash (used in) provided by operating activities | $(18,366) | $20,442 | | Net cash used in investing activities | $(1,021) | $(2,834) | | Net cash (used in) provided by financing activities | $(144) | $1,141 | | Net change in cash | $(19,531) | $18,749 | | Cash, at end of period | $125,547 | $130,463 | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes to the unaudited financial statements, covering operations, accounting policies, leases, acquisitions, goodwill, debt, taxes, and segment information [1. Nature of Operations, Consolidation, and Presentation of Financial Statements](index=7&type=section&id=1.%20Nature%20of%20Operations,%20Consolidation,%20and%20Presentation%20of%20Financial%20Statements) This section describes Addus HomeCare Corporation's business segments, including personal care, hospice, and home health services, and its diverse payor base - Addus HomeCare Corporation operates as a multi-state provider of three distinct but related business segments: personal care (non-medical assistance), hospice (physical, emotional, and spiritual care for terminally ill), and home health (medical services during illness or post-hospitalization)[21](index=21&type=chunk) - The company's payors include federal, state, and local governmental agencies, managed care organizations, commercial insurers, and private individuals[21](index=21&type=chunk) [2. Summary of Significant Accounting Policies](index=7&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines the company's critical accounting estimates and the adoption of new accounting standards - The company's critical accounting estimates include revenue recognition, allowance for doubtful accounts, intangible assets acquired in business combinations, and the quantitative impairment assessment of goodwill and indefinite-lived intangible assets[25](index=25&type=chunk) - ASU 2019-12 (Income Taxes) was adopted as of January 1, 2021, with no impact on the company's results of operations or liquidity. The company is evaluating ASU 2020-04 (Reference Rate Reform) for its potential effect[28](index=28&type=chunk)[29](index=29&type=chunk) [3. Leases](index=8&type=section&id=3.%20Leases) This section details the company's operating lease assets and liabilities, including weighted average lease terms and discount rates | Lease Metric | March 31, 2021 (Thousands) | December 31, 2020 (Thousands) | | :----------------------------------- | :------------------------- | :---------------------------- | | Operating lease assets, net | $38,325 | $37,991 | | Short-term operating lease liabilities | $9,498 | $9,283 | | Long-term operating lease liabilities | $35,623 | $35,516 | | Total operating lease liabilities | $45,121 | $44,799 | | Total lease cost, net (3 months ended) | $2,807 | $2,310 | - As of March 31, 2021, the weighted average remaining lease term for operating leases was **6.83 years**, with a weighted average discount rate of **4.04%**[35](index=35&type=chunk) [4. Acquisitions](index=9&type=section&id=4.%20Acquisitions) This section summarizes the company's recent acquisitions in late 2020, detailing their financial impact and strategic expansion - In late 2020, the company completed several acquisitions: **Queen City Hospice** ($194.8 million, expanded hospice services in Ohio), **County Homemakers** ($15.8 million, expanded personal care in Pennsylvania), **A Plus Health Care** ($14.5 million, expanded personal care in Montana), and **SunLife Home Care** ($1.7 million, expanded personal care in Arizona)[40](index=40&type=chunk)[43](index=43&type=chunk)[45](index=45&type=chunk)[47](index=47&type=chunk) - Goodwill and identifiable intangible assets acquired from these transactions are deductible for tax purposes. Integration costs were expensed as incurred and included in general and administrative expenses[42](index=42&type=chunk)[44](index=44&type=chunk)[46](index=46&type=chunk) [5. Goodwill and Intangible Assets](index=12&type=section&id=5.%20Goodwill%20and%20Intangible%20Assets) This section provides details on the company's goodwill and identifiable intangible assets, including their amortization and useful lives | Metric | March 31, 2021 (Thousands) | December 31, 2020 (Thousands) | | :----------------------------------- | :------------------------- | :---------------------------- | | Goodwill | $469,036 | $469,072 | | Intangibles, net | $69,395 | $71,549 | - Identifiable intangible assets consist of customer and referral relationships, trade names and trademarks, non-competition agreements, and state licenses, with estimated useful lives ranging from **one to twenty-five years**[50](index=50&type=chunk) - Amortization expense for identifiable intangible assets was **$2.2 million** for the three months ended March 31, 2021, compared to **$1.8 million** for the same period in 2020. The weighted average remaining useful life is **9.6 years**[52](index=52&type=chunk) [6. Details of Certain Balance Sheet Accounts](index=12&type=section&id=6.