MODIVCARE INC. The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and accompanying notes for the three and six months endedJune 30, 2022 and 2021 included herein, as well as our audited consolidated financial statements and accompanying notes and management's discussion and analysis of financial condition and results of operations included in our Form 10-K for the year endedDecember 31, 2021 . For purposes of "Management's Discussion and Analysis of Financial Condition and Results of Operations," references to Q2 2022 and Q2 2021 mean the three months endedJune 30, 2022 and the three months endedJune 30, 2021 , respectively.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 3b-6 promulgated thereunder, including statements related to the Company's strategies or expectations about revenues, liabilities, results of operations, cash flows, ability to fund operations, profitability, ability to meet financial covenants, contracts or market opportunities. These statements are predictive in nature and are frequently identified by the use of terms such as "may," "will," "should," "expect," "believe," "estimate," "intend," and similar words indicating possible future expectations, events or actions. In addition, statements that are not historical statements of fact should also be considered forward-looking statements. Such forward-looking statements are based on current expectations, assumptions, estimates and projections about our business and our industry, and are not guarantees of our future performance. These statements are subject to a number of known and unknown risks, uncertainties and other factors, many of which are beyond our ability to control or predict, that may cause actual events to be materially different from those expressed or implied herein. Among such risks, uncertainties and other factors are those summarized under the caption " Summary Risk Factors " in Part I, and described in further detail under the caption " Risk Factors " in Part I, Item 1A, of our Annual Report on Form 10-K filed with theSecurities and Exchange Commission , orSEC , for the fiscal year endedDecember 31, 2021 . Hyperlinks to such sections of our Annual Report are contained in the text included within the quotation marks. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date the statement was made and are expressly qualified in their entirety by the cautionary statements set forth herein and in our other filings with theSEC , which you should read in their entirety before making an investment decision with respect to our securities. We undertake no obligation to update or revise any forward-looking statements contained in this release, whether as a result of new information, future events or otherwise, except as required by applicable law.
Overview of Our Business
ModivCare Inc. ("ModivCare" or the "Company") is a technology-enabled healthcare services company that provides a suite of integrated supportive care solutions for public and private payors and their patients. Its value-based solutions address the social determinants of health, or SDoH, connect members to care, help health plans manage risks, reduce costs, and improve outcomes.ModivCare is a provider of non-emergency medical transportation, or NEMT, personal care, and remote patient monitoring, or RPM, solutions, which serve similar, highly vulnerable patient populations. The technology-enabled operating model includes NEMT core competencies in risk underwriting, contact center management, network credentialing, claims management and non-emergency medical transportation management. Additionally, its personal care services include placements of non-medical personal care assistants, home health aides and nurses primarily to Medicaid patient populations in need of care monitoring and assistance performing daily living activities in the home setting, including senior citizens and disabled adults.ModivCare's remote patient monitoring services include personal emergency response systems, vitals monitoring and data-driven patient engagement solutions.ModivCare is further expanding its offerings to include meal delivery and working with communities to provide food-insecure individuals delivery of meals.ModivCare also holds a 43.6% minority interest inCCHN Group Holdings, Inc. and its subsidiaries, which operates under the Matrix Medical Network brand and which we refer to as "Matrix". Matrix maintains a national network of community-based clinicians who deliver in-home and on-site services, and a fleet of mobile health clinics that provide community-based care with advanced diagnostic capabilities and enhanced care options. 28 --------------------------------------------------------------------------------
Business Outlook and Trends
Our performance is affected by a number of trends that drive the demand for our
services. In particular, the markets in which we operate are exposed to various
trends, such as healthcare industry and demographic dynamics. Over the long
term, we believe there are numerous factors that could affect growth within the
industries in which we operate, including:
•an aging population, which is expected to increase demand for healthcare
services and transportation and, accordingly, in-home personal care services;
•increasing prevalence of chronic illnesses that require active and ongoing
monitoring of health data which can be accomplished at a lower cost and result
in better health outcomes through remote patient monitoring services;
•a movement towards value-based care versus fee-for-service and cost plus care
and budget pressure on governments, both of which may increase the use of
private corporations to provide necessary and innovative services;
•increasing demand for in-home care provision, driven by cost pressures on
traditional reimbursement models and technological advances enabling remote
engagement, including remote monitoring and similar internet-based health
related services;
•technological advancements, which may be utilized by us to improve services and
lower costs, but may also be utilized by others, which may increase industry
competitiveness; and
•State Medicaid programs, Medicaid Managed Care Organizations ("MCOs") and
Medicare Advantage plans increasingly are covering NEMT services for a variety
of reasons, including increased access to care, improved patient compliance with
treatment plans, social trends, and to promote SDoH, and this trend may be
accelerated or reinforced by The Consolidated Appropriations Act of 2021
("H.R.133"), a component of which mandates that state Medicaid programs ensure
that Medicaid beneficiaries have necessary transportation to and from health
care providers.
Since March 2020 and primarily as a result of the COVID-19 pandemic, we have
observed a material reduction in trip volume in our NEMT segment as a result of
state imposed public health orders, many of which reduced medical services to
life-sustaining programs only (for example, dialysis and chemotherapy). This
reduction in trip volume has had a negative financial impact on our
transportation providers and may impact the availability of transportation
providers in the future given the heightened sanitation requirements imposed on
drivers and depressed volume.
Our Personal Care segment has experienced and is expected to continue to
experience a material reduction in volume of service hours and visits. Volume
has been reduced as members put services on hold due to infection concerns,
and/or because they had the alternative of receiving care from family members
and other caregivers working remotely or furloughed from their jobs. Cases have
also been lost due to patient deaths, and new case referrals slowed as referral
sources faced disruption from the various restrictions and public health orders.
These depressed volumes will continue to result in lower than expected revenue,
at least in the near term, in the Personal Care segment.
Our RPM segment has not experienced a direct material impact to operations or
financial activity as a result of the COVID-19 pandemic. While this segment of
the business has proven resilient given the increase in demand for remote
healthcare services in a highly contagious infection environment, potential
risks could arise that could have a material impact on the financial results of
the segment. Specifically, given the strain on the healthcare professionals that
serve the healthcare community, we could experience shortages in qualified
medical professionals that support our remote care monitoring business.
