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United States securities and exchange commission logo
January 8, 2021
Shannon Drake
General Counsel and Chief Legal Officer
Aveanna Healthcare Holdings, Inc.
400 Interstate North Parkway SE
Suite 1600
Atlanta, GA 30339
Re: Aveanna Healthcare
Holdings, Inc.
Draft Registration
Statement on Form S-1
Filed December 11,
2020
CIK 0001832332
Dear Mr. Drake:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1 Submitted December 11, 2020
Industry and Market Data, page iv
1. Your statements that
(i) you have not independently verified any of the data from third
party sources, (ii)
that that there can be no assurance as to the accuracy or completeness of
such information and
(iii) that investors are cautioned not to give undue weight to these
estimates and
information may imply an inappropriate disclaimer of responsibility with
respect to the third
party information. Please either delete these statements or specifically
state that you are
liable for such information.
Prospectus Summary, page 1
Shannon Drake
FirstName LastNameShannon
Aveanna Healthcare Holdings,Drake
Inc.
Comapany
January NameAveanna Healthcare Holdings, Inc.
8, 2021
January
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FirstName LastName
2. Please revise your summary to eliminate repetitive disclosure, focus
on the material
aspects of your offering and balance the positive aspects of your
business with a similarly
prominent discussion of risks, challenges and costs associated with
your revenue
growth.Please note, the summary should not include a lengthy
description of the
company's business, business strategy,market or sponsors. This
detailed information about
your operations, your executive team's prior accomplishments and
sponsors is better
suited for the body of the prospectus.
3. Please revise your disclosure to provide the basis for your statements
that you are the
national leader in pediatric home health, that you have a leading
position in many of your
markets, that your home care platform and pediatric home health
business are leaders in
the industry.
4. We note your references here and throughout your prospectus to third
party research and a
report prepared by Marwood Group, a healthcare regulatory consultant.
Please clarify
whether you commissioned research from the Marwood Group or any other
third-party
research referenced in prospectus. If so, please revise your filing to
identify such third
party and file a consent from such third party. Please see Securities
Act Rule 436 and
Question 233.02 of the Securities Act Rules Compliance and Disclosure
Interpretations.
Our Diversified Home Care Platform, page 5
5. We note your disclosure that your payer mix is highly diversified,
with no individual
payer representing more than 6% of revenue for fiscal year 2019 and
that you have
enjoyed a long, consistent and predictable trajectory of reimbursement
rate increases.
Please revise to include balancing disclosure that that you cannot
control reimbursement
rates and investors cannot be assured that reimbursement payments will
remain at
comparable levels to the present or will be sufficient to cover the
costs allocable for
patient services.
Recent Acquisitions, page 14
6. Please balance your disclosure of revenues from recently acquired
companies with
disclosure of consideration and profitability.
Summary Historical and Pro Forma Consolidated Financial Data, page 21
7. We note your presentation of Adjusted Working Capital, which is not
consistent with the
definition of working capital as defined in the FASB Codification
Master Glossary. In
this regard, please provide all of the non-GAAP financial measure
disclosures required
by Item 10(e) of Regulation S-K.
There is a high degree of uncertainty regarding the implementation of the CARES
Act and other
existing or future stimulus legislation..., page 38
8. We note your disclosures regarding stimulus payments from
Pennsylvania. Please revise
Shannon Drake
FirstName LastNameShannon
Aveanna Healthcare Holdings,Drake
Inc.
Comapany
January NameAveanna Healthcare Holdings, Inc.
8, 2021
January
Page 3 8, 2021 Page 3
FirstName LastName
to disclose the amounts received from all states in the aggregate.
Quantify any amounts
you are required to repay and the amounts for which there is
uncertainty.
Use of Proceeds, page 68
9. Please revise to disclose the approximate amount intended to be used
for each of
the purposes identified. With respect to debt repayments, please refer
to Instruction 4 to
Item 504 of Regulation S-K.
Cares Act, page 87
10. Please revise your disclosure to briefly describe the interim guidance
provided by CMS
regarding the terms and conditions of the Provider Relief Fund. Please
also state whether
the Company is presently in compliance with such conditions, or if it
expects that any
portion of the funds received will be required to be repaid.
Evaluation and Measurement of Our Business, page 89
11. We note your presentation of various metrics, including volume, net
revenue rate, and cost
of patient services rate. Please expand your disclosures to address:
The reasons why the metric is useful to investors;
How management uses the metric; and
Whether there are estimates or assumptions underlying the metric
or its calculation,
and if so, whether disclosure of these estimates or assumptions is
necessary.
Refer to Release No. 33-10751.
Non-GAAP Financial Measures
Adjusted EBITDA, page 99
12. Given the multiple adjustments made to arrive at Adjusted EBITDA,
please expand your
disclosures to better address how you determine what items should be
adjusted for in your
determination of Adjusted EBITDA. Please also tell us how you
determined that the
following items were not normal, recurring cash operating expenses
necessary to operate
your business and therefore appropriate to adjust for:
Sponsor fees;
Integration costs;
Incremental compensation, incremental PP&E, and costs of remote
workforce
enablement included in the COVID-related costs line item;
Legal and compliance costs included in the Legal costs and
settlements associated
with acquisition matters line item; and
Other system transition costs, professional fees and other line
item.
