What changed in this filing

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Item 9A. Controls and Procedures

2025-02-25 compared with 2024-02-27 · 188 added, 153 removed, 937 unchanged (27% of the section changed)

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Under SEC Staff guidance, companies are permitted to exclude acquisitions from their first assessment of internal control over financial reporting which covers the period in which such acquisition was completed.

We excluded Coastal Nursecare of Florida, Inc.

(“CareStaff”) and American Home Care, LLC, a Tennessee limited liability company (“AHC”), and its subsidiaries, Homecare, LLC, a Tennessee limited liability company (“Homecare”), Tennessee Valley Home Care, LLC (d/b/a Tennessee Quality Care – Home Health), a Tennessee limited liability company (“TQC – Home Health”), and Tri-County Home Health and Hospice, LLC (d/b/a Tennessee Quality Care - Hospice), a Tennessee limited liability company (“TQC – Hospice”, and collectively with AHC, Homecare, and TQC – Home Health “Tennessee Quality Care”) each of which are wholly-owned subsidiaries, from our assessment of internal control over financial reporting as of December 31, 2023 because they were acquired in purchase business combinations on January 1, 2023 and August 1, 2023, respectively.

CareStaff represented 0.2% of our revenues and 0.4% of our operating income, respectively, for the year ended December 31, 2023.

Tennessee Quality Care represented 1.5% of our revenues and 3.3% of our operating income, respectively, for the year ended December 31, 2023.

We excluded the personal care business of Curo Health Services, LLC, a Delaware limited liability company that does business as Gentiva (the “ Gentiva Acquisition ” ), from our assessment of internal control over financial reporting as of December 31, 2024 because it was acquired in a purchase business combination on December 2, 2024.

These acquired operations represented 2.0% of our revenues, 3.0% of our operating income and 2.4% of our assets as of and for the year ended December 31, 2024.

The effectiveness of our internal control over financial reporting as of December 31, 2024 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in its report which appears within Part IV, Item 15—“Exhibits and Financial Statement Schedules.”

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Membership Interests Purchase Agreement, dated June 28, 2023, by and among Addus HealthCare, Inc., HHH Newco Holdings, LLC, American Health Companies, LLC, American Home Care, LLC, Homecare, LLC, Tennessee Valley Home Care, LLC, and Tri-County Home Health and Hospice, LLC.

Stock and Asset Purchase Agreement, dated June 8, 2024, by and between Addus HealthCare, Inc.

and Curo Health Services, LLC.

Fourth Amendment to Amended and Restated Credit Agreement, dated as of October 22, 2024, by and among Addus HealthCare, Inc., as the Borrower, Addus HomeCare Corporation, the other Credit Parties party thereto, Capital One, National Association, as administrative agent and as a Lender, and the other Lenders party thereto.

Addus Homecare Corporation Insider Trading Policy

Subsidiaries of Addus HomeCare Corporation.

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The Company hereby undertakes to furnish supplementally a copy of any of the omitted schedules and exhibits upon request by the Securities and Exchange Commission.

***Filed herewith

FORM 10-K SUMMARY

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We believe that our audits provide a reasonable basis for our opinions.

As described in Management’s Annual Report on Internal Control Over Financial Reporting, management has excluded Coastal Nursecare of Florida, Inc.

(“CareStaff”) and American Home Care, LLC, a Tennessee limited liability company (“AHC”), and its subsidiaries, Homecare, LLC, a Tennessee limited liability company (“Homecare”), Tennessee Valley Home Care, LLC (d/b/a Tennessee Quality Care – Home Health), a Tennessee limited liability company (“TQC – Home Health”), and Tri-County Home Health and Hospice, LLC (d/b/a Tennessee Quality Care - Hospice), a Tennessee limited liability company (“TQC – Hospice”, and collectively with AHC, Homecare, and TQC – Home Health “Tennessee Quality Care”), from its assessment of internal control over financial reporting as of December 31, 2023, because they were acquired by the Company in purchase business combinations during 2023.

We have also excluded Carestaff and Tennessee Quality Care from our audit of internal control over financial reporting.

Carestaff and Tennessee Quality Care are wholly-owned subsidiaries whose total revenues and total operating income excluded from management’s assessment and our audit of internal control over financial reporting represent approximately 0.2% and 1.5% of total revenues, respectively, and approximately 0.4% and 3.3% of total operating income, respectively, of the related consolidated financial statement amounts for the year ended December 31, 2023.

As described in Management’s Annual Report on Internal Control Over Financial Reporting, management has excluded the business acquired from Gentiva (the Gentiva Acquisition), from its assessment of internal control over financial reporting as of December 31, 2024, because it was acquired by the Company in a purchase business combination during 2024.

We have also excluded Gentiva from our audit of internal control over financial reporting.

Gentiva is a wholly-owned business whose total revenues, total operating income, and total assets excluded from management’s assessment and our audit of internal control over financial reporting represent approximately 2.0%, 3.0%, and 2.4% respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2024.

Definition and Limitations of Internal Control over Financial Reporting

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Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Valuation of Accounts Receivable, Net of Allowances for Implicit Price Concessions

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and (vi) performing a comparison of the remaining uncollected accounts receivable balance as of a date subsequent to year end, to expected future cash collections based on the Company’s historical collection patterns.

Goodwill Impairment Assessment – Hospice Reporting Unit

As described in Notes 1 and 5 to the consolidated financial statements, the Company’s goodwill balance was $663.0 million as of December 31, 2023, and the goodwill associated with the Hospice reporting unit was $432.8 million.

Management tests goodwill for impairment at the reporting unit level on an annual basis, as of October 1, or whenever potential impairment triggers occur, such as a significant change in business climate or regulatory changes that would indicate that an impairment may have occurred.

The goodwill impairment test involves comparing the fair value of a reporting unit with its carrying value, including goodwill.

Management estimated the fair value of the Hospice reporting unit using the discounted cash flow and market multiple approaches.

These types of models require management to make assumptions and estimates regarding future cash flows, industry-specific economic factors and the profitability of future business strategies.

The discounted cash flow model uses a projection of estimated operating results and cash flows that are discounted using a weighted-average cost of capital.

The market multiple model estimates fair value based on market multiples of earnings before interest, taxes and depreciation and amortization (EBITDA).