%20Details%20of%20Certain%20Balance%20Sheet%20Accounts) This section provides specific details on selected balance sheet accounts, including prepaid expenses, accrued expenses, and government stimulus advances | Account | March 31, 2021 (Thousands) | December 31, 2020 (Thousands) | | :----------------------------------- | :------------------------- | :---------------------------- | | Prepaid expenses and other current assets | $10,787 | $9,969 | | Accrued expenses | $38,654 | $37,564 | | Government stimulus advances | $20,368 | $32,087 | - Government stimulus advances decreased significantly due to the repayment of **$10.8 million** from the Medicare Accelerated and Advance Payment Program by Queen City Hospice in March 2021[58](index=58&type=chunk)[60](index=60&type=chunk) - The company utilized **$0.9 million** of Provider Relief Fund grants for healthcare-related expenses attributable to COVID-19 in Q1 2021 and expects to utilize additional funds through June 30, 2021[59](index=59&type=chunk) [7. Long-Term Debt](index=13&type=section&id=7.%20Long-Term%20Debt) This section outlines the company's long-term debt, including revolving and term loans under its credit facility and compliance with covenants | Debt Type | March 31, 2021 (Thousands) | December 31, 2020 (Thousands) | | :----------------------------------- | :------------------------- | :---------------------------- | | Revolving loan under credit facility | $178,458 | $178,458 | | Term loan under credit facility | $17,885 | $18,130 | | Total long-term debt (net of current portion) | $193,839 | $193,901 | - The company's credit facility totals **$300.0 million** in revolving loans and a **$19.6 million** delayed draw term loan, with a maturity date of **May 8, 2023**[64](index=64&type=chunk)[67](index=67&type=chunk) - As of March 31, 2021, the company had **$112.8 million** available for borrowing under its credit facility and was in compliance with all financial covenants[66](index=66&type=chunk)[69](index=69&type=chunk) [8. Income Taxes](index=16&type=section&id=8.%20Income%20Taxes) This section details the company's effective income tax rate and the factors contributing to its deviation from the federal statutory rate | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :----------------------------------- | :-------------------------------- | :-------------------------------- | | Effective income tax rate | 19.0% | 14.2% | - The difference between the federal statutory rate (**21%**) and the effective income tax rate is primarily due to excess tax benefits from equity share vesting and federal employment tax credits, offset by state taxes and non-deductible compensation[70](index=70&type=chunk) [9. Commitments and Contingencies](index=16&type=section&id=9.%20Commitments%20and%20Contingencies) This section addresses the company's legal and administrative proceedings and the impact of government actions to mitigate COVID-19's effects - Management believes the outcome of pending legal and/or administrative proceedings will not have a material effect on the company's financial position and results of operations[74](index=74&type=chunk) [Government Actions to Mitigate COVID-19's Impact](index=16&type=section&id=Government%20Actions%20to%20Mitigate%20COVID-19's%20Impact) This section details the impact of federal legislation and temporary measures on healthcare providers, including funding and Medicare sequester relief - The CARES Act, PPPHCE Act, CAA, and ARPA provided over **$178 billion** in funding to healthcare providers through the Provider Relief Fund and temporary changes to Medicare/Medicaid payment rules[71](index=71&type=chunk) - Medicare sequester relief increased home health net service revenues by **$0.1 million** and hospice net service revenues by **$0.7 million** for the three months ended March 31, 2021. However, the ARPA may trigger additional Medicare spending reductions (up to **4%**) in fiscal year 2022[72](index=72&type=chunk) [10. Segment Information](index=16&type=section&id=10.%20Segment%20Information) This section provides a breakdown of the company's operating income across its personal care, hospice, and home health segments - The company operates as a multi-state provider of three distinct but related business segments: personal care, hospice, and home health services[75](index=75&type=chunk)[76](index=76&type=chunk)[78](index=78&type=chunk) | Segment Operating Income (Thousands) | 3 Months Ended Mar 31, 2021 | 3 Months Ended Mar 31, 2020 | | :----------------------------------- | :-------------------------- | :-------------------------- | | Personal Care | $26,746 | $26,035 | | Hospice | $9,035 | $6,437 | | Home Health | $705 | $281 | | Total Segment Operating Income | $36,486 | $32,753 | [11. Significant Payors](index=18&type=section&id=11.