Please refer to Item 10(e) of Regulation S-K as well as the guidance
in Questions 100.01
and 102.03 of our Non-GAAP Financial Measures Compliance and
Disclosure
Interpretations.
Management's Discussion and Analysis
Shannon Drake
FirstName LastNameShannon
Aveanna Healthcare Holdings,Drake
Inc.
Comapany
January NameAveanna Healthcare Holdings, Inc.
8, 2021
January
Page 4 8, 2021 Page 4
FirstName LastName
Liquidity and Capital Resources, page 101
13. Your summary of long-term indebtedness obligations on page 104
indicates that almost all
of the interest rates on your debt instruments are determined by
reference to LIBOR. In
this regard, please expand your disclosures to address your plans for
transitioning away
from LIBOR and the expected impact that discontinuation of LIBOR may
have on your
liquidity and results of operations. See the Staff statement on the
LIBOR transition
from July 12, 2019.
Critical Accounting Policies
Patient Accounts Receivable, page 106
14. You disclose that there is no single payer that accounts for more than
10% of your total
outstanding patient accounts receivable. You also disclose that you
believe the
collectability risk associated with Medicaid accounts, which
represented 31.7% of patient
accounts receivable at December 31, 2019, and Medicaid MCO accounts,
which
represented 38.9% of patient accounts receivable at December 31, 2019,
is limited due
to historical collection rates and the fact that the U.S. government
is the payer. Please
better clarify in your disclosures why you are stating that no single
payer accounts for
more than 10% of your total outstanding patient accounts receivable
while also indicating
that the US government as a payer represents over 70% of your patient
accounts
receivable balance at December 31, 2019.
15. We note that accounts receivable is recorded net of allowances and
discounts. Please
address what consideration you gave to including Schedule II -
Valuation and Qualifying
Accounts pursuant to Article 12-09 of Regulation S-X.
Goodwill, page 107
16. Goodwill represents $1.2 billion of your $1.6 billion total assets at
December 31, 2019, or
approximately 77% of your total assets. Of your total goodwill, we
note that $1.1 billion
is related to the Private Duty Services Segment. We also note the
impact that COVID-
19 had on the PDS segment as discussed on page 14, which included
recording a $75.7
million goodwill impairment charges related to the Therapy reporting
unit. In this regard
please expand your disclosures to address the following for each
reporting unit at risk of
failing the impairment test:
The percentage by which fair value exceeded carrying value as of
the date of the most
recent test;
The amount of goodwill allocated to the reporting unit;
A description of the methods and key assumptions used and how the
key assumptions
were determined;
A discussion of the degree of uncertainty associated with the key
assumptions. The
discussion regarding uncertainty should provide specifics to the
extent possible; and
A description of potential events and/or changes in circumstances
that could
reasonably be expected to negatively affect the key assumptions.
Shannon Drake
FirstName LastNameShannon
Aveanna Healthcare Holdings,Drake
Inc.
Comapany
January NameAveanna Healthcare Holdings, Inc.
8, 2021
January
Page 5 8, 2021 Page 5
FirstName LastName
Please refer to Item 303(a)(3)(ii) of Regulation S-K and Section V of
Release 33-8350.
Equity, page 110
17. Once you have an estimated offering price or range, please explain to
us how you
determined the fair value of the common stock underlying your equity
issuances and the
reasons for any differences between the recent valuations of your
common stock leading
up to the IPO and the estimated offering price. This information will
help facilitate our
review of your accounting for equity issuances including stock
compensation.
Our Reimbursement Sources, page 132
18. Please expand your disclosure to discuss the reimbursement
arrangements, including the
reimbursement model, you have negotiated with the payers identified
for each of your
services. Please also include a discussion of the primary payers and
reimbursement
arrangements with respect to your Medical Solutions business.
19. We note your disclosure regarding the number of distinct payers with
respect to Medicare
and Medicaid MCO. Please provide the same information for the
commercial and
Medicare payers.
Pediatric Home Health Reimbursement, page 133
20. We note your disclosure on page 132 that funding from Medicaid
programs and MCOs for
your pediatric home health services is unlikely to be targeted as a
source of savings for
states seeking to alleviate budget pressure and your statements on
page 134 that the
Medicare regulatory and reimbursement outlook is likely stable to
positive for home
health and hospice services over the next three to five years. Please
reconcile these
statements with your statement on page 29 that during the past several
years, third-party
healthcare payers, such as federal and state governments, insurance
companies and
employers, have undertaken cost containment initiatives and that you
expect efforts to
impose greater discounts and more stringent cost controls by
government and other third-
party payers to continue, thereby reducing the payments you receive
for your services.
Description of Certain Indebtedness , page 175
21. Please revise your disclosure to state the leverage ratios you must
maintain in order to
permit the unlimited incurrence of incremental loans under the First
and Second Lien
Facilities.