Under the discounted cash flow model, the projection uses management’s best estimates of economic and market conditions over the projected period for each reporting unit using significant assumptions such as revenue growth rates, operating margins, and the weighted-average cost of capital.

The principal considerations for our determination that performing procedures relating to the goodwill impairment assessment of the Hospice reporting unit is a critical audit matter are (i) the significant judgment by management when developing the fair value estimate of the Hospice reporting unit;

(ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to the revenue growth rates, operating margins, and the weighted-average cost of capital used in the discounted cash flow model, and the market multiples of EBITDA used in the market multiple model;

and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements.

These procedures included testing the effectiveness of controls relating to management’s goodwill impairment assessment, including controls over the valuation of the Hospice reporting unit.

These procedures also included, among others (i) testing management’s process for developing the fair value estimate of the Hospice reporting unit;

(ii) evaluating the appropriateness of the discounted cash flow model and market multiple model used by management;

(iii) testing the completeness and accuracy of underlying data used by management in the discounted cash flow model and market multiple model;

and (iv) evaluating the reasonableness of the significant assumptions used by management related to the revenue growth rates, operating margins, and the weighted-average cost of capital used in the discounted cash flow model and the market multiples of EBITDA used in the market multiple model.

Evaluating management’s assumptions related to the revenue growth rates and operating margins involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the Hospice reporting unit;

(ii) the consistency with external market and industry data;

and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit.

Professionals with specialized skill and knowledge were used to assist in the evaluation of the appropriateness of the discounted cash flow model and market multiples model, and the reasonableness of the weighted-average cost of capital and market multiples of EBITDA significant assumptions.

/s/ PricewaterhouseCoopers LLP

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Long-term operating lease liabilities

Deferred income tax

Other long-term liabilities

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restricted stock award agreements

Forfeiture of shares of common stock under

restricted stock award agreements

Stock-based compensation

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restricted stock award agreements

Forfeiture of shares of common stock under

restricted stock award agreements

Stock-based compensation

Shares issued for exercise of stock options

Shares issued in public offering, net of offering costs

Balance at December 31, 2024

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Provision for credit losses

Gain on disposal of assets

Impairment of operating lease assets

Gain on termination of operating leases

(Gain) loss on termination of operating leases

Gain on divestiture of business

Changes in operating assets and liabilities, net of acquisitions:

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Cash flows from investing activities:

Business acquisition, net of cash acquired

Acquisition of businesses, net of cash acquired

Purchases of property and equipment

Proceeds on disposal of property and equipment

Proceeds received from disposal of assets

Proceeds received from divestiture of business

Net cash used in investing activities

Cash flows from financing activities:

Borrowings on revolver — credit facility

Payments on revolver — credit facility

Payments on term loan — credit facility

Proceeds from borrowings on revolver — credit facility

Payments on revolver loan — credit facility

Proceeds from public offering

Payments for debt issuance costs under the credit facility

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Licensing fees included in Fixed assets

Tax benefit related to the amortization of tax goodwill in excess of book basis

See accompanying Notes to Consolidated Financial Statements

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All intercompany balances and transactions have been eliminated in consolidation.

Reclassification of Prior Period Balances

Certain reclassifications have been made to prior period amounts to conform to the current-year presentation including the reporting of deferred tax liabilities as a separate line item on the Consolidated Balance Sheets.

These reclassifications have no effect on the reported net income for the years ended December 31, 2024, 2023 and 2022.

Revenue Recognition

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An uncollectible amount is written off to the allowance account after reasonable collection efforts have been exhausted.

As of December 31, 2023 and 2022, the allowance for credit losses balance was $ 2.3 m illion and $ 1.6 million, respectively, which is included in accounts receivable, net of allowances for credit losses on the Company’s Consolidated Balance Sheets.

As of December 31, 2024 and 2023, the allowance for credit losses balance was $ 3.5 million and $ 2.3 million, respectively, which is included in accounts receivable, net of allowances for credit losses on the Company’s Consolidated Balance Sheets.

Activity in the allowance for credit losses is as follows (in thousands):

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Operating lease assets are tested for impairment in the same manner as our long-lived assets.

For the years ended December 31, 2023 and 2022 , the Company recorded $ 13,000 and $ 1.2 million, respectively, in impairment charges on operating lease assets, included within general administrative expenses.

For the year ended December 31, 2021, the Company recorded no material impairment charges.

For the years ended December 31, 2024, 2023 and 2022 the Company recorded $ 5.0 million, $ 13,000 and $ 1.2 million, respectively, in impairment charges on operating lease assets, included within general administrative expenses.

Of the $ 5.0 million in impairment charges on operating lease assets recorded, $ 2.2 million in exit charges was included.

Goodwill and Intangible Assets

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The future claims payments related to the workers’ compensation program are secured by letters of credit.

These letters of credit tot aled $ 8.0 million and $ 8.2 million at December 31, 2023 and 2022, respectively.

These letters of credit tot aled $ 8.0 million at each of December 31, 2024 and 2023.

The Company monitors its claims quarterly and adjusts its reserves as necessary in the current period.

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Recently Adopted Accounting Pronouncements

In November 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update ASU 2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance .

ASU 2021-10 requires entities to disclose certain information about the nature of certain governmental assistance received, including the nature of the transaction and the related accounting policy, the financial statement line items impacted by the assistance, as well as the significant terms and conditions of the transactions.

The ASU was adopted as of January 1, 2022 and did no t have a material impact on the Company’s results of operations or liquidity.

In November 2023, the FASB issued ASU 2023-07, Improvements to Reportable Segment Disclosures, which expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The amendments in the ASU require, among other things, disclosure of significant segment expenses that are regularly provided to an entity’s chief operating decision maker (“CODM”) and a description of other segment items (the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss) by reportable segment, as well as disclosure of the title and position of the CODM, and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources.

The ASU was adopted in this annual report by including significant segment expenses reviewed by the Company’s CODM, but did not have a material impact on the Company’s results of operations, financial position or cash flows.

Refer to Note 14, Segment Information, for the updated presentation.

In October 2021, the FASB issued ASU No.

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Therefore, it was in effect for a limited time through December 31, 2022.

The ASU could be adopted no later than December 1, 2022 with early adoption permitted.

The ASU was adopted as of January 1, 2023 and did no t have a material impact on the Company’s results of operations or liquidity.