%20Significant%20Payors) This section details the company's revenue distribution by payor type and significant states for its personal care and hospice segments | Personal Care Revenue by Payor | 3 Months Ended Mar 31, 2021 (%) | 3 Months Ended Mar 31, 2020 (%) | | :----------------------------------- | :------------------------------ | :------------------------------ | | State, local and other governmental programs | 49.0% | 49.4% | | Managed care organizations | 45.8% | 44.9% | | Private pay | 3.0% | 3.3% | | Commercial insurance | 1.4% | 1.6% | | Other | 0.8% | 0.8% | | Hospice Revenue by Payor | 3 Months Ended Mar 31, 2021 (%) | 3 Months Ended Mar 31, 2020 (%) | | :----------------------------------- | :------------------------------ | :------------------------------ | | Medicare | 94.2% | 92.1% | | Managed care organizations | 4.1% | 5.5% | | Other | 1.7% | 2.4% | - Illinois is a significant revenue source, representing **35.8%** of total net service revenues for the three months ended March 31, 2021. The Illinois Department on Aging, the largest payor program for the company's Illinois personal care operations, accounted for **20.4%** of net service revenues in Q1 2021[89](index=89&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's analysis of the company's financial condition, operational results, COVID-19 impact, acquisitions, revenue trends, and liquidity [Overview](index=21&type=section&id=Overview) This section provides an overview of Addus HomeCare's business, including its service segments, geographic reach, and client base - Addus HomeCare is a home care services provider operating in three segments: personal care, hospice, and home health, primarily serving "dual eligible" consumers (Medicare and Medicaid benefits)[92](index=92&type=chunk) | Metric | 3 Months Ended Mar 31, 2021 (Thousands) | 3 Months Ended Mar 31, 2020 (Thousands) | | :----------------------------------- | :-------------------------------------- | :-------------------------------------- | | Net service revenues | $205,302 | $190,216 | | Net income | $8,894 | $8,658 | - As of March 31, 2021, the company provided services in **22 states** through **208 offices**, serving approximately **50,000 discrete individuals**, an increase from 49,000 in the prior year[94](index=94&type=chunk) [COVID-19 Pandemic Update](index=22&type=section&id=COVID-19%20Pandemic%20Update) This section details the financial impact of COVID-19 on the company, including related expenses, deferred reimbursements, and challenges in caregiver attraction - COVID-19-related expenses for the three months ended March 31, 2021, were approximately **$2.1 million**, offset by **$1.8 million** in temporary rate increases from payors and **$0.9 million** from the Provider Relief Fund[96](index=96&type=chunk) - The company deferred the recognition of **$5.1 million** in payments received from payors for COVID-19 reimbursement, which will be recognized as specific pandemic-related expenses are incurred or returned if not used[96](index=96&type=chunk) - Enhanced unemployment benefits have suppressed the opportunity to attract new caregivers, and a return to low unemployment could hinder the company's ability to attract and retain sufficient caregivers[97](index=97&type=chunk) [Acquisitions](index=22&type=section&id=Acquisitions) This section summarizes the company's four acquisitions completed in 2020, detailing their funding and strategic expansion into new markets - The company completed four acquisitions in 2020: **A Plus Health Care** (July 1, **$14.5 million**, Montana personal care), **County Homemakers** (Nov 1, **$15.8 million**, Pennsylvania personal care), **Queen City Hospice** (Dec 4, **$194.8 million**, Ohio hospice), and **SunLife Home Care** (Dec 1, **$1.7 million**, Arizona personal care)[100](index=100&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk) - These acquisitions were funded through a combination of the revolving credit facility and available cash, expanding the company's presence in current and new markets[100](index=100&type=chunk)[103](index=103&type=chunk) [Revenue by Payor and Significant States](index=24&type=section&id=Revenue%20by%20Payor%20and%20Significant%20States) This section analyzes the company's revenue trends by payor type and significant states, highlighting the shift towards managed care organizations - The company is experiencing a transition of