CPSI(CPSI) - 2019 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the company's unaudited condensed consolidated financial statements and management's analysis Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, encompassing balance sheets, income, equity, cash flows, and detailed notes Condensed Consolidated Balance Sheets (Unaudited) This statement provides a snapshot of the company's assets, liabilities, and equity at specific points in time Balance Sheet Highlights (In thousands) | Metric | Sep 30, 2019 | Dec 31, 2018 | | :-------------------------------- | :----------- | :----------- | | Total Assets | $340,856 | $327,746 | | Total Liabilities | $168,825 | $167,963 | | Total Stockholders' Equity | $172,031 | $159,783 | Condensed Consolidated Statements of Income (Unaudited) This statement details the company's revenues, expenses, and net income over specific reporting periods Income Statement Highlights (In thousands, except per share data) | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Sales Revenues | $68,699 | $69,297 | $203,996 | $208,085 | | Gross Profit | $35,915 | $36,124 | $107,560 | $110,056 | | Operating Income | $6,007 | $5,361 | $15,670 | $15,236 | | Net Income | $4,135 | $5,749 | $9,241 | $10,044 | | Net Income Per Common Share—Basic | $0.29 | $0.41 | $0.65 | $0.72 | | Net Income Per Common Share—Diluted | $0.29 | $0.41 | $0.65 | $0.72 | | Dividends Declared Per Common Share | $0.10 | $0.10 | $0.30 | $0.30 | Condensed Consolidated Statement of Stockholders' Equity (Unaudited) This statement outlines changes in the company's equity, including net income, stock-based compensation, and dividends Stockholders' Equity Changes (In thousands) | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Balance at June 30 / Dec 31 | $167,159 (June 30, 2019) | $144,241 (June 30, 2018) | $159,783 (Dec 31, 2018) | $136,086 (Dec 31, 2017) | | Net income | $4,135 | $5,749 | $9,241 | $10,044 | | Stock-based compensation | $2,170 | $2,611 | $7,297 | $7,303 | | Dividends | $(1,436) | $(1,409) | $(4,293) | $(4,211) | | Balance at Sep 30 | $172,031 | $151,192 | $172,031 | $151,192 | Condensed Consolidated Statements of Cash Flows (Unaudited) This statement reports the cash generated and used by operating, investing, and financing activities Cash Flow Highlights (In thousands) | Activity | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net cash provided by operating activities | $25,513 | $14,852 | | Net cash used in investing activities | $(12,403) | $(818) | | Net cash used in financing activities | $(14,854) | $(9,379) | | (Decrease) Increase in cash and cash equivalents | $(1,744) | $4,655 | | Cash and cash equivalents at end of period | $3,988 | $5,175 | Notes to Condensed Consolidated Financial Statements (Unaudited) These notes provide detailed information supporting the financial statements, covering accounting policies, revenue, business combinations, and segment performance - The financial statements are unaudited, prepared under SEC rules and U.S. GAAP, with condensed footnote disclosures[27][28] - CPSI's consolidated entities include TruBridge, Evident, Healthland Holding Inc. (HHI), and Get Real Health[29] 1. BASIS OF PRESENTATION This section outlines the accounting principles and consolidation scope for the financial statements - The financial statements are unaudited, prepared under SEC rules and U.S. GAAP, and include normal recurring adjustments[27] - CPSI's consolidated entities include TruBridge, Evident, Healthland Holding Inc. (HHI), and Get Real Health[29] 2. RECENT ACCOUNTING PRONOUNCEMENTS This section discusses the adoption and potential impact of new accounting standards on the financial statements - Adopted ASU 2016-02 (Leases) on January 1, 2019, increasing lease assets and liabilities by $4.9 million, with no significant impact on net earnings or cash flows[30] - ASU 2016-13 (Financial Instruments-Credit Losses) will be effective for the Company in Q1 2020, and its impact is currently being evaluated[31] 3. REVENUE RECOGNITION This section details the company's policies for recognizing revenue from system sales, support, and services - Revenue is recognized using the 5-step model under ASC 606, upon transfer of control of products or services[33][35] - System Sales and Support includes perpetual software licenses, installation, hardware, and recurring services; SaaS arrangements