NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. The Company
Digirad delivers convenient, effective, and efficient healthcare solutions on an as needed, when needed, and where needed basis. Digirad's diverse portfolio of mobile healthcare solutions and medical equipment and services, including diagnostic imaging and patient monitoring, provides hospitals, physician practices, and imaging centers throughout the United States access to technology and services necessary to provide exceptional patient care in the rapidly changing healthcare environment.
On January 1, 2016, we acquired Project Rendezvous Holding Corporation, the holding company of DMS Health Technologies. DMS Health Technologies (“DMS Health”) offers mobile diagnostic imaging across multiple imaging modalities, including Positron Emission Tomography (“PET”), Computed Tomography (“CT”), Magnetic Resonance Imaging (“MRI”) as well as other imaging and healthcare services. These services are provided to regional and rural hospitals and institutions throughout the United States. In addition, DMS Health, through an exclusive relationship with Philips Healthcare, sells and services Philips' imaging and patient monitoring equipment within a defined region of the upper Midwest region of the United States.
With the acquisition of DMS Health, we now operate the Company in
four
reportable segments:
1.
Diagnostic Services
2.
Diagnostic Imaging
3.
Mobile Healthcare
4.
Medical Device Sales and Service
These four reportable segments are collectively referred to herein as the “Company.” See Note 11 to the unaudited condensed consolidated financial statements for more information related to the Company's segments. The accompanying condensed consolidated financial statements include the operations of all reportable segments. Intercompany accounts and transactions are accounted for at cost and have been eliminated in consolidation. All our long-lived assets are located in the United States and substantially all of our revenues arise from sales in the United States.
Basis of Presentation
The unaudited condensed consolidated financial statements included in this Form 10-Q have been prepared in accordance with the U.S. Securities and Exchange Commission ("SEC") instructions for Quarterly Reports on Form 10-Q. Accordingly, the condensed consolidated financial statements are unaudited and do not contain all the information required by U.S. generally accepted accounting principles ("GAAP") to be included in a full set of financial statements. The unaudited condensed consolidated balance sheet at
December 31, 2015
has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for a complete set of financial statements. The audited consolidated financial statements for our fiscal year ended
December 31, 2015
, filed with the SEC on Form 10-K on March 1, 2016, include a summary of our significant accounting policies and should be read in conjunction with this Form 10-Q. In the opinion of management, all material adjustments necessary to present fairly the results of operations, cash flows, and balance sheets for such periods have been included in this Form 10-Q. All such adjustments are of a normal recurring nature. The results of operations for interim periods are not necessarily indicative of the results of operations for the entire year.
Preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. By their nature, estimates are subject to an inherent degree of uncertainty. Actual results could differ from management’s estimates.
The financial results for the three and nine months ended
September 30, 2016
include the financial results of DMS Health. See Note 3 to the unaudited condensed consolidated financial statements for more information related to the acquisition of DMS Health.
Recent Accounting Pronouncements
In August 2016, the Financial Accounting Standards Board (the "FASB") issued new guidance related to the classification of certain cash receipts and cash payments on the statement of cash flows. The pronouncement provides clarification guidance on eight specific cash flow presentation issues that have developed due to diversity in practice. The issues include, but are not limited to, debt prepayment or extinguishment costs, settlement of zero-coupon debt, proceeds from the settlement of insurance claims, and cash receipts from payments on beneficial interests in securitization transactions. The pronouncement is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2017, with early adoption permitted. We are currently evaluating the impact, if any, of adopting this guidance on our financial statements.
In June 2016, the FASB issued new guidance that changes the accounting for recognizing impairments of financial assets. Under the new guidance, credit losses for certain types of financial instruments will be estimated based on expected losses. The new guidance also modifies the impairment models for available-for-sale debt securities and for purchased financial assets with
credit deterioration since their origination. This guidance will be effective for annual and interim periods beginning after December 15, 2019 with early adoption permitted beginning for periods after December 15, 2018. We are currently evaluating the impact of the guidance on our financial statements.
In March 2016, the FASB amended the existing accounting standards for how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This update is effective for annual and interim periods beginning after December 15, 2016. This guidance will be applied either prospectively, retrospectively, or using a modified retrospective transition method, depending on the area covered in this update. Early adoption is permitted. We are currently evaluating the alternative transition methods and the potential effects of the adoption of this guidance on our financial statements.
In February 2016, the FASB amended the existing accounting standards for the accounting for leases. The amendments are based on the principle that assets and liabilities arising from leases should be recognized within the financial statements. The Company is required to adopt the amendments beginning in 2019. Early adoption is permitted. The amendments must be applied using a modified retrospective transition approach and the FASB decided not to permit a full retrospective transition approach. We are currently evaluating the impact these amendments will have on our consolidated financial statements.
In January 2016, the FASB amended the existing accounting standards for the accounting for financial instruments. The amendments require equity investments, with certain exceptions, to be measured at fair value with changes in fair value recognized in net income. The new standard is effective prospectively for fiscal years beginning after December 15, 2017. We are currently evaluating the impact, if any, of adopting this guidance on our financial statements.
In September 2015, the FASB issued guidance which eliminates the requirement for an acquirer to retrospectively adjust provisional amounts recorded in a business combination to reflect new information about the facts and circumstances that existed as of the acquisition date and that, if known, would have affected measurement or recognition of amounts initially recognized. As an alternative, the amendment requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. The amendments require that the acquirer record, in the financial statements of the period in which adjustments to provisional amounts are determined, the effect on earnings of changes in depreciation, amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at the acquisition date. The new standard is effective prospectively for fiscal years beginning after December 15, 2015, including interim periods within those fiscal years. We adopted this standard in the first quarter of 2016 and this guidance was applied to the manner in which adjustments to provisional amounts in the DMS Health acquisition have been recognized (See Note 3).
In July 2015, the FASB issued guidance that amends the guidelines for the measurement of inventory from lower of cost or market to the lower of cost and net realizable value ("NRV"). NRV is defined as the estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation. Under existing standards, inventory is measured at lower of cost or market, which requires the consideration of replacement cost, NRV, and NRV less an amount that approximates a normal profit margin. This ASU eliminates the requirement to determine and consider replacement cost or NRV less an approximately normal profit margin for inventory measurement. The new standard is effective prospectively for fiscal years beginning after December 15, 2016. We are currently evaluating the impact, if any, of adopting this guidance on our financial statements.
In April 2015, the FASB issued guidance that requires debt issuance costs to be presented in the balance sheet as a direct deduction from the debt liability rather than as an asset. The update requires retrospective application and represents a change in accounting principle. The guidance does not specifically address requirements for the presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. In August 2015, the FASB issued guidance clarifying that debt issuance costs related to line-of-credit arrangements could be presented as an asset and amortized over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. The standard is effective for annual periods beginning after December 15, 2015, including interim periods within those fiscal years. We adopted this guidance in the first quarter of 2016 for the presentation of our debt issuance costs incurred in connection with our new credit facility entered into on January 1, 2016 (See Note 8).
In May 2014, the FASB issued guidance that outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers which supersedes most current revenue recognition guidance, including industry-specific guidance. The guidance provides that an entity recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance also requires additional disclosure about the nature, amount, timing, and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. The guidance allows for either full retrospective or modified retrospective adoption and is currently scheduled to become effective for us in the first quarter of 2018. We are currently evaluating the alternative transition methods and the potential effects of the adoption of this guidance on our financial statements.
Note 2. Basic and Diluted Net Income Per Share
For the
three
and
nine
months ended
September 30, 2016
and
2015
, basic net income per common share is computed by dividing net income by the weighted average number of common shares and vested restricted stock units outstanding during the period. Diluted net income per common share is calculated to give effect to all dilutive securities, if applicable, using the treasury stock method.
The following table sets forth the reconciliation of shares used to compute basic and diluted net income per share for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
(shares in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Weighted average shares outstanding - basic
|
19,618
|
|
|
19,356
|
|
|
19,532
|
|
|
19,145
|
|
Dilutive potential common stock outstanding:
|
|
|
|
|
|
|
|
Stock options
|
—
|
|
|
418
|
|
|
419
|
|
|
444
|
|
Restricted stock units
|
—
|
|
|
24
|
|
|
75
|
|
|
19
|
|
Weighted average shares outstanding - diluted
|
19,618
|
|
|
19,798
|
|
|
20,026
|
|
|
19,608
|
|
The following weighted average outstanding common stock equivalents were not included in the calculation of diluted net income per share because their effect was anti-dilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
(shares in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Stock options
|
418
|
|
|
1
|
|
|
14
|
|
|
2
|
|
Restricted stock units
|
73
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Total
|
491
|
|
|
1
|
|
|
14
|
|
|
2
|
|
Note 3. Acquisitions
DMS Health Technologies
(2016)
On January 1, 2016, pursuant to the Stock Purchase Agreement, dated as of October 13, 2015 and as amended on December 31, 2015 and June 7, 2016 (the “Purchase Agreement”), we completed the acquisition of all issued and outstanding stock of Project Rendezvous Holding Corporation ("PRHC"), the ultimate parent company of DMS Health Technologies (collectively referred to hereinafter as "DMS Health Technologies" or "DMS Health"). DMS Health Technologies offers mobile diagnostic imaging across multiple imaging modalities as well as other imaging and healthcare services. These services are provided to regional and rural hospitals and institutions throughout the United States. In addition, DMS Health, through an exclusive relationship with Philips Healthcare, sells and services Philips' imaging and patient monitoring equipment within a defined region of the upper Midwest region of the United States. With the addition of DMS Health, we added two new reportable segments to Digirad: Mobile Healthcare and Medical Device Sales and Service.
The preliminary aggregate purchase price paid at closing was approximately
$32.9 million
, which included adjustments for pre-existing debt, cash and preliminary working capital adjustments. In June 2016, we agreed on the final working capital adjustment as outlined in the Purchase Agreement. As a result of the settlement, we received proceeds of
$0.6 million
which was recorded as a reduction to goodwill in the second quarter of 2016. The adjusted preliminary purchase price after settlement of the working capital adjustment was
$32.3 million
as of
September 30, 2016
, which consisted of the following:
|
|
|
|
|
|
(in thousands)
|
|
|
Cash paid to DMS Health stockholders
|
|
$
|
31,368
|
|
Cash paid in settlement of share-based compensation awards
|
|
1,556
|
|
Working capital settlement
|
|
(600
|
)
|
Total purchase price
|
|
32,324
|
|
Less: cash and cash equivalents acquired
|
|
(6,842
|
)
|
Total purchase price, net of cash acquired
|
|
$
|
25,482
|
|
Under the terms of the Purchase Agreement, the Company paid
$1.6 million
to settle DMS Health's pre-existing employee stock award plan which included a provision for the acceleration of vesting of awards under certain circumstances in connection with a change in control. The amount paid was associated with pre-combination services and included as a component of the purchase price reflected in the table above.
The acquisition was funded with a combination of cash-on-hand and the financing made available under the credit facility with Wells Fargo Bank, National Association as further described in Note 8 of the unaudited condensed consolidated financial statements. At closing, we also paid $
9.4 million
for long-term debt outstanding on DMS Health's balance sheet, which was recognized separately from the business combination and presented as a financing activity in the statement of cash flows for the
nine
months ended
September 30, 2016
. During the
nine
months ended
September 30, 2016
and 2015, we incurred transaction and integration related costs of $
1.7 million
and
$0.7 million
, respectively, and
$3.1 million
cumulative to date. These costs are classified as general and administrative expenses in the unaudited condensed consolidated statements of comprehensive income (loss).
The acquisition was accounted for under the acquisition method of accounting for business combinations. The allocations of the purchase price below represent the estimated fair values of assets acquired and liabilities assumed, based upon the information available as of
September 30, 2016
. These estimates could be adjusted during the measurement period of up to twelve months based on further information regarding events or circumstances which existed at the acquisition date. Such changes could be significant.
The following table summarizes the allocation of the purchase price to the fair values of the assets acquired and liabilities assumed on the closing date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
As originally reported
|
|
Measurement period adjustments
|
|
As adjusted
|
Cash and cash equivalents
|
|
$
|
6,842
|
|
|
|
|
$
|
6,842
|
|
Accounts receivable
|
|
6,686
|
|
|
|
|
6,686
|
|
Inventories
|
|
324
|
|
|
|
|
324
|
|
Income taxes receivable
|
|
2,062
|
|
|
|
|
2,062
|
|
Other current and non-current assets
|
|
706
|
|
|
|
|
706
|
|
Property and equipment
|
|
26,199
|
|
|
(200
|
)
|
|
25,999
|
|
Intangible assets
|
|
10,862
|
|
|
|
|
10,862
|
|
Goodwill
|
|
4,307
|
|
|
(385
|
)
|
|
3,922
|
|
Accounts payable
|
|
(4,514
|
)
|
|
|
|
(4,514
|
)
|
Accrued expenses
|
|
(2,946
|
)
|
|
|
|
(2,946
|
)
|
Payable to former stockholders
(1)
|
|
(2,062
|
)
|
|
|
|
(2,062
|
)
|
Deferred revenue
|
|
(1,677
|
)
|
|
|
|
(1,677
|
)
|
Debt
|
|
(9,350
|
)
|
|
|
|
(9,350
|
)
|
Income taxes payable, noncurrent
|
|
(949
|
)
|
|
|
|
(949
|
)
|
Deferred tax liabilities, noncurrent
|
|
(3,566
|
)
|
|
(15
|
)
|
|
(3,581
|
)
|
Total net assets acquired
|
|
$
|
32,924
|
|
|
$
|
(600
|
)
|
|
$
|
32,324
|
|
(1)
Includes amounts payable to former PRHC stockholders related to tax refund receivables under the terms of the Purchase Agreement.
During the second quarter of 2016, in addition to the working capital settlement adjustment of
$0.6 million
recorded as a reduction to goodwill, the Company adjusted amounts related to the valuation of property and equipment that was recognized at the acquisition date to reflect new information about the facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurement of the amounts recognized as of that date. Such adjustments resulted in a net decrease of
$0.2 million
in property and equipment. Depreciation expense for the
nine
months ended
September 30, 2016
was decreased by less than
$0.1 million
to reflect the effect on earnings as a result of the change to the provisional amounts recognized.
Intangible assets are recorded at estimated fair value, as determined by management based on available information which includes a preliminary valuation prepared by an independent third party. The fair values assigned to identifiable intangible assets were determined through the use of the income approach. The major assumptions used in arriving at the estimated identifiable intangible asset values included management’s preliminary estimates of future cash flows, discounted at an appropriate rate of return as well as projected customer attrition rates. The useful lives for intangible assets were determined based upon the remaining useful economic lives of the intangible assets that are expected to contribute directly or indirectly to future cash flows.
The following table summarizes the fair value of acquired identifiable intangible assets as of the acquisition date:
|
|
|
|
|
|
|
(in thousands)
|
Weighted Average Useful Lives (in years)
|
|
Fair Value
|
Philips Contract
|
3.3
|
|
$
|
2,165
|
|
Trademarks
|
6.0
|
|
3,823
|
|
Customer relationships
|
10.0
|
|
4,874
|
|
Total intangible assets acquired, excluding goodwill
|
7.3
|
|
$
|
10,862
|
|
The goodwill arising from the acquisition relates to the synergies and economies of scale expected from combining the operations of Digirad and DMS Health. The goodwill will be allocated to our Mobile Healthcare and Medical Device Sales and Service segments upon finalization of the purchase price allocation and will not be deductible for federal and state tax reporting purposes.
DMS Health's operating results were included in the Company's consolidated results of operations beginning on January 1, 2016. Revenues and operating income for the
nine
months ended
September 30, 2016
include revenues and operating income attributable to DMS Health of
$48.1 million
and
$2.0 million
, respectively.
The following table represents the unaudited pro forma consolidated results of operations for the three and
nine
months ended
September 30, 2016
and 2015 as if the acquisition of DMS Health operations had occurred as of January 1, 2015.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
(in thousands, except per share data)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Revenues
|
$
|
31,086
|
|
|
$
|
32,674
|
|
|
$
|
94,333
|
|
|
$
|
96,157
|
|
Net income
|
$
|
29
|
|
|
$
|
21,148
|
|
|
$
|
1,147
|
|
|
$
|
23,182
|
|
Net income per share:
|
|
|
|
|
|
|
|
Basic
|
$
|
—
|
|
|
$
|
1.10
|
|
|
$
|
0.06
|
|
|
$
|
1.21
|
|
Diluted
|
$
|
—
|
|
|
$
|
1.08
|
|
|
$
|
0.06
|
|
|
$
|
1.18
|
|
The pro forma information has been adjusted to eliminate acquisition-related costs of $
1.7 million
and
$0.7 million
, respectively, during the
nine
months ended
September 30, 2016
and 2015. The income tax benefit of
$12.1 million
related to the release of valuation allowance as a result of the acquisition (See Note 10) has also been excluded to give effect to pro forma results that are expected to have a continuing impact on the combined results.
The pro forma information for the three and
nine
months ended
September 30, 2015
also include primarily adjustments for depreciation related to the fair value of property and equipment acquired, amortization expense related to acquired intangibles, and additional interest expense associated with the Company's financing arrangements relating to this acquisition.
The pro forma supplemental information is for informational purposes only, and is not necessarily indicative of what the combined company’s results actually would have been had the acquisition been completed as of the beginning of the periods as indicated. In addition, the pro forma supplemental information does not purport to project the future results of the combined company.
MD Office Solutions
(2015)
On March 5, 2015, we entered into an Agreement of Merger and Plan of Reorganization (the "Merger Agreement") to acquire MD Office Solutions ("MD Office"). MD Office is a provider of in-office nuclear cardiology imaging in the northern and central California regions. The acquisition expands the geographical region in which we are able to provide our in-office nuclear cardiology imaging services.
Total consideration related to the Merger Agreement paid to the sellers was
610,000
shares of common stock of Digirad Corporation, with a total value at closing of
$2.7 million
. The Company issued new shares for the consideration. In addition, there is an earn-out opportunity of up to
$0.4 million
in cash over approximately three years based on the MD Office business meeting certain earnings before interest, taxes, depreciation, and amortization ("EBITDA") milestones. The sellers will receive
fifty percent
of the EBITDA generated by the MD Office business in excess of the EBITDA milestone amounts, which are
$0.7 million
for each of the annual periods ending December 31, 2015, 2016, and 2017, with the target for 2015 being prorated based on the close date.
At
September 30, 2016
, we have estimated the fair value of the contingent earn-out opportunity to be
$0.1 million
. The earn-out opportunity is estimated based on the expected performance of the business over the period from the acquisition date through
December 31, 2017, utilizing an income approach. It is reasonably possible that our estimate of the earn-out potential could change in the near term. Any adjustment in the estimated earn-out opportunity until settled will be recorded as a gain or loss to current operations in the period the estimate changes.
The below tables display estimated pro forma results for the three and
nine
months ended
September 30, 2015
had the business acquisition been completed as of January 1, 2014. In deriving the pro forma results, we utilized the historical operating results of MD Office and adjusted for the impact of the purchase accounting and transaction costs as if the acquisition occurred on January 1, 2014.
|
|
|
|
|
|
|
|
|
(in thousands)
|
Three Months Ended September 30, 2015
|
|
Nine Months Ended September 30, 2015
|
Revenues
|
$
|
15,862
|
|
|
$
|
45,815
|
|
Net income
|
$
|
19,127
|
|
|
$
|
21,172
|
|
Included within our consolidated operating results for the three and
nine
months ended
September 30, 2015
are MD Office operations for the period March 6, 2015 through
September 30, 2015
as follows:
|
|
|
|
|
|
|
|
(in thousands)
|
Three Months Ended September 30, 2015
|
|
Nine Months Ended
September 30, 2015
|
Revenues
|
776
|
|
|
$
|
1,757
|
|
Net income
|
151
|
|
|
$
|
74
|
|
Included within the results for MD Office for the
nine
months ended
September 30, 2015
is approximately
$0.2 million
of transaction costs related to the acquisition. These costs are classified as general and administrative expenses in the consolidated statements of comprehensive income (loss).
Note 4. Inventories
Our inventories are stated at the lower of cost (first-in, first-out) or market (net realizable value) and we review inventory balances for excess and obsolete inventory levels on a quarterly basis. The components of inventory are as follows:
|
|
|
|
|
|
|
|
|
(in thousands)
|
September 30,
2016
|
|
December 31,
2015
|
Inventories:
|
|
|
|
Raw materials
|
$
|
2,872
|
|
|
$
|
2,600
|
|
Work-in-process
|
1,447
|
|
|
1,649
|
|
Finished goods
|
2,031
|
|
|
851
|
|
Total inventories
|
6,350
|
|
|
5,100
|
|
Less reserve for excess and obsolete inventories
|
(441
|
)
|
|
(719
|
)
|
Total inventories, net
|
$
|
5,909
|
|
|
$
|
4,381
|
|
Note 5. Property and Equipment
Property and equipment consists of the following:
|
|
|
|
|
|
|
|
|
(in thousands)
|
September 30,
2016
|
|
December 31, 2015
|
Property and equipment:
|
|
|
|
Land
|
$
|
1,170
|
|
|
$
|
—
|
|
Buildings and leasehold improvements
|
2,938
|
|
|
583
|
|
Machinery and equipment
|
49,053
|
|
|
25,254
|
|
Computer hardware and software
|
4,733
|
|
|
3,555
|
|
Total property and equipment
|
57,894
|
|
|
29,392
|
|
Less accumulated depreciation
|
(26,775
|
)
|
|
(23,140
|
)
|
Total property and equipment, net
|
$
|
31,119
|
|
|
$
|
6,252
|
|
Note 6. Intangibles and Goodwill
Intangibles and goodwill consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2016
|
(in thousands)
|
|
Weighted Average Useful Life (years)
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Intangible Assets, Net (1)
|
Intangible assets with indefinite useful lives:
|
|
|
|
|
|
|
|
|
Goodwill (2)
|
|
Indefinite
|
|
$
|
6,819
|
|
|
$
|
—
|
|
|
$
|
6,819
|
|
|
|
|
|
|
|
|
|
|
Intangible assets with finite useful lives:
|
|
|
|
|
|
|
|
|
Customer relationships (2)
|
|
9.5
|
|
$
|
10,363
|
|
|
$
|
(3,903
|
)
|
|
$
|
6,460
|
|
Trademarks (2)
|
|
6.3
|
|
4,610
|
|
|
(706
|
)
|
|
3,904
|
|
Distribution agreement (2)
|
|
3.3
|
|
2,165
|
|
|
(493
|
)
|
|
1,672
|
|
Patents
|
|
15.0
|
|
141
|
|
|
(129
|
)
|
|
12
|
|
Covenants not to compete
|
|
5.0
|
|
251
|
|
|
(93
|
)
|
|
158
|
|
Total intangible assets, net
|
|
|
|
$
|
17,530
|
|
|
$
|
(5,324
|
)
|
|
$
|
12,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
Weighted Average Useful Life (years)
|
|
Gross Carrying Amount
|
|
Accumulated Amortization
|
|
Intangible Assets, Net (1)
|
Intangible assets with indefinite useful lives:
|
|
|
|
|
|
|
|
|
Goodwill
|
|
Indefinite
|
|
$
|
2,897
|
|
|
$
|
—
|
|
|
$
|
2,897
|
|
|
|
|
|
|
|
|
|
|
Intangible assets with finite useful lives:
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
8.2
|
|
$
|
5,489
|
|
|
$
|
(3,259
|
)
|
|
$
|
2,230
|
|
Trademarks
|
|
8.0
|
|
787
|
|
|
(150
|
)
|
|
637
|
|
Patents
|
|
14.6
|
|
141
|
|
|
(125
|
)
|
|
16
|
|
Covenants not to compete
|
|
5.0
|
|
251
|
|
|
(55
|
)
|
|
196
|
|
Total intangible assets, net
|
|
|
|
$
|
6,668
|
|
|
$
|
(3,589
|
)
|
|
$
|
3,079
|
|
|
|
(1)
|
Amortization expense for intangible assets, net was
$1.7 million
for the
nine
months ended
September 30, 2016
and
$0.4 million
for the
nine
months ended
September 30, 2015
. Estimated amortization expense for intangible assets for the remainder of 2016 is
$.6 million
, for 2017 is
$2.3 million
, for 2018 is
$2.2 million
, for 2019 is
$1.8 million
, for 2020 is
$1.5 million
, for 2021 is
$1.5 million
, and thereafter is
$2.3 million
.
|
|
|
(2)
|
As a result of our acquisition of DMS Health Technologies on January 1, 2016, we recorded certain intangible assets (See Note 3).
|
Note 7. Financial Instruments
Assets and Liabilities Measured at Fair Value on a Recurring Basis.
The following table presents information about our financial assets and liabilities that are measured at fair value on a recurring basis, and indicates the fair value hierarchy of the valuation techniques we utilize to determine such fair value at
September 30, 2016
and
December 31, 2015
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value as of September 30, 2016
|
(in thousands)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets:
|
|
|
|
|
|
|
|
Corporate debt securities
|
$
|
—
|
|
|
$
|
1,313
|
|
|
$
|
—
|
|
|
$
|
1,313
|
|
Equity securities
|
—
|
|
|
308
|
|
|
—
|
|
|
308
|
|
Total
|
$
|
—
|
|
|
$
|
1,621
|
|
|
$
|
—
|
|
|
$
|
1,621
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Acquisition related contingent consideration
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
140
|
|
|
$
|
140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value as of December 31, 2015
|
(in thousands)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
Assets:
|
|
|
|
|
|
|
|
Corporate debt securities
|
$
|
—
|
|
|
$
|
3,227
|
|
|
$
|
—
|
|
|
$
|
3,227
|
|
Equity securities
|
—
|
|
|
491
|
|
|
—
|
|
|
491
|
|
Total
|
$
|
—
|
|
|
$
|
3,718
|
|
|
$
|
—
|
|
|
$
|
3,718
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Acquisition related contingent consideration
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
175
|
|
|
$
|
175
|
|
|
|
|
|
|
|
|
|
The fair value of our corporate debt securities is determined using proprietary valuation models and analytical tools. These valuation models and analytical tools use market pricing or prices for similar instruments that are both objective and publicly available, including matrix pricing or reported trades, benchmark yields, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, and/or offers. We did not reclassify any investments between levels in the fair value hierarchy during the
nine
months ended
September 30, 2016
.
Equity securities consist of shares of Perma-Fix Medical S.A. ("Perma-Fix Medical") a publicly traded company listed on the NewConnect market of the Warsaw Stock Exchange. Fair value of the Perma-Fix Medical investment is based on the closing price observed on
September 30, 2016
.
The acquisition related contingent consideration is related to our acquisition of Telerhythmics on March 13, 2014 and acquisition of MD Office on March 5, 2015 (See Note 3). We reassess the fair value of the contingent consideration to be settled in cash related to our acquisitions of Telerhythmics and MD Office on a quarterly basis using the income approach, which is a Level 3 measurement. Significant assumptions used in the measurement include probabilities of achieving the EBITDA milestones.
Changes in estimated fair value of contingent consideration liabilities from December 31, 2015 to
September 30, 2016
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telerhythmics Contingent Consideration
|
|
MD Office Solutions Contingent Consideration
|
|
Total Contingent Consideration
|
Balance at December 31, 2015
|
|
$
|
22
|
|
|
$
|
153
|
|
|
$
|
175
|
|
Contingent consideration payments
|
|
—
|
|
|
(27
|
)
|
|
(27
|
)
|
Change in estimated fair value
|
|
(22
|
)
|
|
14
|
|
|
(8
|
)
|
Balance at September 30, 2016
|
|
$
|
—
|
|
|
$
|
140
|
|
|
$
|
140
|
|
The fair values of the Company's term loans and revolving credit facility approximate carrying value due to the variable rate nature of these instruments.
Securities Available-for-Sale
Securities available-for-sale primarily consist of investment grade corporate debt securities. In addition, we own shares of common stock issued by Perma-Fix Medical, a publicly traded company on the NewConnect market of the Warsaw Stock Exchange. We classify all debt securities as available-for-sale and as current assets, as the sale of such securities may be required prior to maturity to execute management strategies. The Perma-Fix Medical equity securities are classified as an other asset (non-current), as the investment is strategic in nature and our current intent is to hold the investment over a several year period. Securities available-for-sale are carried at fair value, with the unrealized gains and losses reported as a component of accumulated other comprehensive loss in stockholders' equity until realized. Realized gains and losses from the sale of available-for-sale securities, if any, are determined on a specific identification basis.
It is not more likely than not that we will be required to sell investments before recovery of their amortized costs. Premiums and discounts are amortized or accreted over the life of the related security as an adjustment to yield using the straight-line method and included in interest income. Interest income is recognized when earned. Realized gains and losses on investments in securities are included in other expense, net within the unaudited condensed consolidated statements of comprehensive income (loss). The realized gains and losses on these sales were minimal for the
three
and
nine
months ended
September 30, 2016
and
2015
.
A decline in the market value of any available-for-sale security below cost that is determined to be other than temporary will result in an impairment charge to earnings and a new cost basis for the security is established. During the three months ended
September 30, 2016
, the Company recognized an other-than-temporary impairment charge of
$0.4 million
, reflecting the write-down of this investment to its fair market value of approximately
$0.3 million
at
September 30, 2016
. The Company reviewed various factors in making its determination, including the duration in the decline of value and volatility of the Perma-Fix Medical stock price. While the Company has the intent and ability to hold this investment, there is no indication that the Perma-Fix Medical stock price will rise above the Company's adjusted cost basis within the foreseeable future. The loss is included as a component in other expense, net in the unaudited consolidated statements of comprehensive income (loss).
The following table sets forth the composition of securities available-for-sale as of
September 30, 2016
and
December 31, 2015
.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity in
Years
|
|
Cost
|
|
Unrealized
|
|
Fair Value
|
As of September 30, 2016 (in thousands)
|
Gains
|
|
Losses
|
|
Corporate debt securities
|
Less than 1 year
|
|
$
|
1,313
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,313
|
|
Corporate debt securities
|
1-3 years
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Equity securities
|
-
|
|
308
|
|
|
—
|
|
|
—
|
|
|
308
|
|
|
|
|
$
|
1,621
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,621
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity in
Years
|
|
Cost
|
|
Unrealized
|
|
Fair Value
|
As of December 31, 2015 (in thousands)
|
Gains
|
|
Losses
|
|
Corporate debt securities
|
Less than 1 year
|
|
$
|
2,311
|
|
|
$
|
—
|
|
|
$
|
(5
|
)
|
|
$
|
2,306
|
|
Corporate debt securities
|
1-3 years
|
|
926
|
|
|
—
|
|
|
(5
|
)
|
|
921
|
|
Equity securities
|
-
|
|
721
|
|
|
—
|
|
|
(230
|
)
|
|
491
|
|
|
|
|
$
|
3,958
|
|
|
$
|
—
|
|
|
$
|
(240
|
)
|
|
$
|
3,718
|
|
Note 8. Debt
On January 1, 2016, the Company entered into a Credit Agreement (the “Credit Agreement”) by and among the Company, and the subsidiaries of the Company, and the lenders party thereto (the “Lenders”), with Wells Fargo Bank, National Association (“Wells Fargo”) as administrative agent. The Credit Agreement is a
five
-year credit facility, maturing on January 1, 2021, with a maximum credit amount of
$40.0 million
(the “Credit Facility”). It consisted of a term loan of
$20.0 million
(“Term Loan A”), a second term loan of
$7.5 million
(“Term Loan B”), and a revolving credit facility with a maximum commitment of
$12.5 million
(the “Revolver”). Commitments under Term Loan A and the Revolver are subject to underlying eligible assets of the Company. In the case of the Term Loan A, underlying property, plant and equipment, and in the case of the Revolver, eligible accounts receivable and inventory, all as defined in the Credit Agreement. As of
September 30, 2016
, we had
$5.3 million
available under our revolving credit facility.
At the Company’s option, the Credit Facility will bear interest at a floating rate of either (i) the LIBOR Rate, as defined in the Credit Agreement, plus an applicable margin depending on the borrowing type as follows:
2.5%
for Term Loan A;
5.0%
for
Term Loan B; and
2.0%
for the Revolver; or (ii) the Base Rate, as defined in the Credit Agreement, plus an applicable margin depending on the borrowing type as follows:
1.5%
for Term Loan A;
4.0%
for Term Loan B; and
1.0%
for the Revolver. As further defined in the Credit Agreement, “Base Rate” means the greatest of (a) the Federal Funds Rate (as defined in the Credit Agreement) plus
0.5%
, (b) the LIBOR Rate (which rate will be calculated based upon an interest period of one month and will be determined on a daily basis), plus
1.0%
, and (c) the rate of interest announced, from time to time, within Wells Fargo at its principal office in San Francisco as its “prime rate.” In addition to interest on outstanding borrowings under the Credit Facility, the Revolver bears an unused line fee of
0.25%
, which is presented as interest expense.
At
September 30, 2016
, the total outstanding borrowings on the Credit Agreement, net of associated deferred financing costs, was as follows:
|
|
|
|
|
|
|
September 30, 2016
|
Interest Rate at September 30, 2016
|
Term A
|
$
|
18,096
|
|
3.02%
|
Term B
|
5,207
|
|
5.52%
|
Revolver
|
—
|
|
2.52%
|
Total borrowing
|
23,303
|
|
|
Less: net unamortized debt issuance cost
|
(605
|
)
|
|
Less: current portion
|
(5,358
|
)
|
|
Long-term portion
|
$
|
17,340
|
|
|
Total interest expense associated with the Credit Facility for the three and
nine
months ended
September 30, 2016
was
$0.3 million
and
$1.1 million
, respectively.
The Credit Agreement contains certain representations, warranties, events of default, mandatory prepayment requirements, as well as certain affirmative and negative covenants customary for Credit Agreements of this type. These covenants include restrictions on borrowings, investments, and divestitures, as well as limitations on the Company’s ability to make certain restricted payments, including payment of dividends. These restrictions do not prevent or prohibit the payment of dividends by the Company consistent with past practice, subject to satisfaction of certain conditions. Further, the Credit Agreement requires the Company to maintain certain restricted cash, cash equivalents, and securities available-for-sale balances, at various decreasing levels through January 1, 2018, as cash collateral under the agreement. As of
September 30, 2016
, the Company was required to maintain $
4.0 million
as cash collateral, consisting of $
2.7 million
which has been classified as long-term restricted cash and
$1.3 million
as available for-sale securities in the accompanying unaudited condensed consolidated balance sheets.
The Company is permitted to make voluntary prepayments on amounts borrowed under the Credit Agreement at any time, in whole or in part, without penalty unless in connection with the full repayment of all amounts owed under the Credit Agreement. In the event that the Company fully repays all obligations and terminates the Credit Agreement prior to January 1, 2017, the Company shall be required to pay a prepayment penalty in the amount equal to
1.0%
times the maximum credit amount of the Credit Agreement. After January 2, 2017, the Company shall not be required to pay a prepayment penalty. Furthermore, the Company shall be required to prepay amounts borrowed under the Credit Agreement in the event that the Company receives cash flows in excess of specified percentages upon the occurrence of certain events, such as the sale or disposition of assets or other property, legal judgments or settlements, sale of equity, and other payments received not in the ordinary course of business.
Upon the occurrence and during the continuation of an event of default under the Credit Agreement, the Lenders may, among other things, declare the loans and all other obligations under the Credit Agreement immediately due and payable and increase the interest rate at which loans and obligations under the Credit Agreement bear interest. If an event of default occurs related to the insolvency or bankruptcy of the Company, the loans and all other obligations under the Credit Agreement shall automatically become due and payable. The Company was in compliance with all covenants as of
September 30, 2016
.
Pursuant to a separate Guaranty and Security Agreement dated January 1, 2016, between the Company, its subsidiaries and Wells Fargo, the Credit Facility is secured by a first-priority security interest on substantially all of the assets of the Company and its subsidiaries and a pledge of all shares and membership interests of the Company’s subsidiaries.
Debt maturities.
As of
September 30, 2016
, maturities of long-term obligations for the next five years and thereafter are as follows:
|
|
|
|
|
|
Debt Maturities
|
October 1 - December 31, 2016
|
$
|
1,340
|
|
2017
|
5,358
|
|
2018
|
4,935
|
|
2019
|
2,856
|
|
2020
|
2,856
|
|
January 1, 2021
|
5,958
|
|
Total
|
$
|
23,303
|
|
Note 9. Commitments and Contingencies
Leases
We currently lease facilities and certain automotive equipment under non-cancelable operating leases expiring from December 14, 2016 through November 30, 2021. Rent expense is recognized on a straight-line basis over the initial lease term and those renewal periods that are reasonably assured as determined at lease inception. The difference between rent expense and rent paid is recorded as deferred rent and is included in other liabilities. Rent expense was approximately
$0.9 million
for each of the
nine
months ended
September 30, 2016
and 2015.
As of
September 30, 2016
, we financed certain information technology and medical equipment and vehicles under capital leases. These obligations are secured by the specific equipment financed under each lease and will be repaid monthly over the remaining lease terms through July 31, 2020.
The future minimum lease payments due under both non-cancelable operating leases and capital leases having initial or remaining lease terms in excess of one year as of
September 30, 2016
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
Operating
Leases
|
|
Capital Leases
|
October 1 - December 31, 2016
|
$
|
1,286
|
|
|
$
|
197
|
|
2017
|
1,361
|
|
|
665
|
|
2018
|
1,053
|
|
|
308
|
|
2019
|
846
|
|
|
122
|
|
2020
|
636
|
|
|
29
|
|
2021
|
201
|
|
|
—
|
|
Thereafter
|
—
|
|
|
—
|
|
Total future minimum lease payments
|
$
|
5,383
|
|
|
1,321
|
|
Less amounts representing interest
|
|
|
(73
|
)
|
Present value of obligations
|
|
|
1,248
|
|
Less: current capital lease obligation
|
|
|
(675
|
)
|
Total long-terms capital lease obligations
|
|
|
$
|
573
|
|
Other matters.
In the normal course of business, we have been, and will likely continue to be, subject to litigation or administrative proceedings incidental to our business, such as claims related to customer disputes, employment practices, wage and hour disputes, product liability, professional liability, commercial disputes, licensure restrictions or denials, and warranty or patent infringement. Responding to litigation or administrative proceedings, regardless of whether they have merit, can be expensive and disruptive to normal business operations. We are not able to predict the timing or outcome of these matters.
Note 10. Income Taxes
We provide for income taxes under the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of differences between the tax basis of assets or liabilities and their carrying
amounts in the financial statements. We provide a valuation allowance for deferred tax assets if it is more likely than not that these items will expire before we are able to realize their benefit. We calculate the valuation allowance in accordance with the authoritative guidance relating to income taxes, which requires an assessment of both positive and negative evidence regarding the realizability of these deferred tax assets, when measuring the need for a valuation allowance. Significant judgment is required in determining any valuation allowance against deferred tax assets. Previously, as of December 31, 2015, we had established a valuation allowance against a portion of our deferred tax assets. The valuation allowance was provided against deferred tax assets that were projected to expire before being utilized. As a result of the acquisition of DMS Health Technologies on January 1, 2016 (See Note 3), the Company has determined that it is more likely than not that additional deferred tax assets will be realized due to the increases in the Company's forecasted taxable income.
The Company projects to realize approximately
$13.0 million
of additional deferred tax assets as a result of forecasted future income and the reversal of existing deferred tax liabilities. Approximately
$12.1 million
of the valuation allowance release was recorded as a discrete income tax benefit in the nine months ended September 30, 2016. The remaining
$0.9 million
of income tax benefit associated with the valuation allowance release will be recorded in 2016 ratably as income is generated throughout the year. The release of the valuation allowance will not affect the amount of cash paid for income taxes. We will continue to maintain a valuation allowance related to deferred tax assets that are projected to expire before being utilized. We will reassess the ability to realize the deferred tax assets on a quarterly basis. If it is more likely than not that we will not realize the recognized deferred tax assets, then all or a portion of the valuation allowance may need to be re-established, which would result in a charge to tax expense. Conversely if new events indicate that it is more likely than not that we will realize additional deferred tax assets, then all or a portion of the remaining valuation allowance may be released, which would result in a tax benefit.
As of
September 30, 2016
, we had unrecognized tax benefits of approximately
$4.1 million
related to uncertain tax positions. Included in the unrecognized tax benefits were
$3.4 million
of tax benefits that, if recognized, would reduce our annual effective tax rate, subject to the valuation allowance.
We file income tax returns in the US and in various state jurisdictions with varying statutes of limitations. We are no longer subject to income tax examination by tax authorities for years prior to 2011; however, our net operating loss and research credit carryovers arising prior to that year are subject to adjustment. It is our policy to recognize interest expense and penalties related to uncertain income tax matters as a component of income tax expense.
Note 11. Segments
On January 1, 2016, we acquired DMS Health. With the acquisition of DMS Health, we now operate the Company in
four
reportable segments:
1.
Diagnostic Services
2.
Diagnostic Imaging
3.
Mobile Healthcare
4.
Medical Device Sales and Service
Diagnostic Services.
Through Diagnostic Services, we offer a convenient and economically efficient imaging and monitoring services program as an alternative to purchasing equipment or outsourcing the procedures to another physician or imaging center. For physicians who wish to perform nuclear imaging, echocardiography, vascular or general ultrasound tests, we provide the ability for them to engage our services, which includes the use of our imaging system, qualified personnel, and related items required to perform imaging in their own offices and bill Medicare, Medicaid, or one of the third-party healthcare insurers directly for those services. These services are primarily provided to smaller cardiology and related physician practice customers, though we do provide some services to hospital systems.
Diagnostic Imaging.
Through Diagnostic Imaging, we sell our internally developed solid-state gamma cameras and camera maintenance contracts. Our systems include nuclear cardiac imaging and general purposes nuclear imaging as well. We sell our imaging systems to physician offices and hospitals primarily in the United States, although we have sold a small number of imaging systems internationally.
Mobile Healthcare.
Through our Mobile Healthcare business unit, we provide outsourced diagnostic imaging, including PET, CT, MRI, and healthcare expertise to hospitals, integrated delivery networks (“IDNs”), and federal institutions on a long-term contract basis, but can also provide provisional services to institutions that are in transition. These services are provided primarily when there is a cost, ease and efficiency component of providing the services directly rather than owning and operating the related services and equipment directly by our customers.
Medical Device Sales and Service.
Through Medical Device Sales and Service, we provide outsourced sales and service efforts with our exclusive contract with Philips Healthcare within a defined region in the upper Midwest region of the United States. We primarily sell Philips branded imaging and patient monitoring systems, and collect a commission on these sales, though we never
take title to the underlying equipment. We also warranty and service certain Philips equipment within this territory related to equipment we have sold or other equipment sold in the territory.
Our reporting segments have been determined based on the nature of the products and/or services offered to customers or the nature of their function in the organization. We evaluate performance based on the gross profit and operating income (loss) by each segment. Beginning in the first quarter of 2016, the definition of our segment operating income excludes transaction and integration costs of DMS Health Technologies. Prior periods have been recast to retroactively reflect this change. The Company does not identify or allocate its assets by operating segments.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
(in thousands)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Revenue by segment:
|
|
|
|
|
|
|
|
Diagnostic Services
|
$
|
12,070
|
|
|
$
|
11,982
|
|
|
$
|
36,551
|
|
|
$
|
34,724
|
|
Diagnostic Imaging
|
2,703
|
|
|
3,880
|
|
|
9,703
|
|
|
10,525
|
|
Mobile Healthcare
|
11,755
|
|
|
—
|
|
|
35,945
|
|
|
—
|
|
Medical Device Sales and Service
|
4,558
|
|
|
—
|
|
|
12,134
|
|
|
—
|
|
Condensed consolidated revenue
|
$
|
31,086
|
|
|
$
|
15,862
|
|
|
$
|
94,333
|
|
|
$
|
45,249
|
|
Gross profit by segment:
|
|
|
|
|
|
|
|
Diagnostic Services
|
$
|
2,479
|
|
|
$
|
2,781
|
|
|
$
|
7,934
|
|
|
$
|
7,804
|
|
Diagnostic Imaging
|
1,177
|
|
|
2,021
|
|
|
4,743
|
|
|
5,413
|
|
Mobile Healthcare
|
2,236
|
|
|
—
|
|
|
7,768
|
|
|
—
|
|
Medical Device Sales and Service
|
2,409
|
|
|
—
|
|
|
6,686
|
|
|
—
|
|
Condensed consolidated gross profit
|
$
|
8,301
|
|
|
$
|
4,802
|
|
|
$
|
27,131
|
|
|
$
|
13,217
|
|
Income from operations by segment:
|
|
|
|
|
|
|
|
Diagnostic Services
|
$
|
47
|
|
|
$
|
299
|
|
|
$
|
43
|
|
|
$
|
371
|
|
Diagnostic Imaging
|
40
|
|
|
1,084
|
|
|
1,298
|
|
|
2,648
|
|
Mobile Healthcare
|
18
|
|
|
—
|
|
|
221
|
|
|
—
|
|
Medical Device Sales and Service
|
711
|
|
|
—
|
|
|
1,794
|
|
|
—
|
|
Segment income from operations
|
816
|
|
|
1,383
|
|
|
3,356
|
|
|
3,019
|
|
Unallocated Items
(1)
|
(127
|
)
|
|
(435
|
)
|
|
(1,748
|
)
|
|
(743
|
)
|
Condensed consolidated income from operations
|
$
|
689
|
|
|
$
|
948
|
|
|
$
|
1,608
|
|
|
$
|
2,276
|
|
(1)
Includes transaction and integration costs associated with the DMS Health acquisition.
Note 12. Subsequent Events
On October 28, 2016, the Company announced a cash dividend of
$0.05
per share payable on November 28, 2016 to shareholders of record on November 17, 2016.