business from government payors to managed care organizations, aligning with its emphasis on coordinated care[104](index=104&type=chunk) | Personal Care Revenue by State | 3 Months Ended Mar 31, 2021 (%) | 3 Months Ended Mar 31, 2020 (%) | | :----------------------------------- | :------------------------------ | :------------------------------ | | Illinois | 44.5% | 44.5% | | New York | 16.7% | 19.8% | | New Mexico | 14.3% | 12.9% | | Hospice Revenue by State | 3 Months Ended Mar 31, 2021 (%) | 3 Months Ended Mar 31, 2020 (%) | | :----------------------------------- | :------------------------------ | :------------------------------ | | Ohio | 39.1% | 0.0% | | New Mexico | 25.6% | 43.7% | - The Illinois Department on Aging accounted for **20.4%** of total net service revenues for the three months ended March 31, 2021, down from 23.2% in the prior year period[109](index=109&type=chunk) [Impact of Changes in Medicare and Medicaid Reimbursement](index=25&type=section&id=Impact%20of%20Changes%20in%20Medicare%20and%20Medicaid%20Reimbursement) This section discusses the impact of recent changes in Medicare and Medicaid reimbursement policies on the company's home health and hospice segments - Illinois in-home care rates increased by **7.1%** to **$23.40**, effective April 1, 2021, contingent upon federal CMS approval. A proposed statewide rate increase to **$24.96** is included in the fiscal year 2022 budget, effective January 1, 2022[110](index=110&type=chunk)[111](index=111&type=chunk) - The company was not initially selected as a Lead Fiscal Intermediary in New York's Consumer Directed Personal Assistance Program (CDPAP) RFO process, potentially impacting an estimated **$52 million** in revenue and **$4 million** in operating income for the year ended December 31, 2021. The company is exploring appeals and other arrangements[116](index=116&type=chunk) [Home Health](index=25&type=section&id=Home%20Health) This section details changes in Medicare Home Health Prospective Payment System rates and the phasing out of Request for Anticipated Payment (RAP) payments - Effective calendar year 2021, Medicare Home Health Prospective Payment System (HHPPS) rates increased by **2.0%**, reflecting a 2.3% market basket update reduced by a 0.3% multifactor productivity adjustment[113](index=113&type=chunk) - CMS phased out Request for Anticipated Payment (RAP) payments in 2021 and will replace them with a "Notice of Admission" in 2022 to address program integrity risks[114](index=114&type=chunk) [Hospice](index=26&type=section&id=Hospice) This section outlines the increase in Medicare hospice payment rates and the updated aggregate cap for federal fiscal year 2021 - Effective October 1, 2020, CMS increased hospice payment rates by **2.4%** for federal fiscal year 2021[115](index=115&type=chunk) - The aggregate cap for Medicare reimbursement that a hospice may receive was updated to **$30,683.93** for federal fiscal year 2021[115](index=115&type=chunk) [New York CDPAP](index=26&type=section&id=New%20York%20CDPAP) This section discusses the company's non-selection as a Lead Fiscal Intermediary for New York's CDPAP and potential revenue impacts - The company was not among the initial selected entities for New York's CDPAP Lead Fiscal Intermediary contracts, potentially impacting an estimated **$52 million** in revenue and **$4 million** in operating income for FY2021[116](index=116&type=chunk) - The New York Legislature's FY2022 budget included a provision to add one or two entities per county to those awarded Lead Fiscal Intermediary, based on original RFO scoring. The company has filed a protest against the initial award[116](index=116&type=chunk) [Components of our Statements of Income](index=26&type=section&id=Components%20of%20our%20Statements%20of%20Income) This section defines the key components of the company's income statements, including net service revenues, cost of service revenues, and general and administrative expenses - Net service revenues are generated from personal care (hourly), hospice (daily), and home health (episodic) services, with payments from government agencies, managed care organizations, commercial insurers, and private pay consumers[117](index=117&type=chunk)[118](index=118&type=chunk) - Cost of service revenues includes direct care wages, payroll taxes, benefit-related costs, workers' compensation, general liability coverage, and employee travel reimbursements[119](index=119&type=chunk) - General and administrative expenses cover local agency and administrative office costs, including supervisory personnel, community care supervisors, office administrative costs, and corporate support functions[120](index=120&type=chunk) - Depreciation and