Furthermore, the impact of the COVID-19 pandemic is continuously evolving, and the continuation of the pandemic, any additional resurgence, or COVID-19 variants could continue to change trends in the market.
Critical Accounting Estimates and Policies
There have been no significant changes to our critical accounting policies in our unaudited condensed consolidated financial statements from our Form 10-K for the year endedDecember 31, 2021 . For further discussion of our critical accounting policies, see management's discussion and analysis of financial condition and results of operations contained in our Form 10-K for the year endedDecember 31, 2021 .
Change in Accounting Estimate
During the first quarter, the Company completed an assessment of the useful lives of our intangible assets and adjusted the estimated useful life of the Simplura trademarks and trade names intangible asset from 10 years to 3 years and adjusted the estimated useful life of the payor network from 15 years to 10 years effective as ofJanuary 1, 2022 . This change was driven by strategic shifts in the Company's personal care segment operations, partially contributed to by the acquisition of Care Finders. Based on the intangible asset values as ofDecember 31, 2021 , the effect of the change in estimate during the three and six 29 --------------------------------------------------------------------------------
months ended
Results of Operations
The following results of operations include the accounts of
Revenues
Service revenue, net. Service revenue for our NEMT segment includes contracts
predominately with state Medicaid agencies and MCOs for the coordination of
their members' non-emergency transportation needs. Most contracts are capitated,
which means we are paid on a per-member, per-month basis for each eligible
member. For most contracts, we arrange for transportation of members through our
network of independent transportation providers, whereby we negotiate rates and
remit payment to the transportation providers. However, for certain contracts,
we assume no risk for the transportation network, credentialing and/or payments
to these providers. For these contracts, we only provide administrative
management services to support the customers' efforts to serve their clients.
Certain other contracts are structured as fee-for-service ("FFS") in which we
bill and collect a specified amount for each service that we provide.
FFS revenue is recognized in the period in which the services are rendered and
is reduced by the estimated impact of contractual allowances and policy
discounts in the case of third-party payors.
Service revenue for our Personal Care segment includes hours incurred by our
in-home caregivers that are billed to our customers. Our customers consist of
third-party payors including, but not limited to, MCOs, hospitals, Medicaid
agencies and programs and other home health care providers who subcontract the
services of our caregivers.
Service revenue for our RPM segment includes the sale of monitoring equipment to
our third-party distributors as well as hours incurred by our Clinical Team for
providing monitoring services that are billed to our customers. Our customers
consist of national and regional health plans, government-funded benefit
programs, healthcare provider organizations, and individuals.
Grant Income
Grant Income. The Company has received distributions under theCARES Act Provider Relief Fund and theARPA Coronavirus State and Local Fiscal Relief Fund targeted to providing economic relief and stimulus to combat health and economic impacts of the COVID-19 pandemic.
Operating Expenses
Service expense. Service Expense for our NEMT segment includes purchased transportation, operational payroll and other operational related costs. Purchased transportation includes the amounts we pay to third-party service providers and is typically dependent upon service volume. Operational payroll predominately includes our contact center operations, customer advocacy and transportation network team. Other operating expenses primarily include operational overhead costs, and operating facilities and related charges. Service expense for our Personal Care segment includes payroll and other operational related costs for our caregivers to provide in-home care. Service expense for our RPM segment primarily consists of salaries of employees in our contact centers, connectivity costs and occupancy costs.
General and administrative expense. General and administrative expense for all segments consists principally of salaries for administrative employees that indirectly support the operations, occupancy costs, marketing expenditures, insurance, and professional fees.
Depreciation and amortization expense. Depreciation within this caption includes infrastructure items such as computer hardware and software, office equipment, monitoring and vitals equipment, buildings, and leasehold improvements. Amortization expense is generated primarily from amortization of our intangible assets, including payor networks, trade names, developed technology, a non-compete agreement, an assembled workforce, and a New York LHCSA permit.
Other Expenses
30
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Interest expense, net. Interest expense consists principally of interest
payments on the Company's borrowings outstanding at
Equity in net loss (income) of investee, net of tax. Equity in earnings of equity method investee consists of our proportionate share of equity earnings or losses from our Matrix equity investment, presented net of related taxes.
Income tax provision. The Company is subject to federal taxation in
Results of Operations
Segment reporting. Our segments reflect the manner in which our operations are organized and reviewed by management. Segment results are based on how our chief operating decision maker manages our business, makes operating decisions and evaluates operating performance. We operate four reportable business segments: NEMT, Personal Care, RPM, and Corporate and Other. EffectiveJanuary 1, 2022 , the Company completed its segment reorganization which resulted in the addition of a Corporate and Other segment that includes the costs associated with the Company's corporate operations. The operating results of the Corporate and Other segment include activities related to executive, accounting, finance, internal audit, tax, legal and certain strategic and corporate development functions for each segment, as well as the results of the Matrix investment. Prior to the segment reorganization, we reported the investment in Matrix as a separate operating segment, however based on the relative size of the Matrix investment and all related activity to the overall financial statements, the CODM no longer views it as a separate operating segment but reviews results in conjunction with the other corporate results of the business. The NEMT segment consists of our legacy operations, which provides non-emergency medical transportation services throughout the country. The Personal Care segment provides non-medical personal care and home health services and is composed of the operations from two acquisitions: Simplura onNovember 18, 2020 , and Care Finders onSeptember 14, 2021 . The RPM segment provides remote patient monitoring solutions and was developed through our acquisition of VRI onSeptember 22, 2021 and expanded through our acquisition of GMM onMay 18, 2022 . The operating results of the NEMT, Personal Care and RPM segments include revenue and expenses generated and incurred by the segment.
See Note 4, Segments, in our accompanying unaudited condensed consolidated financial statements for further information on our segments.
31
--------------------------------------------------------------------------------Q2 2022 compared to Q2 2021
Consolidated Results. The following table sets forth results of operations and
the percentage of Service revenue, net represented by items in our unaudited
condensed consolidated statements of operations for Q2 2022 and Q2 2021 (in
thousands):
Three months ended June 30,
2022 2021
Amount % of Revenue Amount % of Revenue
Service revenue, net $ 628,215 100.0 % $ 474,448 100.0 %
Grant income 3,330 0.5 % 852 0.2 %
Operating expenses:
Service expense 504,230 80.3 % 379,565 80.0 %
General and administrative expense 79,411 12.6 % 56,465 11.9 %
Depreciation and amortization 24,758 3.9 % 11,820 2.5 %
Total operating expenses 608,399 96.8 % 447,850 94.4 %
Operating income 23,146 3.7 % 27,450 5.8 %
Other expenses:
Interest expense, net 15,472 2.5 % 8,287 1.7 %
Income before income taxes and equity method
investment 7,674 1.2 % 19,163 4.0 %
Provision for income taxes 2,291 0.4 % 5,671 1.2 %
Equity in net loss (income) of investee, net of
tax 2,055 0.3 % (180) - %
Net income $ 3,328 0.5 % $ 13,672 2.9 %
Service revenue, net. Consolidated service revenue, net for Q2 2022 increased
$153.8 million , or 32.4%, compared to Q2 2021. Service revenue, net, for our
NEMT segment increased by $84.0 million , primarily due to higher trip volume and
higher membership when compared to Q2 2021. Service revenue, net, further
increased by $53.0 million for our Personal Care segment, of which $42.4 million
was related to the inclusion of the operating results of Care Finders which was
acquired in September 2021 . Service revenue, net increased due to the inclusion
of $16.7 million for our RPM segment as a result of the operating results of VRI
which was acquired in September 2021 and expanded with the acquisition of GMM in
May 2022 . See our Results of Operations, Segments, for further discussion.
Grant income. The Company recognized grant income of approximately $3.3 million
during the three months ended June 30, 2022 compared to $0.9 million during the
three months ended June 30, 2021 related to grants from the CARES Act PRF and
the ARPA CSLERF targeted to providing economic relief and stimulus to combat
health and economic impacts of the COVID-19 pandemic. These funds were received
by our Personal Care segment and are available to eligible providers who
diagnose, test, or care for individuals with possible or actual cases of
COVID-19, and have health care related expenses and lost revenues attributable
to COVID-19.
Service expense. Service expense components are shown below (in thousands):
Three months ended June 30,
2022 2021
Amount % of Revenue Amount % of Revenue
Purchased services $ 317,213 50.5 % $ 245,015 51.6 %
Payroll and related costs 171,257 27.3 % 122,651 25.9 %
Other service expenses 15,760 2.5 % 11,899 2.5 %
Total service expense $ 504,230 80.3 % $ 379,565 80.0 %
32-------------------------------------------------------------------------------- Service expense for Q2 2022 increased$124.7 million , or 32.8%, compared to Q2 2021 primarily due to higher purchased services costs in the NEMT segment of$72.2 million due to higher third-party transportation costs and associated payroll costs in our contact centers. Transportation and payroll costs increased primarily as a result of higher trip volume across multiple contracts and higher wage rates. This increase was also driven by higher payroll and related costs of$36.8 million in our Personal Care segment, of which$32.3 million million is related to the Care Finders acquisition inSeptember 2021 . General and administrative expense. General and administrative expense for Q2 2022 increased$22.9 million , or 40.6%, compared to Q2 2021. The increase was primarily attributable to an increase of$15.3 million in general and administrative costs related to the operations of Care Finders in the Personal Care segment and VRI in the RPM segment, both of which were acquired duringSeptember 2021 . General and administrative expense for the NEMT segment increased by$5.5 million . See our Results of Operations, Segments for further discussion. Depreciation and amortization. Depreciation and amortization for Q2 2022 increased$12.9 million or 109.5% compared to Q2 2021 primarily as a result of$6.8 million of additional amortization in the Personal Care and RPM segments associated with intangible assets purchased in the Care Finders and VRI acquisitions, and$3.6 million of additional amortization in the Personal Care segment related to additional amortization for Simplura intangible assets due to a change in useful life estimate. See Note 2, Significant Accounting Policies and Recent Accounting Pronouncements. Interest expense, net. Interest expense, net, for Q2 2022 and Q2 2021 was$15.5 million and$8.3 million , respectively. Interest expense increased as a result of the issuance of$500.0 million of Senior Unsecured Notes due 2029 ("the 2029 Notes"), issued inAugust 2021 . We incurred$8.0 million of interest expense related to the Notes due 2025 and$6.6 million related to the Notes due 2029 in Q2 2022. The remainder of the interest expense in Q2 2022 is related to interest and fees on the credit facility. Interest expense is recorded at our Corporate and Other segment. Equity in net loss (income) of investee, net of tax. Our equity in net loss of investee, net of tax, for Q2 2022 of$2.1 million and our equity in net income of investee, net of tax, of$0.2 million for Q2 2021 was a result of our proportional share of the net income or loss of Matrix and our proportional share of the net loss of our investment in a captive insurance program. Matrix's decrease in net income in Q2 2022 was mainly the result of the operations of its Clinical Solutions business unit which was negatively impacted by a decline in COVID-19 testing and screening withinEmployee Health , coupled with a decrease in COVID-19 related work in Clinical Trials. Provision for income taxes. Our effective tax rate from continuing operations for Q2 2022 and Q2 2021 were provisions of 29.9% and 29.6%, respectively. For Q2 2022 and Q2 2021, the effective tax rates were higher than theU.S. federal statutory rate of 21.0% primarily due to state income taxes and nondeductible expenses. 33 --------------------------------------------------------------------------------
Six months ended
The following table sets forth results of operations and the percentage of consolidated total revenues represented by items in our condensed consolidated statements of operations for the six months endedJune 30, 2022 , which we refer to as "YTD 2022", and for the six months endedJune 30, 2021 , which we refer to as "YTD 2021" (in thousands): Six months ended June 30, 2022 2021 Amount % of Revenue Amount % of Revenue Service revenue, net$ 1,202,690 100.0 %$ 928,058 100.0 % Grant income 3,798 0.3 % 3,500 0.4 % Operating expenses: Service expense 963,545 80.1 % 739,898 79.7 % General and administrative expense 156,219 13.0 % 111,390 12.0 % Depreciation and amortization 48,704 4.0 % 24,059 2.6 % Total operating expenses 1,168,468 97.2 % 875,347 94.3 % Operating income 38,020 3.2 % 56,211 6.1 % Other expenses: Interest expense, net 30,872 2.6 % 16,710 1.8 % Income before income taxes and equity method investment 7,148 0.6 % 39,501 4.3 % Provision for income taxes 1,930 0.2 % 10,410 1.1 % Equity in net loss (income) of investee, net of tax 1,572 0.1 % (3,421) (0.4) % Net income$ 3,646 0.3 %$ 32,512 3.5 % Service revenue, net. Consolidated service revenue, net, for YTD 2022 increased$274.6 million , or 29.6%, compared to YTD 2021. Service revenue, net, for the NEMT segment increased by$141.5 million , primarily due to higher trip volume when compared to YTD 2021, as trip volume was depressed in the prior year due to the impact of COVID-19. Service revenue, net, further increased by$102.6 million for our Personal Care segment, of which$86.7 million was related to the inclusion of the operating results of Care Finders which was acquired inSeptember 2021 . Service revenue, net increased due to the inclusion of$30.6 million for our RPM segment, as a result of the operating results of VRI which was acquired inSeptember 2021 and expanded with the acquisition of GMM inMay 2022 . See our Results of Operations, Segments, for further discussion. Grant income. The Company recognized income of approximately$3.8 million for YTD 2022 compared to$3.5 million during YTD 2021 related to grants from the CARES Act PRF and the ARPA CSLERF targeted to providing economic relief and stimulus to combat health and economic impacts of the COVID-19 pandemic. These funds were received by our Personal Care segment and are available to eligible providers who diagnose, test, or care for individuals with possible or actual cases of COVID-19, and have health care related expenses and lost revenues attributable to COVID-19.
Service expense. Service expense components are shown below (in thousands):
Six months ended June 30,
2022 2021
Amount % of Revenue Amount % of Revenue
Purchased services $ 595,160 49.5 % $ 468,309 50.5 %
Payroll and related costs 338,993 28.2 % 247,763 26.7 %
Other operating expenses 29,392 2.4 % 23,826 2.6 %
Total service expense $ 963,545 80.1 % $ 739,898 79.7 %
34-------------------------------------------------------------------------------- Service expense for YTD 2022 increased$223.6 million , or 30.2%, compared to YTD 2021 due to higher purchased services of$126.9 million related to an increase in transportation costs and associated payroll costs in our contact centers for our NEMT segment. Payroll and related costs increased by$91.2 million , primarily related to incremental costs of$69.5 million in the Personal Care and RPM segments due to the acquisitions of Care Finders and VRI inSeptember 2021 . General and administrative expense. General and administrative expense for YTD 2022 increased$44.8 million , or 40.2%, compared to YTD 2021. This increase is primarily attributable to an increase of$28.8 million in general and administrative costs related to the operations of Care Finders in the Personal Care segment and VRI in the RPM segment, both of which were acquired duringSeptember 2021 . See our Results of Operations, Segments, for further discussion. Depreciation and amortization. Depreciation and amortization for YTD 2022 increased$24.6 million or 102.4% compared to YTD 2021 primarily as a result of intangibles brought on under the Care Finders and VRI acquisitions inSeptember 2021 . See Note 3 Acquisitions. Interest expense, net. Interest expense, net for YTD 2022 increased$14.2 million compared to YTD 2021. Interest expense increased as a result of the activity related to the$500.0 million Senior Notes due 2029 that were issued inAugust 2021 . We incurred$16.0 million and$13.3 million of interest expense related to the Senior Notes due 2025 and the Senior Notes due 2029, respectively, in the six months endedJune 30, 2022 . The remainder of the interest expense during YTD 2022 is related to interest and fees on the credit facility. Interest expense is recorded at our Corporate and Other segment. Equity in net loss (income) of investee, net of tax. For YTD 2022, our equity in net loss of investee is$1.6 million , compared to net income for YTD 2021 of$3.4 million , as a result of our proportional share of the net income or loss of Matrix and our proportional share of the net loss of our investment in a captive insurance program. Matrix's decrease in net income in YTD 2022 was mainly the result of the operations of its Clinical Solutions business unit which was negatively impacted by a decline in COVID-19 testing and screening withinEmployee Health , coupled with a decrease in COVID-19 related work in Clinical Trials. Provision for income taxes. Our effective tax rates from continuing operations for YTD 2022 and YTD 2021 were provisions of 27.0% and 26.4%, respectively. The YTD 2022 and YTD 2021 effective tax rates were higher than theU.S. federal statutory rate of 21.0% primarily due to state income taxes and certain nondeductible expenses. 35 --------------------------------------------------------------------------------
Results of Operations - Segments
The following tables set forth certain financial information from continuing operations attributable to the Company's business segments (in thousands):
NEMT Segment
Three months ended June 30, Six months ended June 30,
2022 2021 2022 2021
Amount % of Segment Revenue Amount % of Segment Revenue Amount % of Segment Revenue Amount % of Segment RevenueService revenue, net$ 448,733 100.0%$ 364,760 100.0%$ 849,653 100.0%$ 708,176 100.0% Service expense 373,724 83.3% 292,656 80.2% 705,820 83.1% 565,072 79.8% General and administrative expense 33,588 7.5% 28,099 7.7% 70,921 8.3% 56,086 7.9% Depreciation and amortization 7,392 1.6% 6,936 1.9% 14,497 1.7% 14,248 2.0% Operating income$ 34,029 7.6%$ 37,069 10.2%$ 58,415 6.9%$ 72,770 10.3% The non-emergency medical transportation ("NEMT") segment, which operates under the brands ModivCare Solutions and Circulation, is the largest manager of NEMT programs for state governments and MCOs in theU.S. Service revenue, net. Service revenue, net, increased by$84.0 million and 23.0%, during the three months endedJune 30, 2022 as compared to the three months endedJune 30, 2021 . This increase is primarily attributable to a 17.6% increase in trip volume, a 13.6% increase in average monthly membership and higher rates per member as compared to the three months endedJune 30, 2021 . Service revenue, net, increased by$141.5 million and 20.0%, during the six months endedJune 30, 2022 , primarily attributable to a 12.5% increase in trip volume, a 9.6% increase in average monthly membership and higher rates per member as compared to the six months endedJune 30, 2021 . Trip volume increased for the three and six months endedJune 30, 2022 when compared to 2021, as trip volume was depressed in the prior year due to the impact of COVID-19. While a majority of our contacts are capitated and we receive monthly payments on a per member/fixed basis in return for full or partial risk of transportation volumes, we have certain contracts that limit profit to within a certain corridor and once we reach the maximum profit level we discontinue recognizing revenue and instead build a liability to return back to the customer upon reconciliation at a later date. Other contracts that are structured as fee-for-service also experienced positive impacts to revenue due to higher trip volumes. Service expense. Service expense components for the NEMT segment are shown below (in thousands): Three months ended June 30, Six months ended June 30, 2022 2021 2022 2021 Amount % of Revenue Amount % of Revenue Amount % of Revenue Amount % of Revenue Purchased services$ 317,213 70.7 %$ 245,015 67.2 %$ 595,160 70.0 %$ 468,309 66.1 % Payroll and related costs 45,795 10.2 % 37,110 10.2 % 90,756 10.7 % 75,738 10.7 % Other service expenses 10,716 2.4 % 10,531 2.9 % 19,904 2.3 % 21,025 3.0 % Total service expense$ 373,724 83.3 %$ 292,656 80.2 %$ 705,820 83.1 %$ 565,072 79.8 % Service expense for our NEMT segment primarily consists of transportation costs paid to third party service providers, salaries of employees within our contact centers and operations centers, and occupancy costs. Service expense increased by$81.1 million and 27.7% for the three months endedJune 30, 2022 , as compared to the three months