Apr 18, 2018 • 08:30 am ET



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Theodore Wahl

simultaneously attempt to right size their capital structures and rent rates. None of these are new issues for the industry, but it does make for uncertain times for some providers, and also create opportunities for many others.

Now there have been other challenging times during various industry cycles over the years. Like in the late 90s through the early 2000s with the Balanced Budget Act or the mid- to late-2000s as the opco/propco model began to gain momentum. And more recently in 2012 and 2013 following the 11% Medicare cut.

During each of these periods not only did our company persevere, but we ultimately thrived, as we identified breakdowns and opportunities, innovated and always delivered a brighter future. So when and if there is an issue like this past quarter, accounts receivable related or otherwise, whether it's related to industry times and underperforming operator or client that's acting in bad faith or our own lack of execution, we own the result.

Still over our four decade history of the company, we've been successful far more than not and overall even in the so-called -- even in so-called stable industry times, as if there ever really was such a thing, right on through the present day and specific to accounts receivable we've written less than one half of 1% of revenue off and we own that result as well.

Next I'd like to touch on cash flow, which in our business is no different than management development, top line growth and as I just highlighted at times bad debt expense, which can be lumpy and vary year-to-year. We try to be clear about our targets and what we're trying to do, knowing that no matter how much we'd like it to be, this is not a quarter-to-quarter or even year-over-year business. That's not how we manage the company and I would never use the word linear to describe any of the above, which is why when we share how we think about cash flow, I often said, the best proxy for cash flow for us is net income. Certainly not quarter-to-quarter or even year-over-year, but over a set of years.

To further that point, between 1997 and 2016 our cash flow from operations was $520 million. And our net income during that time was $510 million. In more recent history between 2012 and 2016, cash flow from operations was $255 million and net income was $250 million. And in the next five years, we expect to be able to look back between 2017 and 2021 and have similar results.

Finally, on our market potential. Since the company's inception in 1976, our niche has been long-term and post-acute care. After four decades of continuous growth and expansion, the demand for our services and opportunities (technical difficulty) targets for our services, with only 18% of those facilities outsourcing housekeeping and laundry services and 8% outsourcing dining and nutrition. We currently contract with over 95% of that outsource market in both segments. With enough