amortization expenses relate to furniture, equipment, software, and finite-lived intangible assets such as customer and referral relationships, trade names, trademarks, and non-competition agreements[121](index=121&type=chunk)[123](index=123&type=chunk) - Interest expense primarily consists of interest and unused credit line fees on the credit facility. Income tax expense is influenced by state and local taxes, excess tax benefits, and federal employment tax credits[124](index=124&type=chunk)[125](index=125&type=chunk) [Results of Operations — Consolidated](index=28&type=section&id=Results%20of%20Operations%20%E2%80%94%20Consolidated) This section provides a consolidated analysis of the company's financial performance, highlighting changes in revenues, gross profit, operating income, and net income | Metric | 3 Months Ended Mar 31, 2021 (Thousands) | 3 Months Ended Mar 31, 2020 (Thousands) | Change (Thousands) | % Change | | :----------------------------------- | :-------------------------------------- | :-------------------------------------- | :----------------- | :------- | | Net service revenues | $205,302 | $190,216 | $15,086 | 7.9% | | Cost of service revenues | $144,105 | $134,381 | $9,724 | 7.2% | | Gross profit | $61,197 | $55,835 | $5,362 | 9.6% | | General and administrative expenses | $45,426 | $42,287 | $3,139 | 7.4% | | Operating income | $12,170 | $10,661 | $1,509 | 14.2% | | Net income | $8,894 | $8,658 | $236 | 2.7% | - Net service revenues increased by **7.9%** due to a **3.7%** increase in personal care revenues per billable hour and a **$10.9 million** increase in hospice revenue, primarily from the acquisition of Queen City Hospice[127](index=127&type=chunk) - Gross profit margin increased to **29.8%** (from 29.4%) mainly attributed to the full-quarter effect of the relatively higher-margin hospice segment businesses acquired in 2020[128](index=128&type=chunk) - General and administrative expenses increased by **$3.1 million**, primarily due to acquisitions, but decreased as a percentage of net service revenues to **22.1%** (from 22.2%)[128](index=128&type=chunk) - Interest expense increased by **33.9%** to **$1.2 million** due to higher outstanding borrowings. The effective income tax rate rose to **19.0%** (from 14.2%) due to a lower excess tax benefit[130](index=130&type=chunk) [Results of Operations – Segments](index=29&type=section&id=Results%20of%20Operations%20%E2%80%93%20Segments) This section provides a detailed breakdown of the operating results and business metrics for each of the company's three segments: Personal Care, Hospice, and Home Health, highlighting key performance drivers and changes [Personal Care Segment](index=29&type=section&id=Personal%20Care%20Segment) This section analyzes the financial performance of the Personal Care segment, focusing on net service revenues, billable hours, and gross profit margin | Metric | 3 Months Ended Mar 31, 2021 (Thousands) | 3 Months Ended Mar 31, 2020 (Thousands) | | :----------------------------------- | :-------------------------------------- | :-------------------------------------- | | Net service revenues | $164,868 | $160,665 | | Gross profit | $42,029 | $41,638 | | Segment operating income | $26,746 | $26,035 | | Revenues per billable hour | $21.75 | $20.97 | | Billable hours | 7,567 | 7,674 | - Net service revenues increased by **2.6%**, primarily due to a **3.7%** increase in revenues per billable hour (mainly from rate increases), partially offset by a **1.4%** decrease in billable hours[135](index=135&type=chunk) - Gross profit margin decreased to **25.5%** (from 25.9%) due to an increase in direct payroll as a percentage of net service revenues. General and administrative expenses decreased by **$0.3 million** due to acquisition synergies[135](index=135&type=chunk)[136](index=136&type=chunk) [Hospice Segment](index=31&type=section&id=Hospice%20Segment) This section details the financial performance of the Hospice segment, including net service revenues, average daily census, and gross profit margin | Metric | 3 Months Ended Mar 31, 2021 (Thousands) | 3 Months Ended Mar 31, 2020 (Thousands) | | :----------------------------------- | :-------------------------------------- | :-------------------------------------- | | Net service revenues | $36,094 | $25,212 | | Gross profit | $17,498 | $12,894 | | Segment operating income | $9,035 | $6,437 | | Average daily census | 2,400 | 1,863 | | Revenue per patient day | $167.09 | $150.49 | - Net service revenues increased by **43.2%**, primarily driven by the acquisition of Queen City Hospice, which led to an increase in average daily census and revenue per patient day. This was partially offset by a decrease in census in same stores