recognize revenue monthly[36][37][38][39][40][41] - TruBridge provides business processing services (BPS) and professional IT services, with fees recognized over the contract period as services are performed[42][43] Deferred Revenue (In thousands) | Metric | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Beginning balance | $10,201 | $9,937 | | Deferred revenue recorded | $13,888 | $15,847 | | Deferred revenue acquired | $430 | — | | Less deferred revenue recognized as revenue | $(15,863) | $(14,669) | | Ending balance | $8,656 | $11,115 | 4. BUSINESS COMBINATION This section details the acquisition of Get Real Health, including its purchase price allocation and financial contribution - Acquired Get Real Health on May 3, 2019, for $10.8 million cash (net of acquired cash) plus a contingent earnout of up to $14.0 million[52][53] - The acquisition added patient outcomes and engagement technology solutions, strengthening CPSI's community healthcare position[52][152] Preliminary Purchase Price Allocation (In thousands) | Asset/Liability | Allocation | | :-------------------------------- | :----------- | | Acquired cash | $159 | | Accounts receivable | $364 | | Prepaid expenses | $107 | | Property and equipment | $365 | | Operating lease asset | $1,285 | | Intangible assets | $7,890 | | Goodwill | $9,511 | | Accounts payable and accrued liabilities | $(594) | | Deferred taxes, net | $(1,480) | | Operating lease liability | $(1,285) | | Contingent consideration | $(5,000) | | Deferred revenue | $(430) | | Net assets acquired | $10,892 | - Get Real Health contributed $0.7 million in revenue and a pre-tax loss of $1.4 million for the nine months ended September 30, 2019[57] 5. PROPERTY AND EQUIPMENT This section provides a breakdown of the company's property and equipment, net of accumulated depreciation Property and Equipment, Net (In thousands) | Category | Sep 30, 2019 | Dec 31, 2018 | | :-------------------------------- | :----------- | :----------- | | Property and equipment, gross | $18,534 | $16,520 | | Less: accumulated depreciation | $(6,708) | $(5,645) | | Property and equipment, net | $11,826 | $10,875 | 6. OTHER ACCRUED LIABILITIES This section details various accrued liabilities, including salaries, benefits, severance, and contingent consideration Other Accrued Liabilities (In thousands) | Category | Sep 30, 2019 | Dec 31, 2018 | | :-------------------------------- | :----------- | :----------- | | Salaries and benefits | $4,103 | $8,722 | | Severance | $647 | $992 | | Commissions | $794 | $830 | | Self-insurance reserves | $1,382 | $1,017 | | Contingent consideration | $5,000 | $206 | | Other | $575 | $452 | | Operating lease liabilities, current portion | $1,483 | — | | Total other accrued liabilities | $13,984 | $12,219 | 7. NET INCOME PER SHARE This section explains the calculation of basic and diluted net income per share, considering participating securities - Basic and diluted EPS are calculated using the two-class method due to unvested restricted stock awards being participating securities[67][68] EPS Calculation (In thousands, except per share data) | Metric | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net income | $4,135 | $5,749 | $9,241 | $10,044 | | Net income attributable to common stockholders | $3,984 | $5,552 | $8,894 | $9,706 | | Basic EPS | $0.29 | $0.41 | $0.65 | $0.72 | | Diluted EPS | $0.29 | $0.41 | $0.65 | $0.72 | - Performance share awards for 200,709 shares were not included in diluted EPS calculation for the periods as performance levels were not achieved[71] 8. INCOME TAXES This section discusses the company's effective tax rates and the impact of R&D credits on tax expense and benefit - Effective tax rate for Q3 2019 was 4% tax expense, compared to a 54% tax benefit for Q3 2018[73] - The Q3 2018 tax benefit was significantly impacted by an 81% benefit from R&D credits due to the ASC 730 Safe Harbor Directive[73] - Effective tax rate for YTD 2019 increased to 15% from 2% for YTD 2018, primarily due to a 31% R&D credit benefit in YTD 2018 from the ASC 730 Safe Harbor Directive[74] 9. STOCK-BASED COMPENSATION This section details stock-based compensation expense and activity related to restricted stock awards Stock-Based Compensation Expense (In thousands) | Category | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Pre-tax stock-based compensation expense | $2,170 | $2,610 | $7,297 | $7,303 | | Net stock-based compensation expense | $1,693 | $2,036 | $5,692 | $5,696 | - Unrecognized compensation expense of $11.2 million related to unvested stock-based awards is expected to be recognized over a weighted-average period of 1.7 years[75] Restricted Stock Activity (Shares) | Metric | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Unvested restricted stock outstanding at beginning of period | 475,132 | 309,195 | | Granted | 133,936 | 148,841 | | Performance share awards settled | 138,566 | 177,395 | | Vested | (221,775) | (153,424) | | Unvested restricted stock outstanding at end of period | 525,859 | 482,007 | 10. FINANCING RECEIVABLES This section provides a breakdown of short-term payment plans and long-term financing arrangements, net of allowances Short-Term Payment Plans, Net (In thousands) | Metric | Sep 30, 2019 | Dec 31, 2018 | | :-------------------------------- | :----------- | :----------- | | Short-term payment plans, gross | $3,593 | $5,773 | | Less: allowance for losses | $(252) | $(404) | | Short-term payment plans, net | $3,341 | $5,369 | Long-Term Financing Arrangements, Net (In thousands) | Metric | Sep 30, 2019 | Dec 31, 2018 | | :-------------------------------- | :----------- | :----------- | | Long-term financing arrangements, gross | $32,947 | $34,841 | | Less: allowance for losses | $(2,044) | $(2,163) | | Less: unearned income | $(3,735) | $(3,725) | | Long-term financing arrangements, net | $27,168 | $28,953 | Allowance for Financing Credit Losses (In thousands) | Metric | Sep 30, 2019 | Dec 31, 2018 | | :-------------------------------- | :----------- | :----------- | | Balance at Beginning of Period | $2,567 | $3,244 | | Provision | $329 | $1,691 | | Charge-offs | $(600) | $(2,368) | | Recoveries | — | — | | Balance at End of Period | $2,296 | $2,567 | 11. INTANGIBLE ASSETS AND GOODWILL This section presents the company's net intangible assets and goodwill, broken down by category and segment Net Intangible Assets (In thousands) | Category | Sep 30, 2019 | Dec 31, 2018 | | :-------------------------------- | :----------- | :----------- | | Customer Relationships | $59,714 | $62,824 | | Trademark | $7,884 | $8,287 | | Developed Technology | $18,379 | $15,115 | | Total Net Intangible Assets | $85,977 | $86,226 | Goodwill by Segment (In thousands) | Segment | Dec 31, 2018 | Goodwill Acquired | Sep 30, 2019 | | :-------------------------------- | :----------- | :---------------- | :----------- | | Acute Care EHR | $97,095 | — | $97,095 | | Post-acute Care EHR | $29,570 | — | $29,570 | | TruBridge | $13,784 | $9,511 | $23,295 | | Total Goodwill | $140,449 | $9,511 | $149,960 | 12. LONG-TERM DEBT This section details the company's long-term debt, including term loans, revolving credit, and compliance with covenants Long-Term Debt (In thousands) | Category | Sep 30, 2019 | Dec 31, 2018 | | :-------------------------------- | :----------- | :----------- | | Term loan facility | $91,017 | $102,432 | | Revolving credit facility | $31,000 | $29,693 | | Finance lease obligation | — | $250 | | Debt obligations, net | $120,970 | $131,069 | | Less: current portion | $(8,430) | $(6,486) | | Long-term debt | $112,540 | $124,583 | - The Amended Credit Facilities bear variable interest rates (LIBOR or alternate base rate plus margin) and are secured by substantially all company assets[106][108] - The company was in compliance with debt covenants (fixed charge coverage ratio, consolidated leverage ratio) as of September 30, 2019[112] - A $7.0 million mandatory prepayment on the Amended Term Loan Facility was made in Q1 2019 from 2018 excess cash flow[113] 13. OPERATING LEASES This section provides information on operating lease assets, liabilities, remaining lease term, and discount rate Operating Lease Information (In thousands) | Metric | Sep 30, 2019 | | :-------------------------------- | :----------- | | Operating lease assets | $8,061 | | Total operating lease liabilities | $8,061 | | Weighted average remaining lease term | 7 years | | Weighted average discount rate | 5.1% | - Total rent expense for the nine months ended September 30, 2019, was $1.6 million, down from $1.9 million in 2018[118] 14. COMMITMENTS AND CONTINGENCIES This section addresses the company's legal proceedings and other commitments, assessing their potential financial impact - The Company is involved in routine litigation but management does not believe it will have a material adverse effect on financial statements[120] 15. FAIR VALUE This section explains the classification of fair value measurements based on input observability levels - Fair value measurements are classified into Level 1, 2, or 3 based on input observability[121][122][123] - Contingent consideration for Get Real Health ($5.0 million) is a Level 3 measurement based on unobservable inputs (EBITDA targets)[124][125] - Contingent consideration for Rycan ($206 thousand) at Dec 31, 2018, was also a Level 3 measurement[126][127] 16. SEGMENT REPORTING This section provides financial data for the company's operating segments: Acute Care EHR, Post-acute Care EHR, and TruBridge - The company operates in three segments: Acute Care EHR, Post-acute Care EHR, and TruBridge[129] Segment Revenues and Gross Profits (In thousands) | Segment | 3 Months Ended Sep 30, 2019 (Revenue) | 3 Months Ended Sep 30, 2018 (Revenue) | 9 Months Ended Sep 30, 2019 (Revenue) | 9 Months Ended Sep 30, 2018 (Revenue) | 3 Months Ended Sep 30, 2019 (Gross Profit) | 3 Months Ended Sep 30, 2018 (Gross Profit) | 9 Months Ended Sep 30, 2019 (Gross Profit) | 9 Months Ended Sep 30, 2018 (Gross Profit) | | :-------------------------------- | :------------------------------------ | :------------------------------------ | :------------------------------------ | :------------------------------------ | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | :----------------------------------------- | | Acute Care EHR | $35,965 | $38,907 | $107,461 | $116,297 | $18,583 | $20,821 | $56,663 | $63,485 | | Post-acute Care EHR | $5,025 | $5,518 | $16,416 | $16,626 | $3,646 | $4,021 | $12,438 | $11,910 | | TruBridge | $27,709 | $24,872 | $80,119 | $75,162 | $13,686 | $11,282 | $38,459 | $34,661 | | Total | $68,699 | $69,297 | $203,996 | $208,085 | $35,915 | $36,124 | $107,560 | $110,056 | 17. SUBSEQUENT EVENTS This section discloses significant events occurring after the reporting period, such as dividend declarations - Declared a Q4 2019 dividend of $0.10 per share, payable November 29, 2019[131] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of financial performance, condition, and outlook, including revenues, expenses, liquidity, and strategy Background This section introduces CPSI as a leading healthcare solutions provider for community hospitals and post-acute care facilities - CPSI is a leading provider of healthcare solutions for community hospitals and post-acute care facilities, operating through Evident, AHT, TruBridge, and Get Real Health[137][138][139] - The company serves approximately 1,000 acute care and 3,300 post-acute care facilities, primarily community hospitals with fewer than 200 beds[140] Management Overview This section outlines the company's long-term growth strategy, focusing on recurring revenue, customer retention, and margin improvement - Long-term growth strategy focuses on selling new and additional products/services to existing customers, cross-selling between segments, and retaining existing EHR customers[142] - Increasing value in developing the recurring revenue base, aided by customer retention and driving demand for technology solution subscriptions[143] - Margin improvement is bolstered by operating leverage from recurring services and cost containment; system sales shift revenue recognition to a monthly basis via financed sales and SaaS[144][145][149][150][151] - Acquired Get Real Health on May 3, 2019, to strengthen its position in community healthcare by offering new patient engagement solutions[152] Results of Operations Total revenues for the nine months ended September 30, 2019, decreased by 2% to $204.0 million, with net income decreasing by $0.8 million due to a higher effective tax rate Three Months Ended September 30, 2019 Compared with Three Months Ended September 30, 2018 This section compares the company's financial performance for the three months ended September 30, 2019, against the prior year - Total Revenues decreased by $0.6 million (1%) to $68.7 million[156] - System Sales and Support Revenues decreased by $3.4 million (8%) to $41.0 million, driven by a $2.8 million (23%) decrease in non-recurring revenues and a $0.6 million (2%) decrease in recurring revenues[158][159] - TruBridge Revenues increased by $2.8 million (11%) to $27.7 