Almost Family (AFAM) 10-K/A 2013 FY Annual report (amended)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

OR

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                       to                      

Commission  file number  001-09848

ALMOST FAMILY, INC.

(Exact name of Registrant as specified in its charter)

Delaware	06-1153720
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

9510 Ormsby Station Road, Suite 300, Louisville, Kentucky 40223

(Address of principal executive offices)

(502) 891-1000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act

Title of each class	Name of each exchange on which registered
Common Stock, par value $0.10 per share	NASDAQ Global Select Market

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o  No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes o  No x

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x  No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x  No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer x Non-accelerated filer o Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes o  No x

As of June 30, 2013, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was $158,216,813 based on the last sale price of a share of the common stock as of June 30, 2013 ($19.09), as reported by the NASDAQ Global Market.

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at March 11, 2014
Common Stock, $0.10 par value per share	9,410,553 Shares

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the 2014 definitive proxy statement relating to the registrant’s Annual Meeting of Stockholders are incorporated by reference in Part III to the extent described therein.

Explanatory Note

This Amendment No. 1 on Form 10-K/A (this “Amendment”) amends Almost Family, Inc.’s (the “Company”) Annual Report on Form 10-K for the fiscal year ended December 31, 2013, originally filed on March 14, 2014 (the “Original Filing”). We are filing this Amendment to (i) amend Item 8, Financial Statements and Supplementary Data, for the sole purpose of adding “LLP” to the signature of the independent registered public accounting firm on its reports and (ii) to include Exhibit 23.1, the consent of independent registered public accounting firm, which was inadvertently omitted from the Original Filing.  Except as set forth above, this Amendment does not alter or restate any of the information set forth in the Original Filing.  Specifically, no information in the Company’s financial statements was altered or restated.

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ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

ALMOST FAMILY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share data)

	Year Ended December 31,
	2013			2012			2011
Net service revenues	$	357,812		$	342,448		$	331,440
Cost of service revenues (excluding depreciation and amortization)	191,268			177,549			163,128
Gross margin	166,544			164,899			168,312
General and administrative expenses:
Salaries and benefits	102,367			96,406			95,113
Other	45,312			39,643			39,889
Deal and transition costs	4,322			588			662
Total general and administrative expenses	152,001			136,637			135,664
Operating income	14,543			28,262			32,648
Interest expense, net	(169		)	(104		)	(180		)
Income before income taxes	14,374			28,158			32,468
Income tax expense	(6,020		)	(11,047		)	(12,822		)
Net income from continuing operations	8,354			17,111			19,646
Discontinued operations:
(Loss) gain from operations, net of tax of ($89), $108, and $757	(477		)	173			1,156
Gain on sale, net of tax of $971	171			—			—
(Loss) gain on discontinued operations	(306		)	173			1,156
Net income	8,048			17,284			20,802
Net loss attributable to noncontrolling interest	178			—			—
Net income attributable to Almost Family, Inc.	$	8,226		$	17,284		$	20,802
Per share amounts-basic:
Average shares outstanding	9,279			9,285			9,278
Income from continued operations attributable to Almost Family, Inc.	$	0.92		$	1.84		$	2.12
Discontinued operations	$	(0.03	)	$	0.02		$	0.12
Net income attributable to Almost Family, Inc.	$	0.89		$	1.86		$	2.24
Per share amounts-diluted:
Average shares outstanding	9,374			9,324			9,360
Income from continued operations attributable to Almost Family, Inc.	$	0.91		$	1.84		$	2.10
Discontinued operations	$	(0.03	)	$	0.01		$	0.12
Net income attributable to Almost Family, Inc.	$	0.88		$	1.85		$	2.22

The accompanying notes to consolidated financial statements are an integral part of these financial statements.

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ALMOST FAMILY, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

	As of December 31,
	2013			2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	12,246		$	26,120
Accounts receivable - net	61,651			49,971
Prepaid expenses and other current assets	10,278			6,968
Deferred tax assets	11,532			6,580
TOTAL CURRENT ASSETS	95,707			89,639
PROPERTY AND EQUIPMENT - NET	8,142			5,401
GOODWILL	192,575			132,014
OTHER INTANGIBLE ASSETS	55,075			19,967
OTHER ASSETS	774			781
OTHER ASSETS, HELD FOR SALE	—			1,457
TOTAL ASSETS	$	352,273		$	249,259
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	11,526		$	4,599
Accrued other liabilities	38,916			21,874
Current portion - notes payable and capital leases	702			625
TOTAL CURRENT LIABILITIES	51,144			27,098
LONG-TERM LIABILITIES:
Revolving credit facility	56,000			—
Deferred tax liabilities	25,580			16,785
Other liabilities	1,856			1,061
TOTAL LONG-TERM LIABILITIES	83,436			17,846
TOTAL LIABILITIES	134,580			44,944
NONCONTROLLING INTEREST - REDEEMABLE	3,639			—
STOCKHOLDERS’ EQUITY:
Preferred stock, par value $0.05; authorized 2,000 shares; none issued or outstanding	—			—
Common stock, par value $0.10; authorized 25,000; 9,500 and 9,421 issued and outstanding	950			942
Treasury stock, at cost, 92 and 91 shares	(2,340		)	(2,320		)
Additional paid-in capital	103,858			101,945
Noncontrolling interest - nonredeemable	(203		)	—
Retained earnings	111,789			103,748
TOTAL STOCKHOLDERS’ EQUITY	214,054			204,315
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	352,273		$	249,259

The accompanying notes to consolidated financial statements are an integral part of these financial statements.

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ALMOST FAMILY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

																					Non-
															Non-controlling			Total			controlling
	Common Stock			Treasury Stock					Additional Paid-in			Retained			Interest - Non-			Stockholders’			Interest -
	Shares	Amount		Shares		Amount			Capital			Earnings			redeemable			Equity			Redeemable
Balance, December 31, 2010	9,243	$	924	(4	)	$	(139	)	$	97,073		$	84,310		$	—		$	182,168		$	—
Options exercised, net of shares surrendered or withheld	125	13		(9	)	(292		)	632			—			—			353			—
Share awards and related compensation	13	1		—		—			1,422			—			—			1,423			—
Tax benefit from exercise of non-qualified stock options	—	—		—		—			1,551			—			—			1,551			—
Net income	—	—		—		—						20,802			—			20,802			—
Balance, December 31, 2011	9,381	$	938	(13	)	$	(431	)	$	100,678		$	105,112		$	—		$	206,297		$	—
Options exercised, net of shares surrendered or withheld	11	1		—		—			69			—			—			70			—
Share awards and related compensation	29	3		(78	)	(1,889		)	1,471			—			—			(415		)	—
Special dividend	—	—		—		—			—			(18,648		)	—			(18,648		)	—
Tax loss from stock-based compensation	—	—		—		—			(273		)	—			—			(273		)	—
Net income	—	—		—		—			—			17,284			—			17,284			—
Balance, December 31, 2012	9,421	$	942	(91	)	$	(2,320	)	$	101,945		$	103,748		$	—		$	204,315		$	—
Stock award maturities, net of shares surrendered or withheld	1	1		(1	)	(20		)	17			—			—			(2		)	—
Share awards and related compensation	52	5		—		—			1,460			—			—			1,465			—
Tax loss from stock-based compensation				—		—			(62		)	—			—			(62		)	—
Stock provided in acquisitions	26	2		—		—			498			—			—			500			—
Acquired noncontrolling interest	—	—		—		—						—			(210		)	(210		)	3,639
Net loss noncontrolling interests - redeemable	—	—		—		—			—			—			—			—			(185		)
Noncontrolling interests - redeemable fair value accretion	—	—		—		—			—			(185		)	—			(185		)	185
Net loss noncontrolling interests - nonredeemable	—	—		—		—			—			—			7			7
Net income attributable to Almost Family, Inc.	—	—		—		—			—			8,226			—			8,226
Balance, December 31, 2013	9,500	$	950	(92	)	(2,340		)	$	103,858		$	111,789		$	(203	)	$	214,054		$	3,639

The accompanying notes to consolidated financial statements are an integral part of these financial statements.

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ALMOST FAMILY, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

   (in thousands)

	Year Ended December 31,
	2013			2012			2011
Cash flows from operating activities:
Net income	$	8,048		$	17,284		$	20,802
(Loss) gain on discontinued operations, net of tax	(306		)	$	173		$	1,156
Net income from continuing operations before noncontrolling interest	$	8,354		$	17,111		$	19,646
Adjustments to reconcile income to net cash provided by operating activities:
Depreciation and amortization	2,863			2,552			2,796
Provision for uncollectible accounts	5,488			2,761			2,361
Stock-based compensation	1,465			1,473			1,423
Deferred income taxes	2,099			3,753			4,371
	20,269			27,650			30,597
Change in certain net assets and liabilities, net of the effects of acquisitions:
(Increase) decrease in:
Accounts receivable	(893		)	(8,708		)	(1,187		)
Prepaid expenses and other current assets	4,243			(1,129		)	632
Other assets	235			228			252
(Decrease) increase in:
Accounts payable and accrued expenses	(4,080		)	(1,705		)	(5,185		)
Net cash provided by operating activities	19,774			16,336			25,109
Cash flows from investing activities:
Capital expenditures	(2,505		)	(2,427		)	(2,859		)
Acquisitions, net of cash acquired	(88,465		)	(536		)	(38,064		)
Net cash used in investing activities	(90,970		)	(2,963		)	(40,923		)
Cash flows from financing activities:
Credit facility borrowings	56,000			—			—
Proceeds from stock option exercises	11			70			288
Purchase of common stock in connection with share awards	(20		)	(1,889		)	(440		)
Tax benefit from stock-based compensation	(62		)	—			1,614
Payment of special dividend	—			(18,562		)	—
Principal payments on notes payable	(720		)	(1,200		)	(696		)
Net cash used in financing activities	55,209			(21,581		)	766
Cash flows from discontinued operations:
Operating activities	(970		)	695			828
Investing activities	3,083			(60		)	(30		)
Net cash from discontinued operations	2,113			635			798
Net (decrease) increase in cash and cash equivalents	(13,874		)	(7,573		)	(14,250		)
Cash and cash equivalents at beginning of period	26,120			33,693			47,943
Cash and cash equivalents at end of period	$	12,246		$	26,120		$	33,693
Supplemental disclosures of cash flow information:
Cash payment of interest, net of amounts capitalized	$	97		$	104		$	180
Cash payment of taxes	$	6,084		$	8,352		$	8,778
Summary of non-cash investing and financing activities:
Acquisitions funded by notes payable	$	1,500		$	—		$	1,000
Acquisitions funded by stock	$	500		$	—		$	—
Settlement of Directors Deferred Compensation Plan	$	—		$	—		$	501
Dividends declared, not paid	$	—		$	86		$	—

The accompanying notes to consolidated financial statements are an integral part of these financial statements.

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ALMOST FAMILY, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unless otherwise indicated all dollar and share amounts are in thousands)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation and Description Of Business

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).

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.

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.

Cash and Cash Equivalents

The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents.

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.

Property and Equipment

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).

Goodwill and Other Intangible Assets

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.

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:

				Other Intangible Assets
	Goodwill			Certificates of Need and Licenses		Trade Names		Non-compete Agreements			Total
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

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).

Capitalization Policies

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.

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.

Insurance Programs

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.

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.

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

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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.

Accounting for Income Taxes

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.

Seasonality

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.

Net Service Revenues

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.

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.

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.

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.

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

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:

	2013		2012		2011
Medicare	71.3	%	71.7	%	77.1	%
Medicaid & other government programs:
Ohio	13.1	%	13.7	%	9.0	%
Connecticut	7.0	%	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	%	19.0	%
All other payors	5.1	%	4.5	%	3.9	%
Total	100.0	%	100.0	%	100.0	%

Concentrations in the Company’s accounts receivable were as follows as of December 31:

	2013					2012
	Amount			Percent		Amount			Percent
Medicare	$	45,607		56.0	%	$	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			5.0	%
Tennessee	4,365			5.4	%	—			0.0	%
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			100.0	%	58,978			100.0	%
Third party payable	(4,250		)			(3,771		)
Allowances	(15,586		)			(5,236		)
Total	$	61,651				$	49,971

Variations between years are largely attributable to the SunCrest acquisition.

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.

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

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:

	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	%

	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	%

Variations between years are largely attributable to the SunCrest acquisition.

Allowance for Uncollectible Accounts by Payor Mix and Related Aging

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:

	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	%

	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	%

Variations between years are largely attributable to the SunCrest acquisition.

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

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.

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.

Net Income per Share

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:

	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

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.

Use of Estimates

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.

Financial Statement Reclassifications

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.

Stock-Based Compensation

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.

Accounting for Leases

The Company accounts for operating leases using the straight-line rents method, which amortizes contracted total rents due evenly over the lease term.

Advertising Costs

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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NOTE 2 - ACCRUED LIABILITIES

Accrued liabilities consist of the following as of December 31:

	2013		2012
Wages and employee benefits	$	20,664	$	10,450
Insurance accruals	11,640		9,700
Accrued taxes	856		381
Accrued professional fees and other	5,756		1,343
	$	38,916	$	21,874

NOTE 3 - PROPERTY AND EQUIPMENT, NET

Property and equipment, net, consist of the following as of December 31:

	2013			2012
Leasehold improvements	$	1,448		$	781
Medical equipment	1,671			641
Computer equipment	14,625			8,060
Internally developed software	1,404			2,689
Office and other equipment	5,071			3,330
Vehicles	387			—
	24,606			15,501
Less accumulated depreciation	(16,464		)	(10,100		)
	$	8,142		$	5,401

Depreciation and amortization expense is recorded in general and administrative expenses - other and was $2,611, $2,315 and $2,522 for the years ended December 31, 2013, 2012 and 2011, respectively.

NOTE 4 - REVOLVING CREDIT FACILITY

At December 31, 2013, the Company had a $125 million senior secured revolving credit facility with JP Morgan Chase Bank, NA, as Administrative Agent, Bank of America, as Syndication Agent and certain other lenders (the “Facility”).  The facility consists of a $125 million credit line with a maturity date of December 2, 2015 and an “accordion” feature providing for potential future expansion of the facility to $175 million.  Borrowings (other than letters of credit) under the credit facility are at either the bank’s prime rate plus a margin (ranging from 1.25% to 2.25%, currently 1.25%) or LIBOR plus a margin (ranging from 2.25% to 3.25%, currently 2.25%).  The margin for prime rate or LIBOR borrowings is determined by the Company’s leverage.  Borrowings under the Facility are secured by a first priority perfected security interest in all tangible and intangible assets of the Company, and all existing and future direct and indirect subsidiaries of the Company, as guarantors.

The weighted average prime rate-based interest rates were 4.50% and 4.50% for the year ended December 31, 2013 and 2012, respectively.  The weighted average LIBOR rate was 2.52% and 2.68% for 2013 and 2012, respectively.  The Company pays a commitment fee quarterly of 0.30% to 0.50% on the average daily unused facility balance based on leverage. Borrowings are subject to various covenants including a multiple of 3.0 times earnings before interest, taxes, depreciation and amortization (“EBITDA”). “EBITDA” may include “Acquired EBITDA” from proforma acquisitions pursuant to a calculation rider, up to 50% of “Adjusted EBITDA”, as defined. Borrowings under the facility may be used for general corporate purposes, including acquisitions. As of December 31, 2013, the formula permitted $25.2 million to be used. The Company has irrevocable letters of credit totaling $7.1 million outstanding in connection with its self-insurance programs. Thus, a total of $18.1 million was available for use at December 31, 2013. The Facility is subject to various financial covenants. As of December 31, 2013, the Company was in compliance with the covenants. Under the most restrictive of its covenants, the Company was required to maintain minimum net worth of at least $160.6 million at December 31, 2013.  At such date, the Company’s net worth was approximately $214.1 million.

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NOTE 5 - FAIR VALUE MEASUREMENTS

The Company’s financial instruments consist of cash, accounts receivable, payables and debt instruments.  Due to their short-term nature, the book values of cash, accounts receivable and payables are considered representative of their respective fair values.  The fair value of the Company’s debt instruments approximates their carrying values as substantially all of such debt instruments have rates which fluctuate with changes in market rates.

As of December 31, 2013, the Company does not have any assets or liabilities carried at fair value that are measured on a recurring basis.

NOTE 6 - INCOME TAXES

The provision for income taxes consists of the following as of December 31:

	2013		2012		2011
Federal - current	$	3,557	$	6,113	$	7,210
State and local - current	364		1,181		1,241
Deferred	2,099		3,753		4,371
	$	6,020	$	11,047	$	12,822

A reconciliation of the statutory to the effective rate of the Company is as follows as of December 31:

	2013		2012		2011
Tax provision using statutory rate	35.0	%	35.0	%	35.0	%
State and local taxes, net of Federal benefit	5.7	%	4.1	%	3.9	%
Valuation allowance	-0.6	%	-0.6	%	0.0	%
Noncontrolling interest related	0.5	%	0.0	%	0.0	%
Other, net	1.3	%	0.7	%	0.6	%
Tax provision for continuing operations	41.9	%	39.2	%	39.5	%

The Company has provided a valuation allowance against certain net deferred tax assets based upon management’s estimation of realizability of those assets through future taxable income.  This valuation allowance was based in large part on the Company’s history of generating operating income or losses in individual tax locales and expectations for the future.  The Company’s ability to generate the expected amounts of taxable income from future operations to realize its recorded net deferred tax assets is dependent upon general economic conditions, competitive pressures on revenues and margins and legislation and regulation at all levels of government.  There can be no assurances that the Company will meet its expectations of future taxable income.  However, management has considered the above factors in reaching its conclusion that it is more likely than not that future taxable income will be sufficient to realize the deferred tax assets (net of valuation allowance) as of December 31, 2013.

During 2013, the valuation allowance increased by $19 million due to a change in expected realizability of deferred tax assets for states operating loss carry-forwards.

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The principal tax carry-forwards and temporary differences were as follows as of December 31:

	2013			2012
Deferred tax assets
Non-deductible reserves and allowances	$	9,520		$	4,331
Insurance accruals	2,372			2,212
Net operating loss carryforwards	1,160			1,251
	13,052			7,794
Valuation allowance	(979		)	(960		)
Deferred tax assets	12,073			6,834
Deferred tax liabilities
Intangibles	(24,509		)	(15,525		)
Accelerated depreciation	(1,612		)	(1,514		)
Deferred tax liabilities	(26,121		)	(17,039		)
Net deferred tax liabilities	$	(14,048	)	$	(10,205	)
Deferred tax (liabilities) assets are reflected in the accompanying balance sheet as:
Current assets	11,532			6,580
Long-term liabilities	(25,580		)	(16,785		)
Net deferred tax liabilities	$	(14,048	)	$	(10,205	)

The Company had book goodwill of $109.0 million and $57.5 million at December 31, 2013 and 2012, respectively, which was not deductible for tax purposes.

State operating loss carry-forwards totaling $22.8 million at December 31, 2013 are being carried forward in jurisdictions where the Company is permitted to use tax losses from prior periods to reduce future taxable income.  If not used to offset future taxable income, these losses will expire between 2014 and 2033.  Due to uncertainty regarding the Company’s ability to use some of the carry-forwards, a valuation allowance has been established on $19.0 million of state net operating loss carry-forwards.  Based on the Company’s historical record of producing taxable income and expectations for the future, the Company has concluded that future operating income will be sufficient to give rise to taxable income sufficient to utilize the remaining state net operating loss carry-forwards.

The Company concluded that there are no significant uncertain tax positions requiring recognition in its financial statements.  For federal tax purposes, the Company is currently subject to examinations for tax years after 2009, while for state purposes, tax years after 2007 are subject to examination, depending on the specific state rules and regulations.  The Internal Revenue Service completed an examination of the December 31, 2011 tax year.

The Company may from time to time be assessed interest and penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to its financial results.  Assessments for interest and/or penalties are classified in the financial statements as general and administrative - other.

NOTE 7 - STOCKHOLDERS’ EQUITY

Employee Stock Incentive Plans

The Company has a 2000 Employee Stock Option Plan which initially provided for options to purchase up to 1,000 shares of the Company’s common stock to key employees, officers and directors.  The Board of Directors determines the amount and terms of the options, which cannot exceed ten years.  At December 31, 2013, options for 121 shares were outstanding under this plan.  There are no shares available for future grant.

Historically, the Company has issued restricted share and/or option awards to employees and non-employee directors.  The Board of Directors determines the amount and terms of the options, which cannot exceed ten years.  Under both the 2013 and 2007 Stock and Incentive Compensation Plans, restricted share awards cliff vest on the third anniversary, while option share awards vest annually in 25% increments over four years.

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The 2007 Stock and Incentive Compensation Plan provided for stock awards up to 500 shares of the Company’s common stock to employees, non-employee directors or independent contractors, with a maximum number of full value restricted share awards up to 200.    As of December 31, 2013, options for 254 shares were outstanding under this plan, while 162 restricted shares had been awarded.  There are no shares available for future grant.

The 2013 Stock and Incentive Compensation Plan provides for stock awards up to 700 shares of the Company’s common stock to employees, non-employee directors or independent contractors, with a maximum number of full value restricted share awards up to 200.  As of December 31, 2013, options for 9 shares had been granted and were outstanding under this plan, while 25 restricted shares had been awarded.  There are 666 shares available for future grant.

Changes in award shares outstanding are summarized as follows:

	Restricted shares				Options
	Shares		Wtd. Avg.  Grant Price		Shares		Wtd. Avg.  Ex. Price
December 31, 2010	92		$	33.74	314		$	22.39
Granted	20		36.69		32		36.69
Vested or Exercised	(35	)	26.81		(38	)	10.86
Forfeited	(6	)	34.76		(16	)	(28.05		)
December 31, 2011	71		$	37.85	292		$	25.15
Granted	29		24.16		63		24.16
Vested or Exercised	(44	)	37.61		(11	)	6.49
Forfeited	(6	)	28.55		(3	)	(20.19		)
December 31, 2012	50		$	31.35	341		$	25.62
Granted	58		20.29		68		20.71
Vested or Exercised	(8	)	19.57		(2	)	12.29
Forfeited	—		—		(24	)	(30.29		)
December 31, 2013	100		$	24.12	383		$	24.52

The following table summarizes information about stock options at December 31, 2013:

	Options Outstanding				Options Exercisable
Range of Exercise Price	Shares	Wtd. Avg. Remaining Contractual Life	Wtd. Avg. Exercise Price		Shares	Wtd. Avg. Remaining Contractual Life	Wtd. Avg. Exercise Price
$4.00-20.00	7	0.87	$	4.28	7	0.87	$	4.28
$20.01-30.00	279	5.75	$	21.01	170	3.79	$	20.50
Over $30.00	97	5.80	$	35.88	82	5.58	$	35.76
	383	5.68	$	24.52	259	4.28	$	24.89

The following table details exercisable options and related information for the year ended December 31:

	2013		2012		2011
Exercisable at end of year	259		240		219
Weighted average price	$	24.89	$	24.33	$	22.21
Weighted average fair value of options granted during the year	$	9.59	$	10.92	$	18.31

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The following table details unvested options for the year ended December 31, 2013:

	Shares		Wtd. Avg. Ex. Price
December 31, 2012	101		$	28.69
Vested	34		31.02
Granted	68		20.71
Forfeited	(11	)	(28.40		)
December 31, 2013	124		$	23.77

The fair value of each option award is estimated on the date of grant using the Monte Carlo option valuation model with suboptimal exercise behavior. The Monte Carlo model places greater emphasis on market evidence and predicts more realistic results because it considers open form information including volatility, employee exercise behaviors and turnover.  Stock options have a contractual term on 10 years.  The following assumptions were used in determining the fair value of option awards for 2013:

Grant date	Equivalent interest rate		Equivalent volatility		Implied expected lives
March 1, 2013	1.86	%	40.00	%	8.33

Expected volatility is based on an analysis that looks at the unbiased standard deviation of the Company’s common stock over the option term as well as implied volatilities of all long-term exchange traded options for the Company. The expected life of the options represents the period of time that the Company expects the options granted to be outstanding. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of the grant of the option for the expected term of the instrument. The dividend yield reflects an estimate of dividend payouts over the term of the award.

As of December 31, 2013, there was $1,878 of total unrecognized compensation cost, after estimated forfeitures, related to unvested share-based compensation granted under the plans.  That cost is expected to be recognized over a weighted-average period of 2.74 years.  The total fair value of option shares vested during the 2013 and 2012 was $363 and $371, respectively.

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan (“2009 ESPP”) which, if implemented, could provide employees of the Company and its subsidiaries with an opportunity to participate in the growth of the Company and to further align the interest of the employees with the interests of the Company through the purchase of shares of the Company’s Common Stock.  Under the 2009 ESPP, 300 shares of the Company’s Common Stock have been authorized for issuance.  As of December 31, 2013, all 300 shares remain available.

Directors Deferred Compensation Plan

The Company had a Non-Employee Directors Deferred Compensation Plan (the “Deferred Plan”) which allowed Directors to elect to receive fees for Board services in the form of shares of the Company’s common stock.  Directors’ fees were expensed as incurred whether paid in cash or deferred into the Deferred Plan.  The Deferred Plan was terminated as of February 22, 2010 with all shares distributed on February 23, 2011.  During 2012, the Company redeemed 72 shares of stock for $1.7 million related to this distribution.

NOTE 8 - RETIREMENT PLAN

The Company administers a 401(k) defined contribution retirement plan for the benefit of the majority of its employees.  Employees may participate in the plan immediately upon employment.  The Company matches contributions in an amount equal to one-quarter of the first 5% of each participant’s contribution to the plan after completion of one year of service with the Company.  401(k) assets are held by an independent trustee, are not

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assets of the Company, and accordingly are not reflected in the Company’s balance sheets.  The Company’s retirement plan expense was approximately $550, $509 and $472 for the years ended December 31, 2013, 2012, and 2011, respectively.

NOTE 9 - COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases certain real estate, office space, and equipment under non-cancelable operating leases expiring at various dates through 2019 and which contain various renewal and escalation clauses.  Rent expense amounted to approximately $8,592, $8,656 and $7,703 for years ended December 31, 2013, 2012 and 2011, respectively. At December 31, 2013, minimum rental payments under these leases were as follows:

2014	$	5,845
2015	3,961
2016	1,785
2017	806
2018	335
Thereafter	15
Total	$	12,747

Legal Proceedings

The Company is currently, and from time to time, subject to claims and suits arising in the ordinary course of its business, including claims for damages for personal injuries.  In the opinion of management, after discussions with legal counsel, the ultimate resolution of any of these ordinary course pending claims and legal proceedings will not have a material effect on the Company’s financial position or results of operations.

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As previously disclosed, four derivative complaints were filed in Jefferson Circuit Court, Kentucky, against the members of the Company’s board of directors and chief financial officer.  All four lawsuits named the Company as a nominal defendant and were consolidated into a single action.  All of the complaints and the resulting consolidated complaint refer to an April 27, 2010 The Wall Street Journal article and the subsequent governmental investigations.  On February 13, 2012, the independent directors filed a motion to dismiss the complaint.  On October 2, 2012, the Court entered an order granting the motion to dismiss and dismissing the complaint with prejudice.  On November 1, 2012 the plaintiffs filed an appeal of the Court’s ruling with the Kentucky Court of Appeals.  Briefing to the Court of Appeals is complete.  In the meantime, the Board received a demand letter dated July 17, 2013, from counsel for one of the derivative plaintiff shareholders.  The letter states that the shareholder believes certain of the Company’s officers and directors violated their fiduciary duties based on allegations similar to those described in the consolidated complaint.  The letter requests that the Board take appropriate action against the individuals in question.  The Board is working on a response to the shareholder demand.  As a further result of the demand from the plaintiff shareholder, the Company’s outside directors filed a motion with the Court of Appeals asking the Court to dismiss the appeal as moot.  On March 11, 2014, the Court of Appeals denied the outside directors’ motion to dismiss the appeal as moot.  Moreover, the Court of Appeals on its own motion abated the appeal.  The abatement removed the appeal from the Court’s active appellate docket.  The Court stated that upon the Board’s response to the shareholder demand, the parties should file a motion to redocket the case.

As previously disclosed, a fifth derivative complaint involving Richard W. Carey was filed in U.S. District Court for the Western District of Kentucky.  The lawsuit names the Company as a nominal defendant and is substantially duplicative of the derivative complaint pending in the Jefferson Circuit Court.  The Court granted the defendants’ motion to stay the lawsuit pending further order of the Court.

The Company is unable to assess the probable outcome or potential liability, if any, arising from these matters.

NOTE 10 - SEGMENT DATA

The Company has two reportable segments, VN and PC.  Reportable segments have been identified based upon how management has organized the business by services provided to customers and the criteria in ASC Topic 280, Segment Reporting.  Consistent with information given to the Chief Operating Decision Maker, the Company does not allocate certain corporate expenses, which include expenses related to Imperium, to the reportable segments.  These expenses are included in Unallocated below.  The Company evaluates the performance of its business segments based upon operating income. Intercompany transactions between segments are eliminated.

The Company’s VN segment provides skilled medical services in patients’ homes largely to enable recipients to reduce or avoid periods of hospitalization and/or nursing home care.  VN Medicare revenues are generated on a per episode basis rather than a fee per visit or day of care.  Approximately 93% of the VN segment revenues are generated from the Medicare program, while the balance is generated from Medicaid and private insurance programs.

The Company’s PC segment services are also provided in patients’ homes.  These services (generally provided by paraprofessional staff such as home health aides) are generally of a custodial rather than skilled nature.  PC revenues are generated on an hourly basis.  Approximately 86% of the PC segment revenues are generated from Medicaid and other government programs, while the balance is generated from insurance programs and private pay patients.

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	Year Ended December 31,
	2013			2012			2011
Net service revenues
Visiting Nurse	$	275,813		$	265,401		$	275,184
Personal Care	81,999			77,047			56,257
	$	357,812		$	342,448		$	331,441
Operating income
Visiting Nurse	$	30,749		$	39,142		$	43,815
Personal Care	10,137			10,029			8,682
Unallocated	(26,343		)	(20,909		)	(19,849		)
	$	14,543		$	28,262		$	32,648
Identifiable assets
Visiting Nurse	$	265,699		$	158,823
Personal Care	57,654			47,860
Unallocated	28,920			42,576
	$	352,273		$	249,259
Identifiable liabilities
Visiting Nurse	$	42,643		$	9,940
Personal Care	5,026			4,670
Unallocated	86,911			30,334
	$	134,580		$	44,944
Capital expenditures
Visiting Nurse	$	767		$	680		$	759
Personal Care	267			648			756
Unallocated	1,471			1,099			1,344
	$	2,505		$	2,427		$	2,859
Depreciation and amortization
Visiting Nurse	$	1,027		$	1,004		$	1,311
Personal Care	202			156			80
Unallocated	1,634			1,392			1,405
	$	2,863		$	2,552		$	2,796

NOTE 11 — DISCONTINUED OPERATIONS

The Company follows the guidance in Accounting Standards Codification (ASC) 205-20, Discontinued Operations and, when appropriate, reclassifies operating units closed, sold or held for sale out of continuing operations and into discontinued operations for all periods presented.  During the quarter ended June 30, 2013, the Company completed the sale of two Alabama locations, which operated in the Visiting Nurse (VN) segment.  The operations and gain on sale related to the Alabama operations were reclassified from continuing operations into discontinued operations for all periods presented.  Other Assets Held for Sale primarily relate to prior period VN segment goodwill that was allocated to the Company’s Alabama operations.  The effective tax rate for discontinued operations is high due primarily to the impact of writing off non-deductible goodwill in addition to providing a valuation allowance for Alabama net operating loss carryforwards.  Unless otherwise noted, amounts in these Notes to Consolidated Financial Statements exclude amounts attributable to discontinued operations.