due to COVID-19 public health restrictions[141](index=141&type=chunk) - Gross profit margin decreased to **48.5%** (from 51.1%) mainly due to an increase in direct employee wages, taxes, and benefit costs, partially offset by a decrease in direct service supply costs and other direct expenses related to acquisition synergies[142](index=142&type=chunk) - General and administrative expenses increased due to acquisitions, but decreased as a percentage of net service revenues to **23.5%** (from 25.6%)[143](index=143&type=chunk) [Home Health Segment](index=32&type=section&id=Home%20Health%20Segment) This section examines the financial performance of the Home Health segment, focusing on net service revenues, gross profit margin, and visit trends | Metric | 3 Months Ended Mar 31, 2021 (Thousands) | 3 Months Ended Mar 31, 2020 (Thousands) | | :----------------------------------- | :-------------------------------------- | :-------------------------------------- | | Net service revenues | $4,340 | $4,339 | | Gross profit | $1,670 | $1,303 | | Segment operating income | $705 | $281 | | New admissions | 1,168 | 1,022 | | Visits | 27,665 | 33,710 | - Net service revenues remained flat. Gross profit margin significantly increased to **38.5%** (from 30.0%) due to a decrease in direct employee wages, taxes, and benefit costs as a percentage of net service revenues, and a decrease in visits in connection with PDGM case mix[148](index=148&type=chunk) - General and administrative expenses decreased as a percentage of net service revenues to **22.3%** (from 23.6%)[148](index=148&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) This section details the company's liquidity position, including cash on hand, operating cash flows, and credit facility availability. It also discusses the ongoing impact of the COVID-19 pandemic on state budgets and the company's financial relief measures, changes in cash flows, and accounts receivable management [Overview](index=34&type=section&id=Overview_Liquidity) This section provides an overview of the company's liquidity sources, including cash on hand, credit facility availability, and accounts receivable status - The company's primary sources of liquidity are cash on hand (**$125.5 million** at March 31, 2021) and cash from operations[149](index=149&type=chunk) - As of March 31, 2021, the company had **$112.8 million** available for borrowing under its revolving credit facility and was in compliance with all financial covenants[150](index=150&type=chunk)[151](index=151&type=chunk) - The open receivable balance from the Illinois Department on Aging increased by **$11.9 million** to **$33.1 million** as of March 31, 2021, due to an increase in days sales outstanding (DSO)[149](index=149&type=chunk) [COVID-19](index=34&type=section&id=COVID-19_Liquidity) This section discusses the ongoing risks of the COVID-19 pandemic on state budgets and the temporary measures assisting healthcare providers - The COVID-19 pandemic continues to pose risks to states' budgets for fiscal year 2021 and potentially beyond, impacting sales tax collections and income tax withholdings[152](index=152&type=chunk) - New York's fiscal plan authorizes up to **$11 billion** in short-term bonds and implemented Medicaid rate reductions (**1%** effective Jan 1, 2020, and an additional **0.5%** effective April 1, 2021)[152](index=152&type=chunk) - The federal public health emergency declaration is likely to extend through 2021, with temporary measures assisting healthcare providers, including relief from Medicare conditions and relaxation of licensure requirements[155](index=155&type=chunk) [Provider Relief Fund](index=36&type=section&id=Provider%20Relief%20Fund_Liquidity) This section details the company's receipt and utilization of grants from the Provider Relief Fund for COVID-19 related expenses - The company received **$13.7 million** in grants from the Provider Relief Fund in November 2020, utilizing **$0.9 million** for COVID-19 related expenses in Q1 2021[156](index=156&type=chunk) - Queen City Hospice intends to administer **$1.9 million** in retention payments to caregivers in Q2 2021 using these funds[156](index=156&type=chunk) [Medicare Accelerated and Advance Payment Program – Queen City Hospice](index=36&type=section&id=Medicare%20Accelerated%20and%20Advance%20Payment%20Program%20%E2%80%93%20Queen%20City%20Hospice) This section outlines Queen City Hospice's receipt and full repayment of advance payments under the Medicare Accelerated and Advance Payment Program - Queen City Hospice received **$10.8 million** in advance payments in April 2020 and fully repaid these funds in March 2021 following the acquisition[157](index=157&type=chunk) [Payroll tax