million, primarily from accounts receivable management services, insurance services, and IT management services, with Get Real Health contributing $0.5 million[160] - Costs of Sales decreased by $0.4 million (1%) to $32.8 million, remaining flat at 48% of total revenues[161] - Total Operating Expenses remained flat at 44% of revenues, with decreases in sales and marketing and general and administrative, partially offset by increased amortization[166][167][168][169][170] - Net Income decreased by $1.6 million (28%) to $4.1 million, or $0.29 per share, primarily due to a higher effective tax rate[173][174] Nine Months Ended September 30, 2019 Compared with Nine Months Ended September 30, 2018 This section compares the company's financial performance for the nine months ended September 30, 2019, against the prior year - Total Revenues decreased by $4.1 million (2%) to $204.0 million[176] - System Sales and Support Revenues decreased by $9.0 million (7%) to $123.9 million, primarily due to a $6.1 million (17%) decrease in non-recurring revenues and a $3.0 million (3%) decrease in recurring revenues[176][177] - TruBridge Revenues increased by $5.0 million (7%) to $80.1 million, driven by growth in accounts receivable management, insurance, and IT management services, with Get Real Health contributing $0.7 million[178] - Costs of Sales decreased by $1.6 million (2%) to $96.4 million, remaining flat at 47% of total revenues[180] - Total Operating Expenses decreased to 45% of revenues from 46%, with decreases in sales and marketing and general and administrative, partially offset by increased product development and amortization[184][185][186][187][188] - Net Income decreased by $0.8 million (8%) to $9.2 million, or $0.65 per share, primarily due to a higher effective tax rate[190][193] Liquidity and Capital Resources Liquidity is supported by cash, operating cash flows, and a revolving credit facility, with operating cash flow improving and financing cash used for debt and dividends Sources of Liquidity This section identifies the company's primary sources of liquidity, including cash and available credit facilities - Cash and cash equivalents: $4.0 million (Sep 30, 2019) vs. $5.7 million (Dec 31, 2018)[194] - Remaining borrowing capacity under Amended Revolving Credit Facility: $19.0 million (Sep 30, 2019) vs. $20.3 million (Dec 31, 2018)[194] - Total indebtedness outstanding under Amended Credit Facilities: $122.0 million (Sep 30, 2019)[195] - Used $11.0 million from revolving credit facility for Get Real Health acquisition[196] Operating Cash Flow Activities This section analyzes the cash generated or used by the company's core operating activities - Net cash provided by operating activities increased by $10.7 million to $25.5 million for the nine months ended September 30, 2019, primarily due to more advantageous changes in working capital[197] - Working capital shifted from a net use of $14.2 million in YTD 2018 to a net use of $2.9 million in YTD 2019[197] Investing Cash Flow Activities This section details cash flows related to the acquisition and disposal of long-term assets and investments - Net cash used in investing activities increased by $11.6 million to $12.4 million for the nine months ended September 30, 2019, primarily due to the $10.9 million acquisition of Get Real Health[198] Financing Cash Flow Activities This section reports cash flows from debt, equity, and dividend transactions - Net cash used in financing activities was $14.9 million for YTD 2019, including $10.4 million in long-term debt principal payments and $4.3 million in dividends[200] - A $7.0 million mandatory prepayment on the Amended Term Loan Facility was made in Q1 2019[200] Credit Agreement This section outlines the terms of the company's credit facilities, including outstanding debt and covenant compliance - Outstanding debt: $91.0 million Term Loan Facility and $31.0 million Revolving Credit Facility as of Sep 30, 2019[202] - Quarterly principal payments for Term Loan Facility: $1.46 million through Sep 30, 2019; $2.19 million through Sep 30, 2021; $2.93 million through Sep 30, 2022; maturity on Oct 13, 2022[203] - The company was in compliance with all debt covenants as of September 30, 2019[205] Backlog This section presents the company's twelve-month backlog for non-recurring system purchases and recurring payments Twelve-Month