SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 12 Months Ended |
Dec. 31, 2013 |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | ' |
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
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Basis of Consolidation and Description Of Business |
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The consolidated financial statements include the accounts of Almost Family, Inc. (a Delaware corporation) and its wholly-owned subsidiaries (collectively “Almost Family” or the “Company”). The Company is a leading, regionally focused provider of home health services and has service locations in Florida, Ohio, Kentucky, Connecticut, New Jersey, Massachusetts, Missouri, Indiana, Illinois, Pennsylvania, Tennessee, Georgia, Mississippi and Alabama (in order of revenue significance). |
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The Company was incorporated in Delaware in 1985. Through a predecessor that merged into the Company in 1991, the Company has been providing health care services, primarily home health care, since 1976. All material intercompany transactions and accounts have been eliminated in consolidation. |
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On December 6, 2013, the Company completed the acquisition of Omni Home Health Holdings, Inc. (“SunCrest”). Branded principally under the SunCrest name, its subsidiaries own and operate 66 Medicare-certified home health agencies and 9 private duty agencies in Florida, Tennessee, Georgia, Pennsylvania, Kentucky, Illinois, Indiana, Mississippi and Alabama. On October 4, 2013, the Company acquired a controlling interest in Imperium Health Management, LLC (“Imperium”), a development-stage enterprise that provides strategic health management services to Accountable Care Organizations (“ACO’s”). On July 17, 2013, the Company acquired the assets of the Medicare-certified home health agencies owned by Indiana Home Care Network (“IHCN”). The acquisitions are more fully described in Note 12, “Acquisitions”. The results of operations for SunCrest and IHCN are principally reported within the Company’s Visiting Nurse reportable segment, while Imperium results are currently included in general and administrative expenses. Results of operations are included from the acquisition date to December 31, 2013. |
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Cash and Cash Equivalents |
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The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. |
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Uninsured deposits at December 31, 2013 and 2012 were approximately $9,449 and $24,515, respectively. These amounts have been deposited with national financial institutions. |
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Property and Equipment |
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Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives (generally two to ten years for medical and office equipment and three years for internally developed software). Leasehold improvements are depreciated over the terms of the respective leases (generally three to ten years). |
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Goodwill and Other Intangible Assets |
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Goodwill and indefinite lived intangible assets acquired are stated at fair value at the date of acquisition. Subsequent to acquisition, the Company conducts annual reviews for impairment, or more frequently if circumstances indicate impairment may have occurred, under Accounting Standards Codification (ASC) Topic 350, Intangibles — Goodwill and Other. The Company has completed its most recent annual impairment tests as of December 31, 2013 and determined that no impairment existed. |
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Other intangible assets consist of licenses, certificates of need, noncompete agreements, and trade names. Licenses, certificates of need and trade names have indefinite lives and are not amortized. Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful lives, such as the cost of non-compete agreements for which their estimated useful life is usually 3 years, beginning after the earn-out period, if any. |
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The following table summarizes the activity related to the Company’s goodwill and other intangible assets for 2013 and 2012: |
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| | | | Other Intangible Assets | |
| | Goodwill | | Certificates | | Trade Names | | Non-compete | | Total | |
of Need and | Agreements |
Licenses | |
Balances at 12-31-11 | | $ | 132,653 | | $ | 9,091 | | $ | 10,421 | | $ | 197 | | $ | 19,709 | |
Additions | | 208 | | 300 | | — | | 30 | | 330 | |
Adjustments | | 610 | | — | | — | | — | | — | |
Amortization | | — | | — | | — | | (72 | ) | (72 | ) |
Balances at 12-31-12 | | $ | 133,471 | | $ | 9,391 | | $ | 10,421 | | $ | 155 | | $ | 19,967 | |
Additions | | 60,561 | | 28,930 | | 6,270 | | — | | 35,200 | |
Disposals | | (1,457 | ) | — | | — | | — | | — | |
Amortization | | — | | — | | — | | (92 | ) | (92 | ) |
Balances at 12-31-13 | | $ | 192,575 | | $ | 38,321 | | $ | 16,691 | | $ | 63 | | $ | 55,075 | |
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At December 31, 2013, the Visiting Nurse (VN) segment includes $155,004, $37,541, $13,311 and $13, while the Personal Care (PC) segment includes $37,571, $780, $3,380 and $50 of total goodwill, certificates of need and licenses, trade names and non-compete agreements, respectively. At December 31, 2012, the Visiting Nurse (VN) segment includes $102,497, $8,781, $7,701 and $8, while the Personal Care (PC) segment includes $30,447, $610, $2,720 and $163 of total goodwill, certificates of need and licenses, trade names and non-compete agreements, respectively. Additions were due to acquisitions (Note 12) and disposals were due to asset dispositions (Note 11). |
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Capitalization Policies |
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Maintenance, repairs and minor replacements are charged to expense as incurred. Major renovations and replacements are capitalized to appropriate property and equipment accounts. Upon sale or retirement of property, the cost and related accumulated depreciation are eliminated from the accounts and the related gain or loss is recognized in income. |
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The Company capitalizes the cost of internally developed computer software for the Company’s own use. Software development costs of approximately $647, $968 and $535 were capitalized in the years ended December 31, 2013, 2012 and 2011, respectively. |
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Insurance Programs |
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The Company bears significant insurance risk under its large-deductible workers’ compensation insurance program and its self-insured employee health program. Under the workers’ compensation insurance program, the Company bears risk up to $250 per incident, after which stop-loss coverage is maintained. The Company purchases stop-loss insurance for the employee health plan that places a specific limit, generally $300, on its exposure for any individual covered life. |
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Malpractice and general patient liability claims for incidents which may give rise to litigation have been asserted against the Company by various claimants. The claims are in various stages of processing and some may ultimately be brought to trial. The Company is aware of incidents that have occurred through December 31, 2013 that may result in the assertion of additional claims. The Company currently carries professional and general liability insurance coverage (on a claims made basis) for this exposure with no deductible. The Company also carries D&O coverage (also on a claims made basis) for potential claims against the Company’s directors and officers, including securities actions, with deductibles ranging from $100 to $250 per claim. |
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The Company records estimated liabilities for its insurance programs based on information provided by the third-party plan administrators, historical claims experience, the life cycle of claims, expected costs of claims incurred but not paid, and expected costs to settle unpaid claims. The Company monitors its estimated insurance-related liabilities and recoveries, if any, on a monthly basis and as required by ASU No. 2010-24, Health Care Entities (Topic 954): Presentation of Insurance Claims and Related Insurance Recoveries, records amounts due under insurance policies in other current assets, while recording the estimated carrier liability in other current liabilities. As facts change, it may become necessary to make adjustments that could be material to the Company’s results of operations and financial condition. |
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Accounting for Income Taxes |
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The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the Company’s book and tax bases of assets and liabilities and tax carry-forwards using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of changes in tax rates on deferred taxes is recognized in the period in which the enactment dates change. Valuation allowances are established when necessary on a jurisdictional basis to reduce deferred tax assets to the amounts expected to be realized. |
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Seasonality |
