Filed pursuant to Rule 424(b)(5)
 Registration No. 333-251452
Prospectus Supplement
(To Prospectus dated December 30, 2020)
8,000,000 Shares
AdaptHealth Corp.
Class A Common Stock
We are offering 7,250,000 shares of our Class A common stock, par value $0.0001 per share (“Class A Common Stock”). The selling stockholder identified in this prospectus supplement is offering an additional 750,000 shares of our Class A Common Stock.
We intend to use approximately half of the net proceeds of the shares offered by us in this offering, together with senior secured term loan borrowings, the net proceeds from the issuance of unsecured senior notes and cash on hand, to finance the AeroCare Acquisition (as defined herein) and to pay related fees and expenses, and the remainder for general corporate purposes, which may include future acquisitions and other business opportunities, capital expenditures and working capital. We will not receive any proceeds from the sale of our Class A Common Stock by the selling stockholder. See “Use of Proceeds.”
Our Class A Common Stock is listed on the Nasdaq Capital Market (“Nasdaq”) and trades under the symbol “AHCO”. On January 5, 2021, the closing price of our Class A Common Stock was $33.89.
See “Risk Factors” on page S-19 of this prospectus supplement and page 6 of the accompanying prospectus to read about factors you should consider before buying shares of our Class A Common Stock.
We are currently an “emerging growth company” as defined in Section 2(a) of the Securities Act and are subject to reduced public company reporting requirements. We are also a “smaller reporting company” as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and are subject to reduced public company reporting requirements. See “Risk Factors.”
Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus supplement or the accompanying prospectus. Any representation to the contrary is a criminal offense.
Per Share
Total
Public offering price
$ 33.00 $ 264,000,000
Underwriting discounts and commissions(1)
$ 1.5675 $ 12,540,000
Proceeds to us, before expenses
$ 31.4325 $ 227,885,625
Proceeds to the selling stockholder, before expenses
$ 31.4325 $ 23,574,375
(1)
See “Underwriting” beginning on page S-54 for additional information.
We have granted the underwriters the option to purchase up to an additional 1,200,000 shares of Class A Common Stock within 30 days from the date of this prospectus supplement.
The underwriters expect to deliver the shares of Class A Common Stock on or about January 8, 2021.
Joint Book-Running Managers
Deutsche Bank Securities
Jefferies
BofA Securities
Truist Securities
Baird
RBC Capital Markets
Stifel
UBS Investment Bank
Co-Managers
Canaccord Genuity
SVB Leerink
Citizens Capital Markets
Regions Securities LLC
Fifth Third Securities
Janney Montgomery Scott
KeyBanc Capital Markets
The date of this prospectus supplement is January 5, 2021.

 
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
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You should rely only on the information contained or incorporated by reference in this prospectus supplement or the accompanying prospectus. Neither we, the selling stockholder nor any of the underwriters have authorized anyone to provide you with different information. Neither we, the selling stockholder nor any of the underwriters are making an offer to sell or soliciting an offer to buy Class A Common Stock in any jurisdiction where the offer is not permitted. You should not assume that the information contained in this prospectus supplement or the accompanying prospectus is accurate as of any date other than the date on the front cover of those documents.
 

 
ABOUT THIS PROSPECTUS SUPPLEMENT
This document is in two parts. The first part is this prospectus supplement, which describes the specific terms of this offering of Class A Common Stock and also adds to and updates information contained in the accompanying prospectus dated December 30, 2020 and the documents incorporated by reference herein and therein. The second part, the accompanying prospectus, gives more general information, some of which does not apply to this offering. If the description of this offering varies between this prospectus supplement and the accompanying prospectus or any document incorporated by reference herein or therein filed prior to the date of this prospectus supplement, you should rely on the information contained in this prospectus supplement. However, if any statement in one of these documents is inconsistent with a statement in another document having a later date — for example, a document incorporated by reference in this prospectus supplement or the accompanying prospectus — the statement in the document having the later date modifies or supersedes the earlier statement. You should rely only on the information contained in or incorporated by reference into this prospectus supplement or contained in or incorporated by reference into the accompanying prospectus. It is important for you to read and consider all information contained in this prospectus supplement and the accompanying prospectus, including the documents incorporated by reference herein and therein, in their entirety before making your investment decision. You should also read and consider the information in the documents to which we have referred you under the captions “Where You Can Find More Information” and “Incorporation of Certain Information by Reference” in this prospectus supplement and in the accompanying prospectus.
We and the selling stockholder are offering to sell, and are seeking offers to buy, the Class A Common Stock only in jurisdictions where such offers and sales are permitted. The distribution of this prospectus supplement and the accompanying prospectus and the offering of Class A Common Stock in certain jurisdictions may be restricted by law. Persons outside the United States who come into possession of this prospectus supplement and the accompanying prospectus must inform themselves about and observe any restrictions relating to the offering of Class A Common Stock and the distribution of this prospectus supplement and the accompanying prospectus outside the United States. This prospectus supplement and the accompanying prospectus do not constitute, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy, any Class A Common Stock offered by this prospectus supplement and the accompanying prospectus by any person in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation.
Unless the context requires otherwise, references in this prospectus supplement to “AdaptHealth,” the “Company,” “we,” “us,” “our” and similar terms refer to AdaptHealth Corp. and its consolidated subsidiaries on and after the consummation of the Business Combination, and references to “DFB” refer to us prior to the consummation of the Business Combination.
 
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
We make forward-looking statements in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein and therein within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for our business. These statements may be preceded by, followed by or include the words “may,” “might,” “will,” “will likely result,” “should,” “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “continue,” “target” or similar expressions.
These forward-looking statements are based on information available to us as of the date they were made, and involve a number of risks and uncertainties which may cause them to turn out to be wrong. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different from those expressed or implied by these forward-looking statements. Some factors that could cause actual results to differ include:

competition and the ability of our business to grow and manage growth profitably;

changes in applicable laws or regulations;

fluctuations in the U.S. and/or global stock markets;

the possibility that we may be adversely affected by other economic, business, and/or competitive factors;

the impact of the coronavirus (COVID-19) pandemic and our response to it;

failure to consummate or realize the expected benefits of the acquisition of AeroCare Holdings, Inc. (“AeroCare”); and

other risks and uncertainties set forth in this prospectus supplement or in the accompanying prospectus, as well as the documents incorporated by reference herein and therein.
 
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FREQUENTLY USED TERMS
A&R Registration Rights Agreement” means the Amended and Restated Registration Rights Agreement, dated as of July 1, 2020, by and among AdaptHealth, AdaptHealth Holdings, and certain investors party thereto, as amended on December 1, 2020;
AdaptHealth Holdings” means AdaptHealth Holdings LLC, a Delaware limited liability company;
AdaptHealth Units” means units representing limited liability company interests in AdaptHealth Holdings;
Business Combination” means our business combination with AdaptHealth Holdings, which we completed on November 8, 2019;
Class A Common Stock” means our Class A Common Stock, par value $0.0001 per share;
Class B Common Stock” means our Class B Common Stock, par value $0.0001 per share;
Consideration Unit” means one AdaptHealth Unit together with one share of Class B Common Stock;
OEP Purchaser” means OEP AHCO Investment Holdings, LLC, a Delaware limited liability company;
Series A Preferred Stock” means the series of preferred stock of the Company designated as “Series A Convertible Preferred Stock,” par value $0.0001 per share;
Series B-1 Preferred Stock” means the series of preferred stock of the Company designated as “Series B-1 Convertible Preferred Stock,” par value $0.0001 per share;
Series B-2 Preferred Stock” means the series of preferred stock of the Company designated as “Series B-2 Convertible Preferred Stock,” par value $0.0001 per share;
Series C Preferred Stock” means the series of preferred stock of the Company to be designated as “Series C Convertible Preferred Stock,” par value $0.0001 per share; and
Sponsor” means Deerfield/RAB Ventures LLC.
 
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PROSPECTUS SUPPLEMENT SUMMARY
This summary highlights information contained elsewhere in this prospectus supplement and the accompanying prospectus or incorporated by reference in this prospectus supplement and the accompanying prospectus. This summary does not contain all of the information that you should consider before deciding to invest in our Class A Common Stock. You should read this entire prospectus supplement and the accompanying prospectus carefully, including the “Risk Factors” sections contained in this prospectus supplement, in the accompanying prospectus, in our Annual Report on Form 10-K for the year ended December 31, 2019 and in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020, and September 30, 2020, our consolidated financial statements and the related notes and the other documents incorporated by reference in this prospectus supplement and the accompanying prospectus.
Our Company
We are a leading provider of home healthcare equipment, medical supplies to the home and related services in the United States. We focus primarily on providing (i) sleep therapy equipment, supplies and related services (including continuous positive airway pressure (“CPAP”) and bilevel positive airway pressure (“bi-PAP”) services) to individuals suffering from obstructive sleep apnea, (ii) medical devices and supplies to patients for the treatment of diabetes (including continuous glucose monitors and insulin pumps), (iii) home medical equipment (“HME”) to patients discharged from acute care and other facilities, (iv) oxygen and related chronic therapy services in the home and (v) other HME medical devices and supplies on behalf of chronically ill patients with wound care, urological, incontinence, ostomy and nutritional supply needs. We service beneficiaries of Medicare, Medicaid and commercial insurance payors. As of September 30, 2020, we serviced approximately 1.8 million patients annually in all 50 states through our network of 269 locations in 41 states.
Corporate History
We were originally formed in November 2017 as a special purpose acquisition company under the name DFB Healthcare Acquisitions Corp. for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization, or similar business combination involving one or more businesses.
On November 8, 2019, we completed our initial business combination with AdaptHealth Holdings. As part of the transaction, we changed our name from DFB Healthcare Acquisitions Corp. to AdaptHealth Corp.
Company Operations
Product Offering
We deliver home medical equipment and supplies directly to a patient’s home upon discharge from a hospital and/or receipt of referral. The breadth of our products is particularly valuable to acute care hospitals, sleep laboratories and long-term care facilities that discharge patients with complex conditions and multiple product needs.
We are often paid a fixed monthly amount for certain HME products as designated by the Centers for Medicare and Medicaid Services (“CMS”) or commercial payors, such as CPAP equipment, wheelchairs, hospital beds, oxygen concentrators, continuous glucose monitors (“CGM”) and other similar products. These sales accounted for approximately 32% of our revenue for the twelve months ended September 30, 2020.
For resupply sale and one-time sale products, which include those deemed to be consumables, we receive a single payment upon shipment of the product. These products, which include CPAP masks and related supplies, diabetes management supplies, wound care supplies, wheelchair cushions accessories, orthopedic bracing, breast pumps and supplies, walkers, commodes and canes, nutritional supplies and incontinence supplies, accounted for approximately 68% of our revenue for the twelve months ended September 30, 2020.
 
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Supply Chain
We play an important role in delivering HME products to patients in their homes. Manufacturers of home medical equipment sell and ship their products to us directly. We also contract with national healthcare distribution companies to ship certain HME products directly to patients’ homes. These distributors invoice us for the cost of shipped products at the time of sale. We receive referrals from a variety of sources, such as acute care hospitals, sleep laboratories, pulmonologist offices, skilled nursing facilities and hospice operators. Our products are either shipped to patients’ homes by AdaptHealth-operated or contracted delivery trucks or shipped using proprietary or third-party distribution services. We bill payors and patients directly for the products that are delivered and for the services that are provided.
Operating Structure
Management
We are led by a proven management team with experience in the HME industry across a variety of healthcare organizations. We have a centralized approach for key business processes, including M&A activity, revenue cycle management, strategic purchases, payor contracting, finance, compliance, legal, human resources, IT and sales management. In addition, we have centralized many of the functions relating to our CPAP and other resupply businesses. However, we believe that the personalized nature of customer requirements and referral relationships, characteristic of the home healthcare business, mandate that we emphasize a localized operating structure as well. We focus on regional management to respond promptly and effectively to local market demands and opportunities. Our regional managers are responsible and accountable for maintaining and developing relationships with referral sources, customer service for non-CPAP supply product lines and logistics for non-drop-shipped products.
Following the closing of the AeroCare Acquisition, Stephen Griggs will join Luke McGee as co-Chief Executive Officer of AdaptHealth.
Revenue Cycle Management
Our revenue cycle management and billing processes have both manual and computerized elements that are designed to maintain the integrity of revenue and accounts receivable. Third-party payors that can accommodate electronic claims submission, such as Medicare, certain state Medicaid payors and many commercial payors, are billed electronically on a daily basis. For other payors, who are unable to accept electronic submissions, we generate paper claims and invoices.
We contract with several business process outsourcing providers to provide certain billing and administrative functions related to revenue cycle management. These providers are based in the Philippines, India and Central America and provide us with the ability to scale our workforce in a cost-effective manner. As of September 30, 2020, approximately 1,500 full-time equivalent personnel were provided to us under such arrangements.
The AeroCare Acquisition
Acquisition overview
On December 1, 2020, we entered into an Agreement and Plan of Merger, dated December 1, 2020 (the “Merger Agreement”), among AeroCare, AdaptHealth Corp., AH Apollo Merger Sub Inc., AH Apollo Merger Sub II Inc. and Peloton Equity, LLC, as stockholder representative, to acquire AeroCare, one of the nation’s leading technology-enabled respiratory and HME distributors, for total consideration of approximately $2.0 billion, which includes a cash purchase price of $1.1 billion and 31 million shares (which were valued at $926 million based on the closing price on the date prior to announcement of the transaction and $1.1 billion based on the closing price as of January 5, 2021), subject to customary purchase price adjustments.
The obligations of the parties to consummate the transactions contemplated by the Merger Agreement are subject to the satisfaction or waiver of, among other closing conditions, the accuracy of the representations
 
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and warranties in the Merger Agreement, the compliance by the parties with the covenants in the Merger Agreement, the absence of any legal order barring the AeroCare Acquisition, the termination or expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (for which we received early termination of the waiting period on December 21, 2020), and the receipt of certain regulatory approvals. Our obligation to effect the closing is also subject to the satisfaction or waiver of the condition that no more than 3.5% of the shares of common stock of AeroCare issued and outstanding as of immediately prior to the closing have properly demanded appraisal for such shares pursuant to Section 262 of the General Corporation Law of the State of Delaware.
Pursuant to the Merger Agreement, the parties are provided with customary termination rights, including the right of either party to terminate the Merger Agreement if the consummation of the AeroCare Acquisition has not occurred on or prior to May 31, 2021 unless the party electing to terminate the Merger Agreement is in breach of its representations or obligations under the Merger Agreement and such breach caused the failure of a condition to closing or was the primary cause of the failure to consummate the closing prior to outside date. We will be required to pay a termination fee to AeroCare equal to $60 million if the Merger Agreement is terminated for breach by us that primarily gives rise to the failure of certain conditions to closing of AeroCare or for our failure to close when required. The AeroCare Acquisition is expected to close in the first quarter of 2021 subject to the satisfaction of the closing conditions as described above.
We believe that the combination of AdaptHealth and AeroCare brings together industry-leading technology platforms and strengthens our position as a leading independent HME provider creating significantly enhanced scale and geographic reach across the United States. The combined company will be a provider of home healthcare equipment, medical supplies to the home, and related services. We will operate in 47 out of the 48 U.S. continental states, offering greater managed care access, broader product availability, and enhanced customer service to our approximately 2.8 million patients.
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AeroCare overview
AeroCare is a leading technology-enabled respiratory therapy distribution platform that serves U.S. patients with chronic conditions in their homes. AeroCare provides equipment and services for home
 
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oxygen, nebulized respiratory medications and sleep therapy for over 995,000 patients across over 300 locations in 30 states. For the twelve months ended September 30, 2020, AeroCare generated net revenue of $652 million.
We believe AeroCare has consistently expanded its product mix distribution and payor channels as the market has evolved over the past several years towards broader respiratory product utilization. AeroCare’s comprehensive respiratory therapy production distribution portfolio includes oxygen concentrators, CPAPs and bi-PAPs, home ventilators, bronchodilator therapy medications and services and other home care products to patients discharged from acute care and other facilities. AeroCare’s representative customer base includes health plans, such as Aetna, Humana, UnitedHealth Group and various blue cross blue shield associations, as well as network managers like CareCentrix and StateServ Hospicelink.
AeroCare is well-positioned in a large and growing market as a key link between patients, physicians, payors and original equipment manufacturers with a trusted brand in the home. Through its highly integrated technology platform, AeroCare is transforming operational workflows and enhancing information transparency to drive growth, margins and care quality. AeroCare is highly efficient and has a replicable M&A and integration engine, with 50 acquisitions closed since 2017 and 155 acquisitions closed since its inception. In addition, AeroCare is committed to providing only the highest quality of care and services for their patients which is shown through their high Google ratings. In September 2020, AeroCare generated 19,000 5-star reviews.
AeroCare was founded in 2000 and is currently headquartered in Orlando, FL. As of September 30, 2020, AeroCare employed approximately 3,800 individuals.
Strategic rationale for the AeroCare Acquisition
We believe the AeroCare Acquisition will provide the following strategic benefits:

Combination will be a leading independent HME provider with significantly enhanced scale and geographic reach:   The combined company will be a one-stop-shop provider of HME products and services, offering a comprehensive line of oxygen and ventilation, sleep, mobility, wound care, diabetes, incontinence and urology products. This combination will further solidify AdaptHealth’s position as the second largest overall HME provider in the United States. Our geographic footprint will span across 47 states and serve approximately 2.8 million patients per annum. We believe that our enhanced scale will increase our ability to provide patients with a broader range of products delivered more efficiently than competitors, which in turn, improves the patient experience. In addition, as a leading provider with national scale, we believe that we are well positioned to drive stakeholders value by entering new markets through acquisitions and increasing market share in existing markets.

Expands our presence in attractive and fast growing HME markets:   AeroCare brings a highly complementary footprint and access to the fast-growing Southeastern geographies where it maintains a substantial presence. The expansion into high growth states such as Florida, Tennessee, Texas, Georgia and South Carolina is expected to be significantly accretive to growth. Each of these states is growing organically at over 10% for the twelve months ended August 31, 2020 compared to the year ended December 31, 2019. We believe the increased geographic diversification will not only drive topline growth and market share but also make our financial profile more stable and resilient to changes in reimbursement or regulatory policies.

Combines two industry leading technology platforms:   Historically, each company has focused on using technology to reduce costs and advance the patient and referral experiences in ordering home medical equipment and supplies. The combined company will maintain a long-term strategy of delivering connected healthcare in the home, leveraging our advanced technology-enabled platform. AeroCare has developed technology that streamlines delivery and patient communication, and we have made significant progress in the technology of e-prescribing and revenue cycle management. Through the combination of our collective technology strategies, we anticipate being able to achieve both a better customer experience as well as a more efficient operating model. We believe that the integration of AeroCare will enhance our existing platform and help accelerate our growth trajectory.

Provides multiple pathways for future growth, including additional acquisitions in a highly fragmented market:   The combined company addresses the large and growing HME ($12 to $15 billion), diabetes
 
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($16 billion) and home medical supplies ($10 billion) markets. Furthermore, positive industry tailwinds such as aging demographics and the increased prevalence of chronic conditions are expected to drive organic growth. Additionally, we believe we are well positioned to continue our M&A strategy and grow through accretive acquisitions. We operate in a highly fragmented market that is made up of thousands of smaller HME competitors and diabetes companies. This combination provides us with additional scale and financial breadth to capitalize on ample future acquisition opportunities. Both companies have extensive and successful M&A track records, having completed over 110 acquisitions between them since 2017.

Strengthens the financial profile of the combined business through achievable cost synergies:   We expect that the enhanced capabilities of the combined company will be able to deliver significant cost synergies with the potential for additional revenue synergies that will be accretive to our earnings and operating cash flows. We expect to generate pre-tax run rate cost synergies of approximately $50 million per annum, including approximately $25 million in 2021, which is comprised primarily of revenue cycle management and branch support, direct and indirect spend, branch consolidation, technology, and general and administrative savings. We expect to incur approximately $20 million in costs to achieve these synergies, which are expected to be fully realized by 2022. Furthermore, we believe revenue synergies are potentially achievable and include PAP 90-day compliance, PAP resupply compliance, payment collections efficiency, and cross-selling respiratory medications and diabetes products. Overall, we expect the synergies realized during this combination to lead to enhanced EBITDA margins and financial strength.

Produces a strong senior leadership team with strong cultural alignment:   The combination brings together two experienced leadership teams with deep domain expertise in the HME industry and across healthcare who are both committed to the vision of providing quality home health equipment to patients nationwide. By leveraging our respective teams’ strengths and sharing of best practices, we believe that the combined company will be strongly positioned to serve the evolving HME market.
Reimbursement Landscape
CMS’s decision to cancel the 2021 competitive bidding program is a significant development for AdaptHealth. CMS is proposing to reimburse all HME other than off-the-shelf back and knee braces at current rates, to schedule the next round of competitive bidding in 2024, and to make the higher blended rates in rural territory permanent. In total, we believe these changes to the competitive bidding program are significantly positive to the business, and we expect the rate changes for the off-the-shelf back and knee braces to be immaterial to AdaptHealth.
Industry Overview
The HME industry provides critical medical products and recurring supply services, designed to improve quality of life, to patients in their homes. The HME industry allows patients with complex and chronic conditions to transition to their homes and achieve a greater level of independence, which is often lost in facility-based settings. While the industry has traditionally treated outpatient and lower acuity ailments, recent technological improvements have helped make higher acuity treatment more affordable and, in turn, have allowed the industry to shift to the treatment of more advanced acute ailments. The equipment and supplies that HME providers deliver can support respiratory, mobility, diabetes management, nutritional and other general home needs (bathroom needs, nutritional needs, hospital beds, among others).
According to CMS, the HME industry has grown from $40 billion in 2010 to $56 billion in 2018 (representing a 4.3% CAGR), of which we estimate our total addressable market for our sleep therapy, oxygen services, mobility products and hospice HME business lines to be approximately $12 billion to $15 billion in 2018. During that time Medicaid data shows a continued shift of long-term services and supports spending into the home, with 57% of that spending going to home and community-based services in 2016. According to CMS, the HME market is projected to continue to grow at a 6.1% CAGR over the next nine years. As a result of our recent diabetes and home medical supplies acquisitions, we believe we have more than doubled our total addressable market to more than $25 billion. Primary drivers of continued market growth include:
 
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Aging U.S. population:   The population of adults aged 65 and older in the United States, a significant group of end users of our products and services, is expected to continue to grow and thus grow our market opportunity. According to CMS, in the United States, the population of adults between the ages of 65 and 84 is expected to grow at a 2.5% CAGR through 2030, while the population of adults over 85 is projected to grow at a 2.9% CAGR during that same time period. Not only is the elderly population expected to grow, but it is also expected to make up a larger percentage of the total U.S. population. According to the U.S. Census Bureau, the U.S. geriatric population was approximately 15% of the total population in 2014 and is expected to grow to approximately 24% of the total population by 2060. This growth emphasizes the need for companies, such as us, to provide efficient and effective equipment to a patient’s home, shortening the amount of time that the patient population spends in an inpatient setting.

Increasing prevalence of chronic conditions:   HME is necessary to help treat significant health issues affecting millions of Americans. For example, chronic obstructive pulmonary disease was the third leading cause of death in the United States in 2014 with over 15 million reported diagnoses, according to the Centers for Disease Control and Prevention (“CDC”). Congestive heart failure, another condition where HME plays a role in successful treatment, impacts more than five million Americans, according to the CDC. The CDC also estimates that more than 9% of the U.S. population suffers from diabetes. We believe that CGM and diabetes represent a $16 billion market segment. AdaptHealth believes that the CGM market could grow by 18% to $3.4 billion by 2022, and the insulin pump market could grow by 12% to $2.2 billion by 2022. Finally, according to the American Sleep Apnea Association, obstructive sleep apnea affects 20 million people across the nation, with 15 million undiagnosed, including many individuals younger than 65 years old. As these conditions continue to increase in prevalence, we expect that the demand within the HME industry for suppliers, such as us, will grow with it, positioning us to be able to expand our market reach and penetration.

Advancements in technology:   Continuing development of technology and supply logistics has enabled more efficient and effective delivery of care in the home along with the collection of data that can be used for ongoing treatment. This, in turn, has helped grow our total addressable market. With improvements in technology, physicians are often able to monitor patients’ adherence to prescribed therapy, which previously required admission to a facility. With the advancement of technology, physicians are more confident in shifting care to a patient’s home and patients are more comfortable receiving care in this setting.

Increasing prevalence of and preference for in-home treatments:   The number of conditions that can be treated in the home continues to grow, with recent additions including chronic wound care, sleep testing, dialysis and chemotherapy. In-home care is also increasingly becoming the preferred method of treatment, particularly for the elderly population. According to the AARP Public Policy Institute, 90% of patients over age 55 have indicated a preference to receive care in the home rather than in an institutional setting. Patient preference is supported by data that has shown that the efficacy of home care is often equivalent to that of facility-based care. The home setting provides comfort and convenience for a population that often faces barriers to receiving effective traditional treatment, such as transportation and adherence. By bringing the care to them, the elderly population can maintain a higher quality of life while still receiving high-quality care and equipment. As a result, more companies within the healthcare industry that are primarily facility-based are beginning to shift towards in-home offerings. We believe that medical supplies to the home represents a $10 billion segment.

Home care is the lowest cost setting:   Not only can in-home care be just as effective as care delivered in a facility-based setting, but it has also proven to be more cost effective. The cost effectiveness of in-home care is particularly important within the context of government pressures to lower the cost of care, pushing payors, such as Medicare and Medicaid, and clinicians to seek care settings that are less costly than hospitals and inpatient facilities. On a daily basis, home healthcare has been estimated by Cain Brothers & Company, LLC to be approximately seven times less expensive than care provided in skilled nursing facilities, the closest acuity site of care. Home care generally offers a significant cost reduction opportunity relative to facility-based care without sacrificing quality.
 
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Competitive Strengths
We believe that the following strengths will continue to enable us to provide high-quality products and services to our customers and to create value:

Differentiated technology-enabled platform:   Over the last five years, we have developed an integrated technology system (based upon leading third-party applications and proprietary software products), which we believe provides a competitive advantage within the HME industry. Our integrated platform distinguishes itself from other industry participants by automating processes that can be complex, prone to mistakes and inefficient. We believe that our platform’s ease of use, improved compliance and automated, integrated workflow for delivery of care appeals to physicians and payors. Additionally, we believe our adoption of e-prescribing solutions enhances transparency and reduces clinical errors and delays. We believe such systems provide better patient service by reducing the time between an order’s receipt and the delivery of the products to the patient. We believe our model is scalable, supporting future organic growth while also allowing for timely on-boarding of acquisitions. We believe that this differentiated technology platform will help generate business from new clients, as other competitors either lack the resources to modernize their infrastructure or utilize systems which do not easily allow for changes from traditional, less automated models.

National scale and operational excellence:   We have relationships with national healthcare distribution companies to drop ship certain HME products directly to patients’ homes in one to two days. We believe that our scale makes us attractive to payors as we are able to service our patients across the nation. As of September 30, 2020, we have been able to build a network of more than 1,000 payors, including 10 national insurers. Our payor network allows our organization to provide in-network rates for most prospective patients, unlike many of our competitors. We believe that this, in turn, promotes access to our services among patients, providers and facilities, which helps to support and grow our business. We have a broad distribution network to leverage with respect to timely and efficient delivery of products. We have strategically located small depots across the country based upon equipment volume and drive times to support our delivery fleet and help enhance operational success.

Proven M&A success:   Our integrated technology platform includes scalable and centralized front-end and back office processes that facilitate the effective onboarding of potential acquisitions and help achieve cost synergies. We have demonstrated our ability to execute upon acquisitions, completing 86 transactions from our date of founding through December 31, 2020. As we continue to grow, we expect to deploy incrementally more capital and integrate substantially larger targets over time, which in turn we expect will be a source of continued growth for us.

Experienced management team:   We are led by a proven management team with significant experience in the HME and healthcare services industries. The team has domain knowledge within the industry having been employed at various healthcare organizations throughout their careers. Multiple members of the management team have also built independent HME companies and have the proven ability to scale a business within the HME industry. Additionally, several members of the management team have experience within their specific roles in both private and public company settings. Given the complexity of the highly regulated industry in which we operate, we believe that management’s experience is a meaningful differentiator relative to our competitors.
Business Strategy
We aim to grow our revenue while expanding margins through targeted strategies for organic growth as well as opportunistic acquisitions that take advantage of our scalable, integrated technology platform.

Drive market share gains in the HME market:   We plan to leverage our technological and clinical advantages as well as our relationships with key constituents across the HME supply chain to deepen our presence in the HME market. We have built a strong network of highly diversified referral relationships that our sales force will continue to grow to help expand market penetration in certain geographies. Primary referral sources include acute care hospitals, sleep laboratories, pulmonologist offices, skilled nursing facilities and hospice operators, with no one source accounting for a material portion of our revenue as of September 30, 2020. We believe that maintaining and broadening these relationships will drive organic growth. Our ability to provide many products across our contracted
 
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payors is particularly valuable, especially to providers and facilities that discharge patients with a variety of product needs and insurance coverages. While some of our HME competitors focus on certain specific product lines, we are able to offer a wide array of products to our customers. We believe that our strong referral relationships and broad product portfolio will help drive market share growth.

Grow through acquisitions:   The HME industry is highly fragmented, with more than 6,000 unique suppliers. We believe that ongoing reimbursement changes will continue the consolidation trend in the HME industry that has accelerated in recent years. We believe that, in the current environment, companies with the ability to scale operations possess competitive advantages that can drive volume to their platforms. As one of a limited number of national HME companies, we plan to continue to evaluate acquisitions and execute upon attractive opportunities to help drive growth.

Improve profitability with technology-enabled platform:   We plan to leverage our combined integrated technology system (based upon third-party applications and proprietary software products) to reduce costs and improve operational efficiency in our current business and the businesses we acquire. Through the third quarter of 2020, we have deployed our technology solutions with respect to the majority of our acquisitions and have worked to establish the ability to improve logistics performance and operating margins. The AeroCare Acquisition combines two of the industry’s leading technology platforms, which we intend to continue to improve to enhance our communications with referral sources and provide better patient service. Further, we believe both platforms are leaders in tech-enabled devices and are positioned to lead the shift to connected healthcare through our offerings of various connected devices designed to drive early interventions, reduce hospitalizations and improve outcomes, making us a value-add partner to payors, providers and patients.

Expand product portfolio:   In addition to our other growth initiatives, we also plan to augment our product portfolio to help drive growth. While we offer a suite of products to our referrers and patients, we have identified several key expansion opportunities, including products in the respiratory device, respiratory medicine, diabetes management, orthotic bracing and hospice HME markets. We believe that the AeroCare Acquisition greatly enhances the depth of our product offering in respiratory devices and medicine, allowing us to further address key clinical conditions which, in turn, is expected to help drive growth across our customer base. Our scale has helped us be successful in the past when bidding on Medicare contracts.

Utilize value-based reimbursement arrangements:   Our broad HME service offerings and technology-enabled infrastructure provide us with the opportunity to enter into value-based reimbursement arrangements with our payors and referrers (including large multi-specialty physician groups, hospital systems, and accountable care organizations) pursuant to which we provide certain HME services on a per-patient, per-month basis or shares in reduction of HME service costs over baseline periods. Such arrangements are attractive to risk-bearing providers (such as capitated medical groups) and payors wishing to reduce administrative costs related to HME services.
Recent Developments
AeroCare Financing
In connection with the entry into the Merger Agreement, we entered into a debt commitment letter, dated as of December 1, 2020 (the “Commitment Letter”), with Jefferies Finance LLC (“Jefferies Finance”) pursuant to which Jefferies Finance (together with any additional commitment parties party thereto) committed to provide to us (i) a senior secured term loan B facility in an aggregate principal amount of up to $900.0 million (the “Term B Facility”) and (ii) a senior unsecured bridge facility in an aggregate principal amount of up to $450.0 million (the “Bridge Facility”), on the terms and subject to certain conditions as described in the Commitment Letter. The Term B Facility commitment consists of $250.0 million to backstop a required amendment on our existing $250.0 million term loan A facility, which was received on December 14, 2020, and up to $650.0 million to finance the cash consideration payable in the AeroCare Acquisition and related fees and expenses. Additionally, on January 4, 2021, we issued $500.0 million aggregate principal amount of 4.625% Senior Notes due 2029 (the “Notes”). The proceeds from the Notes reduce commitments in respect of the Bridge Facility on a dollar-for-dollar basis, and as a result of the
 
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completion of such offering, we do not expect to enter into the Bridge Facility. On or prior to the consummation of the AeroCare Acquisition, the commitments in respect of the Term B Facility may be automatically reduced on a dollar-for-dollar basis by certain debt incurrences (excluding the Notes) and 50% of the net proceeds from equity issuances by us (including this offering). As a result of the reduction in the commitment for this offering, AdaptHealth currently intends to incur $486.7 million aggregate principal amount in new senior secured term loan borrowings in connection with the AeroCare Acquisition, which may include an incremental term loan A facility or a combination of a term loan B facility and an incremental term loan A facility. See “Use of Proceeds.”
For more information on the AeroCare Acquisition and the Commitment Letter, see “Where You Can Find More Information” and “Incorporation of Certain Information by Reference.”
Put/Call Agreement
We and AdaptHealth Holdings are party to the Put/Call Option and Consent Agreement, dated as of May 25, 2020, as amended on October 16, 2020, with BlueMountain Foinaven Master Fund L.P., BMSB L.P., BlueMountain Fursan Fund L.P. and BlueMountain Summit Opportunities Fund II (US) L.P. (the “Option Parties”), pursuant to which the parties were granted certain put and call rights with respect to our securities. On December 15, 2020, we purchased 1,898,967 shares of our Class A Common Stock from the Option Parties at a price per share of $15.76, pursuant to our call right (the “Call Exercise”), resulting in a $29.9 million payment to the Option Parties.
Up-C Unwinding
On December 31, 2020 and January 1, 2021, all members of AdaptHealth Holdings (other than us) elected to exchange the Consideration Units held thereby pursuant to the terms of the Exchange Agreement, dated as of November 8, 2019, by and among AdaptHealth, AdaptHealth Holdings, and holders of AdaptHealth Units (the “Exchange Agreement”), for shares of Class A Common Stock. As a result of these elections and the resulting exchanges, AdaptHealth Holdings is our wholly owned, indirect subsidiary, the Class A Common Stock is our only class of common stock outstanding and, for the fiscal year ending December 31, 2021, we will no longer be an “Up-C” (collectively, the “Up-C Unwinding”). The Up-C Unwinding is expected to reduce our tax compliance costs and enhance our ability to structure future acquisitions.
In addition, on December 7, 2020 prior to the Up-C Unwinding, certain members of our management elected to exchange an aggregate of 4,652,351 Consideration Units directly or indirectly held thereby for Class A Common Stock subject to the terms of the Exchange Agreement. We elected to deliver $44.3 million in cash as set forth in the Exchange Agreement in lieu of delivering shares of Class A Common Stock for 1,507,808 of such Consideration Units surrendered for exchange pursuant to the Exchange Agreement. The amount in cash delivered in lieu of shares of Class A Common Stock was an amount sufficient to permit such members of our management to satisfy their tax obligations in connection with such exchange.
Impact of the COVID-19 Pandemic
Our and AeroCare’s priorities during the COVID-19 pandemic remain protecting the health and safety of our respective employees (including patient-facing employees providing respiratory and other services), maximizing the availability of our respective services and products to support patient health needs, and maintaining the operational and financial stability of our respective businesses.
In response to the COVID-19 pandemic and the National Emergency Declaration, dated March 13, 2020, we and AeroCare activated certain business interruption protocols, including acquisition and distribution of personal protective equipment to our respective patient-facing employees, accelerated capital expenditures of certain products and relocation of significant portions of our respective workforces to “work-from-home” status. We also increased our cash liquidity by, among other things, seeking recoupable advance payments of $45.8 million made available by CMS under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) legislation, which were received in April 2020. AeroCare secured a $20.0 million incremental loan facility in April 2020. In addition, in April 2020, we received distributions of the CARES Act provider relief funds of $17.2 million, and AeroCare received $13.8 million, targeted to
 
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offset lost revenue and expenditures incurred in connection with the COVID-19 pandemic. The provider relief funds are subject to certain restrictions and are subject to recoupment if not used for designated purposes.
As a result of these actions, and the lack of disruption to date of our respective vendors’ ability to supply product despite the COVID-19 pandemic, we and AeroCare have been able to substantially maintain our respective operations. The U.S. Department of Health and Human Services (“HHS”) has indicated that the CARES Act provider relief funds are subject to ongoing reporting and changes to the terms and conditions. We are currently in the process of determining how much of the CARES Act provider relief funds we and AeroCare will be entitled to based on the terms and conditions of the program, including recent guidance issued by HHS in October 2020. To the extent that reporting requirements and terms and conditions are modified, it may affect our and AeroCare’s ability to comply and may require the return of funds. Furthermore, HHS has indicated that it will be closely monitoring and, along with the Office of Inspector General of the Department of Health and Human Services (the “OIG-HHS”), auditing providers to ensure that recipients comply with the terms and conditions of relief programs and to prevent fraud and abuse. For any deliberate omissions, misrepresentations or falsifications of any information given to HHS, providers may be subject to civil, criminal, and administrative penalties, including the revocation of Medicare billing privileges, exclusion from federal health care programs, and the imposition of fines, civil damages, and imprisonment.
While the impact of the COVID-19 pandemic, the National Emergency Declaration and the various state and local government imposed stay-at-home restrictions did not have a material impact on our consolidated operating results for the three months ended March 31, 2020, we and AeroCare began to experience declines in net revenues commencing in April 2020 with respect to certain services associated with elective medical procedures (such as commencement of new CPAP services and medical equipment and, in our case, orthopedic supply related to facility discharges), and commencement of bi-PAP services on behalf of new patients. In response to these declines, as well as specific over-staffing conditions associated with recently completed acquisitions, we conducted a workforce assessment and implemented a reduction in force in April 2020, resulting in the elimination of approximately 6% of our workforce. In connection with the workforce reductions, we incurred a one-time charge for severance and related expenses of approximately $1.6 million.
Offsetting the declines in net revenues associated with the decline in elective medical procedures, we and AeroCare continue to experience an increase in net revenue associated with increased demand for certain respiratory products (such as oxygen) and increased sales in our resupply businesses (primarily as a result of the increased ability to contact patients at home as a result of continuing remote education and work-from-home directives). From April 2020 through September 2020, we also experienced an increase in revenue associated with the one-time sale of certain respiratory equipment (primarily ventilators, bi-level PAP devices and oxygen concentrators) to hospitals and local health agencies. Additionally, suspension of Medicare sequestration through December 31, 2020 (resulting in a 2% increase in Medicare payments to all providers), and recent regulatory guidance from CMS expanding telemedicine and reducing documentation requirements during the emergency period, are expected to result in increased net revenues for certain products and services. Despite the ongoing effects of the COVID-19 pandemic throughout the summer and fall of 2020, our volume of new CPAP and bi-PAP services has substantially rebounded from April 2020 levels; however, there can be no assurance that these services will not decline in connection with a resurgence of the COVID-19 pandemic or otherwise.
The full extent of the impact of the continuing COVID-19 pandemic on our and AeroCare’s respective businesses, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict. For additional information on risk factors that could impact our and AeroCare’s results, please refer to “Risk Factors” in this prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein and therein.
 
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The Offering
Shares Offered by Us
7,250,000 shares of Class A Common Stock
Shares Offered by the Selling Stockholder
750,000 shares of Class A Common Stock
Underwriters’ Option to Purchase Additional Shares from Us
Up to 1,200,000 shares of Class A Common Stock
Shares Outstanding Immediately After this Offering
95,680,112 shares of Class A Common Stock (or 96,880,112 shares of Class A Common Stock if the underwriters exercise their option to purchase additional shares in full) and no shares of Class B Common Stock.
Use of Proceeds
We expect that the net proceeds to us from this offering will be approximately $226.6 million (or $264.4 million if the underwriters exercise their option to purchase additional shares in full). We intend to use approximately half of the net proceeds of the shares offered by us in this offering, together with senior secured term loan borrowings, the net proceeds from the issuance of unsecured senior notes and cash on hand, to finance the AeroCare Acquisition (as defined herein) and to pay related fees and expenses, and the remainder for general corporate purposes, which may include future acquisitions and other business opportunities, capital expenditures and working capital. We will not receive any proceeds from the sale of our Class A Common Stock by the selling stockholder. See “Use of Proceeds.”
Risk Factors
See the section titled “Risk Factors” in this prospectus supplement and the accompanying prospectus and other information included or incorporated by reference in this prospectus supplement and the accompanying prospectus for a discussion of factors that you should consider carefully before deciding to invest in our Class A Common Stock.
Trading Market and Ticker Symbol
Our Class A Common Stock is listed on Nasdaq under the symbol “AHCO.”
The number of issued and outstanding shares is based on 88,430,112 shares of Class A Common Stock and no shares of Class B Common Stock outstanding as of January 1, 2021 and does not include (i) 1,534,563 shares of Class A Common Stock available for future issuance as of January 1, 2021 under the AdaptHealth Corp. 2019 Stock Incentive Plan, (ii) 4,280,548 shares of Class A Common Stock issuable upon the exercise of private placement warrants as of January 1, 2021 or (iii) 16,356,002 shares of Class A Common Stock issuable upon the conversion of the 163,560.02 shares of Series B-1 Preferred Stock outstanding as of January 1, 2021 at the current conversion rate.
Unless we specifically state otherwise, all information in this prospectus supplement assumes no exercise by the underwriters of their option to purchase additional shares. Unless we specifically state otherwise, this prospectus supplement also does not give effect to the issuance of 31 million shares of Class A Common Stock (on an as converted basis) in connection with the AeroCare Acquisition.
For additional information concerning the offering, see the section titled “Underwriting.”
 
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Summary Historical Consolidated Financial Data of AdaptHealth Corp.
The following table presents AdaptHealth’s summary historical consolidated financial data. The consolidated statements of operations and cash flows for the years ended December 31, 2019 and 2018 and the consolidated balance sheets as of December 31, 2019 and 2018 have been derived from our audited consolidated financial statements incorporated by reference herein. The consolidated statements of operations and cash flows for the year ended December 31, 2017 and the consolidated balance sheet as of December 31, 2017 have been derived from our audited consolidated financial statements not incorporated by reference herein.
The summary consolidated statements of operations and cash flows for the nine months ended September 30, 2020 and 2019 and the consolidated balance sheets as of September 30, 2020 and 2019 have been derived from our unaudited condensed consolidated financial statements incorporated by reference herein. Our unaudited condensed consolidated financial statements have been prepared on the same basis as our audited consolidated financial statements and, in the opinion of management, include all adjustments (consisting only of normal recurring accruals) necessary for a fair statement of the financial position and results of operations as of the dates and for the periods indicated. Results of interim periods are not necessarily indicative of the results expected for a full year or for future periods. Historical results are not necessarily indicative of future operating results.
Year ended December 31,
Nine months ended
September 30
2017
2018
2019
2019
2020
(audited)
(unaudited)
Consolidated statements of operations data:
(in thousands)
Net revenue
$ 192,559 $ 345,278 $ 529,644 $ 380,103 $ 707,960
Operating income (loss)
16,088 31,091 29,696 28,982 39,040
Net income (loss) attributable to AdaptHealth
Corp.
9,687 23,260 (14,996) (11,570) 1,386
Consolidated statements of cash flows data:
(in thousands)
Net cash provided by operating activities
$ 45,930 $ 68,427 $ 60,418 $ 43,174 $ 145,287
Net cash used in investing activities
(15,077) (96,284) (84,870) (62,399) (627,097)
Net cash provided by (used in) financing activities
(30,263) 48,768 76,144 2,862 677,250
Balance sheet data (as of period end):
(in thousands)
Cash and cash equivalents
$ 4,274 $ 25,186 $ 76,878 $ 8,823 $ 272,318
Total assets
111,984 368,957 546,121 427,987 1,548,826
Total liabilities
112,621 266,188 575,370 564,685 1,109,111
Total long-term debt, including current portion
54,781 134,185 396,833 419,432 731,209
Total stockholders’ equity (deficit) / members’
equity (deficit)
(637) 102,769 (29,249) (136,698) 439,715
Other financial data:
(in thousands)
EBITDA
$ 43,580 $ 77,569 $ 90,142 $ 71,938 $ 91,585
Adjusted EBITDA
45,035 84,447 123,021 89,352 126,254
Adjusted EBITDA less Patient Equipment Capex
19,186 45,083 75,601 53,763 83,971
 
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The following table reconciles net income (loss) attributable to AdaptHealth Corp., the most directly comparable GAAP measure, to EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex.
Management believes the presentation of these measures is relevant and useful because it allows investors to view our performance in a manner similar to the method management uses, adjusted for items management believes makes it easier to compare its results with other companies that have different financing and capital structures. EBITDA, Adjusted EBITDA, and Adjusted EBITDA less Patient Equipment Capex, as management defines them, may not be comparable to EBITDA, Adjusted EBITDA, Adjusted EBITDA less Patient Equipment or similarly titled measurements used by other companies. Items added into our calculation of EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex that will not occur on a continuing basis may have associated cash payments. EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex should be viewed in conjunction with measurements that are computed in accordance with GAAP. A reconciliation of EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex to net income (loss) attributable to AdaptHealth Corp., the most closely comparable financial measure calculated in accordance with GAAP, is set forth in the table below.
Year ended December 31,
Nine months ended
September 30,
2017
2018
2019
2019
2020
(audited)
(unaudited)
Non-GAAP reconciliation:
(in thousands)
Net income (loss) attributable to AdaptHealth Corp.
$ 9,687 $ 23,260 $ (14,996) $ (11,570) $ 1,386
Income attributable to noncontrolling interest
580 1,077 2,111 1,336 2,222
Interest expense (income) – Excluding change in fair value of interest rate swaps
5,041 8,000 27,878 19,292 27,826
Interest expense (income) – Change in fair value of interest rate swaps
(547) 11,426 12,359
Income tax expense (benefit)
249 (2,098) 1,156 5,444 2,290
Depreciation and amortization
27,816 47,877 62,567 45,077 57,861
Loss from discontinued operations, net of tax
207
EBITDA $ 43,580 $ 77,569 $ 90,142 $ 71,938 $ 91,585
Loss on extinguishment of debt, net(a)
324 1,399 2,121 2,121 5,316
Equity-based compensation expense(b)
49 884 11,070 5,806 10,969
Transaction costs(c)
2,514 15,984 8,232 16,612
Severance(d) 826 1,920 2,301 721 3,245
Other non-recurring (income) expense(e)
256 161 1,403 534 (1,473)
Adjusted EBITDA
$ 45,035 $ 84,447 $ 123,021 $ 89,352 $ 126,254
Less: Patient equipment capex(f)
(25,849) (39,364) (47,420) (35,589) (42,283)
Adjusted EBITDA less Patient Equipment Capex
$ 19,186 $ 45,083 $ 75,601 $ 53,763 $ 83,971
(a)
Represents write offs of deferred financing costs in 2020, 2019 and 2018 and prepayment penalty expense related to refinancing of debt offset by gain on debt extinguishment in 2018.
(b)
Represents equity-based compensation expense to employees and non-employee directors. The higher expense for the nine months ended September 30, 2020 versus the comparable prior year period is due to year-to-date expense for awards granted in late 2019, and overall increased equity-compensation grant activity in 2020. The expense for the year ended December 31, 2019 includes expense resulting from accelerated vesting and modification of certain awards in that period.
 
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(c)
Represents transaction costs related to acquisitions, certain 2019 recapitalization transactions, and the Business Combination.
(d)
Represents severance costs related to acquisition integration and internal AdaptHealth restructuring and workforce reduction activities.
(e)
The nine months ended September 30, 2020 includes $2.9 million of reductions in the fair value of contingent consideration liabilities related to acquisitions, a $0.6 million gain in connection with the sale of a cost method investment, offset by a $1.5 million expense associated with the PCS Transition Services Agreement and $0.5 million of other non-recurring expenses. The year ended December 31, 2019 includes a net $0.9 million increase in the fair value of contingent consideration liabilities and $0.5 million of other non-recurring expenses.
(f)
Represents the value of the patient equipment received during the respective period without regard to whether the equipment is purchased or financed through lease transactions.
 
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Summary Historical Consolidated Financial Data of AeroCare
The following table presents AeroCare’s summary historical consolidated financial data. The consolidated statements of operations and cash flows for the years ended December 31, 2019 and 2018 and the consolidated balance sheets as of December 31, 2019 and 2018 have been derived from AeroCare’s audited consolidated financial statements incorporated by reference herein.
The summary consolidated statements of operations and cash flows for the nine months ended September 30, 2020 and 2019 and the consolidated balance sheet as of September 30, 2020 have been derived from AeroCare’s unaudited consolidated financial statements incorporated by reference herein. AeroCare’s unaudited consolidated financial statements have been prepared on the same basis as its audited consolidated financial statements and, in the opinion of AeroCare’s management, include all adjustments (consisting only of normal recurring accruals) necessary for a fair statement of the financial position and results of operations as of the dates and for the periods indicated. Results of interim periods are not necessarily indicative of the results expected for a full year or for future periods. Historical results are not necessarily indicative of future operating results.
Year ended
December 31,
Nine months ended
September 30,
2018
2019
2019
2020
(audited)
(unaudited)
Consolidated statements of operations data:
(in thousands)
Net revenue
$ 393,418 $ 533,649 $ 379,245 $ 497,664
Operating income (loss)
25,555 47,199 33,792 60,895
Net income
15,889 30,422 22,031 43,935
Consolidated statements of cash flows data:
(in thousands)
Net cash provided by operating activities
$ 91,202 $ 110,982 $ 78,125 $ 125,012
Net cash used in investing activities
(109,751) (134,138) (83,734) (128,073)
Net cash provided by (used in) financing activities
32,212 13,897 (4,227) 18,828
Balance sheet data (as of period end):
(in thousands)
Cash and cash equivalents
$ 25,709 $ 16,450 $ 32,217
Total assets
324,715 410,641 496,937
Total liabilities
319,310 480,096 522,982
Total long-term debt, including current portion
233,238 367,170 389,202
Total redeemable convertible preferred stock
37,179 97,086 103,092
Total stockholders’ equity (deficit)
(31,774) (166,541) (129,137)
Other financial data:
(in thousands)
EBITDA
$ 83,750 $ 121,745 $ 86,810 $ 128,255
Adjusted EBITDA
87,042 124,655 89,407 129,979
Adjusted EBITDA less Patient Equipment Capex
21,190 41,039 27,987 59,867
The following table reconciles net income, the most directly comparable GAAP measure, to EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex.
EBITDA, Adjusted EBITDA and Adjusted EBITDA less Patient Equipment Capex are not calculated or presented in accordance with GAAP. As a result, these financial measures have limitations as analytical
 
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and comparative tools, and you should not consider these items in isolation, or as a substitute for analysis of our results as reported under GAAP.
Year ended December 31,
Nine months
ended September 30,
2018
2019
2019
2020
(audited)
(unaudited)
Non-GAAP reconciliation:
(in thousands)
Net income
$ 15,889 $ 30,422 $ 22,031 $ 43,935
Interest expense
7,610 14,370 9,766 11,486
Income tax expense (benefit)
3,036 4,001 2,694 8,179
Depreciation and amortization expense
57,215 72,952 52,319 64,655
EBITDA $ 83,750 $ 121,745 $ 86,810 $ 128,255
Loss on extinguishment of debt, net
1,227 1,509 1,509
Equity-based compensation expense
2,065 1,401 1,088 1,724
Adjusted EBITDA
$ 87,042 $ 124,655 $ 89,407 $ 129,979
Less: Patient equipment capex
(65,852) (83,616) (61,420) (70,112)
Adjusted EBITDA less Patient Equipment Capex
$ 21,190 $ 41,039 $ 27,987 $ 59,867
 
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Summary Unaudited Pro Forma Condensed Combined Financial Information of AdaptHealth Corp.
The following summary unaudited pro forma condensed combined financial information presents the summary unaudited pro forma condensed combined balance sheet data as of September 30, 2020 and the summary unaudited pro forma condensed combined statements of operations data for the nine months ended September 30, 2020 and the year ended December 31, 2019 based upon the combined historical financial statements of AdaptHealth Corp. (“AdaptHealth”), the Patient Care Solutions business (“PCS”), Solara Medical Supplies, LLC (“Solara”) and AeroCare Holdings, Inc. and its subsidiaries (“AeroCare”), after giving effect to (1) AdaptHealth’s acquisition of PCS on January 2, 2020 (the “PCS Acquisition”), (2) AdaptHealth’s acquisition of Solara on July 1, 2020 (the “Solara Acquisition”), (3) AdaptHealth’s recently announced proposed acquisition of AeroCare (the “AeroCare Acquisition”), which is expected to close in the first quarter of 2021, subject to certain customary closing conditions and regulatory approvals, (4) the issuance of the shares of Class A Common Stock offered in connection with this offering, and related adjustments described in “Unaudited Pro Forma Condensed Combined Financial Information of AdaptHealth Corp.” This offering is not conditioned on the consummation of the AeroCare Acquisition or the related transactions, and there can be no assurance that the AeroCare Acquisition or any of the related transactions described herein will close.
The summary unaudited pro forma condensed combined statements of operations data for the nine months ended September 30, 2020 and for the year ended December 31, 2019 gives pro forma effect to the PCS Acquisition, the Solara Acquisition, the AeroCare Acquisition, and the issuance of the shares of Class A Common Stock offered hereby, as if they had occurred on January 1, 2019. The summary unaudited pro forma condensed combined balance sheet data as of September 30, 2020 gives pro forma effect to the AeroCare Acquisition and the issuance of the shares of Class A Common Stock offered hereby as if they were completed on September 30, 2020. This summary unaudited pro forma condensed combined financial information should be read in conjunction with the historical financial statements of AdaptHealth Corp., PCS, Solara and AeroCare incorporated by reference herein.
This summary unaudited pro forma condensed combined financial information is provided for informational purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the PCS Acquisition, the Solara Acquisition, the AeroCare Acquisition and the issuance of shares of Class A Common Stock offered in connection with this offering had been completed as of the dates set forth above, nor is it indicative of the future results or financial position of the combined company. This summary unaudited pro forma condensed combined financial information also does not give effect to the potential impact of any anticipated synergies, operating efficiencies or cost savings resulting from favorable vendor pricing had AdaptHealth owned PCS, Solara and AeroCare in the periods indicated above, or any integration costs and benefits from restructuring plans.
Year ended
December 31,
2019
Nine months
ended
September 30,
2020
Consolidated statements of operations data:
(in thousands)
Net revenue
$ 1,375,750 $ 1,288,779
Operating income
56,933 99,820
Net income (loss) attributable to AdaptHealth Corp.
(49,227) 9,245(a)
Balance sheet data (as of period end):
(in thousands)
Cash and cash equivalents
$ 374,653
Total assets
3,882,571
Total liabilities
2,175,630
Total stockholders’ equity attributable to AdaptHealth Corp.
1,715,856
 
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(a)
For the twelve months ended September 30, 2020, AdaptHealth generated consolidated net loss attributable to AdaptHealth Corp. of $1 million and Adjusted EBITDA of $488 million, which is pro forma for the acquisition of AeroCare and the other transactions described above and adjusted to include $50 million of estimated pre-tax annual cost savings associated with the AeroCare Acquisition and the acquisition of $81.7 million in Adjusted EBITDA from 18 acquisitions by AdaptHealth and $12.5 million in Adjusted EBITDA from 12 acquisitions by AeroCare, in each case completed after September 30, 2019 and including twelve months of Adjusted EBITDA as well as expected cost synergies related to such acquisitions. Such figures are unaudited and have not been reviewed by AdaptHealth’s or AeroCare's independent auditors.
 
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RISK FACTORS
Investment in our Class A Common Stock involves a high degree of risk. You should consider carefully the following risks and the risks and uncertainties described under the heading “Risk Factors” in the accompanying prospectus, our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as updated by our subsequent Quarterly Reports on Form 10-Q, and our other filings with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, which are incorporated herein by reference, before you decide whether to purchase any of our Class A Common Stock. These risks could materially adversely affect our business, financial condition, results of operations and cash flows, and you may lose part or all of your investment. In addition, the exposure of AeroCare’s business to certain of the risks below, in the accompanying prospectus and in the documents incorporated by reference herein and therein could potentially be different or greater for the combined company after the consummation of the AeroCare Acquisition. For more information, see “Where You Can Find More Information” and “Incorporation of Certain Information by Reference.”
Risks Related to the AeroCare Acquisition
The AeroCare Acquisition is subject to conditions, including certain conditions that may not be satisfied, and it may not be completed on a timely basis, or at all. Failure to complete the AeroCare Acquisition could have material and adverse effects on us.
On December 1, 2020, we entered into the Merger Agreement in connection with the AeroCare Acquisition. The completion of the AeroCare Acquisition is subject to a number of conditions, which make both the completion and the timing of completion of the AeroCare Acquisition uncertain. Also, either AeroCare or we may terminate the Merger Agreement under certain circumstances described therein, including if the AeroCare Acquisition has not been completed by May 31, 2021 (subject to extension under certain circumstances), unless the failure of the AeroCare Acquisition to be completed has resulted from the failure of the party seeking to terminate the Merger Agreement to perform its obligations. We will be required to pay a termination fee to AeroCare equal to $60 million if the Merger Agreement is terminated for breach by us that primarily gives rise to the failure of certain conditions to closing of AeroCare or for our failure to close when required.
If the AeroCare Acquisition is not completed on a timely basis, or at all, our ongoing business may be adversely affected. Additionally, in the event the AeroCare Acquisition is not completed, the Company will be subject to a number of risks without realizing any of the benefits of having completed the AeroCare Acquisition, including the following:

we will be required to pay our costs relating to the AeroCare Acquisition, such as legal, accounting and financial advisory fees, whether or not the AeroCare Acquisition is completed;

time and resources committed by our management to matters relating to the AeroCare Acquisition could otherwise have been devoted to pursuing other beneficial opportunities; and

the market price of our securities could decline to the extent that the current market price reflects a market assumption that the AeroCare Acquisition will be completed, or to the extent that the AeroCare Acquisition is fundamental to our business strategy.
The incurrence of indebtedness to fund the AeroCare Acquisition may impact our financial position and subject us to additional financial and operating restrictions.
In connection with the AeroCare Acquisition, we expect to incur a substantial amount of additional indebtedness, including as a result of the issuance of the Notes and the other financing transactions described in “Prospectus Supplement Summary — Recent Developments — AeroCare Financing.” Our ability to make scheduled payments on or refinance our debt obligations depends on our financial condition and operating performance, which are subject to prevailing economic and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control. The combined company may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness.
The incurrence of indebtedness in connection with the issuance of the Notes and additional senior secured term loan borrowings will subject us to additional financial and operating covenants, which may
 
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limit our flexibility in responding to our business needs. If we are not able to maintain compliance with stated financial covenants or if we breach other covenants in any debt agreement, we could be in default under such agreement. Such a default could allow our creditors to accelerate the related indebtedness and may result in the acceleration of any other indebtedness to which a cross-acceleration or cross-default provision applies.
Our overall leverage and terms of our financing could, among other things:

make it more difficult to satisfy our obligations under the terms of our indebtedness;

limit our ability to refinance our indebtedness on terms acceptable to us or at all;

limit our flexibility to plan for and adjust to changing business and market conditions and increase our vulnerability to general adverse economic and industry conditions;

require us to dedicate a substantial portion of our cash flows to make interest and principal payments on our debt, thereby limiting the availability of our cash flow to fund future acquisitions, working capital, business activities, and other general corporate requirements; and

limit our ability to obtain additional financing for working capital, to fund growth or for general corporate purposes, even when necessary to maintain adequate liquidity, particularly if any ratings assigned to our debt securities by rating organizations were revised downward.
The unaudited pro forma condensed combined financial information for AdaptHealth included in this prospectus supplement is preliminary, and our actual financial position and operations after the AeroCare Acquisition may differ materially from the unaudited pro forma condensed combined financial information included in this prospectus supplement.
The unaudited pro forma condensed combined financial information included in this prospectus supplement is presented for illustrative purposes only and is not necessarily indicative of what our actual financial position or results of operations would have been had the AeroCare Acquisition and other transactions described therein been completed on the dates indicated. Our actual results and financial position after the AeroCare Acquisition and other transactions described therein may differ materially and adversely from the unaudited pro forma condensed combined financial information included in this prospectus supplement.
We may experience difficulties in integrating the operations of AeroCare into our business and in realizing the expected benefits of the AeroCare Acquisition.
The success of the AeroCare Acquisition will depend in part on our ability to realize the anticipated business opportunities from combining the operations of AeroCare with our business in an efficient and effective manner. The integration process could take longer than anticipated and could result in the loss of key employees, the disruption of each company’s ongoing businesses, tax costs or inefficiencies, or inconsistencies in standards, controls, information technology systems, procedures and policies, any of which could adversely affect our ability to maintain relationships with customers, employees or other third parties, or our ability to achieve the anticipated benefits of the AeroCare Acquisition, and could harm our financial performance. If we are unable to successfully or timely integrate the operations of AeroCare with our business, we may incur unanticipated liabilities and be unable to realize the revenue growth, synergies and other anticipated benefits resulting from the AeroCare Acquisition, and our business, results of operations and financial condition could be materially and adversely affected.
We have incurred significant costs in connection with the AeroCare Acquisition. The substantial majority of these costs are non-recurring expenses related to the AeroCare Acquisition. These non-recurring costs and expenses are not reflected in the unaudited pro forma condensed combined financial information included herein. We may incur additional costs in the integration of AeroCare’s business, and may not achieve cost synergies and other benefits sufficient to offset the incremental costs of the AeroCare Acquisition.
 
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Risks Relating to the Offering and Our Class A Common Stock
This offering is not conditioned upon the closing of the AeroCare Acquisition. If the AeroCare Acquisition does not close, we will have broad discretion as to the use of the proceeds from this offering, and we may not use the proceeds effectively.
The offering will be consummated prior to the closing of the AeroCare Acquisition and we intend to use approximately half the net proceeds of the shares offered by us in this offering, together with senior secured term loan borrowings, the net proceeds from the issuance of unsecured senior notes and cash on hand, to finance the AeroCare Acquisition and to pay related fees and expenses, and the remainder for general corporate purposes, which may include future acquisitions and other business opportunities, capital expenditures and working capital. See “Use of Proceeds.” The AeroCare Acquisition is expected to close in the first quarter of 2021, however, there can be no assurance that all of the conditions to closing will be satisfied, or, if they are, as to the timing of such satisfaction. As a result, the AeroCare Acquisition may be delayed or not close at all.
This offering is not conditioned on the completion of the AeroCare Acquisition, and our management will have broad discretion as to the application of a portion of the net proceeds from this offering, or as to the application of all of the net proceeds from this offering if the AeroCare Acquisition does not close. Accordingly, if you decide to purchase Class A Common Stock in this offering, you should be willing to do so whether or not we complete the AeroCare Acquisition. In the event that we fail to consummate the AeroCare Acquisition, we will have issued a significant number of additional shares of Class A Common Stock and we will not have acquired the revenue-generating assets that would be required to produce the earnings and cash flow we anticipated. As a result, failure to consummate the AeroCare Acquisition could adversely affect our earnings per share and our ability to make distributions to stockholders.
Our management might not apply our net proceeds in ways that ultimately increase the value of any investment in our Class A Common Stock. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.
Our only significant assets are the ownership of AdaptHealth Holdings, and such ownership may not be sufficient to generate the funds necessary to meet our financial obligations or to pay any dividends on our Class A Common Stock.
We have no direct operations and no significant assets other than the ownership of AdaptHealth Holdings. We depend on AdaptHealth Holdings and its subsidiaries for distributions, loans and other payments to generate the funds necessary to meet our financial obligations or to pay any dividends with respect to our Class A Common Stock. Legal and contractual restrictions in agreements governing the indebtedness of AdaptHealth Holdings and its subsidiaries may limit our ability to obtain cash from AdaptHealth Holdings. The earnings from, or other available assets of, AdaptHealth Holdings and its subsidiaries may not be sufficient to enable us to satisfy our financial obligations or pay any dividends on our Class A Common Stock. Prior to the Up-C Unwinding, AdaptHealth Holdings was classified as a partnership for U.S. federal income tax purposes and, as such, was generally not subject to entity-level U.S. federal income tax. Instead, taxable income was allocated to holders of AdaptHealth Units, including us. As a result, we generally incurred taxes on our allocable share of any net taxable income generated by AdaptHealth Holdings. Under the terms of the Fifth Amended and Restated Limited Liability Company Agreement of AdaptHealth Holdings, dated as of November 8, 2019, AdaptHealth Holdings was obligated to make tax distributions to holders of AdaptHealth Units, including us, except to the extent such distributions would render AdaptHealth Holdings insolvent or were otherwise prohibited by law or the terms of AdaptHealth’s credit facility. After the Up-C Unwinding, AdaptHealth Holdings is our wholly owned, indirect subsidiary and, as such, we incur taxes on all of its net taxable income. In addition to our tax obligations, we also incur expenses related to our operations and our interests in AdaptHealth Holdings, including costs and expenses of being a publicly traded company, all of which could be significant. To the extent that we require funds and AdaptHealth Holdings or its subsidiaries are restricted from making distributions under applicable law or regulation or under the terms of their financing arrangements, or are otherwise unable to provide such funds, it could materially adversely affect our liquidity and financial condition, including our ability to pay our income taxes when due.
 
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Fluctuations in the price of our securities could contribute to the loss of all or part of your investment.
As an active market for our Class A Common Stock continues to develop, the trading price of our Class A Common Stock could be volatile and subject to wide fluctuations in response to various factors, some of which are beyond our control. Any of the factors listed below could have a material adverse effect on your investment in our Class A Common Stock and our Class A Common Stock may trade at prices significantly below the price you paid for it. In such circumstances, the trading price of our Class A Common Stock may not recover and may experience a further decline.
Factors affecting the trading price of our Class A Common Stock may include:

the COVID-19 pandemic;

actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;

changes in the market’s expectations about our operating results;

success of competitors;

our operating results failing to meet the expectation of securities analysts or investors in a particular period;

changes in financial estimates and recommendations by securities analysts concerning AdaptHealth or the home medical equipment industry in general;

operating and stock price performance of other companies that investors deem comparable to us;

our ability to market new and enhanced products on a timely basis;

changes in laws and regulations affecting our business;

our ability to meet compliance requirements;

commencement of, or involvement in, litigation involving us;

changes in our capital structure, such as future issuances of securities or the incurrence of additional debt;

the volume of shares of our Class A Common Stock available for public sale;

any major change in our board of directors or management;

sales of substantial amounts of Class A Common Stock by our directors, executive officers or significant stockholders or the perception that such sales could occur; and

general economic and political conditions such as recessions, interest rates, fuel prices, international currency fluctuations and acts of war or terrorism.
Broad market and industry factors may materially harm the market price of our securities irrespective of our operating performance. The stock market in general, and Nasdaq in particular, have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of our Class A Common Stock, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to us could depress our stock price regardless of our business, prospects, financial condition or results of operations. A decline in the market price of our Class A Common Stock also could adversely affect our ability to issue additional securities and our ability to obtain additional financing in the future.
We may not be able to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act that are applicable to us.
As a public company, we are required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of internal
 
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control over financial reporting. To comply with the requirements of being a public company, we are required to provide attestation on internal controls, and we may need to undertake various actions, such as implementing additional internal controls and procedures and hiring additional accounting or internal audit staff. The standards required for a public company under Section 404 of the Sarbanes-Oxley Act are significantly more stringent than those that were required of AdaptHealth Holdings as a privately held company. Management may not be able to effectively and timely implement controls and procedures that adequately respond to the increased regulatory compliance and reporting requirements that became applicable to us after the Business Combination. If we are not able to implement the additional requirements of Section 404 in a timely manner or with adequate compliance, we may not be able to assess whether our internal controls over financial reporting are effective, which may subject us to adverse regulatory consequences and could harm investor confidence and the market price of our Class A Common Stock. Further, as an emerging growth company, our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal controls over financial reporting pursuant to Section 404 until the date we are no longer an emerging growth company. At such time, our independent registered public accounting firm may issue a report that is adverse in the event that it is not satisfied with the level at which our controls are documented, designed or operating.
Certain of our principal stockholders have significant influence over us.
As of January 1, 2021, Q Management Services (PTC) Ltd., as Trustee of Everest Trust, will beneficially own approximately 15.6% of our Class A Common Stock, assuming the exercise of 665,628 private placement warrants held by Clifton Bay Offshore Investments L.P. and 41,473 private placement warrants held by Quadrant Management LLC. As of January 1, 2021, the OEP Purchaser will beneficially own approximately 14.4% of our Class A Common Stock. As long as Q Management Services (PTC) Ltd., as Trustee of the Everest Trust, and/or the OEP Purchaser own or control a significant percentage of our outstanding voting power, they will have the ability to significantly influence all corporate actions requiring stockholder approval, including the election and removal of directors and the size of our board of directors, any amendment to our Second Amended and Restated Certificate of Incorporation (our “Charter”) or Amended and Restated Bylaws (our “Bylaws”), or the approval of any merger or other significant corporate transaction, including a sale of substantially all of our assets.
The interests of Q Management Services (PTC) Ltd., as Trustee of the Everest Trust, and/or the OEP Purchaser may not align with the interests of our other stockholders. Each of Q Management Services (PTC) Ltd., as Trustee of the Everest Trust, and the OEP Purchaser is in the business of making investments in companies and may acquire and hold interests in businesses that compete directly or indirectly with us. Each of Q Management Services (PTC) Ltd., as Trustee of the Everest Trust, and the OEP Purchaser may also pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. Our Charter provides that our stockholders and our directors, including any who were designated by any of our stockholders, other than any such persons who are employees of us or any of our subsidiaries, do not have any obligation to offer to us any corporate opportunity of which he or she may become aware prior to offering such opportunities to other entities with which they may be affiliated, subject to certain limited exceptions.
We will continue to incur significant increased expenses and administrative burdens as a result of being a public company, which could have a material adverse effect on our business, financial condition and results of operations.
We will continue to face increased legal, accounting, administrative and other costs and expenses as a public company that AdaptHealth Holdings did not incur as a private company. The Sarbanes-Oxley Act, including the requirements of Section 404, as well as rules and regulations subsequently implemented by the SEC, the Dodd-Frank Wall Street Reform and Consumer Protection Act and the rules and regulations promulgated and to be promulgated thereunder, the Public Company Accounting Oversight Board and the securities exchanges, impose additional reporting and other obligations on public companies. Compliance with public company requirements increases costs and makes certain activities more time-consuming. A number of those requirements require us to carry out activities AdaptHealth had not prior to the Business Combination. In addition, additional expenses associated with SEC reporting requirements will continue to be incurred. Furthermore, if any issues in complying with those requirements are identified (for example,
 
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if the auditors identify a material weakness or significant deficiency in the internal control over financial reporting), we could incur additional costs to remediate those issues, and the existence of those issues could adversely affect our reputation or investor perceptions of us. It may also be more expensive to obtain director and officer liability insurance. Risks associated with our status as a public company may make it more difficult to attract and retain qualified persons to serve on the board of directors or as executive officers. The additional reporting and other obligations imposed by these rules and regulations will increase legal and financial compliance costs and the costs of related legal, accounting and administrative activities. These increased costs will require us to divert a significant amount of money that could otherwise be used to expand the business and achieve strategic objectives. Advocacy efforts by stockholders and third parties may also prompt additional changes in governance and reporting requirements, which could further increase costs.
Certain of AdaptHealth’s management has limited experience in operating a public company.
Certain of AdaptHealth’s executive officers and directors have limited experience in the management of a publicly traded company. AdaptHealth’s management team may not successfully or effectively manage its transition to a public company that is subject to significant regulatory oversight and reporting obligations under federal securities laws. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being devoted to the management and growth of the company. It is possible that we will be required to expand our employee base and hire additional employees to support our operations as a public company, which will increase our operating costs in future periods.
Our ability to successfully operate our business is largely dependent upon the efforts of certain key personnel of AdaptHealth, including the key personnel of AdaptHealth who have stayed with us following the Business Combination. The loss of such key personnel could negatively impact our operations and financial results.
Our ability to successfully operate our business is dependent upon the efforts of certain key personnel of AdaptHealth. It is possible that AdaptHealth will lose some key personnel, the loss of which could negatively impact our operations and profitability. Furthermore, certain of the key personnel of AdaptHealth may be unfamiliar with the requirements of operating a company regulated by the SEC, which could cause us to have to expend time and resources helping them become familiar with such requirements.
Because we have no current plans to pay cash dividends on our Class A Common Stock for the foreseeable future, you may not receive any return on investment unless you sell your Class A Common Stock for a price greater than that which you paid for it.
We may retain future earnings, if any, for future operations, expansion and debt repayment and have no current plans to pay any cash dividends for the foreseeable future. Any decision to declare and pay dividends as a public company in the future will be made at the discretion of our board of directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that our board of directors may deem relevant. In addition, our ability to pay dividends may be limited by covenants of any existing and future outstanding indebtedness we or our subsidiaries incur. As a result, you may not receive any return on an investment in our Class A Common Stock unless you sell our Class A Common Stock for a price greater than that which you paid for it.
We are required to make payments under the Tax Receivable Agreement for certain tax benefits we may claim, and the amounts of such payments could be significant.
The Tax Receivable Agreement, which we entered into at the Closing with certain pre-Business Combination owners of AdaptHealth Holdings (collectively, the “TRA Holders”), generally provides for the payment by us of 85% of the net cash savings, if any, in U.S. federal, state and local income tax that we actually realize (or are deemed to realize in certain circumstances) in periods after the Closing as a result of: (i) certain tax attributes of Access Point Medical, Inc. existing prior to the Business Combination; (ii) certain increases in tax basis resulting from exchanges of AdaptHealth Units; (iii) imputed interest deemed to be paid
 
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by us as a result of payments we make under the Tax Receivable Agreement; and (iv) certain increases in tax basis resulting from payments we make under the Tax Receivable Agreement. We will retain the benefit of the remaining 15% of these cash savings. The amount of the cash payments that we may be required to make under the Tax Receivable Agreement could be significant and is dependent upon significant future events and assumptions, including the timing of the exchanges of AdaptHealth Units, the price of our Class A Common Stock at the time of each exchange, the extent to which such exchanges are taxable transactions and the amount of the exchanging TRA Holder’s tax basis in its AdaptHealth Units at the time of the relevant exchange. The amount of such cash payments is also based on assumptions as to the amount and timing of taxable income we generate in the future, the U.S. federal income tax rate then applicable and the portion of our payments under the Tax Receivable Agreement that constitute interest or give rise to depreciable or amortizable tax basis. Moreover, payments under the Tax Receivable Agreement will be based on the tax reporting positions that we determine, which tax reporting positions are subject to challenge by taxing authorities. We are dependent on distributions from AdaptHealth Holdings to make payments under the Tax Receivable Agreement, and we cannot guarantee that such distributions will be made in sufficient amounts or at the times needed to enable us to make our required payments under the Tax Receivable Agreement, or at all. Any payments made by us to the TRA Holders under the Tax Receivable Agreement will generally reduce the amount of overall cash flow that might have otherwise been available to us. To the extent that we are unable to make timely payments under the Tax Receivable Agreement for any reason, the unpaid amounts will be deferred and will accrue interest until paid by us. Nonpayment for a specified period may constitute a breach of a material obligation under the Tax Receivable Agreement, and therefore, may accelerate payments due under the Tax Receivable Agreement. The payments under the Tax Receivable Agreement are also not conditioned upon the TRA Holders maintaining a continued ownership interest in AdaptHealth Holdings or us.
In certain cases, payments under the Tax Receivable Agreement may be accelerated and/or significantly exceed the actual benefits, if any, we realize in respect of the tax attributes subject to the Tax Receivable Agreement.
The Tax Receivable Agreement provides that if we breach any of our material obligations under the Tax Receivable Agreement, if we undergo a change of control or if, at any time, we elect an early termination of the Tax Receivable Agreement, then the Tax Receivable Agreement will terminate and our obligations, or our successor’s obligations, to make payments under the Tax Receivable Agreement would accelerate and become immediately due and payable. The amount due and payable in those circumstances is determined based on certain assumptions, including an assumption that we would have sufficient taxable income to fully utilize all potential future tax benefits that are subject to the Tax Receivable Agreement. We may need to incur debt to finance payments under the Tax Receivable Agreement to the extent our cash resources are insufficient to meet our obligations under the Tax Receivable Agreement as a result of timing discrepancies or otherwise.
As a result of the foregoing, (i) we could be required to make cash payments to the TRA Holders that are greater than the specified percentage of the actual benefits we ultimately realize in respect of the tax benefits that are subject to the Tax Receivable Agreement, and (ii) we would be required to make a cash payment equal to the present value of the anticipated future tax benefits that are the subject of the Tax Receivable Agreement, which payment may be made significantly in advance of the actual realization, if any, of such future tax benefits. In these situations, our obligations under the Tax Receivable Agreement could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combination, or other changes of control due to the additional transaction costs a potential acquirer may attribute to satisfying such obligations. There can be no assurance that we will be able to finance our obligations under the Tax Receivable Agreement.
We will not be reimbursed for any payments made to TRA Holders under the Tax Receivable Agreement in the event that any tax benefits are disallowed.
We will not be reimbursed for any cash payments previously made to the TRA Holders pursuant to the Tax Receivable Agreement if any tax benefits initially claimed by us are subsequently challenged by a taxing authority and are ultimately disallowed. Instead, any excess cash payments made by us to a TRA Holder will be netted against any future cash payments that we might otherwise be required to make under the terms of the Tax Receivable Agreement. However, a challenge to any tax benefits initially claimed by us may not
 
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arise for a number of years following the initial time of such payment or, even if challenged early, such excess cash payment may be greater than the amount of future cash payments that we might otherwise be required to make under the terms of the Tax Receivable Agreement and, as a result, there might not be future cash payments from which to net against. The applicable U.S. federal income tax rules are complex and factual in nature, and there can be no assurance that the Internal Revenue Service or a court will not disagree with our tax reporting positions. As a result, it is possible that we could make cash payments under the Tax Receivable Agreement that are substantially greater than our actual cash tax savings.
Certain of the TRA Holders have substantial control over us, and their interests, along with the interests of other TRA Holders, in our business may conflict with the interests of our stockholders.
The TRA Holders may receive payments from us under the Tax Receivable Agreement upon any redemption or exchange of their AdaptHealth Units, including the issuance of shares of our Class A Common Stock upon any such redemption or exchange. As a result, the interests of the TRA Holders may conflict with the interests of holders of our Class A Common Stock. For example, the TRA Holders may have different tax positions from us which could influence their decisions regarding whether and when to dispose of assets, whether and when to incur new or refinance existing indebtedness, especially in light of the existence of the Tax Receivable Agreement, and whether and when we should terminate the Tax Receivable Agreement and accelerate our obligations thereunder. In addition, the structuring of future transactions may take into consideration tax or other considerations of TRA Holders even in situations where no similar considerations are relevant to us.
Our warrants may have an adverse effect on the market price of our Class A Common Stock.
Simultaneously with the closing of our IPO, we issued in a private placement an aggregate of 4,333,333 private placement warrants, each exercisable to purchase one share of Class A Common Stock at $11.50 per share. As of January 1, 2021, there were 4,280,548 private placement warrants outstanding. To the extent such warrants are exercised, additional shares of our Class A Common Stock will be issued, which will result in dilution to our stockholders and increase the number of shares of Class A Common Stock eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such warrants may be exercised could adversely affect the market price of our Class A Common Stock.
The JOBS Act permits “emerging growth companies” like us to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies.
We currently qualify as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. As such, we plan to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements. We will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of our Class A Common Stock that is held by non-affiliates exceeds $700 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which we have total annual gross revenue of $1.07 billion or more during such fiscal year, (iii) the date on which we have issued more than $1.0 billion in non-convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the date of the first sale of our common stock in the IPO, which would be December 31, 2023. AdaptHealth had revenues for the year ended December 31, 2019 of $529.6 million and its revenues for the nine months ended September 30, 2020 were $708.0 million. If we continue to expand our business through acquisitions and/or continue to grow revenues organically, or if we continue to issue debt, including to fund such acquisitions, we may cease to be an emerging growth company prior to December 31, 2023. For instance, we expect to exceed $1.07 billion in revenue for the year ended December 31, 2021, meaning we would no longer be an emerging growth company as of December 31, 2021.
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in
 
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Section 7(a)(2)(B) of the Securities Act as long as we are an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the same time private companies are required to adopt the new or revised standard. Investors may find our Class A Common Stock less attractive because we will rely on these exemptions, which may result in a less active trading market for our Class A Common Stock and its stock price may be more volatile.
We are also currently a “smaller reporting company.” In the event that we are still considered a “smaller reporting company,” at such time as we cease being an “emerging growth company,” the disclosure we will be required to provide in our SEC filings will increase, but will still be less than it would be if we were not considered either an “emerging growth company” or a “smaller reporting company.” Specifically, similar to “emerging growth companies,” “smaller reporting companies” are able to provide simplified executive compensation disclosures in their filings; may be exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings. Decreased disclosures in our SEC filings due to our status as an “emerging growth company” or “smaller reporting company” may make it harder for investors to analyze our results of operations and financial prospects.
Our Charter requires that the Court of Chancery of the State of Delaware and, to the extent enforceable, the federal district courts of the United States of America be the exclusive forums for substantially all disputes between us and our stockholders, which may have the effect of discouraging lawsuits against our directors and officers.
Our Charter requires, to the fullest extent permitted by law, other than any claim to enforce a duty or liability created by the Exchange Act or other claim for which federal courts have exclusive jurisdiction, that derivative actions brought in our name, actions against directors, officers and employees for breach of fiduciary duty and other similar actions may be brought only in the Court of Chancery in the State of Delaware and, if brought outside of the State of Delaware, the stockholder bringing such suit will be deemed to have consented to service of process on such stockholder’s counsel. Our Charter further provides that the federal district courts of the United States of America are the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. These provisions may have the effect of discouraging lawsuits against our directors and officers. If a court were to find either exclusive forum provision in our Charter to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could seriously harm our business. Although the Delaware Supreme Court recently held that exclusive forum provisions of federal district courts of the United States of America for resolving any complaint asserting a cause of action arising under the Securities Act are facially valid, courts in other jurisdictions may find such provisions to be unenforceable.
 
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USE OF PROCEEDS
We expect that the net proceeds to us from this offering will be approximately $226.6 million (or $264.4 million if the underwriters exercise their option to purchase additional shares in full). We expect to use approximately half the net proceeds of the shares offered by us in this offering, together with senior secured term loan borrowings, the net proceeds from the issuance of unsecured senior notes and cash on hand, to finance the AeroCare Acquisition and to pay related fees and expenses, and the remainder for general corporate purposes, which may include future acquisitions and other business opportunities, capital expenditures and working capital. We will not receive any proceeds from the sale of our Class A Common Stock by the selling stockholder. However, we have agreed to pay expenses incurred by the selling stockholder in connection with the offering, other than the underwriting discounts and commissions.
The completion of this offering is not contingent on the completion of the AeroCare Acquisition. In the event that the AeroCare Acquisition does not close for any reason, then all of the net proceeds to us from this offering would be available for general corporate purposes. Accordingly, if you decide to purchase Class A Common Stock in this offering, you should be willing to do so whether or not we complete the AeroCare Acquisition. See “Risk Factors — Risks Relating to the Offering and Our Class A Common Stock — This offering is not conditioned upon the closing of the AeroCare Acquisition. If the AeroCare Acquisition does not close, we will have broad discretion as to the use of the proceeds from this offering, and we may not use the proceeds effectively.”
The following table assumes that the AeroCare Acquisition will be consummated and illustrates the estimated sources and uses of funds for the AeroCare Acquisition, including a portion of the net proceeds from this offering. Actual amounts may vary from the estimated amounts.
Sources of funds
Uses of funds
($ in millions)
New senior secured term loan(1)
$ 486.7
Unsecured senior notes
500
Common stock issued to AeroCare shareholders(2)
1,051
Common stock issued to AeroCare shareholders(2)
$ 1,051
Class A Common Stock offered hereby(3)
113.3
Cash consideration paid to AeroCare shareholders or to repay existing AeroCare indebtedness(4)
1,100
Cash on balance sheet
43.2
Transaction fees and expenses(5)
43.2
Total sources of funds
$ 2,194.2
Total uses of funds
$ 2,194.2
(1)
Represents $486.7 million aggregate principal amount in new senior secured term loan borrowings expected in connection with the AeroCare Acquisition. In connection with the Merger Agreement, we entered into the Commitment Letter, pursuant to which Jefferies Finance (together with any additional commitment parties party thereto) committed to provide to us the Term B Facility. The definitive documentation governing the Term B Facility has not been finalized, and, accordingly, the actual amounts borrowed and terms thereof may differ from the description of such terms in the Commitment Letter. On or prior to the consummation of the AeroCare Acquisition, the commitments in respect of the Term B Facility may be automatically reduced on a dollar-for-dollar basis by certain debt incurrences (excluding the Notes) and 50% of the net proceeds from equity issuances by us (including this offering). As a result of the reduction in the commitment for this offering, AdaptHealth currently intends to incur $486.7 million aggregate principal amount in new senior secured term loan borrowings in connection with the AeroCare Acquisition, which may include an incremental term loan A facility or a combination of a term loan B facility and an incremental term loan A facility.
(2)
Represents shares of Class A Common Stock and shares of Series C Preferred Stock, representing, in the aggregate, on an as-converted basis, the economic equivalent of 31 million shares of Class A Common Stock (which were valued at $926 million based on the closing price on the date prior to announcement of the transaction and $1.1 billion based on the closing price as of January 5, 2021).
 
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(3)
Represents half of the net proceeds from this offering.
(4)
A portion of the cash consideration paid to AeroCare will be used to repay existing AeroCare indebtedness.
(5)
Represents estimated fees and expenses associated with the AeroCare Acquisition, including OID and upfront fees, commitment, placement and other financing and investment banking fees and other transaction costs and professional fees.
 
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CAPITALIZATION
The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2020:

on an actual basis; and

on an as adjusted basis to give effect to the issuance of 7,250,000 new shares of our Class A Common Stock in this offering at a public offering price of $33.00 per share, after deducting the underwriting discount and commissions and estimated offering expenses payable by us; and

on a pro forma as adjusted basis to give further effect to (1) the AeroCare Acquisition, including the payment of $1.1 billion of cash consideration (and the application of half the net proceeds from this offering therefor) and the issuance of 31 million shares of Class A Common Stock (on an as converted basis) to the AeroCare shareholders pursuant to the Merger Agreement, (2) the incurrence of $986.7 million aggregate principal amount of incremental debt in connection with the AeroCare Acquisition and (3) $43.2 million estimated related financing and acquisition costs.
This offering is not conditioned on the consummation of the AeroCare Acquisition or the related transactions, and there can be no assurance that the AeroCare Acquisition or any of the related transactions described herein will close.
You should read this table together with our consolidated financial statements and other financial information incorporated by reference herein.
At September 30, 2020
(in thousands, except share data)
Actual
As
Adjusted(1)
Pro Forma
As Adjusted(1)
Cash and cash equivalents(2)
$ 272,318 $ 498,954 $ 374,653
Debt:
Long-term debt, less current portion(3)
$ 722,730 $ 722,730 $ 1,671,345
Current portion of long-term debt(3)
8,479 8,479 13,346
Total debt(3)
$ 731,209 $ 731,209 $ 1,684,691
Shareholders’ equity:
Class A Common Stock, par value of $0.0001 per share, 210,000,000 shares authorized; 62,680,967 shares issued and outstanding (actual), 69,930,967 shares issued and outstanding (as adjusted), 100,930,967 shares issued and outstanding (pro forma as adjusted)(4)
$ 6 $ 7 $ 10
Class B Common Stock, par value of $0.0001 per share, 35,000,000 shares authorized; 25,874,704 shares issued and outstanding (actual, as adjusted, pro forma as adjusted)(5)
3 3 3
Preferred Stock, par value $0.0001 per share, 5,000,000 shares authorized (actual, as adjusted, pro forma as adjusted):
Series A Preferred Stock, 0 shares issued and outstanding (actual,
as adjusted, pro forma as adjusted)
Series B-1 Preferred Stock, 183,560.02 shares issued and outstanding (actual, as adjusted, pro forma as adjusted)(6)
1 1 1
Series B-2 Preferred Stock, 0 shares issued and outstanding (actual, as adjusted, pro forma as adjusted)
Additional paid-in capital
476,861 703,496 1,754,083
Accumulated deficit
(23,130) (23,130) (33,130)
Accumulated other comprehensive loss
(5,111) (5,111) (5,111)
Total stockholders’ equity attributable to AdaptHealth Corp.
$ 448,630 $ 675,266 $ 1,715,856
Total capitalization
$ 1,179,839 $ 1,406,475 $ 3,400,547
(1)
Assumes that the underwriters’ option is not exercised.
(2)
As adjusted and pro forma as adjusted cash and cash equivalents does not reflect the cash purchase
 
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price for acquisitions completed subsequent to September 30, 2020 or the payment by the Company in December 2020 of (i) $29.9 million to the Option Parties pursuant to the Call Exercise on December 15, 2020 (see “Prospectus Supplement Summary — Recent Developments — Put/Call Agreement”) or (ii) $44.3 million to exercise its right to deliver cash in lieu of shares of Class A Common Stock in exchange for certain Consideration Units held by members of management in order for them to satisfy their tax obligations arising from the conversion of such individual’s Consideration Units (see “Prospectus Supplement Summary — Recent Developments — Up-C Unwinding”).
(3)
Amounts are shown net of unamortized debt issuance costs of $13.0 million (actual, as adjusted) and $46.2 million (pro forma as adjusted).
(4)
In connection with the AeroCare Acquisition, we will issue shares of our Series C Preferred Stock to the AeroCare shareholders, which, together with the shares of Class A Common Stock to be issued to the AeroCare shareholders, will represent, in the aggregate, on an as-converted basis, the economic equivalent of 31 million shares of Class A Common Stock. Upon the receipt of stockholder approval pursuant to the Nasdaq Listing Rules, we or any holder thereof may convert the Series C Preferred Stock into Class A Common Stock at either party’s election. The pro forma as adjusted Class A Common Stock shares outstanding includes the 31 million shares of Class A Common Stock discussed above.
(5)
In connection with the Up-C Unwinding, the former members of AdaptHealth Holdings (other than us) received one share of Class A Common Stock in exchange for each Consideration Unit, and as a result, there are no shares of Class B Common Stock outstanding as of the date of this prospectus supplement. See “Prospectus Supplement Summary — Recent Developments — Up-C Unwinding.”
(6)
Does not reflect the conversion by Deerfield Partners, L.P. on December 24, 2020 of 20,000 shares of Series B-1 Preferred Stock into 2,000,000 shares of Class A Common Stock.
 
S-31

 
UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION OF ADAPTHEALTH CORP.
The following unaudited pro forma condensed combined financial information presents the unaudited pro forma condensed combined balance sheet as of September 30, 2020 and the unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2020 and 2019 and the year ended December 31, 2019 based upon the combined historical financial statements of AdaptHealth Corp. (“AdaptHealth”), the Patient Care Solutions business (“PCS”), Solara Medical Supplies, LLC (“Solara”) and AeroCare Holdings, Inc. and its subsidiaries (“AeroCare”), after giving effect to (1) AdaptHealth’s acquisition of PCS on January 2, 2020 (the “PCS Acquisition”), (2) AdaptHealth’s acquisition of Solara on July 1, 2020 (the “Solara Acquisition”), (3) AdaptHealth’s recently announced proposed acquisition of AeroCare (the “AeroCare Acquisition”), which is expected to close in the first quarter of 2021, subject to certain customary closing conditions and regulatory approvals, (4) the issuance of the shares of Class A Common Stock offered in connection with this offering, and related adjustments described in the accompanying notes. This offering is not conditioned on the consummation of the AeroCare Acquisition or the related transactions, and there can be no assurance that the AeroCare Acquisition or any of the related transactions described herein will close.
The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2020 and 2019 and for the year ended December 31, 2019 give pro forma effect to the PCS Acquisition, the Solara Acquisition, the AeroCare Acquisition, and the issuance of the shares of Class A Common Stock offered hereby, as if they had occurred on January 1, 2019. The unaudited pro forma condensed combined balance sheet as of September 30, 2020 gives pro forma effect to the AeroCare Acquisition and the issuance of the shares of Class A Common Stock offered hereby as if they were completed on September 30, 2020.
The unaudited pro forma condensed combined financial information should be read in conjunction with the following:

the audited historical financial statements of AdaptHealth and the notes thereto as included in the Form 10-K filed on March 6, 2020;

the unaudited historical financial statements of AdaptHealth and the notes thereto as included in the Form 10-Q filed on November 6, 2020;

the audited and unaudited historical financial statements of PCS and the notes thereto as included in the Form S-1/A filed on March 9, 2020;

the audited and unaudited historical financial statements of Solara and the notes thereto as included in the Form 8-K filed on June 18, 2020;

the unaudited historical financial statements of Solara and the notes thereto as included in the Form 8-K filed on December 14, 2020; and;

the audited and unaudited historical financial statements of AeroCare and the notes thereto as included in the Form 8-K filed on December 14, 2020.
The unaudited pro forma condensed combined financial information is provided for informational purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the PCS Acquisition, the Solara Acquisition, the AeroCare Acquisition and the issuance of the shares of Class A Common Stock offered in connection with this offering had been completed as of the dates set forth above, nor is it indicative of the future results or financial position of the combined company. The unaudited pro forma condensed combined financial information also does not give effect to the potential impact of any anticipated synergies, operating efficiencies or cost savings resulting from favorable vendor pricing had AdaptHealth owned PCS, Solara and AeroCare in the periods indicated above, or any integration costs and benefits from restructuring plans.
 
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ADAPTHEALTH CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
September 30, 2020
(in thousands)
AdaptHealth
Historical
AeroCare
Reclassified(1)
Pro Forma
Adjustments
Note 3
AdaptHealth
Pro Forma
Assets
Current assets:
Cash and cash equivalents
$ 272,318 $ 32,217 $ 70,118
(a)
$ 374,653
Accounts receivable, net
147,335 69,365 216,700
Inventory
46,477 28,200 74,677
Prepaid and other current assets
18,255 6,638 24,893
Total current assets
484,385 136,420 70,118 690,923
Equipment and other fixed assets, net
101,656 148,578 250,234
Goodwill
810,480 208,182 1,707,409
(b)
2,726,071
Intangible assets, net
94,725 1,296 105,704
(c)
201,725
Other assets
6,466 2,461 8,927
Deferred tax asset
51,114 (46,423)
(d)
4,691
Total assets
$ 1,548,826 $ 496,937 $ 1,836,808 $ 3,882,571
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable and accrued expenses
$ 192,337 $ 79,812 $ $ 272,149
Current portion of capital lease
obligations
19,699 19,699
Current portion of long-term debt
8,479 18,000 (13,133)
(e)
13,346
Contract liabilities
13,231 26,026 39,257
Other liabilities
81,059 4,405 85,464
Total current liabilities
314,805 128,243 (13,133) 429,915
Long-term debt, less current portion
722,730 371,202 577,413
(f)
1,671,345
Other long-term liabilities
71,576 23,537 (20,743)
(d)
74,370
Total liabilities
$ 1,109,111 $ 522,982 $ 543,537 $ 2,175,630
Total stockholders’ equity (deficit):
Total stockholders’ equity (deficit) attributable to AdaptHealth Corp.
448,630 (26,045) 1,293,271
(g)
$ 1,715,856
Noncontrolling interest in subsidiaries
(8,915) (8,915)
Total stockholders’ equity (deficit)
439,715 (26,045) 1,293,271 1,706,941
Total Liabilities and Stockholders’ Equity (Deficit)
$ 1,548,826 $ 496,937 $ 1,836,808 $ 3,882,571
(1)
Refer to Note 2 for reclassification of AeroCare historical information.
 
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ADAPTHEALTH CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020
(in thousands, except per share data)
AdaptHealth
Historical
Solara
Reclassified(1)
AeroCare
Reclassified(1)
Pro Forma
Adjustments
Note 3
AdaptHealth
Pro Forma
Net revenue
$ 707,960 $ 83,155 $ 497,664 $ $ 1,288,779
Costs and expenses:
Cost of net revenue
604,777 70,834 413,294 1,088,905
General and administrative expenses
57,745 17,998 14,738 (15,129)
(h)
75,352
Depreciation and amortization, excluding patient equipment depreciation
6,398 3,587 6,055 8,662
(i)
24,702
Total costs and expenses
668,920 92,419 434,087 (6,467) 1,188,959
Operating income (loss)
39,040 (9,264) 63,577 6,467 99,820
Interest expense, net
27,826 7,367 11,463 24,654
(j)
71,310
Loss on extinguishment of debt, net
5,316 5,316
Income (loss) before income taxes
5,898 (16,631) 52,114 (18,187) 23,194
Income tax expense
2,290 8,179 (4,902)
(k)
5,567
Net income (loss)
3,608 (16,631) 43,935 (13,285) 17,627
Income attributable to noncontrolling interests
2,222 6,160
(l)
8,382
Net income (loss) attributable to AdaptHealth Corp.
$ 1,386 $ (16,631) $ 43,935 $ (19,445) $ 9,245
Net income (loss) per common share:
Basic
$ 0.03 $ 0.09
Diluted
$ 0.02 $ 0.09
Weighted average shares outstanding for net income (loss) attributable to AdaptHealth Corp.:
Basic
47,986 50,066
(m)
98,052
Diluted
50,848 50,066
(m)
100,914
(1)
Refer to Note 2 for reclassification of Solara and AeroCare historical information.
 
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ADAPTHEALTH CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2019
(in thousands, except per share data)
AdaptHealth
Historical
PCS
Reclassified(1)
Solara
Reclassified(1)
AeroCare
Reclassified(1)
Pro Forma
Adjustments
Note 3
AdaptHealth
Pro Forma
Net revenue
$ 529,644 $ 132,885 $ 179,572 $ 533,649 $ $ 1,375,750
Costs and expenses:
Cost of net revenue
440,386 163,772 142,627 460,376 1,207,161
General and administrative expenses
56,493 5,563 4,043 16,127 82,226
Depreciation and amortization, excluding patient equipment depreciation
3,068 235 7,110 6,868 12,149
(n)
29,430
Total costs and expenses
499,947 169,570 153,780 483,371 12,149 1,318,817
Operating income (loss)
29,697 (36,685) 25,792 50,278 (12,149) 56,933
Interest expense, net
39,305 (90) 13,261 14,346 32,296
(o)
99,118
Loss on extinguishment of debt, net
2,121 1,509 (1,509)
(p)
2,121
Income (loss) before income taxes
(11,729) (36,595) 12,531 34,423 (42,936) (44,306)
Income tax expense
1,156 294 4,001 (1,084)
(k)
4,367
Net income (loss)
(12,885) (36,595) 12,237 30,422 (41,852) (48,673)
Income attributable to noncontrolling interests
2,111 (1,557)
(l)
554
Net income (loss) attributable to AdaptHealth Corp.
$ (14,996) $ (36,595) $ 12,237 $ 30,422 $ (40,295) $ (49,227)
Net income (loss) per common share:
Basic and diluted
$ (0.66) $ (0.63)
Weighted average shares outstanding for net income (loss) attributable to AdaptHealth Corp.:
Basic and diluted
22,557 55,974
(m)
78,531
(1)
Refer to Note 2 for reclassification of PCS, Solara and AeroCare historical information.
 
S-35

 
ADAPTHEALTH CORP.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2019
(in thousands, except per share data)
AdaptHealth
Historical
PCS
Reclassified(1)
Solara
Reclassified(1)
AeroCare
Reclassified(1)
Pro Forma
Adjustments
Note 3
AdaptHealth
Pro Forma
Net revenue
$ 380,103 $ 99,217 $ 126,537 $ 379,245 $ $ 985,102
Costs and expenses:
Cost of net revenue
317,174 122,843 100,542 327,426 867,985
General and administrative expenses
31,508 4,165 3,625 10,993 50,291
Depreciation and amortization, excluding patient equipment depreciation
2,439 727 5,331 4,846 9,180
(q)
22,523
Total costs and expenses
351,121 127,735 109,498 343,265 9,180 940,799
Operating income (loss)
28,982 (28,518) 17,039 35,980 (9,180) 44,303
Interest expense, net
31,651 (73) 9,207 9,746 25,863
(r)
76,394
Loss on extinguishment of debt, net
2,121 1,509 (1,509)
(p)
2,121
Income (loss) before income taxes
(4,790) (28,445) 7,832 24,725 (33,534) (34,212)
Income tax expense
5,444 2,694 (4,766)
(k)
3,372
Net income (loss)
(10,234) (28,445) 7,832 22,031 (28,768) (37,584)
Income attributable to noncontrolling interests
1,336 1,336
Net income (loss) attributable to AdaptHealth Corp.
$ (11,570) $ (28,445) $ 7,832 $ 22,031 $ (28,768) $ (38,920)
Net income (loss) per common share:
Basic and diluted
$ (0.60) $ (0.52)
Weighted average shares outstanding for net income (loss) attributable to AdaptHealth Corp.:
Basic and diluted
19,130 55,974
(m)
75,104
(1)
Refer to Note 2 for reclassification of PCS, Solara and AeroCare historical information.
 
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NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1 — General Information
Basis of Presentation
The historical financial information has been adjusted in the unaudited pro forma condensed combined financial information to give effect to events that reflect the GAAP accounting for the PCS Acquisition, the Solara Acquisition, the AeroCare Acquisition (collectively, the “Acquisitions”), and the issuance of the shares of Class A Common Stock offered hereby, and are prepared to illustrate the estimated effects of the Acquisitions to the Company’s audited and unaudited historical consolidated financial statements.
AdaptHealth’s historical results reflect AdaptHealth’s unaudited consolidated balance sheet as of September 30, 2020, unaudited consolidated statement of operations for the nine months ended September 30, 2020 and 2019, and audited consolidated statement of operations for the year ended December 31, 2019. PCS’s historical results reflect PCS’s unaudited consolidated statement of operations for the twelve-month period ended December 31, 2019 and unaudited consolidated statement of operations for the nine-month period ended September 30, 2019. Solara’s historical results reflect Solara’s unaudited consolidated statement of operations for the six months ended June 30, 2020, audited consolidated statement of operations for year ended December 31, 2019, and unaudited consolidated statement of operations for the nine months ended September 30, 2019. AeroCare’s historical results reflect AeroCare’s unaudited consolidated balance sheet as of September 30, 2020, unaudited consolidated statements of income for the nine months ended September 30, 2020 and 2019, and audited consolidated statement of income for the year ended December 31, 2019.
Description of the PCS Acquisition
On January 2, 2020, AdaptHealth purchased 100% of the equity interests of PCS, a subsidiary of McKesson Corporation (“McKesson”). PCS currently provides wound care supplies, ostomy supplies, urological supplies, incontinence supplies, diabetic care supplies, and breast pumps directly to patients across the United States. PCS maintains extensive national relationships with physicians, medical facilities and customers, and currently serves all 50 states. AdaptHealth allocated the consideration paid to the estimated fair values of the net assets acquired on a provisional basis, including $17.4 million to accounts receivable, $0.5 million to equipment and other fixed assets, $0.1 million to goodwill, and $4.0 million of net liabilities to other working capital accounts. Management of AdaptHealth will finalize the measurement of the separately identifiable assets acquired and the liabilities assumed at the acquisition date in accordance with the requirements of FASB ASC Topic 805, Business Combinations, as soon as practicable but no later than one year from the acquisition date. In addition, AdaptHealth may be required to make an additional payment of $1.5 million to McKesson after the closing of the PCS Acquisition pursuant to the terms and conditions of a Transition Services Agreement executed in connection with the PCS Acquisition.
Description of the Solara Acquisition
On July 1, 2020, AdaptHealth acquired 100% of the equity interests of Solara. AdaptHealth believes Solara is an independent distributor of continuous glucose monitors (“CGM”) in the United States and offers a comprehensive suite of direct-to-patient diabetes management supplies to patients throughout the country, including CGMs, insulin pumps and other diabetic supplies. Solara maintains extensive relationships with leading national manufacturers, managed healthcare plans and is a registered pharmacy in all 50 states. AdaptHealth allocated the consideration paid to the estimated fair values of the net assets acquired on a provisional basis, including $12.1 million to cash and cash equivalents, $15.1 million to accounts receivable, $15.0 million to inventory, $4.4 million to equipment and other fixed assets, $85.7 million to identifiable intangible assets, $347.1 million to goodwill, $22.4 million to accounts payable and accrued expenses, and $3.0 million of net liabilities to other working capital accounts. Management of AdaptHealth will finalize the measurement of the separately identifiable assets acquired and the liabilities assumed at the acquisition date in accordance with the requirements of FASB ASC Topic 805, Business Combinations, as soon as practicable but no later than one year from the acquisition date.
 
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Description of the AeroCare Acquisition
On December 1, 2020, AdaptHealth entered into a definitive merger agreement (the “Merger Agreement”) pursuant to which AdaptHealth agreed to acquire AeroCare, on the terms and subject to the conditions as further described in the Merger Agreement. The AeroCare Acquisition is expected to close in the first quarter of 2021, subject to the satisfaction or waiver of the closing conditions as described in the Merger Agreement. AeroCare is a leading national technology-enabled respiratory and home medical equipment distribution platform in the United States and offers a comprehensive suite of direct-to-patient equipment and services including CPAP and bi-PAP machines, oxygen concentrators, home ventilators, and other durable medical equipment products. AeroCare maintains extensive relationships with leading national manufacturers and managed healthcare plans, and services patients in over 300 locations across 30 states.
The purchase consideration for the AeroCare Acquisition is expected to consist of $1.1 billion in cash plus shares of AdaptHealth Corp. Class A Common Stock and shares of AdaptHealth Corp. Series C Preferred Stock, representing, in the aggregate, on an as-converted basis, the economic equivalent of 31 million shares of AdaptHealth Corp. Class A Common Stock. The cash portion of the purchase price is subject to customary adjustments for cash, indebtedness, transaction expenses and net working capital (as compared to an agreed target net working capital amount) and certain other adjustments and subject to escrows to fund certain potential indemnification matters and potential amounts owed by AeroCare equityholders with respect to post-closing purchase price adjustments, if any. AdaptHealth intends to fund the cash portion of the purchase consideration for the AeroCare Acquisition and associated costs through cash on hand together with the net proceeds from the issuance of unsecured senior notes and senior secured term loan borrowings, and approximately half of the net proceeds from the issuance of the shares of Class A Common Stock offered hereby.
As described above, the purchase consideration for the AeroCare Acquisition is expected to include such number of shares of AdaptHealth Corp. Class A Common Stock and AdaptHealth Corp. Series C Preferred Stock representing the economic equivalent of 31 million shares of AdaptHealth Corp. Class A Common Stock, which was used to estimate the fair value of the purchase consideration for purposes of the unaudited pro forma condensed combined financial information. A preliminary estimate of the purchase consideration, assuming the transaction closed on January 5, 2021, is as follows (in thousands, except stock price):
Cash consideration
$ 1,100,000
Number of economic equivalent shares of Class A Common Stock
31,000
AdaptHealth Corp. Class A Common Stock price
$ 33.89
Equity consideration
$ 1,050,590
Total estimated purchase consideration
$ 2,150,590
For pro forma purposes, the fair value of the AdaptHealth Corp. Class A Common Stock used in determining the estimated purchase consideration was $33.89 per share based on the closing price of AdaptHealth Corp. Class A Common Stock on January 5, 2021. The final purchase consideration could significantly differ from the amounts presented in the unaudited pro forma condensed combined financial information due to changes in AdaptHealth Corp.’s Class A Common Stock price as of the closing date of the AeroCare Acquisition. A sensitivity analysis related to the fluctuation in the AdaptHealth Corp. common stock price was performed to assess the impact a hypothetical change of 20% on the closing price of AdaptHealth Corp. Class A Common Stock on January 5, 2021 would have on the estimated purchase consideration and goodwill as of the closing date.
The following table shows the change in stock price and the impact on the equity consideration included in the total estimated purchase consideration (dollars in thousands, except stock price):
Change in Stock Price
Stock Price
Equity Consideration
Increase 20%
$ 40.67 $ 1,260,770
Decrease 20%
$ 27.11 $ 840,410
 
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Other than as described above relating to the equity consideration, the unaudited pro forma condensed combined balance sheet as of September 30, 2020 gives pro forma effect to the AeroCare Acquisition as if it was completed on September 30, 2020, and includes an allocation of the estimated purchase consideration to the estimated fair value of AeroCare’s net assets at such date, including $32.2 million to cash and cash equivalents, $69.3 million to accounts receivable, $28.2 million to inventory, $148.6 million to equipment and other fixed assets, $107.0 million to estimated identifiable intangible assets, $1,915.6 million to goodwill, $79.8 million to accounts payable and accrued expenses, $12.3 million to contract liabilities, $46.4 million to deferred tax liabilities, and $11.8 million of other net liabilities.
Description of the Primary Offering
AdaptHealth expects to sell 7.25 million shares of Class A Common Stock pursuant to this prospectus supplement for net proceeds of approximately $226.6 million, net of estimated underwriter fees and other transaction fees and expenses, based on a public offering price of $33.00 per share. AdaptHealth intends to use approximately half of the net proceeds of the shares offered by us in this offering, together with senior secured term loan borrowings, the net proceeds from the issuance of unsecured senior notes and cash on hand, to finance the AeroCare Acquisition (as defined herein) and to pay related fees and expenses, and the remainder for general corporate purposes, which may include future acquisitions and other business opportunities, capital expenditures and working capital.
Description of the Notes Offering
On January 4, 2021, AdaptHealth LLC issued $500.0 million aggregate principal amount of unsecured senior notes for net proceeds of approximately $491.3 million, net of estimated transaction fees and expenses. AdaptHealth LLC expects to use the net proceeds from the unsecured senior notes to partially fund the cash portion of the purchase price associated with the AeroCare Acquisition.
Description of the Term B Facility
In connection with the entry into the Merger Agreement, AdaptHealth entered into a debt commitment letter, dated as of December 1, 2020 (“Commitment Letter”), with Jefferies Finance LLC (“Jefferies Finance”), pursuant to which Jefferies Finance (together with any additional commitment parties thereto) committed to provide AdaptHealth (i) a senior secured term loan B facility in an aggregate principal amount of up to $900.0 million (“Term B Facility”) and (ii) a senior unsecured bridge facility in an aggregate principal amount of up to $450.0 million (the “Bridge Facility”), on the terms and subject to certain conditions as described in the Commitment Letter. The proceeds from the issuance of $500.0 million aggregate principal amount of unsecured senior notes described above reduce commitments in respect of the Bridge Facility on a dollar-for-dollar basis, and as a result of the completion of the unsecured senior note transaction, AdaptHealth does not expect to enter into the Bridge Facility. The Term B Facility commitment consists of $250.0 million to backstop a required amendment on AdaptHealth’s existing $250.0 million term loan A facility, which was received on December 14, 2020, and up to $650.0 million to finance the cash consideration payable in the AeroCare Acquisition and related fees and expenses. As a result of the issuance of $500.0 million aggregate principal amount of unsecured senior notes described above, AdaptHealth may receive $600.0 million in term loans under the Term B Facility in order to partially fund the cash portion of the purchase price in connection with the AeroCare Acquisition. On or prior to the consummation of the AeroCare Acquisition, the commitments in respect of the Term B Facility will be automatically reduced on a dollar-for-dollar basis by certain debt incurrences (excluding the unsecured senior notes) and 50% of the net proceeds from equity issuances by us (including this offering). As a result of the reduction in the commitment for this offering, AdaptHealth currently intends to incur $486.7 million aggregate principal amount in new senior secured term loan borrowings in connection with the AeroCare Acquisition, which may include an incremental term loan A facility or a combination of a term loan B facility and an incremental term loan A facility. The unaudited pro forma condensed combined financial information assumes that AdaptHealth receives $500.0 million of gross proceeds from unsecured senior notes, $486.7 million of gross proceeds from the Term B Facility and uses $113.3 million from the net proceeds from the issuance of the shares of Class A Common Stock offered hereby in order to fund the cash portion of the purchase price in connection with the AeroCare Acquisition.
 
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Basis of the Pro Forma Presentation
Upon consummation of the AeroCare Acquisition, AeroCare will adopt AdaptHealth’s accounting policies. AdaptHealth may identify differences between the accounting policies among the companies, that when conformed, could have a material impact on the consolidated financial statements of the combined entity.
Note 2 — Reclassifications to Historical Financial Information of PCS, Solara and AeroCare
Certain balances and transactions presented in the historical financial statements of PCS, Solara and AeroCare included within the unaudited pro forma condensed combined financial information have been reclassified to conform to the presentation of the financial statements of AdaptHealth as indicated in the tables below.
AeroCare Balance Sheet Reclassifications at September 30, 2020
(in thousands)
As per
Financial
Statements
Reclassifications
As
Reclassified
Assets:
Other receivables
$ 1,277 $ (1,277) $
Prepaid and other current assets
$ 5,361 $ 1,277 $ 6,638
Liabilities:
Accounts payable and accrued expenses
$ $ 79,812 $ 79,812
Accounts payable
$ 51,646 $ (51,646) $
Accrued expenses and other current liabilities
$ 28,166 $ (28,166) $
Due to sellers
4,405 (4,405)
Other liabilities
$ $ 4,405 $ 4,405
Interest rate swap
2,794 (2,794)
Deferred tax liability
20,743 (20,743)
Other long-term liabilities
$ $ 23,537 $ 23,537
Redeemable convertible preferred stock:
Total redeemable convertible preferred stock
$ 103,092 $ (103,092) $
Total stockholders’ equity (deficit):
Total stockholders’ equity (deficit) attributable to AdaptHealth Corp.
$ $ (26,045) $ (26,045)
Total stockholders’ deficit
$ (129,137) $ 129,137 $
AeroCare Statement of Operations Reclassifications for the Nine Months Ended September 30, 2020
(in thousands)
As per
Financial
Statements
Reclassifications
As
Reclassified
Costs and expenses:
Cost of Sales
$ 201,907 $ 211,387 $ 413,294
General and administrative expenses
$ $ 14,738 $ 14,738
Selling, general and administrative expenses
$ 228,807 $ (228,807) $
Interest expense (income)
$ 11,486 $ (23) $ 11,463
Other income
$ (2,705) $ 2,705 $
 
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AeroCare Statement of Operations Reclassifications for the Twelve Months Ended December 31, 2019
(in thousands)
As per
Financial
Statements
Reclassifications
As
Reclassified
Costs and expenses:
Cost of net revenue
$ 218,369 $ 242,007 $ 460,376
General and administrative expenses
$ $ 16,127 $ 16,127
Selling, general and administrative expenses
$ 261,213 $ (261,213) $
Interest expense (income)
$ 14,370 $ (24) $ 14,346
Other income
$ (3,103) $ 3,103 $
AeroCare Statement of Operations Reclassifications for the Nine Months Ended September 30, 2019
(in thousands)
As per
Financial
Statements
Reclassifications
As
Reclassified
Costs and expenses:
Cost of sales
$ 152,675 $ 174,751 $ 327,426
General and administrative expenses
$ $ 10,993 $ 10,993
Selling, general and administrative expenses
$ 187,932 $ (187,932) $
Interest expense (income)
$ 9,766 $ (20) $ 9,746
Other income
$ (2,208) $ 2,208 $
Solara Statement of Operations Reclassifications for the Six Months Ended June 30, 2020
(in thousands)
As per
Financial
Statements
Reclassifications
As
Reclassified
Net revenue
$ 84,878 $ (1,723) $ 83,155
Costs and expenses:
Cost of Sales
$ 53,013 $ 17,821 $ 70,834
General and administrative expenses
$ $ 17,998 $ 17,998
Depreciation and amortization, excluding patient equipment depreciation
$ $ 3,587 $ 3,587
Selling, general and administrative expenses
$ 41,190 $ (41,190) $
Interest expense (income)
$ 7,369 $ (2) $ 7,367
Other income
$ (63) $ 63 $
Solara Statement of Operations Reclassifications for the Twelve Months Ended December 31, 2019
(in thousands)
As per
Financial
Statements
Reclassifications
As
Reclassified
Net revenue
$ 183,352 $ (3,780) $ 179,572
Costs and expenses:
Cost of Sales
$ 113,335 $ 29,292 $ 142,627
General and administrative expenses
$ $ 4,043 $ 4,043
Depreciation and amortization, excluding patient equipment depreciation
$ $ 7,110 $ 7,110
Selling, general and administrative expenses
$ 44,360 $ (44,360) $
Other income
$ (135) $ 135 $
 
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Solara Statement of Operations Reclassifications for the Nine Months Ended September 30, 2019
(in thousands)
As per Internal
Financial
Statements
Reclassifications
As
Reclassified
Net revenue
$ 129,236 $ (2,699) $ 126,537
Costs and expenses:
Cost of Sales
$ 79,643 $ 20,899 $ 100,542
General and administrative expenses
$ $ 3,625 $ 3,625
Depreciation and amortization, excluding patient equipment depreciation
$ $ 5,331 $ 5,331
Selling, general and administrative expenses
$ 32,651 $ (32,651) $
Other income
$ (97) $ 97 $
PCS Statement of Operations Reclassifications for the Twelve Months Ended December 31, 2019
(in thousands)
As per Internal
Financial
Statements
Reclassifications
As
Reclassified
Costs and expenses:
Cost of Sales
$ 82,263 $ 81,509 $ 163,772
General and administrative expenses
$ $ 5,563 $ 5,563
Depreciation and amortization, excluding patient equipment depreciation
$ $ 235 $ 235
Selling, distribution, and administrative expenses
$ 82,483 $ (82,483) $
Restructuring Charges
$ 4,838 $ (4,838) $
Interest expense (income)
$ $ (90) $ (90)
Other expense, net
$ (104) $ 104 $
PCS Statement of Operations Reclassifications for the Nine Months Ended September 30, 2019
(in thousands)
As per Internal
Financial
Statements
Reclassifications
As
Reclassified
Costs and expenses:
Cost of Sales
$ 60,310 $ 62,533 $ 122,843
General and administrative expenses
$ $ 4,165 $ 4,165
Depreciation and amortization, excluding patient equipment depreciation
$ $ 727 $ 727
Selling, distribution, and administrative expenses
$ 63,346 $ (63,346