endedJune 30, 2021 , primarily related to higher purchased services of$72.2 million related to an increase in transportation costs and associated payroll costs in our contact centers due to higher trip volume in the current year. Service expense increased by$140.7 million and 24.9% for the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 primarily due to an increase in purchased services of$126.9 million for the same reason as stated above. General and administrative expense. General and administrative expense primarily consists of salaries for administrative employees that indirectly support the operations, occupancy costs, marketing expenditures, insurance, and professional fees. General and administrative expense increased by$5.5 million and 19.5% for the three months endedJune 30, 2022 , as compared to the three months endedJune 30, 2021 , primarily as a result of higher salary costs and legal expense. General and administrative expense increased by$14.8 million and 26.5% for the six months endedJune 30, 2022 , as compared 36 --------------------------------------------------------------------------------
to the six months ended
Depreciation and amortization expense. Depreciation and amortization expense increased by$0.5 million and 6.6% for the three months endedJune 30, 2022 , as compared to the three months endedJune 30, 2021 . Depreciation and amortization expense increased by$0.2 million and 1.7% for the six months endedJune 30, 2022 , as compared to the six months endedJune 30, 2021 .
Personal Care Segment
Three months ended June 30, Six months ended June 30,
2022 2021 2022 2021
Amount % of Segment Revenue Amount % of Segment Revenue Amount % of Segment Revenue Amount % ofSegment Revenue Service revenue, net$ 162,737 100.0%$ 109,688 100.0%$ 322,435 100.0%$ 219,882 100.0% Grant income 3,330 2.0% 852 0.8% 3,798 1.2% 3,500 1.6% Service expense 124,445 76.5% 86,909 79.2% 246,677 76.5% 174,826 79.5% General and administrative expense 23,346 14.3% 14,775 13.5% 46,479 14.4% 29,804 13.6% Depreciation and amortization 12,552 7.7% 4,884 4.5% 25,057 7.8% 9,811 4.5% Operating income$ 5,724 3.5%$ 3,972 3.6%$ 8,020 2.5%$ 8,941 4.1% Our Personal Care segment was established inNovember 2020 with the acquisition of Simplura and expanded inSeptember 2021 with the acquisition of Care Finders. Our Personal Care segment's services include placements of non-medical personal care assistants and home health aides and nurses primarily to Medicaid patient populations in need of care monitoring and assistance performing daily living activities in the home setting, including senior citizens and disabled adults. The quarter over quarter fluctuations include incremental changes from the acquisition of Care Finders, as there was only Simplura activity in 2021 and both Simplura and Care Finders activity in 2022. Service revenue, net. Personal care service contracts are generally structured as fee-for-service contracts, with revenue being driven by hours worked by our personal care providers. Service revenue, net increased by$53.0 million or 48.4% for the three months endedJune 30, 2022 as compared toJune 30, 2021 , primarily due to incremental revenue from the Care Finders acquisition of$42.4 million . The remainder of the increase in service revenue is attributable to Simplura, due to higher hours worked by personal care providers in Q2 2022 as compared to Q2 2021. Service revenue, net increased by$102.6 million or 46.6% for the six months endedJune 30, 2022 as compared toJune 30, 2021 , primarily due to incremental revenue from the Care Finders acquisition of$86.7 million . Grant Income. In the three and six months endedJune 30, 2022 , the Company received distributions of the CARES Act PRF and the ARPA CSLERF targeted to providing economic relief and stimulus to combat health and economic impacts of the COVID-19 pandemic of approximately$3.3 million and$3.8 million , respectively, targeted to offset lost revenue and unreimbursed expenditures incurred in connection with the COVID-19 pandemic. In comparison, in the three and six months endedJune 30, 2021 , the Company received distributions of approximately$0.9 million and$3.5 million . Service expense. Service expense components for the Personal Care segment are shown below (in thousands): Three months ended June 30, Six months ended June 30, 2022 2021 2022 2021 Amount % of Revenue Amount % of Revenue Amount % of Revenue Amount % of Revenue Payroll and related costs$ 122,375 75.2 %$ 85,541 78.0 %$ 242,512 75.2 %$ 172,024 78.2 % Other service expenses 2,070 1.3 % 1,368 1.2 % 4,165 1.3 % 2,802 1.3 % Total service expense$ 124,445 76.5 %$ 86,909 79.2 %$ 246,677 76.5 %$ 174,826 79.5 % Service expense for our Personal Care segment primarily consists of salaries for the employees providing the personal care services and it typically trends with the number of hours worked. Service expense for the three months endedJune 30, 2022 increased by$37.5 million and 43.2% as compared to the three months endedJune 30, 2021 , primarily as a result of incremental expense of$33.3 million related to the Care Finders acquisition. Service expense for the six months endedJune 30, 2022 increased by$71.9 million and 41.1% as compared to the six months endedJune 30, 2021 , primarily as a result of 37 -------------------------------------------------------------------------------- incremental expense of$65.3 million related to the Care Finders acquisition. The remainder of the increase is related to increased pay rates for the personal care providers for the Simplura business. General and administrative expense. General and administrative expense primarily consists of salaries for administrative employees that indirectly support the operations, occupancy costs, marketing expenditures, insurance, and professional fees. General and administrative expense increased by$8.6 million and 58.0% for the three months endedJune 30, 2022 as compared to the three months endedJune 30, 2021 , primarily related to incremental costs from the acquisition of Care Finders of$8.6 million . General and administrative expense increased by$16.7 million and 55.9% for the six months endedJune 30, 2022 as compared to the six months endedJune 30, 2021 , primarily related to incremental costs from the acquisition of Care Finders of$17.1 million . Depreciation and amortization expense. Depreciation and amortization expense increased by$7.7 million and 157.0% for the three months endedJune 30, 2022 as compared to 2021, and increased by$15.2 million and 155.4% for the six months