NOTE 12 - ACQUISITIONS

The Company completed each of the following acquisitions in pursuit of its strategy for operational expansion in the eastern United States through an expanded service base and enhanced position in certain geographic areas.  The purchase price of each acquisition was determined based on the Company’s analysis of comparable acquisitions, expected cash flows and arm’s length negotiation with the sellers.  Each acquisition was included in the

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Company’s consolidated financial statements from the respective acquisition date.

Goodwill recognized from the acquisitions primarily relates to expected contributions of each entity to the overall corporate strategy in addition to synergies and acquired workforce, which are not separable from goodwill.  Goodwill and other intangible assets generated in asset purchase transactions are expected to be amortizable for tax purposes on a straight-line basis over 15 years, unless otherwise noted.  Goodwill and other intangible assets generated in stock purchase transactions are not amortizable, unless otherwise noted.  The purchase price allocations for 2013 acquisitions are preliminary as the Company is continuing to obtain information regarding acquired assets and liabilities.

On December 6, 2013, the Company acquired the stock of SunCrest.  SunCrest and 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.  The total SunCrest purchase price for the stock was $76.6 million, subject to a working capital adjustment.  The purchase price consisted of cash consideration of $75.1 million, of which $1.5 million remained unpaid at December 31, 2013 and a $1.5 million note payable, net of acquired cash balances of $2.2 million.  The following table summarizes to approximate estimated fair values of the assets acquired and liabilities assumed of the SunCrest acquisition.

Accounts Receivable - net	$	16,237
Property, plant & equipment	2,276
Other assets	2,933
Goodwill	44,096
Other intangibles	33,390
Assets acquired	98,932
Liabilities assumed	(22,375		)
Net assets acquired	$	76,557

Amortizable goodwill and intangibles acquired in the SunCrest acquisition are expected to provide an annual tax deduction approximating $2.8 million through 2020.

The unaudited proforma result of operations for the Company as if the SunCrest acquisition had been made at the beginning of 2013 are as follows:

	Twelve months ended December 31,
	2013		2012
Revenues	$	495,025	$	496,428
Net income from continuing operations	$	7,230	$	14,074
Net income	$	7,102	$	14,247
Earnings per share from continuing operations
Basic	$	0.78	$	1.52
Diluted	$	0.76	$	1.53
Earnings per share
Basic	$	0.77	$	1.51
Diluted	$	0.76	$	1.53

The proforma information presented above is presented for illustrative purposes only and may not be indicative of the results of operations that would have actually occurred if the transaction described had been completed as of the beginning of 2012.  In addition, future results may vary from the results reflected in such information.

On October 4, 2013, the Company acquired 61.5% of Imperium for $5.8 million, of which $3.0 million was working capital for Imperium.  Imperium is a development-stage enterprise that provides strategic health management services to ACOs.  Substantially all of the purchase price was allocated to goodwill.  The Company is party to a put and call arrangement with respect to the remaining 38.5% non-controlling interest in Imperium.  The redemption value for both the put and the call arrangement is equal to fair value.  Due to the existing put and call arrangements, the non-controlling interest is considered to be redeemable and is recorded on the balance sheet as a redeemable non-controlling interest outside of permanent equity.  The redeemable non-controlling interest is recognized at the higher of 1) the accumulated earnings associated with the non-controlling interest or 2) the redemption value as of the balance sheet date.

On July 17, 2013, the Company acquired the assets of the Medicare-certified home agencies owned by IHCN.  IHCN operated six home health agencies primarily in northern Indiana for a total purchase price of $12.5 million consisting of cash and $0.5 million of Almost Family, Inc. common stock.  A preliminary allocation of purchase price resulted primarily in the allocation of $9.9 million to goodwill, $1.8 million to identified intangibles with the remainder primarily due to property plant and equipment and accounts receivable.

During 2012, the Company completed two small acquisitions to expand existing VN and PC segment operations.

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On August 5, 2011 the Company acquired 100% of the outstanding equity interests of Cambridge Home Health Care Holdings, Inc. (Cambridge) with a cash-free, debt-free balance sheet for an all-cash purchase price of $32.8 million.  Cambridge and its subsidiaries own and operate 37 home health branches with 34 in Ohio and three in western Pennsylvania.  The Cambridge transaction was a 100% acquisition of stock and accordingly, tax deductible goodwill and identified intangibles is limited to $4.0 million.

On April 1, 2011, the Company acquired the assets of a Medicare-certified home health agency in Cincinnati, Ohio with approximately $5 million in annual revenues for $5.3 million in total consideration consisting of cash and a $1 million note payable.

NOTE 13 - QUARTERLY FINANCIAL DATA— (UNAUDITED)

Summarized quarterly financial data are as follows for the years ended December 31:

	2013												2012
	Dec. 31			Sept. 30			Jun. 30			Mar. 31			Dec. 31			Sept. 30			Jun. 30		Mar. 31
Net service revenues	$	96,341		$	88,818		$	86,818		$	85,835		$	85,421		$	83,880		$	85,296	$	87,851
Gross margin	44,637			41,267			40,470			40,170			40,823			40,077			40,827		43,172
Income from continuing operations attributable to Almost Family, Inc.	383			2,239			2,584			3,326			3,736			4,147			4,444		4,784
Discontinued operations	(55		)	(110		)	(61		)	(80		)	(31		)	(48		)	105		147
Net income attributable to
Almost Family, Inc.	$	328		$	2,129		$	2,523		$	3,247		$	3,704		$	4,099		$	4,549	$	4,932
Average shares outstanding
Basic	9,308			9,302			9,270			9,254			9,280			9,256			9,255		9,268
Diluted	9,401			9,348			9,348			9,338			9,313			9,315			9,315		9,334
Net income attributable to Almost Family, Inc. per share
Basic	$	0.03		$	0.23		$	0.27		$	0.35		$	0.40		$	0.44		$	0.49	$	0.53
Diluted	$	0.02		$	0.23		$	0.27		$	0.35		$	0.40		$	0.44		$	0.49	$	0.53

NOTE 14 - SUBSEQUENT EVENTS

Management has evaluated all events and transactions that occurred after December 31, 2013.  During this period, the Company had no material subsequent events requiring recognition in the consolidated financial statements or any non-recognized subsequent events requiring disclosure.

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Report of Independent Registered Public Accounting Firm

The Board of Directors and Shareholders of Almost Family, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of Almost Family, Inc. and Subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2013. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Almost Family, Inc. and Subsidiaries at December 31, 2013 and 2012, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2013, in conformity with U.S. generally accepted accounting principles

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Almost Family, Inc. and subsidiaries’ internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) and our report dated March 14, 2014 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Louisville, Kentucky

March 14, 2014

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Management’s Report on Internal Control over Financial Reporting

The consolidated financial statements appearing in this Annual Report have been prepared by management that is responsible for their preparation, integrity and fair presentation. The statements have been prepared in accordance with U. S. generally accepted accounting principles, which requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended). Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Further, because of changes in conditions, the effectiveness of an internal control system may vary over time.

Under the supervision and with the participation of our management, including our Chief Executive Officer (CEO) and Principal Financial Officer (PFO), we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2013 based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (COSO), with the exception of the operations of Imperium Health Management, LLC, Indiana HomeCare Network, LLC, and Omni Home Health Holdings, Inc., which constituted 34% of total assets as of December 31, 2013 and 4% of net service revenues for the year then ended..  Based on that evaluation, our management concluded our internal control over financial reporting was effective based on the criteria described above as of December 31, 2013.

Ernst & Young LLP, an independent registered public accounting firm, has audited and reported on the consolidated financial statements of Almost Family, Inc. and on the effectiveness of our internal control over financial reporting. The reports of Ernst & Young LLP are contained in this Annual Report.

/s/ William B. Yarmuth	/s/ C. Steven Guenthner
William B. Yarmuth	C. Steven Guenthner
Chairman and Chief Executive Officer	President & Principal Financial Officer
Date: March 14, 2014	March 14, 2014

65

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Almost Family, Inc. and Subsidiaries

We have audited Almost Family, Inc. and Subsidiaries’ internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (1992 framework) (the COSO criteria). Almost Family, Inc. and Subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of Imperium Health Management, LLC, Indiana HomeCare Network, LLC, and Omni Home Health Holdings, Inc., which are in included in the 2013 consolidated financial statements of Almost Family, Inc. and Subsidiaries and constituted 34% of total assets as of December 31, 2013 and 4% of net service revenues for the year then ended. Our audit of internal control over financial reporting of Almost Family, Inc. and Subsidiaries also did not include an evaluation of the internal control over financial reporting of Imperium Health Management, LLC, Indiana HomeCare Network, LLC, and Omni Home Health Holdings, Inc.

In our opinion, Almost Family, Inc. and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Almost Family Inc. and Subsidiaries as of December 31, 2013 and 2012 and the related consolidated statements of income, stockholders’ equity and cash flows for each of the three years in

66

the period ended December 31, 2013 of Almost Family, Inc. and Subsidiaries and our report dated March 14, 2014 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Louisville, Kentucky

March 14, 2014

67

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ALMOST FAMILY, INC.

March 14, 2014

By:	/s/ William B. Yarmuth	March 14, 2014
William B. Yarmuth
Chairman, Chief Executive Officer
By:	/s/ C. Steven Guenthner	March 14, 2014
C. Steven Guenthner
President and Principal Financial Officer

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EXHIBIT INDEX

Documents filed or furnished as part of this Amendment No.1 to Form 10-K/A

Number	Description of Exhibit
23.1*	Consent of Ernst & Young LLP
31.1*	Certification of Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
31.2*	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.
32.1*	Certification of Chief Executive Officer pursuant to 18 U.S.C 1350, as adopted pursuant to section 906 of the Sarbanes Oxley Act of 2002.
32.2*	Certification of Principal Financial Officer pursuant to 18 U.S.C 1350, as adopted pursuant to section 906 of the Sarbanes Oxley Act of 2002.
101*	Financial statements from the annual report on Form 10-K/A of Almost Family, Inc. for the year ended December 31, 2013, filed on March 17, 2014, formatted in XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income, (iii) Consolidated Statements of Cash Flows, (iv) Consolidated Statements of Stockholders’ Equity, and (v) the Notes to Consolidated Financial Statements.

*Denotes filed or furnished herein.

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