As discussed further in Note 9 and pursuant to the Third Amendment to Amended and Restated Credit Agreement dated as of April 26, 2023, the Company amended its credit facility to replace LIBOR with the secured overnight financing rate as administered by the Federal Reserve Bank of New York (“SOFR”) as the benchmark reference rate for loans under its credit facility.

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Recently Issued Accounting Pronouncements

The amendments in the ASU require, among other things, disclosure of significant segment expenses that are regularly provided to an entity's chief operating decision maker (“CODM”) and a description of other segment items (the difference between segment revenue less the segment expenses disclosed under the significant expense principle and each reported measure of segment profit or loss) by reportable segment, as well as disclosure of the title and position of the CODM, and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources.

Annual disclosures are required for fiscal years beginning after December 15, 2023 and interim disclosures are required for periods within fiscal years beginning after December 15, 2024.

Retrospective application is required, and early adoption is permitted.

These requirements will result in expanded disclosures.

In December 2023, the FASB issued ASU 2023-09, Improvement to Income Tax Disclosures, which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation, and modifies other income tax-related disclosures.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, may be applied prospectively or retrospectively, and allows for early adoption.

These requirements are no t expected to have an impact on the Company's financial statements and will expand income tax disclosures.

These requirements are not expected to have a material impact on the Company’s financial statements and will expand income tax disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses.

The new guidance is intended to provide investors more detailed disclosures around specific types of expenses.

The new disclosures require certain details for expenses presented on the face of the Consolidated Statements of Operations as well as selling expenses to be presented in the notes to the financial statements.

ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted.

The disclosure updates are required to be applied prospectively with the option for retrospective application.

The Company is currently assessing the impact and timing of adopting the updated provisions.

Amounts reported on the Company’s Consolidated Balance Sheets for operating leases were as follows:

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Operating lease assets, net

Short-term operating lease liabilities (in accrued expenses )

Short-term operating lease liabilities

Long-term operating lease liabilities

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The Company sublet a portion of its corporate headquarters space in Frisco, Texas in November 2022 to a third party under a two-year sublease term for a monthly base rent of $ 0.1 million.

Acqui sitions

The sublease expired in January 2025 .

As the result, the Company recorded $ 5.0 million in impairment charges on operating lease assets, included within general administrative expenses.

Of the $ 5.0 million in impairment charges on operating lease assets recorded, $ 2.2 million in exit charges was included.

Public Offering

On June 28, 2024, the Company completed a public offering of an aggregate 1,725,000 shares of common stock, par value $ 0.001 per share, including 225,000 shares of common stock sold pursuant to the exercise in full by the underwriters of their option to purchase additional shares, at a public offering price of $ 108.00 per share (the “Public Offering”).

The Company received net proceeds of approximately $ 175.6 million, after deducting underwriting discounts and estimated offering expenses of approximately $ 10.7 million.

The Company used approximately $ 81.4 million from the net proceeds of the Public Offering for the repayment of indebtedness outstanding under its credit facility and may use any remaining net proceeds of the Public Offering for general corporate purposes, including the Gentiva Acquisition and any future acquisitions or investments.

The Public Offering resulted in an increase to additional paid in capital of approximately $ 175.6 million on the Company’s Consolidated Balance Sheets at December 31, 2024.

The Company’s acquisitions have been accounted for in accordance with ASC Topic 805, Business Combinations , and the resulting goodwill and other intangible assets were accounted for under ASC Topic 350, Goodwill and Other Intangible Assets .

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Management’s assessment of qualitative factors affecting goodwill for each acquisition includes estimates of market share at the date of purchase, ability to grow in the market, synergy with existing Company operations and the payor profile in the markets.

Gentiva Acquisition

On December 2, 2024, the Company completed the Gentiva Acquisition.

The purchase price was approximately $ 353.6 million, and is subject to the completion of working capital and related adjustments.

The purchase was funded with the combination of a $ 233.0 million draw on the Company’s revolving credit facility and a portion of the net proceeds of the Public Offering.

With the Gentiva Acquisition, the Company expanded its services within its personal care services segment in Arizona, Arkansas, California and North Carolina, and entered the market in Missouri and Texas.

The home health segment also was expanded in Tennessee.

The related acquisition and integration costs were $ 10.8 million and $ 1.0 million, respectively, for the year ended December 31, 2024.

These costs are included in general and administrative expenses on the Consolidated Statements of Income and were expensed as incurred.

Based upon management’s valuations, which are preliminary and subject to completion of working capital adjustments, the fair values of the assets and liabilities acquired are as follows:

(Amounts in Thousands)

Identifiable intangible assets

Accounts receivable

Property and equipment

Operating lease assets, net

Other current assets

Accounts payable

Accrued payroll

Operating lease liabilities, total

Deferred tax liabilities, net

Tota purchase price

Identifiable intangible assets acquired includ ed $ 4.9 million in a trade name, $ 23.0 million of definite-lived state licenses and $ 0.7 million of indefinite-lived state licenses.

The preliminary estimated fair value of identifiable intangible assets was determined with the assistance of a valuation specialist, using Level 3 inputs as defined under ASC Topic 820.

The fair value analysis and related valuations reflect the conclusions of management.

All estimates, key assumptions, and forecasts were either provided by or reviewed by the Company.

The goodwill and intangible assets acquired are deductible for tax purposes.

The Gentiva Acquisition accounte d for $ 22.6 million of net service revenues and $ 3.1 million of operating income for the year ended December 31, 2024.

Tennessee Quality Care

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The related acquisition and integration costs were $ 2.1 million and $ 1.0 million, respectively, for the year ended December 31, 2023.

The se costs are included in general and administrative expenses on the Consolidated Statements of Income and were expensed as incurred.

Based upon management’s valuations, which are preliminary and subject to completion of working capital adjustments, the fair values of the assets and liabilities acquired are as follows:

These costs are included in general and administrative expenses on the Consolidated Statements of Income and were expensed as incurred.

Based upon management’s valuations, the fair values of the assets and liabilities acquired are as follows:

(Amounts in Thousands)

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These costs are included in general and administrative expenses on the Consolidated Statements of Income and were expensed as incurred.

Based upon management’s valuations, which are preliminary and subject to completion of working capital adjustments, the fair values of the assets and liabilities acquired are as follows:

Based upon management’s valuations, the fair values of the assets and liabilities acquired are as follows:

(Amounts in Thousands)

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JourneyCare accounted for $ 47.2 million of net service revenues and $ 9.1 million of operating income for the year ended December 31, 2022.

Armada Skilled Homecare

On August 1, 2021, we completed the acquisition of Armada Skilled Homecare of New Mexico LLC, Armada Hospice of New Mexico LLC and Armada Hospice of Santa Fe LLC (collectively, “Armada”) for approximately $ 29.7 million, including the amount of acquired excess cash held by Armada at the closing of the acquisition (approximately $ 0.7 million).

The purchase of Armada was funded with the Company’s revolving credit facility.

With the purchase of Armada, the Company expanded its home health and hospice services in the state of New Mexico.

The related acquisition and integration costs were $ 0.4 million and $ 0.5 million, respectively, for the year ended December 31, 2021.

These costs are included in general and administrative expenses on the Consolidated Statements of Income and were expensed as incurred.

Based upon management’s final valuations, the fair values of the assets and liabilities acquired are as follows:

Identifiable intangible assets

Property and equipment

Accounts payable

Accrued payroll

Total purchase price

Identifiable intangible assets acquired included $ 0.6 million of non-competition agreements with estimated useful lives of five yea rs and $ 0.4 million of indefinite-lived state licenses.

Th e estimated fair value of identifiable intangible assets was determined with the assistance of a valuation specialist, using Level 3 inputs as defined under ASC Topic 820.

The fair value analysis and related valuations reflect the conclusions of management.

All estimates, key assumptions, and forecasts were either provided by or reviewed by the Company.

The goodwill and intangible assets acquired are deductible for tax purposes.

Other Acquisitions

On March 9, 2024, we completed our acquisition of the operations of Upstate for $ 0.4 million, with funding provided by available cash.

With the purchase of Upstate, the Company expanded its personal care services segment in South Carolina.

On January 1, 2023, we completed the acquisition of CareStaff for approximately $ 1.0 million, with funding provided by available cash.

With the purchase of CareStaff, the Company expanded its personal care services segment in Florida and recorded goodwill of $ 0.6 mill ion.

With the purchase of CareStaff, the Company expanded its personal care services segment in Florida and recorded goodwill of $ 0.6 million.

On October 1, 2022 , we completed the acquisition of Apple Home for approximately $ 12.7 million, with funding provided by drawing on the Company’s revolving credit facility.

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With the purchase of Apple Home, the Company expanded clinical services for its home health segment in Illinois and recorded goodwill of $ 8.9 million.

On October 1, 2021, we completed the acquisition of Summit Home Health, LLC (“Summit”) for approximately $ 8.1 million, with funding provided by available cash.

With the purchase of Summit, we added clinical services to our home health segment in Illinois and recorded goodwill of $ 6.5 million.

For the year ended December 31, 2024, the following table contains unaudited pro forma Consolidated Income Statement information of the Company as if the Gentiva Acquisition closed on January 1, 2023.

For the year ended December 31, 2023, the following table contains unaudited pro forma Consolidated Income Statement information of the Company as if the acquisition of Tennessee Quality Care closed on January 1, 2022.

For the year ended December 31, 2022, the following table contains unaudited pro forma Consolidated Income Statement information of the Company as if the acquisition of JourneyCare closed on January 1, 2021.

For the year ended December 31, 2021, the following table contains unaudited pro forma Consolidated Income Statement information of the Company as if the acquisition of Armada closed on January 1, 2020.

For the Years Ended December 31,

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The unaudited pro forma financial information does not reflect the impact of future events that may occur after the acquisition, such as anticipated cost savings from operating synergies.

Effective May 20, 2024, the Company entered into a definitive asset purchase agreement to sell all of the Company’s New York operations for a purchase price of up to $ 23.0 million in cash, subject to certain adjustments, including adjustments for future operating requirements (the “New York Asset Sale”).

The purchase price of up to $ 23.0 million includes 50 % cash consideration, paid out as an initial payment of $ 4.6 million, $ 6.9 million paid pro rata as a deferred payment as caregivers are transferred and 50 % in the form of contingent consideration for the Company’s CDPAP business.

The Company entered into a consulting agreement with the purchaser effective May 20, 2024, as the transfer of clients and caregivers and payment for assets pursuant to the New York Asset Sale is occurring over time as regulatory approvals are received, coordination of the transfer of clients and caregivers occurs, and the change of control takes place.

The Company determined that the consulting agreement gave it the ability to control the business.

In October 2024, the Company determined that it no longer controlled the business as it transferred more than 50 % of the clients and caregivers and therefore qualified for sale consideration of the New York Asset Sale.

As a result, the Company deconsolidated the results of its New York operations and recorded a gain on divestiture of $ 3.7 million during the year ended December 31, 2024.

The gain is reflected within general and administrative expenses on the consolidated statement of operations.

In connection with this transaction, the Company will cease operations in New York.

During the year ended December 31, 2024, the Company recorded $ 1.7 millio n in consulting fees and received a $ 4.6 million initial payment on the acquisition and deferred payments of $ 0.8 million, totaling $ 5.4 million related to the pro rata portion of caregivers transferred to purchaser.

The remaining $ 6.1 million due from the seller as of December 31, 2024 is reflected within prepaid expenses and other current assets on the consolidated balance sheets.

No amount was recorded related to the CDPAP business contingent consideration.

The New York Asset Sale did not qualify as a discontinued operation because it did not represent a strategic shift that has or will have a major effect on the Company’s operation or financial results.

Goodwill and intangible assets of $ 2.9 million and $ 4.2 million, respectively were derecognized in connection with the divestiture.

The carrying amounts of the assets and liabilities associated with our New York personal care operations included in our Consolidated Balance Sheets as of December 31, 2024 were as follows (amounts in thousands):

December 31, 2024

Current assets

Accounts receivable, net of allowances

Prepaid expenses and other current assets

Total current assets

Property and equipment, net of accumulated depreciation and amortization

Intangibles, net of accumulated amortization

Operating lease assets, net

Total other assets

Current liabilities

Accounts payable

Accrued payroll

Accrued expenses

Operating lease liabilities, current portion

Total current liabilities

Long-term liabilities

Operating lease liabilities, long-term portion

Total liabilities

Property and Equipment

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accumulated depreciation and amortization

Computer software includes $ 1.6 million of internally developed software for both years ended December 31, 2023 and 2022 .

Computer software includes $ 1.3 million and $ 1.6 million of internally developed software for the years ended December 31, 2024 and 2023, respectively.

Depreciation and amortization expense totaled $ 6.6 million , $ 6.9 million and $ 6.8 million for the years ended December 31, 2024, 2023 and 2022 , respectively.

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Goodwill at December 31, 2024

In 2023, the Company recognized goodwill in the hospice and home health segments of $ 35.0 million and $ 44.3 million, respectively, related to the acquisition of Tennessee Quality Care and $ 0.6 million related to the acquisition of CareStaff in the personal care services segment.

In connection with the acquisition of JourneyCare in 2022, the Company recognized goodwill in its hospice segment of $ 69.4 million and $ 8.9 million with the acquisition of Apple Home in 2022 in our home health segment.

In 2024, the Company recognized goodwill in the personal care services segment of $ 292.2 million related to the acquisition of Upstate and the Gentiva Acquisition and recognized goodwill in the home health segment of $ 18.1 million related to the Gentiva Acquisition.

In connection with the acquisition of Tennessee Quality Care in 2023, the Company recognized goodwill in its hospice and home health segments of $ 35.0 million and $ 44.3 million, respectively.

The Company also recognized goodwill of $ 0.6 million related to the CareStaff acquisition in the personal care services segment in 2023.

Goodwill adjustments to previously recorded goodwill are generally related to accounts receivable and accrued expenses based on the final valuations.

See Note 3 to the Notes to Consolidated Financial Statements for additional information regarding the acquisitions made by the Company in 2022 and 2023.

See Note 4 to the Notes to Consolidated Financial Statements for additional information regarding the acquisitions made by the Company in 2023 and 2024, and Note 5 for additional information regarding the divestiture for New York Asset Sale.

The Company’s identifiable intangible assets consist of customer and referral relationships, trade names and trademarks, non-competition agreements and state licenses.

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The determination of fair value in the Company’s goodwill impairment analysis is based on an estimate of fair value for each reporting unit utilizing known and estimated inputs at the evaluation date.

Some of those inputs include, but are not limited to, the most recent price of the Company’s common stock and fair value of long term debt, estimates of future revenue and expense growth, estimated market multiples, expected capital expenditures, income tax rates and cost of invested c apital.

Significant assumptions used in the analysis included a 10.0 % discount rate and long-term revenue growth rates that ranged from 3.5 % to 5.8 %.

Some of those inputs include, but are not limited to, the most recent price of the Company’s common stock and fair value of long term debt, estimates of future re venue and expense growth, estimated market multiples, expected capital expenditures, income tax rates and cost of invested capital.

Significant assumptions used in the analysis included a 9.0 % discount rate and a 3.5 % long-term revenue growth rate.

The Company did no t record any impairment charges for the years ended December 31, 2024, 2023 or 2022.

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Total intangible assets

During the year ended December 31, 2024, the Company acquired state licenses and a trade name of $ 23.0 million and $ 4.9 million, respectively, in its personal care services segment related to the Gentiva Acquisition.

The Company also acquired indefinite-lived state licenses of $ 0.7 million in its home health segment in connection with the Gentiva Acquisition.

During the year ended December 31, 2023, the Company acquired indefinite-lived state licenses and a trade name of $ 7.6 million and $ 2.1 million, respectively, in its hospice segment related to the acquisition of Tennessee Quality Care.

The Company also acquired indefinite-lived state licenses and trade name of $ 11.6 million and $ 5.4 million, respectively, in its home health segment in connection with the Tennessee Quality Care acquisition.

During the year ended December 31, 2022, the Company acquired indefinite-lived state licenses and trade names of $ 4.8 million and $ 9.0 million, respectively, related to the acquisition of JourneyCare.

During the year ended December 31, 2022, the Company acquired indefinite lived state licenses and trade names of $ 1.2 million and $ 0.1 million, respectively, related to the acquisition of Apple Home.

Amortization expense related to the identifiable intangible assets amounted to $ 6.7 million , $ 7.1 million and $ 7.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.

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(Amounts in Thousands)

Income tax receivable

Prepaid payroll

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Total prepaid expenses and other current assets

(1) Include d $ 6.1 million related to NY divestiture deferred payments as of December 31, 2024 .

Accrued expenses consisted of the following:

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Total accrued expenses

(1) Represents the deferred portion of payments received from payors for COVID-19 reimbursements which will be recognized as we incur specific COVID-19 related expenses (including expenses related to securing and maintaining adequate personnel) or will be returned to the extent such related expenses are not incurred.

(2) Represents the deferred portion of payments received from payors for COVID-19 reimbursements which was recognized as we incurred specific COVID-19 related expenses (including expenses related to securing and maintaining adequate personnel).

Long-Term Debt

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Revolving loan under the credit facility

Term loan under the credit facility

Less unamortized issuance costs

Less current maturities

Long-term debt

Amended and Restated Senior Secured Credit Facility

On October 31, 2018, the Company entered into the Amended and Restated Credit Agreement, with certain lenders and Capital One, National Association, as a lender and as agent for all lenders, as amended by the First Amendment to Amended and Restated Credit Agreement, dated as of September 12, 2019, as further amended by the Second Amendment to Amended and Restated Credit Agreement, dated as of July 30, 2021, and as further amended by the Third Amendment to Amended and Restated Credit Agreement, dated as of April 26, 2023 (as described below, the “Third Amendment”) (as amended, the “Credit Agreement”, as used throughout this Annual Report on Form 10-K, “credit facility” shall mean the credit facility evidenced by the Credit Agreement).

On October 31, 2018, the Company entered into the Amended and Restated Credit Agreement, with certain lenders and Capital One, National Association, as a lender and as agent for all lenders, as amended by the First Amendment to Amended and Restated Credit Agreement, dated as of September 12, 2019, as further amended by the Second Amendment to Amended and Restated Credit Agreement, dated as of July 30, 2021, as further amended by the Third Amendment to Amended and Restated Credit Agreement, dated as of April 26, 2023 (as described below, the “Third Amendment”), and as further amended by the Fourth Amendment to Amended and Restated Credit Agreement, dated as of October 22, 2024 (as described below, the “Fourth Amendment”) (as amended, the “Credit Agreement”, as used throughout this Annual Report on Form 10-K, “credit facility” shall mean the credit facility evidenced by the Credit Agreement).

The credit facility consists of a $ 650.0 million revolving credit facility and a $ 150.0 million incremental loan facility, which incremental loan facility may be for term loans or an increase to the revolving loan commitments.

The maturity of this credit facility is July 30, 2028 .

On April 26, 2023, the Company entered into the Third Amendment to replace LIBOR with SOFR as the benchmark reference rate for loans under its credit facility.

On April 26, 2023, the Company entered into the Third Amendment to replace LIBOR with the Secured Overnight Financing Rate (“SOFR”) as the benchmark reference rate for loans under its credit facility.

The Third Amendment did not amend any other terms of the Credit Agreement.

The transition to SOFR did not and is not expected to have a material impact on the Company’s results of operations or liquidity.

Interest on the credit facility may be payable at (x) the sum of (i) an applicable margin ranging from 0.75 % to 1.50 % based on the applicable senior net leverage ratio plus (ii) a base rate equal to the greatest of (a) the rate of interest last quoted by The Wall Street Journal as the “prime rate,” (b) the sum of the federal funds rate plus a margin of 0.50 % and (c) the sum of Term SOFR (as published by the CME Group Benchmark Administrative Limited) for an interest period of one month for such applicable day plus 0.10 % (not to be less than 0.00 %), plus a margin of 1.00 % or (y) the sum of (i) an applicable margin ranging from 1.75 % to 2.50 % based on the applicable senior net leverage ratio plus (ii) the rate per annum equal to the sum of Term SOFR (as published by the CME Group Benchmark Administrative Limited) for the applicable interest period plus 0.10 % (not to be less than zero ).

On October 22, 2024, the Company entered into the Fourth Amendment to, among other things, (a) increase the Company’s revolving credit facility to an aggregate amount of $ 650.0 million, (b) increase the Company’s incremental loan facility to an aggregate amount of $ 150.0 million, and (c) extend the maturity date of the credit facility from July 30, 2026 to July 30, 2028 .

Interest on the credit facility may be payable at (x) the sum of (i) an applicable margin ranging from 0.75 % to 1.50 % based on the applicable senior net leverage ratio plus (ii) a base rate equal to the greatest of (a) the rate of interest last quoted by The Wall Street Journal as the “prime rate,” (b) the sum of the federal funds rate plus a margin of 0.50 % and (c) the sum of Term SOFR (as published by the CME Group Benchmark Administrative Limited) for an interest period of one month for such applicable day (not to be less than 0.00 %), plus a margin of 1.00 % or (y) the sum of (i) an applicable margin ranging from 1.75 % to 2.50 % based on the applicable senior net leverage ratio plus (ii) the rate per annum equal to the sum of Term SOFR (as published by the CME Group Benchmark Administrative Limited) for the applicable interest period (not to be less than 0.00 %).

Swing loans may not be SOFR loans.

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The Credit Agreement contains customary affirmative covenants regarding, among other things, the maintenance of records, compliance with laws, maintenance of permits, maintenance of insurance and property and payment of taxes.

The Credit Agreement also contains certain customary financial covenants and negative covenants that, among other things, include a requirement to maintain a minimum Interest Coverage Ratio (as defined in the Credit Agreement), a requirement to stay below a maximum Total Net Leverage Ratio (as defined in the Credit Agreement) and a requirement to stay below a maximum permitted amount of capital expenditures.

The Credit Agreement also contains certain customary financial covenants and negative covenants that, among other things, include a requirement to maintain a minimum Interest Coverage Ratio (as defined in the Credit Agreement) and a requirement to stay below a maximum Total Net Leverage Ratio (as defined in the Credit Agreement).

The Credit Agreement also contains restrictions on guarantees, indebtedness, liens, investments and loans, subject to customary carve outs, a restriction on dividends (provided that Addus HealthCare may make distributions to the Company in an amount that does not exceed $ 10.0 million in any year absent of an event of default, plus limited exceptions for tax and administrative distributions), a restriction on the ability to consummate acquisitions (without the consent of the lenders) under its credit facility subject to compliance with the Total Net Leverage Ratio (as defined in the Credit Agreement) thresholds, restrictions on mergers, dispositions of assets, and affiliate transactions, and restrictions on fundamental changes and lines of business.

As of December 31, 2024, the Company was in compliance with all financial covenants under the Credit Agreement.

During the twelve months ended December 31, 2023 , the Company drew approximately $ 110.0 million under its credit facility to fund, in part, the Tennessee Quality Care acquisition.

During the twelve months ended December 31, 2024 , the Company (i) drew approximately $ 233.0 million under its credit facility to fund, in part, the Gentiva Acquisition and (ii) repaid $ 136.4 million under the revolving credit facility.

At December 31, 2024, the Company had a total of $ 223.0 million of revolving loans, with an interest rate of 6.34 % , outstanding on its credit facility.

After giving effect to the amount drawn on its credit facility, approximately $ 8.0 million of outstanding letters of credit and borrowing limits based on an advance multiple of Adjusted EBITDA (as defined in the Credit Agreement), the Company had $ 577.7 million of capacity and $ 346.6 million available for borrowing under its credit facility.

During the twelve months ended December 31, 2022, the Company drew approximately $ 47.0 million under its credit facility to fund in part, the JourneyCare and Apple Home acquisitions.

During the twelve months ended December 31, 2023, the Company drew approximately $ 110.0 million under its credit facility to fund, in part, the Tennessee Quality Care acquisition.

At December 31, 2023, the Company had a total of $ 126.4 million of revolving loans, with an interest rate of 7.21 %, outstanding on its credit facility.

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For the Years Ended December 31,

(Amounts in Thousands)

Federal income tax at statutory rate

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Nondeductible permanent items

Stock acquisition cost

Federal/state return to provision

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The effective income tax rate was 25.9 %, 23.1 % and 23.5 % for the years ended December 31, 2024, 2023 and 2022, respectively.

The difference between our federal statutory and effective income tax rates was principally due to the inclusion of state taxes and non-deductible compensation, partially offset by an excess tax benefit and the use of federal employment tax credits.

The excess tax expense/benefit is a discrete item, related to the vesting of equity shares, which requires the Company to recognize the expense or benefit fully in the period.

The difference between our federal statutory and effective income tax rates was principally due to the inclusion of state taxes, non-deductible compensation, and non-deductible permanent items, partially offset by the use of federal employment tax credits.

The Company is subject to taxation in the jurisdictions in which it operates.

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These individual annual limitations are cumulative in that any shares of common stock or cash for which Awards are permitted to be granted to a Participant during a fiscal year are not covered by an Award in that fiscal year (such shortfall, the “Shortfall Amount”), the number of shares of common stock (or amount of cash, as the case may be) will automatically increase in the subsequent fiscal years during the term of the A&R 2017 Plan until the earlier of the time when the Shortfall Amount has been granted to the Participant, or the end of the third fiscal year following the year to which such Shortfall Amount relates.

At December 31, 2023, there wer e 854,003 shares of c ommon stock available for future grant under the A&R 2017 Plan.

At December 31, 2024, there were 707,772 shares of common stock available for future grant under the A&R 2017 Plan.

Awards made under the 2017 Plan (and the 2009 Plan) that are forfeited, canceled, settled in cash or otherwise terminated without a distribution of shares to a Participant will be deemed available for Awards under the A&R 2017 Plan;

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Exercisable, end of period

The weighted-average estimated fair value of employee stock options granted was calculated using the Black-Scholes Option Pricing Model in 2022 and 2021 .

The Company did no t grant any stock options in 2023.

The weighted-average estimated fair value of employee stock options granted was calculated using the Black-Scholes Option Pricing Model in 2022 .

The Company did no t grant any stock options in 2024 and 2023.

The related assumptions follow:

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Dividend yield

Stock option compensation expense totale d $ 0.9 million, $ 1.2 million and $ 1.4 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Stock option compensation expense tot aled $ 0.5 million, $ 0.9 million and $ 1.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.

As of December 31, 2024 , there was $ 0.5 million of total unrecognized compensation cost that is expected to be recognized over a weighted average period of 1.1 years.

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Segment Information

Operating segments are defined as components of a company that engage in business activities from which it may earn revenues and incur expenses, and for which separate financial information is available and is regularly reviewed by the Company’s chief operating decision makers, to assess the performance of the individual segments and make decisions about resources to be allocated to the segments.

The Company operates as a multi-state provider of three distinct but related business segments providing in-home services.

The Company identifies its Chief Executive Officer and Chief Operating Officer together as CODM to assess the performance of the individual segments and make decisions about resources to be allocated to the segments.

The Company operates as a multi-state provider of three business segments providing in-home services.

In its personal care segment, the Company provides non-medical assistance with activities of daily living, primarily to persons who are at increased risk of hospitalization or institutionalization, such as the elderly, chronically ill or disabled.

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In its home health segment, the Company provides services that are primarily medical in nature to individuals who may require assistance during an illness or after hospitalization and include skilled nursing and physical, occupational and speech therapy.

The tables below set forth information about the Company’s reportable segments for the years ended December 31, 2023, 2022 and 2021 along with the items necessary to reconcile the segment information to the totals reported in the accompanying consolidated financial statements.

Segment assets are not reviewed by the Company’s chief operating decision maker function and therefore are not disclosed below.

The Company’s method for measuring profitability on each reportable segment basis is the same as those described in the summary of significant accounting policies and its CODM frequently reviews the actual result to budget variance to allocate resources to the segment and assess its performance.

Segment operating income consists of revenue generated by a segment, less the direct costs of service revenues and general and administrative expenses that are incurred directly by the segment.

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These costs include accounting, finance, human resources, legal, information technology, corporate office support and facility costs and overall corporate management.

The CODM does not review disaggregated assets by segment.

The measure of segment assets is reported on the balance sheet as total consolidated assets.

The tables below set forth information about the Company’s reportable segments, including significant expenses, for the years ended December 31, 2024, 2023 and 2022 along with the items necessary to reconcile the segment information to the totals reported in the accompanying consolidated financial statements.

For the Year Ended December 31, 2024

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Net service revenues

Cost of services revenues

General and administrative expenses

Direct service personnel

General and administrative salaries, wages and benefits

Other segment items 1

Segment operating income

Segment reconciliation:

Items not allocated at segment level:

Other general and administrative expenses

Depreciation and amortization

Interest income

Interest expense

Income before income taxes

(2) Other segment items include other costs for direct service personnel, office expense, licenses & taxes, communication, medical director fees, travel and bad debt expense.

For the Year Ended December 31, 2023

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Net service revenues

Cost of services revenues

General and administrative expenses

Direct service personnel

General and administrative salaries, wages and benefits

Other segment items 1

Segment operating income

Segment reconciliation:

Items not allocated at segment level:

Other general and administrative expenses

Depreciation and amortization

Interest income

Interest expense

Income before income taxes

(1) Other segment items include other costs for direct service personnel, office expense, licenses & taxes, communication, medical director fees, travel and bad debt expense.

For the Year Ended December 31, 2022

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Net service revenues

Cost of services revenues

General and administrative expenses

Direct service personnel

General and administrative salaries, wages and benefits

Other segment items 1

Segment operating income

For the Years Ended December 31,

(Amounts in Thousands)

Segment reconciliation:

Total segment operating income

Items not allocated at segment level:

4 unchanged sentences

Income before income taxes

Significant Payors

(1) Other segment items include other costs for direct service personnel, office expense, licenses & taxes, communication, medical director fees, travel and bad debt expense.

Significant Payor s

For 2024, 2023 and 2022, the Company’s revenue by payor type was as follows:

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Total home health segment net service revenues

The Company derives a significant amount of its revenue from its operations in Illinois, New Mexico and New York.

The Company has derived a significant amount of its revenue from its operations in Illinois, New Mexico and New York.

The percentages of segment revenue for each of these significant states for 2024, 2023 and 2022 were as follows:

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Total personal care segment net service revenues

(1) The selection process for the New York Consumer Directed Personal Assistance Program (“CDPAP”) fiscal intermediaries has changed significantly in recent years and the program continues to be an area of focus for New York governmental authorities.

As a result of the changes and uncertainty in the state, the Company determined that its New York personal care operations no longer fit its growth strategy and is divesting these operations.

See Note 5 to the Notes to Consolidated Financial Statements, Divestiture , for additional details regarding our divestiture.

For the Years Ended December 31,

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However, the Company decided at that time to suspend materially all of its new fee-for-service patient admissions in the CDPAP through County Social Service Departments.

On June 6, 2023, the New York State Department of Health notified the Company that it had received a contract award.

Under this contract, the Company is providing services to all current payors and has resumed new fee-for-service patient admissions through County Social Service Departments in the CDPAP.

On June 6, 2023, the New York State Department of Health notified the Company that it had received a contract award, under which the Company provided services during 2023 and 2024.

The CDPAP continues to be targeted for changes by New York governmental authorities, however.

For example, the governor’s most recent update on the state budget contained proposals that could adversely affect the Company’s ability to participate in the CDPAP.

The Company recognized approximat ely $ 40.7 million from the program for the year ended December 31, 2023.

Government Actions to Mitigate COVID-19’s Impact

The acute phase of the COVID-19 pandemic has faded, but the future course of COVID-19 remains uncertain.

We will continue to closely monitor the impact of COVID-19 on all aspects of our business, including the impacts to our employees, patients and suppliers.

In recognition of the significant threat to the liquidity of financial markets posed by the COVID-19 pandemic, the Federal Reserve and Congress took dramatic actions to provide liquidity to businesses and the banking system in the United States, including relief for healthcare providers in the CARES Act, which was expanded by the Paycheck Protection Program and Health Care Enhancement (“PPPHCE”) Act, and the Consolidated Appropriations Act (“CAA”), as well as the ARPA.

See Note 5 to the Notes to Consolidated Financial Statements, Divestiture, for additional details regarding our divestiture of our operations in New York, including CDPAP operations.

ARPA Spending Plans

In recognition of the significant threat to the liquidity of financial markets and challenges to healthcare providers posed by the COVID-19 pandemic, the Federal Reserve and Congress took dramatic actions to provide liquidity to businesses and the banking system in the United States and to assist healthcare providers, including through relief legislation such as the American Rescue Plan Act of 2021 (“ARPA”).

The ARPA provides for $ 350 billion in relief funding for eligible state, local, territorial, and Tribal governments to mitigate the fiscal effects of the COVID-19 public health emergency.

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Funds may be subject to recoupment if not expended or if they are expended on non-approved uses.

The Company received state funding provided by the ARPA in an aggregate amount of $ 3.7 million and $ 23.4 million for the years ended December 31, 2023 and 2022, respectively.

The Company recorded revenue of $ 0.3 million and $ 1.9 million and related cost of service revenues of $ 0.1 million and $ 1.5 million for certain states that met the revenue recognition criteria for the years ended December 31, 2023 and 2022, respectively.

The Company deferred the remaining $ 3.4 million and $ 21.5 million for the years ended December 31, 2023 and 2022, respectively, which was received from states with specific spending plans and reporting requirements.

The Company utilized $ 10.5 million and $ 8.6 million of these funds during the years ended December 31, 2023 and 2022, respectively, primarily for caregivers and adding support to recruiting and retention efforts.

The Company received state funding provided by the ARPA in an aggregate amount o f $ 15.7 million a nd $ 3.7 million for the years ended December 31, 2024 and 2023, respectively.

The Company u tilized $ 10.2 million and $ 10.5 million of these funds during the years ended December 31, 2024 and 2023, respectively, pri marily for caregivers and adding support to recruiting and retention efforts.

The deferred portion of ARPA funding was $ 11.2 million and $ 5.8 million as of December 31, 2024 and 2023, respectively, which is included within Government stimulus advances on the Company’s Consolidated Balance Sheets.

Provider Relief Funds

In addition, the CARES Act authorized funding to be distributed through the Provider Relief Fund to eligible providers, including public entities and Medicare- and/or Medicaid-enrolled providers.

In November 2020, the Company received grants in an aggregate principal amount of $ 13.7 million from the Provider Relief Fund.

The Company utilized $ 12.3 million remaining of these funds during the year ended December 31, 2021 for healthcare related expenses, including retention payments, attributable to COVID-19 that were unreimbursed by other sources.

The Company documented the use of such funds in 2021 in reports to the U.S.

Department of Health and Human Services ( “HHS” ), as required, and submitted the reports to HHS prior to the deadline of March 31, 2022.

During the year ended December 31, 2023, we submitted an unmodified audit report to HHS for 2022 in accordance with Generally Accepted Government Auditing Standards, as required for commercial organizations that received and expended total awards of $ 750,000 or more.

Medicare sequester

The CARES Act and related laws temporarily lifted the Medicare sequester which would have otherwise reduced payments to Medicare providers by 2 %, as required by the Budget Control Act of 2011, from May 1, 2020, through March 31, 2022.

The sequestration payment adjustment was phased back in with a 1 % reduction beginning April 1, 2022, and returned to 2 % on July 1, 2022.

These sequestration cuts have been extended through April 2032.

The ARPA increases the federal budget deficit in a manner that triggers an additional statutorily mandated sequestration under the Pay-As-You-Go Act of 2010 (“PAYGO Act”).

As a result, an additional Medicare payment reduction of up to 4 % was required to take effect in January 2022.

However, Congress delayed implementation of this payment reduction until 2025.

In the hospice segment, Medicare sequester relief resulted in an increase in net service revenues of $ 0.0 million and $ 1.4 million for the years ended December 31, 2023 and 2022, respectively.

In the home health segment, Medicare sequester relief resulted in an increase in net service revenues of $ 0.0 million and $ 0.3 million for the years ended December 31, 2023 and 2022, respectively.

Payroll tax deferral

The CARES Act also provide s for certain federal income and other tax changes, including the deferral of the employer portion of Social Security payroll taxes through December 31, 2021.

The payroll tax deferral requires that the deferred payroll taxes be paid over two years , with half of the eligible deferred amount required to be paid by December 31, 2021 and the other half by December 31, 2022.

The Company received a cash benefit of approximately $ 7.1 million related to the deferral of employer payroll taxes for 2020 under the CARES Act, for the period April 2, 2020 through June 30, 2020.

Effective July 1, 2020, the Company began paying its deferred portion of employer Social Security payroll taxes and re paid $ 4.1 mill ion and $ 3.0 million as of December 31, 2022 and 2021 respectively.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures