November 1st Update

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This Home Health Index (HH Index) measures the performance of four publicly traded home health companies, all listed on the NASDAQ — Almost Family (AFAM), LHC Group (LHCG), Gentiva (GTIV) and Amedisys (AMED). This index is updated monthly.

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Quote of the Month:

Although we are still assessing the impact of the partial government shutdown on completion of the calendar year 2014 Medicare fee for service regulations, we intend to issue the final rules on or before November 27, 2013.”   The Centers for Medicare & Medicaid Services (CMS)

The Home Health Index Falls Over 6%!

After hitting a two year high last month, our Stoneridge Partners Home Health Index slumped 6.4% in October.  In comparison the general market went on a tear with the S&P 500 up 4.5%.

All stocks in our index were down with LHC Group hit the worst….down over 12%.  Even Addus HealthCare, which had been phenomenal, was down 10.7%.

We are still up 6.5% for the year, however that pales in comparison to the general market with the S&P 500 up over 23% YTD.

Here are the results:

Company Price 10/31/13 % Change  Month % Change  YTD Price 10/31/12 % Change  One Year
Almost Family 19.23 -1.03% -5.08% 20.73 -7.24%
Amedisys 16.28 -5.40% 43.94% 11.04 47.46%
Gentiva 11.42 -5.15% 13.63% 9.37 21.88%
LHC Group 20.6 -12.19% -5.46% 17.52 17.58%
Home Health Index 16.88 -6.39% 6.50% 14.67 15.12%
S&P 500 1756.54 4.46% 23.16% 1412.16 24.39%
Addus 25.85 -10.77% 261.54% 5.43 376.06%

It is interesting to look back one year.  All stocks, with the exception of Almost Family, are to the plus side with Amedisys up over 47%.

For the last few months we have included Addus in our monthly tracking; however, because they have very little Medicare revenue, they are not included in our index.  Addus is a home care company to watch closely, and, for the past year, they have had outstanding stock market performance.   One year ago their stock sold for $5.35, today it sits at 25.85, up 376%.  Who saw that coming?

The high for our HH Index was set in September, 2008 at 41.75.  It now sits at 16.88, about where it was in March, 2012.

 GRAPHS:  This first graph shows the HH Index compared to the actual prices of the individual companies that make up the chart through October, 2013.

(Note that by hovering your pointer over a spot, you will get the price at that point.  For the past decade, it’s been quite a ride)

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi.html” width=”604″ height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index vs. S&P 500 Index

This second chart compares the percentage change of the HH index to the percentage change in the S&P 500 index going back to November, 2002.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-vs-sp.html” height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index 12 Months Trailing

This third graph is a 12 month trailing chart of the HH Index compared to the actual prices of the individual companies that make up the chart, through October, 2013.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-12.html” height=”450″ scrolling=”no”]

 

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-addus.html” width=”604″ height=”450″ scrolling=”no”]

MERGER & ACQUISITION ACTIVITY – Last month the big news was the Gentiva-Harden transaction.  The previous month it was the large investment KK&R made in Amedisys. This month it is the definitive agreements that call for Kindred Healthcare’s acquisition of Senior Home Care, and Almost Family’s acquisition of SunCrest HealthCare.

Is private equity headed for the hills?

Kindred Healthcare signs Definitive Agreement to Acquire Senior Home Care – For a purchase price of $95 million (66% of revenue).  Senior Homecare generates approximately $143 million in revenue and operates 47 locations.

We have been following the Senior Homecare story since the 90s when it was started by the Piazza family.  The original license was tied to ALFs exclusively.  They held on through the difficult IPS period, and then expanded across Florida.

To read the entire press release go to the following link: Kindred-Senior

Almost Family signs Definitive Agreement to Acquire SunCrest HealthCare –  For a purchase price of $75.5 million.  SunCrest revenues for 2012 were approximately $150 million (50% of revenue).  This appears to be an ideal transaction for Almost Family, bringing in new geographic clusters in Tennessee, Georgia and Mississippi, and significantly expanding their current clusters in Florida, the Northeast and the Midwest.