deferral](index=36&type=section&id=Payroll%20tax%20deferral) This section details the company's deferral of employer Social Security payroll taxes under the CARES Act and its repayment schedule - The company deferred approximately **$7.1 million** in employer Social Security payroll taxes in 2020 under the CARES Act and expects to repay this amount in 2021[158](index=158&type=chunk) [Medicare sequester](index=36&type=section&id=Medicare%20sequester) This section discusses the impact of the temporary lifting of the Medicare sequester and potential future spending reductions under the ARPA - Temporary lifting of the Medicare sequester increased home health net service revenues by **$0.1 million** and hospice net service revenues by **$0.7 million** for the three months ended March 31, 2021[159](index=159&type=chunk) - The American Rescue Plan Act of 2021 (ARPA) may trigger additional Medicare spending reductions of up to **4%** in fiscal year 2022 due to the Pay-As-You-Go Act of 2010 (PAYGO Act)[159](index=159&type=chunk) [Amended and Restated Senior Secured Credit Facility](index=36&type=section&id=Amended%20and%20Restated%20Senior%20Secured%20Credit%20Facility_Liquidity) This section describes the company's credit facility, including loan amounts, maturity date, interest rates, collateral, and financial covenants - The credit facility totals **$300.0 million** in revolving loans and a **$19.6 million** delayed draw term loan, with a maturity date of **May 8, 2023**[160](index=160&type=chunk)[167](index=167&type=chunk) - Interest rates are variable, based on an applicable margin plus a base rate or LIBOR. The facility is collateralized by the company's assets and contains customary financial and negative covenants, including a Total Net Leverage Ratio not exceeding **3.75:1.00**[162](index=162&type=chunk)[163](index=163&type=chunk)[164](index=164&type=chunk) - As of March 31, 2021, the company had **$178.5 million** in revolving loans and **$17.9 million** in term loans outstanding, with **$112.8 million** available for borrowing[169](index=169&type=chunk) [Cash Flows](index=38&type=section&id=Cash%20Flows) This section analyzes the company's cash flow activities from operations, investing, and financing, highlighting key drivers of changes | Cash Flow Activity | 3 Months Ended Mar 31, 2021 (Thousands) | 3 Months Ended Mar 31, 2020 (Thousands) | | :----------------------------------- | :-------------------------------------- | :-------------------------------------- | | Net cash (used in) provided by operating activities | $(18,366) | $20,442 | | Net cash used in investing activities | $(1,021) | $(2,834) | | Net cash (used in) provided by financing activities | $(144) | $1,141 | - The decrease in operating cash flow was due to payroll timing, the repayment of **$10.8 million** in government stimulus funds, and an **$11.9 million** increase in accounts receivable from the Illinois Department of Aging[165](index=165&type=chunk) - Net cash used in investing activities decreased due to lower property and equipment purchases. Net cash used in financing activities was primarily from cash received from the exercise of stock options[166](index=166&type=chunk)[169](index=169&type=chunk) [Outstanding Accounts Receivable](index=40&type=section&id=Outstanding%20Accounts%20Receivable) This section details the company's gross accounts receivable and the Days Sales Outstanding (DSO) for the Illinois Department on Aging | Metric | March 31, 2021 (Thousands) | December 31, 2020 (Thousands) | | :----------------------------------- | :------------------------- | :---------------------------- | | Gross accounts receivable | $139,500 | $133,400 | | Accounts receivable (Illinois Dept. on Aging) | $33,100 | $21,200 | | Metric | March 31, 2021 | December 31, 2020 | | :----------------------------------- | :------------- | :---------------- | | Days Sales Outstanding (DSO) | 61 days | 61 days | | DSO (Illinois Dept. on Aging) | 72 days | 46 days | - The Days Sales Outstanding (DSO) for the Illinois Department on Aging increased from **46 days** at December 31, 2020, to **72 days** at March 31, 2021, indicating potential payment consistency issues[172](index=172&type=chunk) [Off-Balance Sheet Arrangements](index=40&type=section&id=Off-Balance%20Sheet%20Arrangements) This section confirms the absence of any off-balance sheet guarantees or arrangements with unconsolidated entities as of March 31, 2021 - As of March 31, 2021, the company did not have any off-balance sheet guarantees or arrangements with unconsolidated entities[175](index=175&type=chunk) [Critical Accounting Policies and Estimates](index=40&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section states that there have