Backlog (In millions) | Category | Sep 30, 2019 | Sep 30, 2018 | | :-------------------------------- | :----------- | :----------- | | Non-recurring system purchases | ~$14 | ~$35 | | Recurring payments (support, Cloud EHR, TruBridge) | ~$231 | ~$225 | Bookings This section provides a breakdown of bookings by segment for various reporting periods Bookings (In thousands) | Segment | 3 Months Ended Sep 30, 2019 | 3 Months Ended Sep 30, 2018 | 9 Months Ended Sep 30, 2019 | 9 Months Ended Sep 30, 2018 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Acute Care EHR | $12,299 | $10,699 | $30,436 | $44,276 | | Post-acute Care EHR | $1,066 | $844 | $4,232 | $2,625 | | TruBridge | $10,248 | $7,302 | $17,572 | $17,492 | | Total Bookings | $23,613 | $18,845 | $52,240 | $64,393 | - Acute Care EHR bookings for YTD 2019 decreased by $13.8 million (31%) due to a lack of urgency from prospective customers following the end of the Meaningful Use era[210] - TruBridge bookings for Q3 2019 increased by $2.9 million (40%) due to expansion outside the traditional EHR customer base[212] Off-Balance Sheet Arrangements This section confirms the absence of any off-balance sheet arrangements as of the reporting date - The company had no off-balance sheet arrangements as of September 30, 2019[213] Critical Accounting Policies and Estimates This section addresses significant accounting policies and estimates that require management's judgment - No significant changes to critical accounting policies (revenue recognition, allowances for doubtful accounts and credit losses, and estimates) during the nine months ended September 30, 2019[216] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk exposure is to interest rate fluctuations, specifically the LIBOR rate, affecting its variable-rate long-term debt - Exposure to market risk primarily relates to changes in LIBOR on $122.0 million of outstanding variable-rate borrowings under Amended Credit Facilities[217] - A 100 basis point change in interest rate would result in an annual change in interest expense of approximately $1.3 million[217] - The company does not use derivative financial instruments to manage interest rate risks[218] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of September 30, 2019, with no material impact from the Get Real Health acquisition or lease accounting standard adoption on internal controls - Disclosure controls and procedures were evaluated and deemed effective at the reasonable assurance level by management, including the CEO and CFO, as of September 30, 2019[220] - The Get Real Health acquisition did not materially affect internal control over financial reporting, and new controls for lease accounting standard adoption had no significant impact on overall internal controls[221] PART II. OTHER INFORMATION This section includes legal proceedings, risk factors, and other miscellaneous disclosures not covered in financial statements Item 1. Legal Proceedings The company is involved in routine litigation but does not anticipate any material adverse effects on its financial condition or results of operations - Involved in routine litigation in the ordinary course of business[224] - No material adverse effect on financial condition or results of operations is expected from current claims[224] Item 1A. Risk Factors This section refers readers to the comprehensive discussion of risk factors in the company's Annual Report on Form 10-K for the year ended December 31, 2018 - Readers should refer to Part I, "Item 1A. Risk Factors" in the Annual Report on Form 10-K for the year ended December 31, 2018, for a detailed discussion of material business factors[225] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This item is not applicable to the current report - Not Applicable[227] Item 3. Defaults Upon Senior Securities This item is not applicable to the current report - Not applicable[228] Item 4. Mine Safety Disclosures This item is not applicable to the current report - Not applicable[229] Item 5. Other Information No other information is reported under this item - None[230] Item 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q, including corporate documents, certifications, and interactive data files - Includes certifications from the CEO and CFO (pursuant to Rule 13a-14(a) and 18 U.S.C. Section 1350)[231] - Includes Interactive Data Files for the Form 10-Q[231]