To read the entire press release go to the following link:  Almost Family-Suncrest

Jordan Health Services (“Jordan”), which provides home health services to patients throughout the state of Texas, and Healthcare Innovations Private Services (“HCIPS”), the largest provider of Medicaid home health services in the state of Oklahoma, announced that they have combined their organizations.  Together, the companies each day will fulfill the personal care, case management, skilled nursing, pediatric, and hospice needs of approximately 22,000 patients in Texas and Oklahoma through 61 locations across both states.

Stoneridge Partners Transactions:

  • Horizon Home Care, a New Mexico Medicare home nursing agency, sold to a local health care group.  Don Cummins & Rhonda Gronberg teamed up to provide sell-side advisory services.
  • Innovative Nurses & Sitters, a Houston private duty agency, sold to a national healthcare provider.  Kevin Taggart, one of our partners, provided sell-side advisory services.
  • A nine (9) location multi-state, Medicare agency sold to a strategic buyer. Cory Mertz, one of our partners, provided sell-side advisory services.
  • Mercer Street, Trenton, New Jersey, announced that they have finalized their sale of Friends Home Health, a Medicare agency, to Ocean Healthcare, a network of family-owned and operated healthcare centers headquartered in Lakewood, New Jersey.   Cory Mertz, one of our partners, provided sell-side advisory services.

We have completed ten transactions in the last ten weeks!  To see the complete list go to our blog at the following location:  http://stoneridgepartners.com/blog

By the Numbers:  Earning reports for the third quarter are pouring in.  We will have a complete summary in next month’s issue.

Selling Price as a Percent of Revenue:  For many years the selling price of good Medicare agencies was generalized at about 100% of revenue.  Clearly that is no longer the case.  These public companies (with the exception of Addus) are now selling for considerably less.  The following percentages are based on Enterprise Value (EV), with data provided by Capital IQ.

Company EV as % of Revenue
Almost Family 43%
Amedisys 42%
Gentiva 65%
LHC Group 60%
Addus 93%

Multiples of EBITDA which are based on Enterprise Value (EV).  Data provided by Capital IQ.

Company Multiple of EV/EBITDA
Almost Family 5.79
Amedisys 7.82
Gentiva 6.41
LHC Group 6.26
Addus 12.30

NAHC’S ANNUAL CONFERENCE & EXPO:  For the 12th straight year we attended NAHC.

We gave two presentations, one of which was a panel discussion with Shelly Berman of Simione Consulting, Peter Sosnow of SeniorBridge/Humana, Kevin Taggart, one of our partners and Brian Bruenderman, formerly with Almost Family.  Brian recently joined our team here at Stoneridge.  It was a lively discussion about the seismic changes taking place in Medicare, Medicaid Waiver and private pay.

We make note of the absence of many of the key executives from the public companies at NAHC.  If you are looking for them you might check out Home Care 100, February 1 – 4 in Florida at the Boca Raton Resort. http://www.homecare100.com

Do you know of any acquisitions that have taken place?  We would be interested in your comments.  At the top of this column is a “Contact Tab” with a section for comments.  These can be sent anonymously.  The return email address can be left blank.  We are interested in what you have to say, or acquisitions that you know about.

MORE:  And for additional musings on the state of homecare and what’s going on at Stoneridge Partners, visit our blog, which is updated regularly: stoneridgepartners.com/blog

From Don Cummins, Publisher of “The Home Health Index”  [email protected]

Previous editions of this monthly newsletter can be searched for at the bottom of this page.

Cartoon of the Month, from The New Yorker

Rescue

Links to Google Finance: Almost Family | Amedisys | Gentiva | LHC Group

 

 

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October 1st Update

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This Home Health Index (HH Index) measures the performance of four publicly traded home health companies, all listed on the NASDAQ — Almost Family (AFAM), LHC Group (LHCG), Gentiva (GTIV) and Amedisys (AMED). This index is updated monthly.

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Quote of the Month:

As Congress shuts down the Federal Government, millions of Federal workers will not get paid, however one group will get paid.  You guessed it….our Senators and Congressmen and women….the same group that voted themselves exempt from Obamacare”    Harry Newton

The Home Health Index Hits a New Two Year High!

In June, after CMS issued their onerous proposal, our Stoneridge Partners Home Health Index (HH Index) crashed.  It charged back in July, up 6.5%, then in August it was up 6%, and now in September it’s up another 4%.  Over the last three months its up over 16%, while the general market, as measured by the S&P 500, is up only 4.6%.  All this while facing the new CMS proposal for reduced reimbursement.

All stocks in the HH Index were up for both the month, and for the last three months.

To make matters more confusing,  Addus HealthCare is up close to 50% over this same three month period.

What is going on?

Last month the big news was the announcement that private equity giant KK&R had taken a stake of over 8% in Amedisys.   This month the big news was Gentiva’s announcement of their proposal to buy home care industry giant Harden Healthcare, with annual revenues of $476 million.  More on this below.

For the last few months we have included Addus in our monthly tracking; however, because they have very little Medicare revenue, they are not included in our index.  Addus is however a home care company to watch, and, for the past year, they have had outstanding stock market performance.  Here are the results:

Company Price 9/30/13 Change in %,  Month Change in %,  YTD Price 9/30/12 Change in %, year
Almost Family 19.43 2.97% -4.10% 21.28 -8.69%
Amedisys 17.21 5.65% 52.17% 13.82 24.53%
Gentiva 12.04 4.97% 19.80% 11.32 6.36%
LHC Group 23.46 3.67% 7.66% 18.47 27.02%
Home Health Index 18.04 4.16% 13.77% 16.22 11.17%
S&P 500 1681.55 2.97% 17.91% 1440.67 16.72%
Addus 28.97 36.78% 196.22% 5.35 441.50%

As you can see, all stocks were up nicely for the month, and, with the exception of Almost Family, all stocks are also up nicely for both YTD and from one year ago.

Regarding stock market performance over the past year, clearly the big winner continues to be Addus HealthCare.  Talk about a stock on a tear….up another 36% in September.  One year ago their stock sold for $5.35, today it sits at 28.97, up over 400%.  Did anyone see this coming?

The high for our HH Index was set in September, 2008 at 41.75.  It now sits at 18.04.

 GRAPHS:  This first graph shows the HH Index compared to the actual prices of the individual companies that make up the chart through September, 2013.

(Note that by hovering your pointer over a spot, you will get the price at that point.  For the past decade, it’s been quite a ride)

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi.html” width=”604″ height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index vs. S&P 500 Index

This second chart compares the percentage change of the HH index to the percentage change in the S&P 500 index going back to November, 2002.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-vs-sp.html” height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index 12 Months Trailing

This third graph is a 12 month trailing chart of the HH Index compared to the actual prices of the individual companies that make up the chart, through September, 2013.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-12.html” height=”450″ scrolling=”no”]

 

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-addus.html” width=”604″ height=”450″ scrolling=”no”]

 GENTIVA ANNOUNCES A PROPOSED ACQUISITION OF HARDEN HEALTHCARE

In a surprise move, it looks like Gentiva is going to buy the home health and hospice segment of Harden Healthcare.  Harden, with revenues of $476 million, is being purchased for $408.8 million (about 86% of revenue).  The logic of this acquisition appears to be to reduce Gentiva’s dependency on Medicare home care.  About 40% of Harden’s revenue comes from Hospice with most of the remaining revenue coming from community care programs such as Medicaid waiver programs.

Prior to the acquisition Medicare accounted for approx. 86% of revenue, and, with the Harden acquisition, this will drop to 72%.

 ProForma by Bridgewater Invesments

2014 Pro Forma ($ in MM) GTIV Harden Combined
Revenue $1,770 $485 $2,255
 EBITDA $160 $53 $213
   EBITDA Margin 9.04% 10.82% 9.42%
Net Income $31.64 $11.20 $42.84
Earnings per Share $1.01 $0.19 $1.20

To read the entire analysis by Bridgewater Investment you can go to the following link:

Gentiva-Harden

On the Good News Front!   It looks like the Partnership for Quality Home Healthcare, a coalition of home health providers, is making some progress in Washington…..142 members of the US House of Representatives have expressed their deep concern regarding the proposed rate cuts in a letter to Marilyn Tavenner, the Administrator of CMS.  To read the entire article go to the following link:

Partnership

Selling Price as a Percent of Revenue:  For many years the selling price of good Medicare agencies was generalized at about 100% of revenue.  Clearly that is no longer the case.  These public companies (with the exception of Addus) are now selling for considerably less.  The following percentages are based on Enterprise Value (EV), with data provided by Capital IQ.

Company EV as % of Revenue
Almost Family 43%
Amedisys 43%
Gentiva 65%
LHC Group 68%
Addus 107%

Multiples of EBITDA which are based on Enterprise Value (EV).  Data provided by Capital IQ.

Company Multiple of EV/EBITDA
Almost Family 5.79
Amedisys 7.98
Gentiva 6.43
LHC Group 7.04
Addus 14.08

MERGER & ACQUISITION ACTIVITY – Clearly the big news was the Gentiva-Harden transaction discussed earlier in this column, however it’s been a very busy couple of months for us.  Over the last seven weeks we have handled the sale of seven home health agencies or hospices.  Our most recent:

Synergy Comfort Services, a Massachusetts based private duty agency sold to a diversified health care company.  Kevin Taggart, one of our partners, provided sell-side advisory services.

You can find all of these “sold” transactions on our blog at www.stoneridgepartners.com/blog

Gentiva also announced a joint venture with Wake Forest Baptist Medical Center based in Winston-Salem, NC.

NAHC’S ANNUAL CONFERENCE & EXPO will be in Washington DC October 31 – November 3rd.

Panel Discussion:  At the NAHC conference, on Friday at 2:30, we will hosting a “Panel Discussion”  on  mergers & acquisitions, and how the current home care environment is affecting acquisition strategies and valuations.  On our panel will be:

  • Shelly Berman, Principal of Simione Consulting, a leading home care and hospice consulting firm.
  • Peter Sosnow, Director of Development at Senior Bridge, now owned by Humana.
  • Brian Bruenderman, Director of Development at Almost Family, a public home care company.
  • Cory Mertz, a partner here at Stoneridge Partners.
  • Don Cummins (me), founding partner at Stoneridge Partners, will be moderating the discussion.

We would really like to put your tough questions to this panel of experts.  There is a contact tab at the top of this page where you can send us your questions, or you can send them to me directly: [email protected]  Please let us hear from you.

The Battle Begins….is the title of another presentation we will be giving at NAHC.  On Friday, November 1 at 4:15 in Washington we will be giving our ever-popular presentation titled “Negotiating the Sale of a Home Care Agency or Hospice…The Battle Begins”, where we humorously depict a transaction from initial valuation issues through negotiations, offers, due diligence and the final closing. Please join us, its a lot of fun!

Do you know of any acquisitions that have taken place?  We would be interested in your comments.  At the top of this column is a “Contact Tab” with a section for comments.  These can be sent anonymously.  The return email address can be left blank.  We are interested in what you have to say, or acquisitions that you know about.

MORE:  And for additional musings on the state of homecare and what’s going on at Stoneridge Partners, visit our blog, which is updated regularly: stoneridgepartners.com/blog

From Don Cummins, Publisher of “The Home Health Index”  [email protected]

Previous editions of this monthly newsletter can be searched for at the bottom of this page.

Cartoon of the Month, from The New Yorker

 

http://www.technologyinvestor.com/wp-content/uploads/2013/09/foodwishes.jpg

HokeyPokey

 

 

 

 

Links to Google Finance: Almost Family | Amedisys | Gentiva | LHC Group

 

 

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September 1st Update

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This Home Health Index (HH Index) measures the performance of four publicly traded home health companies, all listed on the NASDAQ — Almost Family (AFAM), LHC Group (LHCG), Gentiva (GTIV) and Amedisys (AMED). This index is updated monthly.

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Quote of the Month:

“The Medicare proposed rule could result in nearly $100 billion in total cuts to the home health benefit.”                                                                                                                               

From an analysis released through the combined efforts of NAHC, VNA of America and The Partnership for Quality Home Health Care.

The Stoneridge Partners Home Health Index Hits a Two Year High!

In June, after CMS issued their onerous proposal,  our Stoneridge Partners Home Health Index (HH Index) crashed.  It charged back in July, up 8.5% and now in August it’s up another 6%.   Not since July of 2011 have we been at this level.  Meanwhile the overall market turned in a poor performance, with the S&P 500 down over 3%, ending  the month at about where it was last May (sell in may and go away).

But before we get too carried away with this seemingly good news it must be pointed out that this increase was primarily the result of one stock’s  big jump.  On August 9th it was announced that private equity giant KK&R had taken a stake of over 8% in Amedisys.   That day the stock jumped from 14.62 to 17.90….over 22% with 3.5 million shares traded.  In terms of our Home Health Index, that news was huge!  Consider that at the close of June, Amedisys stock hit a multi-year low of under $10.  At that time we ruminated that it might be a good buy.

For the last few months we have been including Addus in our monthly tracking; however, because they have very little Medicare revenue, they are not included in our index.  Addus is however a home care company to watch, and, for the past year, they have had outstanding stock market performance.  Here are the monthly results:

Company Price 8/31/13 Change in %,  Month Change in %,  YTD Price 7/31/12 Change in %, year
Almost Family 18.87 -1.36% –6.86% 22.08 -14.54%
Amedisys 16.29 30.22% 44.03% 14.08 15.70%
Gentiva 11.47 6.80% 14.13% 10.98 4.46%
LHC Group 22.63 -1.35% 3.85% 17.40 30.06%
Home Health Index 17.32 6.03% 9.23% 16.14 7.31%
S&P 500 1632.97 -3.13% 14.50% 1406.58 16.1%
Addus 21.18 7.84% 196.22% 4.87 334.91%

As you can see, most of this month’s increase came from Amedisys, although Gentiva too had a good month.  Both Almost Family and LHC Group were down.   Almost Family is the only stock that is down both YTD and from one year ago.  All others are up.

Regarding stock market performance over the past year, clearly the big news continues to be Addus HealthCare.  Talk about a stock on a tear….up over 300% from one year ago.

The high for our HH Index was set in September, 2008 at 41.75, and then, within five months it dropped to $21.  It now sits at $17.32.  As a comparison, since 2008, the S&P 500 is up about 75%.

GRAPHS:  This first graph shows the HH Index compared to the actual prices of the individual companies that make up the chart through August, 2013.

(Note that by hovering your pointer over a spot, you will get the price at that point.  For the past decade, it’s been quite a ride)

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi.html” width=”604″ height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index vs. S&P 500 Index

This second chart compares the percentage change of the HH index to the percentage change in the S&P 500 index going back to November, 2002.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-vs-sp.html” height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index 12 Months Trailing

This third graph is a 12 month trailing chart of the HH Index compared to the actual prices of the individual companies that make up the chart, through August, 2013.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-12.html” height=”450″ scrolling=”no”]

 

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-addus.html” width=”604″ height=”450″ scrolling=”no”]

By the Numbers:

Now that all of the earnings reports have been released for the second quarter, we thought it might be interesting to look at some totals.  Below is the total revenue, gross profit and operating income for all of the four companies that are included in our home health index:  Almost Family, Amedisys, Gentiva and LHC Group.