been no material changes to the company's critical accounting policies and estimates - There have been no material changes to the critical accounting policies and estimates previously disclosed in the Annual Report on Form 10-K for the period ended December 31, 2020[176](index=176&type=chunk) [Recently Issued Accounting Pronouncements](index=40&type=section&id=Recently%20Issued%20Accounting%20Pronouncements_Liquidity) This section refers to Note 2 for further discussion on recently issued accounting pronouncements - Refer to Note 2 to the Notes to Condensed Consolidated Financial Statements (Unaudited) for further discussion on recently issued accounting pronouncements[177](index=177&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, primarily related to interest rate fluctuations on its variable-rate long-term debt - The company is exposed to market risk associated with changes in interest rates on its variable rate long-term debt, with approximately **$196.3 million** outstanding borrowings on its credit facility as of March 31, 2021[178](index=178&type=chunk) - A **100 basis point increase** in variable interest rates would decrease net income by **$0.4 million**, or **$0.02 per diluted share**, for the three months ended March 31, 2021[178](index=178&type=chunk) - The company does not currently have any derivative or hedging arrangements, or other known exposures, to changes in interest rates[178](index=178&type=chunk) [Item 4. Controls and Procedures](index=41&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the company's disclosure controls and procedures and reports on any changes in internal controls over financial reporting [Evaluation of Disclosure Controls and Procedures](index=41&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures as evaluated by management and executive officers - Management, with the participation of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the company's disclosure controls and procedures and concluded they were effective as of March 31, 2021[179](index=179&type=chunk)[180](index=180&type=chunk) [Changes in Internal Controls Over Financial Reporting](index=41&type=section&id=Changes%20in%20Internal%20Controls%20Over%20Financial%20Reporting) This section reports no material changes in internal control over financial reporting during the fiscal quarter ended March 31, 2021 - There were no changes in internal control over financial reporting identified during the fiscal quarter ended March 31, 2021, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[181](index=181&type=chunk) [PART II. OTHER INFORMATION](index=42&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, equity sales, defaults, mine safety, and exhibits [Item 1. Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) This section addresses legal and administrative proceedings the company is involved in - Management believes that the outcome of pending legal and/or administrative proceedings will not have a material effect on the company's financial position and results of operations[183](index=183&type=chunk) [Item 1A. Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the comprehensive discussion of risk factors affecting the company's business - There have been no material changes to the risk factors previously disclosed under the caption "Risk Factors" in the Annual Report on Form 10-K for the year ended December 31, 2020[184](index=184&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on any unregistered sales of equity securities and the use of proceeds - There were no unregistered sales of equity securities and no use of proceeds to report[184](index=184&type=chunk) [Item 3. Defaults Upon Senior Securities](index=42&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section reports on any defaults upon senior securities - There were no defaults upon senior securities to report[184](index=184&type=chunk) [Item 4. Mine Safety Disclosures](index=42&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section reports on mine safety disclosures - There were no mine safety disclosures to report[184](index=184&type=chunk) [Item 5. Other Information](index=42&type=section&id=Item%205.%20Other%20Information) This section includes other information not covered elsewhere - There was no other information to report[185](index=185&type=chunk) [Item 6. Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q, including corporate documents, certifications, and XBRL data - The exhibits include the Amended and Restated Certificate of Incorporation, Bylaws, Common Stock Certificate, CEO and CFO certifications (Sections 302 and 906 of Sarbanes-Oxley Act), and Inline XBRL documents[186](index=186&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk)