| Significant Accounting Policies | Significant Accounting Policies Cash and Cash Equivalents The Company considers money market accounts and other highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Book overdrafts, if any, are included in accounts payable in the consolidated balance sheets and in operating activities in the consolidated statements of cash flows. Accounts Receivable and Allowance for Credit Losses Trade accounts receivable are recorded at the invoiced amount. Concentrations of credit risk with respect to trade accounts receivable are limited due to the number of customers and their geographical distribution. The Company performs initial and ongoing credit evaluations of its customers and maintains allowances for potential credit losses. The allowance for credit losses is based on historical loss experience and estimated exposure on specific trade receivables . Inventories Inventories consist of supplies and equipment held for resale and are valued at the lower of cost and net realizable value. Cost is determined by the average cost method, which approximates the first-in, first-out (“FIFO”) method. Property and Equipment The Company separates its property and equipment into two categories - medical equipment and property and office equipment. Depreciation of medical equipment is provided on the straight-line method over the equipment’s estimated useful life generally five . During fiscal year ended December 31, 2022, the Company performed a review of the estimated useful lives associated with certain medical equipment and determined that these assets had actual lives that were longer than previously estimated. As a result, effective July 1, 2022, the Company increased the expected useful lives of such medical equipment from four five Property and office equipment includes leasehold improvements, vehicles, computer software and hardware, and office equipment. Depreciation of property and office equipment is provided on the straight-line method over the lesser of the remaining useful life or lease term for leasehold improvements and three . The Company periodically reviews its property and equipment for impairment and assesses whenever significant events or changes in business circumstances indicate that the carrying value of the assets may not be recoverable. A recoverability test is performed by comparing the anticipated future undiscounted cash flows to the carrying value of the assets. If impairment is identified, an impairment loss is recognized for the excess of the carrying amount of an asset over the anticipated future discounted cash flows expected to result from the use of the asset and its eventual disposition. For other property and equipment, primarily movable medical equipment, the Company continuously monitors specific makes/models for events such as product recalls or obsolescence. The amount of the impairment loss to be recorded, if any, is calculated by the excess of the asset’s carrying value over its fair value . Goodwill Goodwill represents the excess of the cost of acquired businesses over the fair value of identifiable tangible net assets and identifiable intangible assets purchased. Goodwill is tested at least annually for impairment at the reporting unit level and more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company reviews goodwill for impairment by comparing the fair value of a reporting unit with its carrying value and recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value . For the periods presented, The Company identified one reporting segment which is equal to the Company's one reporting unit for purposes of evaluating goodwill. No goodwill impairments have been recognized in 2022, 2021, or 2020. Leases At inception, the Company determines whether an arrangement is a lease and the appropriate lease classification. Operating leases with terms greater than twelve months are included as operating lease right-of-use (“ROU”) assets, and lease liabilities within current portion of operating lease liability and operating lease liability less current portion on the consolidated balance sheets. Finance leases with terms greater than twelve months are included as finance ROU assets within property and office equipment, and finance lease liabilities within current portion of long-term debt and long-term debt, less current portion on the consolidated balance sheets. Leases with terms of less than twelve months, referred to as short-term leases, do not create a ROU asset or lease liability on the balance sheet . ROU assets represent the right to use an underlying asset for the lease term. Lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the commencement date of the lease, based on the present value of lease payments over the lease term. As most of the Company's leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms. Finance leases are recognized on the date the asset is placed into service at the cost of capital. For both operating and finance leases, the initial ROU asset equals the lease liability, plus initial direct costs and favorable lease commitments, less lease incentives received. The Company's lease agreements may include options to extend or terminate the lease, which are included in the lease term at the commencement date when it is reasonably certain that the Company will exercise that option. In general, the Company does not consider optional periods included in the lease agreements as reasonably certain of exercise at inception. The Company has lease agreements with lease and non-lease components, which are generally accounted for separately. Variable lease payments (for example, common area maintenance and real estate tax charges) are recorded separately from the determination of the ROU asset and lease liability. Other Intangible Assets Other intangible assets primarily include customer relationships, trade names, developed technology and non-compete agreements. Other intangible assets are amortized over their estimated economic lives of two . Deferred Financing Costs and Debt Discount Unamortized financing costs and discounts associated with issuing debt are presented in the consolidated balance sheet as a direct deduction from the carrying amount of the debt and are deferred and amortized to interest expense over the related terms using the effective interest rate method . Acquisitions The Company accounts for business acquisitions in accordance with ASC 805, Business Combinations . This standard requires the acquiring entity in a business combination to recognize all (and only) the assets acquired and liabilities assumed in the transaction and establishes the acquisition-date fair value as the measurement objective for all assets acquired and liabilities assumed in a business combination. Certain provisions of this standard prescribe, among other things, the determination of acquisition-date fair value of consideration paid in a business combination (including contingent consideration) and the exclusion of transaction and acquisition-related restructuring costs from acquisition accounting . Assigning estimated fair values to the net assets acquired requires the use of significant estimates, judgments, inputs, and assumptions regarding the fair value of the assets acquired and liabilities assumed as of the acquisition date. The Company may refine the estimated fair values of assets acquired and liabilities assumed over a period not to exceed one year from the date of acquisition by taking into consideration new information about facts and circumstances that existed as of the acquisition date. Purchase price allocation revisions that occur outside of the measurement period, if applicable, are recorded within cost of revenue or selling, general and administrative expense within the consolidated statements of operations depending on the nature of the adjustment. Revenue Recognition The Company recognizes revenue in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers . Revenue is recognized when control of goods or services has transferred to customers in the amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. The Company applies the following five-step model in order to determine this amount: 1. Identify the contract with a customer; 2. Identify the performance obligation(s) in the contract; 3. Determine the transaction price; 4. Allocate the transaction price to the performance obligations; and 5. Recognize revenue when (or as) the Company satisfies each performance obligation. The Company generates revenue through the sale of a wide range of services to provide equipment solutions, clinical engineering and/or onsite equipment managed services. At contract inception, the Company assesses the services promised to its customers and identifies a performance obligation for each promise to transfer to the customer a service, or a bundle of services, that is distinct. The majority of contracts contain multiple promises that represent an integrated bundle of services comprised of activities that may vary over time. However, these activities fulfill a single integrated stand-ready obligation since the Company performs a continuous service that is substantially the same and has the same pattern of transfer to the customer. Contract payment terms are typically net 30 days. Collectability is assessed based on a number of factors including collection history and creditworthiness of the customer. If it is determine that collectability related to a contract is not probable, revenue is not recorded until collectability becomes probable at a later date. Contracts do not generally include a significant financing component. Either stated or implied, the Company provides assurance the related products and services will comply with all agreed-upon specifications and other warranties provided under the law. No services beyond an assurance warranty are provided to customers. R evenue is recognized at the transaction price which the Company expects to be entitled. Consideration paid by the customer is typically billed at a fixed fee. Progress toward satisfaction of the performance obligation is measured as the services are provided, because the customer simultaneously receives and consumes the benefits of the services as they are performed. In certain contracts, the as-invoiced practical expedient is applied to record revenue as the services are provided, given the nature of the services provided and the frequency of billing under the customer contracts. Under this practical expedient, revenue is recognized in an amount that corresponds directly with the value to the customer of performance completed to date and for which the Company has the right to invoice the customer. Revenue is recognized net of allowances for estimated rebates and group purchasing organization ("GPO") fees, which are established at the time of sale. Adjustments are made to these allowances at each reporting period. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. In limited arrangements, the transaction price is variable on a per hour or per use rate or fixed price for consumables /equipment sold and control transfers to customers at a point-in-time when the service has been performed or goods delivered to the carrier. The Company does not have material unfulfilled performance obligation balances for contracts with an original length greater than one year in any years presented . Contractual prices are established within the Company's customer arrangements that are representative of the stand-alone selling price. For a majority of contracts, the shipping and handling services are performed after the customer controls the goods. As such, management has made an accounting policy election and will not treat shipping and handling as a separate performance obligation and has elected to accrue for shipping and handling as a fulfillment cost. The Company incurs incremental costs related to obtaining new contracts, primarily for commissions and implementation. Management expects those costs attributable to new revenue production are recoverable and therefore the Company capitalizes them as contract costs in accordance with ASC 340 and is amortizing them over the anticipated period of the new revenue production which the Company estimates to be a period of five years. The Company does not have any material contract liabilities. Derivative Financial Instruments The Company has an interest rate swap agreement which it uses as a derivative financial instrument to manage its interest rate exposure. The Company does not use financial instruments for trading or other speculative purposes. ASC 815, Derivatives and Hedging, establishes accounting and reporting standards requiring that derivative instruments be recorded on the balance sheet as either an asset or liability measured at fair value. The standard requires that changes in the derivative’s fair value be recognized currently in earnings unless specific hedge accounting criteria are met. If hedge accounting criteria are met, the changes in a derivative’s fair value (for a cash flow hedge) are deferred in stockholders’ equity as a component of accumulated other comprehensive loss. These deferred gains and losses are recognized as income in the period in which hedged cash flows occur. The ineffective portions of hedge returns are recognized as earnings. Income Taxes The Company accounts for deferred income taxes utilizing ASC 740, Income Taxes. ASC 740 requires the asset and liability method, whereby deferred tax assets and liabilities are recognized based on the tax effects of temporary differences between the financial statement and the tax bases of assets and liabilities, as measured at current enacted tax rates. The Company has assessed the need for a valuation allowance by considering whether it is more likely than not that some portion or all of the Company's deferred tax assets will not be realized. The Company continues to evaluate its ability to realize the tax benefits associated with deferred tax assets by analyzing the relative impact of all the available positive and negative evidence regarding its forecasted taxable income, the reversal of existing deferred tax liabilities, taxable income in prior carry-back years (if permitted) and the availability of tax planning strategies. In future reporting periods, The Company will continue to assess the likelihood that deferred tax assets will be realizable . I nterest and penalties associated with uncertain income tax positions is classified as income tax expense. Fair Value of Financial Instruments The financial instruments of the Company include cash and cash equivalents, accounts receivable, interest rate swap, deferred compensation, accounts payable, accrued liabilities, contingent compensation, contingent consideration, debt obligations, and obligation under the Tax Receivable Agreement ("TRA"). Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal or most advantageous market as of the measurement date. ASC 820, Fair Value Measurements , provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to and is composed of the following levels: Level 1 — Inputs represent unadjusted quoted prices for identical assets or liabilities exchanged in active markets. Level 2 — Inputs include directly or indirectly observable inputs other than Level 1 inputs such as quoted prices for similar assets or liabilities exchanged in active or inactive markets; quoted prices for identical assets or liabilities exchanged in inactive markets; other inputs that are considered in fair value determinations of the assets or liabilities, such as interest rates and yield curves that are observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks and default rates; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 — Inputs include unobservable inputs used in the measurement of assets and liabilities. Management is required to use its own assumptions regarding unobservable inputs because there is little, if any, market activity in the assets or liabilities or related observable inputs that can be corroborated at the measurement date. Measurements of non-exchange traded derivative contract assets and liabilities are primarily based on valuation models, discounted cash flow models or other valuation techniques that are believed to be used by market participants. Unobservable inputs require management to make certain projections and assumptions about the information that would be used by market participants in pricing assets or liabilities. The Company considers that the carrying amount of financial instruments, including accounts receivable, accounts payable and accrued liabilities approximate fair value due to their short maturities. The deferred compensation assets are held in mutual funds. The fair value of the deferred compensation assets and liabilities is based on the quoted market prices for the mutual funds and thus represents a Level 1 fair value measurement. The fair value of the Company's outstanding First Lien Term Loan (each as defined in Note 7, Long-Term Debt), based on the quoted market price for the same or similar issues of debt, represents a Level 2 fair value measurement. The fair value of the Company’s revolving line of credit facilities and long-term debt are based on current lending rates for similar borrowings, assuming the debt is outstanding through maturity, and considering the collateral. The carrying values of variable interest rate long-term debt and revolving line of credit facilities approximate their fair values because the variable interest rates of these instruments are generally reset monthly. The fair value of the Company's non-variable interest rate debt is estimated by discounting future cash flows at currently available rates for borrowing arrangements with similar terms and conditions, which are considered to be Level 2 inputs under the fair value hierarchy. The fair value of the Company’s derivative instruments designated as hedge instruments, which are considered Level 2 inputs under the fair value hierarchy, are determined using standard pricing models and market-based assumptions for all significant inputs, such as yield curves and quoted spot and forward exchange rates. The fair value of the Company’s contingent consideration obligation is determined utilizing a series of call options with strike prices at revenue thresholds defined in the acquisition purchase agreement. The fair value of the Company’s contingent compensation obligation is determined using projected financial information. The TRA obligation is valued using a discounted cash flow analysis given that the fair value of the liability is expected to approximate the maximum obligation under the TRA. The assumptions used in pr eparing the discounted cash flow analyses include estimates of interest rates and the timing and amount of incremental cash flows. These fair value measurements are based on significant unobservable inputs in the market and thus represents a Level 3 measurement within the fair value hierarchy. Share-Based Compensation Share-based compensation expense related to stock options is measured by the fair value of the stock options on the date of grant, net of the estimated forfeiture rate. The Company determines the fair value of options using the Black-Scholes option pricing model. The estimated fair value of options is recognized as expense on a straight-line basis over the options’ vesting periods. The fair value of the stock options contain certain assumptions, such as the risk-free interest rate, expected volatility, dividend yield and expected option life. Share-based compensation expense related to restricted stock units and performance restricted stock units is recorded based on the market value of the Company's common stock on the date of grant, net of the estimated forfeiture rate. The expense is recognized over the requisite service period within the statement of operations line item cash compensation paid to the same employees is recorded. Certain of the Company's performance restricted stock units award have a graded vesting schedule. The expense is recognized for each separately vesting tranche as though each tranche of the award is, in substance, a separate award. The amount of compensation expense recognized for performance restricted stock units is dependent upon an assessment of the likelihood of achieving the performance and market conditions and is subject to adjustment based on management’s assessment of the Company’s performance relative to the target number of shares performance criteria. The Company has an employee stock purchase plan (“ESPP”) under which shares of the Company’s common stock are available for purchase by eligible participants. The plan allows participants to purchase the Company's common stock at 85% of its fair market value at the end of the six-month offering period ending on April 30 and October 31 each year. The fair value of purchases is estimated based on actual employee contributions during the offering period. Comprehensive Incom e (Loss) Comprehensive income (loss) is comprised of net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) includes minimum pension liability adjustments and cash flow hedge. These amounts are presented in the consolidated statements of comprehensive income (loss) net of reclassification adjustments to earnings, if any . Earnings (Loss) Per Share Basic earnings (loss) per share ("EPS") is computed by dividing net income (loss) by the weighted average number of common shares outstanding during the period. Diluted EPS includes the effect of all potentially dilutive common stock equivalents by application of the treasury stock method, which considers the effect on a per share basis of restricted stock units, performance restricted stock units, and stock options as if they had been converted to common stock at the beginning of the periods presented, or issuance date, if later. Potential shares that have an anti-dilutive effect are excluded from the calculation of diluted EPS and presented separately. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Examples include, but are not limited to, estimates for fair value measurements in business combinations including valuation of long-lived assets, goodwill and definite-lived intangible, interest rate swap, income tax reserves, and obligation under the tax receivable agreement. Actual results could differ from those estimates. Recent Accounting Pronouncements Standards Adopted In December 2020, the FASB issued ASU No. 2019-12 Income Taxes (ASC 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and recognition of deferred tax liabilities. This standard also simplifies the accounting for franchise taxes and enacted change in tax laws or rates and clarifies the accounting for transactions that result in a step-up in the basis of goodwill. The ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company adopted this standard on January 1, 2021. The adoption of this standard did not have a material impact on the consolidated financial statements. Standards Not Yet Adopted In October 2021, the FASB issued ASU No. 2021-08 Business Combinations (ASC 805)-Accounting for Contract Assets and Contract Liabilities from Contracts with Customers (“ASU 2021-08”). ASU 2021-08 improves the accounting for acquired revenue contracts with customers in a business combination. The amendments in this ASU require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606. At the acquisition date, an acquirer should account for the related revenue contracts in accordance with ASC 606 as if it had originated the contracts. To achieve this, an acquirer may assess how the acquiree applied ASC 606 to determine what to record for the acquired revenue contracts. The ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption of the amendments is permitted. The Company expects to adopt this standard on January 1, 2023, but it does not expect the adoption to have a material impact on the consolidated financial statements. In March 2020, the FASB issued ASU No. 2020-04 Reference Rate Reform (ASC 848) Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. In December 2022, the FASB issued ASU No. 2022-06 Reference Rate Reform (ASC 848): Deferral of the Sunset Date of ASC 848 , which delayed the adoption of Reference Rate Reform from December 31, 2022, to December 31, 2024. The Company will continue to evaluate the phase out of LIBOR but do not expect the adoption will have a material impact on the consolidated financial statements. |