endedJune 30, 2022 as compared to 2021. The increase in this expense for the three and six months endedJune 30, 2022 is primarily due to amortization expense on the intangible assets brought on under the Care Finders acquisition of$3.7 million and$7.4 million , respectively. The increase for the three and six months endedJune 30, 2022 is also driven by the additional amortization expense of$3.6 million and$7.1 million , respectively, related to the change in useful lives of Simplura intangible assets as discussed in Note 2, Significant Accounting Policies and Recent Accounting Pronouncements. RPM Segment Three months ended June 30, Six months ended June 30, 2022 2022 % of Segment % of Segment Amount Revenue Amount Revenue Service revenue, net$ 16,745 100.0 %$ 30,602 100.0 % Service expense 6,061 36.2 % 11,048 36.1 % General and administrative expense 6,742 40.3 % 11,704 38.2 % Depreciation and amortization 4,606 27.5 % 8,734 28.5 % Operating income$ (664) (4.0) %$ (884) (2.9) % Our Remote Patient Monitoring segment was established inSeptember 2021 with the acquisition of VRI and expanded inMay 2022 with the acquisition of GMM. The RPM segment is a provider of remote patient monitoring solutions and manages a comprehensive suite of services, including personal emergency response systems, vitals monitoring and data-driven patient engagement solutions. Service revenue, net. RPM contracts are generally structured as a fee per enrolled member per month, and therefore revenue is generally driven by number of enrolled members. Service revenue, net, from MCO contracts accounted for 47.5% and 47.4% of service revenue, net, for the three and six months endedJune 30, 2022 , respectively, whileU.S. State Medicaid program contracts accounted for 34.9% and 34.5% of service revenue, net for the three and six months endedJune 30, 2022 , respectively. The remainder of the RPM segment revenue is derived from private pay and other contracts. Service expense. Service expense components for the RPM segment are shown below (in thousands): Three months ended June 30, Six months ended June 30, 2022 2022 Amount % of Revenue Amount % of Revenue
Payroll and related costs$ 3,087 18.4 %$ 5,725 18.7 % Other service expenses 2,974 17.8 % 5,323 17.4 % Total service expense$ 6,061 36.2 %$ 11,048 36.1 %
Service expense for our RPM segment primarily consists of salaries for the employees providing the remote monitoring services and it typically trends with the number of hours worked.
General and administrative expense. General and administrative expense primarily
consists of salaries for administrative employees that indirectly support the
operations, occupancy costs, marketing expenditures, insurance, and professional
fees.
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Depreciation and amortization expense. Depreciation and amortization expense
consists primarily of amortization expense on the intangible assets brought on
during the acquisition as well as depreciation on the fixed assets acquired.
Corporate and Other Segment
Three months ended June 30, Six months ended June 30,
2022 2021 2022 2021
Amount Amount Amount Amount
General and administrative expense
$ 27,115 $ 25,500 Depreciation and amortization 208 - 416 - Operating income (loss)$ (15,943) $ (13,591) $ (27,531) $ (25,500) Our Corporate and Other segment was established beginningJanuary 1, 2022 as a result of a segment reorganization completed by the Company. The Company's Corporate and Other segment includes the Company's executive, accounting, finance, internal audit, tax, legal, public reporting, and corporate development functions. This segment also includes the results of our equity investment in Matrix. Our Corporate and Other segment holds costs incurred related to strategy and stewardship of the other operating segments. These expenses are primarily general and administrative expenses, with a small amount related to depreciation. The general and administrative expense increased by$2.1 million and$1.6 million for the three and six months endedJune 30, 2022 , primarily due to increased occupancy costs related to the lease for the new corporate headquarters.
Seasonality
Our NEMT segment's operating income and cash flows normally fluctuate as a result of seasonal variations in our business, principally due to lower transportation demand during the winter season and higher demand during the summer season.
Our Personal Care segment's operating income and cash flows also normally fluctuate as a result of seasonal variations in the business, principally due to somewhat lower demand for in-home services from caregivers during the summer and periods with major holidays, as patients may spend more time with family and less time alone needing outside care during those periods.
Our RPM segment's operating income and cash flows do not normally fluctuate as a result of seasonal variations in the business.
Liquidity and capital resources
Short-term capital requirements consist primarily of recurring operating expenses, new revenue contract start-up costs and costs associated with our strategic initiatives. We expect to meet our short-term cash requirements through available cash on hand, cash generated from operations, net of capital expenditures, and borrowing from time to time under our New Credit Facility. For information regarding our long-term capital requirements, see below under the caption "Liquidity". Cash flow from operating activities during the six months endedJune 30, 2022 was$51.2 million . Our balance of cash and cash equivalents, including restricted cash, was$88.0 million and$133.4 million atJune 30, 2022 andDecember 31, 2021 , respectively. We had restricted cash of$0.3 million atDecember 31, 2021 and an immaterial amount atJune 30, 2022 . Restricted cash amounts are not included in our balance of cash and cash equivalents in the unaudited condensed consolidated balance sheets, although they are included in the cash, cash equivalents and restricted cash balance on the accompanying unaudited condensed consolidated statements of cash flows. We may, from time to time, access capital markets to raise equity or debt financing for various business reasons, including acquisitions, repurchases of our common stock, investments in our business and possible refinancing activity. The timing, term, size, and pricing of any such financing will depend on investor interest and market conditions, and there can be no assurance that we will be able to obtain any such financing on terms acceptable to us at the time or at all.
YTD 2022 cash flows compared to YTD 2021
Operating activities. Cash provided by operating activities was$51.2 million and$169.1 million for YTD 2022 and YTD 2021, respectively. The decrease of$117.9 million was primarily a result of a decrease in cash provided by changes in working capital of$110.2 million . The working capital changes were related to a decrease in the change in accrued contract 39 -------------------------------------------------------------------------------- payables of$125.0 million primarily related to repayments and lower liability reserves on certain risk corridor, profit rebate and reconciliation contracts due to higher trip volumes in YTD 2022. These working capital decreases were partially offset by an increase in the change in accrued transportation costs of$19.0 million primarily related to higher trip volume and unit cost in YTD 2022. The remaining decrease in cash flow provided by operating activities was a result of the decrease in net income of$28.9 million , primarily from higher operating expenses, offset by an increase in amortization of$20.6 million due to the intangible assets brought on under the Care Finders and VRI acquisitions in Q3 2021. Investing activities. Net cash used in investing activities of$94.8 million in YTD 2022 increased by$70.8 million as compared to YTD 2021 primarily as a result of an increase in cash spent on acquisitions of$63.0 million related to the purchase of GMM. Financing activities. Net cash used in financing activities of$1.9 million in YTD 2022 decreased by$35.7 million as compared to net cash used in financing activities during YTD 2021 of$37.6 million . The change was primarily due to the Company not participating in a stock repurchase program during YTD 2022 as compared to YTD 2021 during which cash paid to repurchase common stock was$39.0 million . See Note 11, Earnings Per Share, for further information on the stock buyback. Obligations and commitments Senior Unsecured Notes. OnNovember 4, 2020 , the Company issued$500.0 million in aggregate principal amount of 5.875% senior unsecured notes due onNovember 15, 2025 (the "Senior Notes due 2025"). Subsequently, onAugust 24, 2021 , the Company issued an additional$500.0 million in aggregate principal amount of 5.000% senior unsecured notes due onOctober 1, 2029 (the "Senior Notes due 2029"and, together with the Senior Notes due 2025, the "Notes"). The Senior Notes due 2025 and the Senior Notes due 2029 were issued pursuant to two indentures, datedNovember 4, 2020 andAugust 24, 2021 , respectively, between the Company andThe Bank of New York Mellon Trust Company, N.A. , as trustee. The proceeds from the Senior Notes due 2025 were used to fund a portion of the Company's acquisition of Simplura and the proceeds from the Senior Notes due 2029 were used to fund a portion of the Company's acquisition of VRI. The Notes are senior unsecured obligations and rank senior in right of payment to all of the Company's future subordinated indebtedness, rank equally in right of payment with all of the Company's existing senior indebtedness, are effectively subordinated to any of the Company's existing and future secured indebtedness, including indebtedness under the New Credit Facility, to the extent of the value of the assets securing such indebtedness, and are structurally subordinated to all of the existing and future liabilities (including trade payables) of each of the Company's non-guarantor subsidiaries. The Company will pay interest on the Notes at their applicable annual rates until maturity. Interest on the Senior Notes due 2025 is payable semi-annually in arrears onMay 15 andNovember 15 of each year. Interest on the Senior Notes due 2029 is payable semi-annually in arrears onApril 1 andOctober 1 of each year, with the first interest payment date beingApril 1, 2022 . Principal payments are not required until the maturity date onNovember 15, 2025 andOctober 1, 2029 when 100% of the outstanding principal will be required to be repaid on the Senior Notes due 2025 and the Senior Notes due 2029, respectively. New Credit Facility. OnFebruary 3, 2022 , the Company entered into a new credit agreement (the "New Credit Agreement") withJPMorgan Chase Bank, N.A ., as administrative agent, swing line lender and an issuing bank,Wells Fargo Bank, National Association , as an issuing bank,Truist Bank andWells Fargo Bank, National Association , as co-syndication agents, Deutsche Bank AG New York Branch,Bank of America, N.A .,Regions Bank , Bank of Montreal andCapital One, National Association , as co-documentation agents, andJPMorgan Chase Bank, N.A .,Truist Securities, Inc. andWells Fargo Securities, LLC , as joint bookrunners and joint lead arrangers, and the other lenders party thereto. The New Credit Agreement provides the Company with a senior secured revolving credit facility (the "New Credit Facility") in an aggregate principal amount of$325.0 million . The New Credit Facility includes sublimits for swingline loans, letters of credit and alternative currency loans in amounts of up to$25.0 million ,$60.0 million and$75.0 million , respectively. The Company did not draw any amount of the New Credit Facility at closing of the New Credit Agreement. At closing of the New Credit Agreement, the Company had$22.8 million of outstanding letters of credit under the New Credit Facility. The proceeds of the New Credit Facility may be used (i) to finance working capital needs of the Company and its subsidiaries and (ii) for general corporate purposes of the Company and its subsidiaries (including to finance capital expenditures, permitted acquisitions and investments). The New Credit Facility replaces the Credit Facility under the Credit Agreement, which was terminated concurrently with the Company's entry into the New Credit Agreement. Under the New Credit Facility the Company has an option to request an increase in the amount of the New Credit Facility or obtain incremental term loans from time to time (on substantially the same terms as apply to the existing facilities) by an aggregate amount of up to$175.0 million , plus an unlimited amount so long as the pro forma secured net leverage ratio does not exceed 3.50:1.00, with either additional commitments from lenders under the New Credit Agreement at such time or new commitments from financial institutions approved by the Company and the administrative agent (which approval is not to 40 -------------------------------------------------------------------------------- be unreasonably withheld), so long as, at the time of any such increase, no default or event of default exists, the representations and warranties of the Company set forth in the New Credit Agreement are true and correct in all material respects and the Company is in pro forma compliance with the financial covenants in the New Credit Agreement. The Company may not be able to access additional funds under this increase option as no lender is obligated to participate in any such increase under the New Credit Facility. The New Credit Facility matures onFebruary 3, 2027 . The Company may prepay the New Credit Facility in whole or in part, at any time without premium or penalty, subject to reimbursement of the lenders' breakage and redeployment costs in connection with prepayments of Term Benchmark loans or RFR loans, each as defined in the New Credit Agreement. The unutilized portion of the commitments under the New Credit Facility may be irrevocably reduced or terminated by the Company at any time without penalty. Interest on the outstanding principal amount of the loans accrues at a per annum rate equal to the Alternate Base Rate, the Adjusted Term SOFR Rate, the Adjusted Daily Simple SOFR Rate, the Adjusted EURIBOR Rate or the Adjusted Daily Simple SONIA Rate, as applicable and each as defined in the New Credit Agreement, in each case, plus an