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The Company’s VN segment operations located in Florida (which generated approximately 41% of that segment’s revenues in 2013) normally experience higher admissions during the first quarter and lower admissions during the third quarter than in the other quarters due to seasonal population fluctuations. |
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Net Service Revenues |
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The Company is paid for its services primarily by federal and state third-party reimbursement programs, commercial insurance companies, and patients. Revenues are recorded at established rates in the period during which the services are rendered. Appropriate allowances to give recognition to third party payment arrangements are recorded when the services are rendered. |
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Approximately 71% of the Company’s net service revenues are derived from the Medicare program. Net service revenues are recorded under the Medicare prospective payment program (PPS) based on a 60-day episode payment rate that is subject to adjustment based on certain variables including, but not limited to: (a) changes in the base episode payments established by the Medicare program; (b) adjustments to the base episode payments for case mix and geographic wages; (c) a low utilization payment adjustment (LUPA) if the number of visits was fewer than five; (d) a partial payment if a patient is transferred to another provider or if a patient is received from another provider before completing the episode; (e) a payment adjustment based upon the level of therapy services required (thresholds set at 6, 14 and 20 visits); (f) an outlier payment if the patient’s care was unusually costly (capped at 10% of total reimbursement); (g) the number of episodes of care provided to a patient; and (h) a 2% reduction for sequestration. |
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At the beginning of each Medicare episode the Company calculates an estimate of the amount of expected reimbursement based on the variables outlined above and recognizes Medicare revenue on an episode-by-episode basis during the course of each episode over its expected number of visits. Over the course of each episode, as changes in the variables become known, adjustments are calculated and recorded as needed to reflect changes in expectations for that episode from those established at the start of the 60 day period until its ultimate outcome at the end of the 60 day period is known. |
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Substantially all remaining revenues are earned on a per visit, hour or unit basis (as opposed to episodic). For all services provided, the Company uses either payor-specific or patient-specific fee schedules for the recording of revenues at the amounts actually expected to be received. |
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Laws and regulations governing the Medicare and Medicaid programs are extremely complex and subject to interpretation. It is common for issues to arise related to: 1) medical coding, particularly with respect to Medicare, 2) patient eligibility, particularly related to Medicaid, and 3) other reasons unrelated to credit risk, all of which may result in adjustments to recorded revenue amounts. The Company continuously evaluates the potential for revenue adjustments and when appropriate provides allowances for losses based upon the best available information. There is at least a reasonable possibility that recorded estimates could change by material amounts in the near term. Changes in estimates related to prior periods decreased revenues by approximately $114, $75, and $215 in the years ended December 31, 2013, 2012 and 2011, respectively. |
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Revenue and Receivable Concentrations |
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The following table sets forth the percent of the Company’s revenues generated from Medicare, state Medicaid programs and other payors for the year ended December 31: |
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| | 2013 | | 2012 | | 2011 | | | | | | | | | | |
Medicare | | 71.3 | % | 71.7 | % | 77.1 | % | | | | | | | | | |
Medicaid & other government programs: | | | | | | | | | | | | | | | | |
Ohio | | 13.1 | % | 13.7 | % | 9 | % | | | | | | | | | |
Connecticut | | 7 | % | 6.6 | % | 6.2 | % | | | | | | | | | |
Kentucky | | 2.3 | % | 2.7 | % | 2.8 | % | | | | | | | | | |
Florida | | 0.7 | % | 0.5 | % | 0.6 | % | | | | | | | | | |
Others | | 0.5 | % | 0.3 | % | 0.4 | % | | | | | | | | | |
Subtotal | | 23.6 | % | 23.8 | % | 19 | % | | | | | | | | | |
All other payors | | 5.1 | % | 4.5 | % | 3.9 | % | | | | | | | | | |
Total | | 100 | % | 100 | % | 100 | % | | | | | | | | | |
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Concentrations in the Company’s accounts receivable were as follows as of December 31: |
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| | 2013 | | 2012 | | | | | | |
| | Amount | | Percent | | Amount | | Percent | | | | | | |
Medicare | | $ | 45,607 | | 56 | % | $ | 34,882 | | 59.1 | % | | | | | |
Medicaid & other government programs: | | | | | | | | | | | | | | |
Ohio | | 6,310 | | 7.7 | % | 6,092 | | 10.3 | % | | | | | |
Connecticut | | 5,201 | | 6.4 | % | 6,081 | | 10.3 | % | | | | | |
Kentucky | | 3,793 | | 4.7 | % | 2,931 | | 5 | % | | | | | |
Tennessee | | 4,365 | | 5.4 | % | — | | 0 | % | | | | | |
Others | | 2,696 | | 2.6 | % | 1,014 | | 1.8 | % | | | | | |
Subtotal | | 21,765 | | 26.7 | % | 16,118 | | 27.4 | % | | | | | |
All other payors | | 14,115 | | 17.3 | % | 7,978 | | 13.5 | % | | | | | |
Subtotal | | 81,487 | | 100 | % | 58,978 | | 100 | % | | | | | |
Third party payable | | (4,250 | ) | | | (3,771 | ) | | | | | | | |
Allowances | | (15,586 | ) | | | (5,236 | ) | | | | | | | |
Total | | $ | 61,651 | | | | $ | 49,971 | | | | | | | | |
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Variations between years are largely attributable to the SunCrest acquisition. |
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At December 31, 2013 and 2012, the Company had $4,250 and $3,771 of payables outstanding primarily related to filed or estimated cost reports with the Kentucky Medicaid program. |
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The ability of payors to meet their obligations depends upon their financial stability, future legislation and regulatory actions. The Company does not believe there are any significant credit risks associated with receivables from Federal and state third-party reimbursement programs. The allowance for uncollectible accounts principally consists of management’s estimate of amounts that may prove uncollectible for coverage, eligibility and technical reasons. |
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Payor Mix Concentrations and Related Aging of Accounts Receivable |
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The approximate breakdown by payor classification as a percent of total accounts receivable, net of contractual allowances, if any, at December 31, 2013 and 2012 is set forth in the following tables: |
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| | 2013 | | | | | | |
Payor | | 0-90 | | 91-180 | | 181-365 | | >1 yr. | | Total | | | | | | |
Medicare | | 30 | % | 12 | % | 5 | % | 3 | % | 50 | % | | | | | |
Medicaid & Government | | 18 | % | 4 | % | 4 | % | 7 | % | 33 | % | | | | | |
Self Pay | | 4 | % | 1 | % | 1 | % | 1 | % | 7 | % | | | | | |
Insurance | | 4 | % | 1 | % | 2 | % | 3 | % | 10 | % | | | | | |
Total | | 56 | % | 18 | % | 12 | % | 14 | % | 100 | % | | | | | |
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| | 2012 | | | | | | |
Payor | | 0-90 | | 91-180 | | 181-365 | | >1 yr. | | Total | | | | | | |
Medicare | | 39 | % | 14 | % | 5 | % | 2 | % | 60 | % | | | | | |
Medicaid & Government | | 20 | % | 3 | % | 2 | % | 2 | % | 27 | % | | | | | |
Self Pay | | 2 | % | 1 | % | 0 | % | 1 | % | 4 | % | | | | | |
Insurance | | 4 | % | 2 | % | 2 | % | 1 | % | 9 | % | | | | | |
Total | | 65 | % | 20 | % | 9 | % | 6 | % | 100 | % | | | | | |
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Variations between years are largely attributable to the SunCrest acquisition. |
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Allowance for Uncollectible Accounts by Payor Mix and Related Aging |
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The Company records an estimated allowance for uncollectible accounts by applying estimated bad debt percentages to its accounts receivable aging. The percentages to be applied by payor type are based on the Company’s historical collection and loss experience. The Company’s effective allowances for uncollectible accounts as a percent of accounts receivable were as follows at December 31, 2013 and 2012: |
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| | 2013 | | | | | | |
Payor | | 0-90 | | 91-180 | | 181-365 | | >1 yr. | | >2 yrs. | | | | | | |
Medicare | | 0 | % | 1 | % | 9 | % | 100 | % | 100 | % | | | | | |
Medicaid & Government | | 2 | % | 16 | % | 49 | % | 92 | % | 100 | % | | | | | |
Self Pay | | 5 | % | 36 | % | 80 | % | 87 | % | 100 | % | | | | | |
Insurance | | 5 | % | 22 | % | 38 | % | 87 | % | 100 | % | | | | | |
Total | | 1 | % | 8 | % | 33 | % | 92 | % | 100 | % | | | | | |
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| | 2012 | | | | | | |
Payor | | 0-90 | | 91-180 | | 181-365 | | >1 yr. | | >2 yrs. | | | | | | |
Medicare | | 0 | % | 1 | % | 9 | % | 100 | % | 100 | % | | | | | |
Medicaid & Government | | 1 | % | 11 | % | 31 | % | 71 | % | 100 | % | | | | | |
Self Pay | | 1 | % | 4 | % | 34 | % | 77 | % | 100 | % | | | | | |
Insurance | | 6 | % | 17 | % | 44 | % | 79 | % | 100 | % | | | | | |
Total | | 1 | % | 4 | % | 23 | % | 82 | % | 100 | % | | | | | |
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Variations between years are largely attributable to the SunCrest acquisition. |
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The Company’s allowance for uncollectible accounts at December 31, 2013 and 2012 was approximately $15,586 and $5,236, respectively. The increase is primarily due to the SunCrest acquisition. |
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Contingent Service Revenues |
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The Company, through its Imperium acquisition, provides strategic health management services to ACOs that have been approved to participate in the Medicare Shared Savings Program (“MSSP”). While the Company does not have ownership interests in ACO’s, it does have service agreements with ACOs that provide for sharing of MSSPs received by the ACO, if any. |
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ACOs are entities that contract with CMS to serve the Medicare fee-for-service population with the goal of better care for individuals, improved health for populations and lower costs. ACOs share savings with CMS to the extent that the actual costs of serving assigned beneficiaries are below certain trended benchmarks of such beneficiaries and certain quality performance measures are achieved. The MSSP is relatively new and therefore has limited historical experience, which impacts the Company’s ability to accurately accumulate and interpret the data available for calculating an ACOs’ shared savings, if any. MSSP payments are not recognized in revenue until actually received. The Company recorded no MSSP revenue for the year ended December 31, 2013. |
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Net Income per Share |
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Net income per share is presented as a unit of basic shares outstanding and diluted shares outstanding. Diluted shares outstanding is computed based on the weighted average number of common shares and common equivalent shares outstanding. Common equivalent shares result from dilutive stock options and unvested restricted shares. The following table is a reconciliation of basic to diluted shares used in the earnings per share calculation for the year ended December 31: |
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| | 2013 | | 2012 | | 2011 | | | | | | | | | | |
Basic weighted average outstanding shares | | 9,279 | | 9,285 | | 9,278 | | | | | | | | | | |
Dilutive effect of outstanding compensation awards | | 95 | | 39 | | 82 | | | | | | | | | | |
Diluted weighted average outstanding shares | | 9,374 | | 9,324 | | 9,360 | | | | | | | | | | |
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The assumed conversions to common stock of 195, 218, and 125 of the Company’s outstanding stock options were excluded from the diluted EPS computation in 2013, 2012, and 2011, respectively, because these items, on an individual basis, have an anti-dilutive effect on diluted EPS. |
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Use of Estimates |
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The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
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Financial Statement Reclassifications |
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Certain prior period amounts and data have been reclassified in the financial statements and related notes in order to conform to the 2013 presentation. Such reclassifications had no effect on previously reported net income. |
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Stock-Based Compensation |
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Stock options and restricted stock are granted under various stock compensation programs to employees and independent directors. The Company accounts for such grants in accordance with ASC Topic 718, Compensation — Stock Compensation and amortizes the fair value of awards, after estimated forfeiture, on a straight-line basis over the requisite service periods. |
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Accounting for Leases |
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The Company accounts for operating leases using the straight-line rents method, which amortizes contracted total rents due evenly over the lease term. |
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Advertising Costs |
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The Company expenses the costs of advertising as incurred. Advertising expense was $325, $316 and $370 for the years ended December 31, 2013, 2012, and 2011, respectively. |
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