Financial Statements
Consolidated Statements of Operations, page F-5
22. Your disclosures on page 88 indicate that the cost of patient service,
excluding
depreciation and amortization line item also includes the cost of
medical solutions product
sales. In this regard, please consider revising the name of this line
item so that it does not
imply that it only includes the cost of services provided. For
example, you could change
Shannon Drake
FirstName LastNameShannon
Aveanna Healthcare Holdings,Drake
Inc.
Comapany
January NameAveanna Healthcare Holdings, Inc.
8, 2021
January
Page 6 8, 2021 Page 6
FirstName LastName
to cost of revenue versus only referring to services.
Note 3. Revenue, page F-17
23. We note the complexities involved in determining amounts ultimately
due under
reimbursement arrangements with third-party payers and that you may
receive
reimbursement for healthcare services authorized and provided that is
different from your
estimates. Please disclose any material revenue adjustments recognized
from performance
obligations satisfied (or partially satisfied) in previous periods.
Refer to ASC 606-10-50-
12A.
24. Your discussion of the Medical Solutions business on page F-18
indicates that this
business generates revenues from the sale of products, specifically
medical equipment and
nutritional products. Your disclosures on page F-40 in your
description of this segment
indicate that this segment also provides services. If you have
material arrangements under
which you are providing both products and services, please provide the
disclosures
required by ASC 606-10-50-20 regarding the allocation of the
transaction price.
Note 11. Shareholders Equity and Share-Based Compensation, page F-32
25. Please better clarify in your disclosures your accounting for deferred
restricted stock units
by addressing the following:
Your disclosures indicate that you have determined that the awards
upon grant have
characteristics of a liability and therefore you account for them
as liabilities until the
earlier of settlement or when awards are reclassified to deferred
restricted stock
units. Please clarify what these characteristics are and whether
there are any amounts
currently reflected in liabilities related to deferred restricted
stock units and whether
they are being remeasured to fair value; and
We note that you reflect deferred restricted stock units as
temporary equity pursuant
to 480-10-S99-3A. Please disclose what features led to this
classification. Please
also see the disclosures required by ASC 480-10-S99.
Note 13. Commitments and Contingencies, page F-37
26. We note that there are certain matters for which you have recorded
provisions to provide
for losses as well as certain matters for which you believe a loss is
not probable at this
time. If there is at least a reasonable possibility that a loss
exceeding amounts already
recognized may have been incurred for any of your matters, please
either disclose an
estimate (or, if true, state that the estimate is immaterial in lieu
of providing quantified
amounts) of the additional loss or range of loss, or state that such
an estimate cannot be
made in future filings. Please refer to ASC 450-20-50-3 and 50-4.
Note 16. Segment Information, page F-40
27. Your disclosures state that the CODM evaluates performance using gross
margin and field
Shannon Drake
Aveanna Healthcare Holdings, Inc.
January 8, 2021
Page 7
contribution. We remind you that ASC 280-10-50-28 states that if the
CODM uses more
than one measure of a segment's profit or loss, the reported measures
shall be those that
management believes are determined in accordance with the measurement
principles most
consistent with those used in measuring the corresponding amounts in
your consolidated
financial statements. We also remind you that measures of segment
profit or loss other
than the one used by the CODM to allocate resources and assess
performance are
considered non-GAAP measures unless calculated in accordance with US
GAAP. Please
revise your disclosures as necessary in your notes to the financial
statements as well as in
MD&A.
Once it is determined which measure should be reported for segment
profit or loss, we
remind you that the presentation of the total segment profit or loss
measure on page 91 in
any context other than the ASC 280 required reconciliation in the
notes to the financial
statements would be the presentation of a non-GAAP financial measure.
Please provide
the disclosures required by Item 10(e) of Regulation S-K. Refer to
Question 104.04 of our
Non-GAAP Financial Measures Compliance and Disclosure Interpretations.
28. Pursuant to ASC 280-10-50-30(b), please reconcile your segment profit
measure to your
consolidated loss before income taxes.
Exhibits
29. With reference to disclosures on pages 14, 85, and 129 as well as
other descriptions
contained in the prospectus, please file the acquisition agreements as
exhibits to the
registration statement. Refer to Regulation S-K, Item 601(b)(2).
General
30. Please provide us with copies of all written communications, as
defined in Rule 405 under
the Securities Act, that you, or anyone authorized to do so on your
behalf, present to
potential investors in reliance on Section 5(d) of the Securities Act,
whether or not they
retain copies of the communications.
You may contact Nudrat Salik at 202-551-3692 or Terence O'Brien at
202-551-3355 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Deanna Virginio at 202-551-4530 or Suzanne Hayes at 202-551-3675 with
any other
questions.
FirstName LastNameShannon Drake Sincerely,
Comapany NameAveanna Healthcare Holdings, Inc.
Division of
Corporation Finance
January 8, 2021 Page 7 Office of Life
Sciences
FirstName LastName