applicable margin. The applicable margin ranges from 1.75% to 3.50% in the case of Term Benchmark loans or RFR loans, and 0.75% to 2.50% in the case of the Alternate Base Rate loans, in each case, based on the Company's total net leverage ratio as defined in the New Credit Agreement. Interest on the loans is payable quarterly in arrears in the case of Alternate Base Rate loans, on the last day of the relevant interest period in the case of Term Benchmark loan, and monthly in arrears in the case of RFR loans. In addition, the Company is obligated to pay a quarterly commitment fee based on a percentage of the unused portion of the revolving credit facility and quarterly letter of credit fees based on a percentage of the maximum amount available to be drawn under each outstanding letter of credit. The commitment fee and letter of credit fee range from 0.30% to 0.50% and 1.75% to 3.50%, respectively, in each case, based on the Company's total net leverage ratio. The New Credit Agreement contains customary representations and warranties, affirmative and negative covenants and events of default. The negative covenants include restrictions on the Company's ability to, among other things, incur additional indebtedness, create liens, make investments, give guarantees, pay dividends, sell assets and merge and consolidate. The Company is subject to financial covenants, including total net leverage and interest coverage covenants. The Company's obligations under the New Credit Facility are guaranteed by all of the Company's present and future material domestic subsidiaries, excluding certain material domestic subsidiaries that are excluded from being guarantors pursuant to the terms of the New Credit Agreement. The Company's obligations under, and each guarantor's obligations under its guaranty of, the New Credit Facility are secured by a first priority lien on substantially all of the Company's or such guarantor's respective assets. If an event of default occurs, the required lenders may cause the administrative agent to declare all unpaid principal and any accrued and unpaid interest and all fees and expenses under the New Credit Facility to be immediately due and payable. All amounts outstanding under the New Credit Facility will automatically become due and payable upon the commencement of any bankruptcy, insolvency or similar proceedings. The New Credit Agreement also contains a cross default to any of the Company's indebtedness having a principal amount in excess of$40.0 million .
We were in compliance with all covenants under the New Credit Agreement as of
Liquidity Liquidity measures our ability to meet current and future cash flow needs on a timely basis and at a reasonable cost. We manage our liquidity position to meet our daily cash flow needs, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of our shareholders. Our liquidity position is supported by management of liquid assets and liabilities and access to alternative sources of funds. Liquid assets include cash of$88.0 million and accounts receivable and other receivables of$279.1 million . Liquid liabilities totaled$692.6 million at period end as detailed in the table below. Other sources of liquidity include our New Credit Facility of$325.0 million . In the ordinary course of business we have entered into contractual obligations and have made other commitments to make future payments. Our short-term and long-term liquidity requirements are primarily to fund on-going operations. These liquidity requirements are met primarily through cash flow from operations of$51.2 million , debt financing, and our New Credit Facility of$325.0 million . For additional information regarding our operating, investing and financing cash flows, see "Condensed Consolidated Financial Statements- Condensed Consolidated Statements of Cash Flows," included in Part I, Item I of this report. 41 -------------------------------------------------------------------------------- The Company has cash requirements of$692.6 million due in one year or less in addition to$1,353.0 million due in more than one year as ofJune 30, 2022 . The following is a summary of our future cash requirements for the next twelve months and the period extending beyond twelve months as ofJune 30, 2022 (in thousands): At June 30, 2022 Less than Greater than Total 1 Year 1 Year Senior Unsecured Notes (1)$ 1,000,000 $ -$ 1,000,000 Contracts payable (2) 281,738 278,052 3,686 Interest (1) 279,493 54,375 225,118 Transportation costs (3) 131,282 131,282 - Deferred tax liabilities (4) 80,119 - 80,119 Operating leases (5) 50,388 6,299 44,089 Guarantees (6) 47,659 47,659 - Letters of credit (6) 40,810 40,810 - Other current cash obligations (7) 134,125 134,125 - Total$ 2,045,614 $ 692,602 $ 1,353,012 (1)See Note 9 of the Notes to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1, "Financial Statements" for further detail of our Senior Unsecured Notes and the timing of expected future payments. Interest payments are typically paid semi-annually in arrears and have been calculated at the rates fixed as ofJune 30, 2022 . (2)See Note 5 of the Notes to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1, "Financial Statements" for further detail of our contracts payable. (3)See Note 1 of the Notes to the Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of our Form 10-K for the year endedDecember 31, 2021 filed onFebruary 28, 2022 for further detail of our accrued transportation cost. (4)See Note 12 of the Notes to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1, "Financial Statements" for further detail of our deferred tax liabilities. (5)The operating leases are for office space. Certain leases contain periodic rent escalation adjustments and renewal options. See Note 18 of the Notes to the Consolidated Financial Statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of our Form 10-K for the year endedDecember 31, 2021 filed onFebruary 28, 2022 for further detail of our operating leases. (6)Letters of credit ("LOCs") are guarantees of potential payments to third parties under certain conditions. Guarantees include surety bonds we provide to certain customers to protect against potential non-delivery of our non-emergency transportation services. Our LOCs shown in the table were provided by our Credit Facility and reduced our availability under the related Credit Agreement. The surety bonds and LOC amounts in the above table represent the amount of commitment expiration per period. (7)These include other current liabilities reflected in our unaudited condensed consolidated balance sheets as ofJune 30, 2022 , including accounts payable and accrued expenses as detailed at Note 8 to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1, "Financial Statements". Our primary sources of funding include operating cash flows and access to capital markets. There are statutory, regulatory, and debt covenant limitations that affect our ability to access the capital market for funds. Management believes that such limitations will not impact our ability to meet our ongoing short-term cash obligations. Management continuously monitors our liquidity position and adjustments are made to the balance between sources and uses of funds as deemed appropriate. Our management is not aware of any events that are reasonably likely to have a material adverse effect on our liquidity, capital resources, or operations. In addition, our management is not aware of any regulatory recommendations regarding liquidity, which if implemented, would have a material adverse effect on us.
Off-Balance Sheet Arrangements
There have been no material changes to the Off-Balance Sheet Arrangements
discussion previously disclosed in our audited consolidated financial statements
contained in our Annual Report on Form 10-K for the year ended
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