Second Quarter Totals (000s) 2013 2012 + or – 2011 + or –
Revenue 980,644 1,034,151 (53,507) 1,073,401 (92,757)
Gross Profit 442,263 472,164 (29,901) 513,066 (70,803)
    Gross Profit % 45.1% 45.6% -0.5% 47.8% -2.7%
Operating Income 53,597 76,101 (22,404) 89,868 (36,271)
 Home Health Index on June 30 16.33 14.67 +1.66 24.88 -8.55

Summary….Over the last two years:

1.  Revenue for the quarter dropped about $93 million or 8.6%.

2.  Gross profit dollars dropped about $71 million or 13.8%.

3.  Gross profit percentage dropped from 47.8% to 45.1% down 5.6%

4.  As a result, operating income dropped dramatically, down $36 million, over 40%.

5.  Stock prices as measured by our Home Health Index dropped 34%.

These sad results appear to be tied directly to the decrease in Medicare reimbursement….and, with the new proposal from CMS, the future does not look better.

On the bright side however, over the last year, even with revenue and operating income down substantially, the stock prices, as measured by our HH Index, are up….over 11%.  What does that tell us?

Certainly another bright spot appears to be the investment of KK&R in Amedisys.  As a giant private equity firm, they certainly do not have a reputation for making mistakes.  It makes one wonder what they know?  Further, how active are they going to be, and if they do become active, will this usher in a change in management?

Selling Price as a Percent of Revenue:  For many years the selling price of good Medicare agencies was generalized at about 100% of revenue.  Clearly that is no longer the case.  These public companies are now selling for considerably less.  The following percentages are based on Enterprise Value (EV), with data provided by Capital IQ.

Company EV as % of Revenue
Almost Family 42%
Amedisys 42%
Gentiva 65%
LHC Group 66%
Addus 80%

Multiples of EBITDA which are based on Enterprise Value (EV).  Data provided by Capital IQ.

Company Multiple of EV/EBITDA
Almost Family 5.66
Amedisys 7.82
Gentiva 6.37
LHC Group 6.83
Addus 10.50

MERGER & ACQUISITION ACTIVITY –

  • Kindred Healthcare signed a definitive agreement to acquire Western Reserve Senior Care, a Cleveland, Ohio physician practice specializing in home care.  Financial terms were not disclosed.
  • We just finished the sale of a $16 million Medicare agency in the southeast.  Cory Mertz, one of our partners, provided advisory services to the seller.   At this time the name of the company is confidential.

Do you know of any acquisitions that have taken place?  We would be interested in your comments.  At the end of this column we have added a section for comments.  These can be sent anonymously.  The return email address can be left blank.  We are interested in what you have to say, or acquisitions that you know about.

Presentation:  On September 10th in Columbus, Ohio we will be giving our presentation titled “Selling a Home Health Agency….how to successfully value, structure and execute a merger or sale of a home health agency”.  Go to our home page for further information.

MORE:  And for additional musings on the state of homecare and what’s going on at Stoneridge Partners, visit our blog, which is updated regularly: stoneridgepartners.com/blog

Cartoon of the Month, from The New Yorker

http://www.technologyinvestor.com/wp-content/uploads/2013/09/reinvent.jpg

 

Links to Google Finance: Almost Family | Amedisys | Gentiva | LHC Group

 

 

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August 1st Update

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This Home Health Index (HH Index) measures the performance of four publicly traded home health companies, all listed on the NASDAQ — Almost Family (AFAM), LHC Group (LHCG), Gentiva (GTIV) and Amedisys (AMED). This index is updated monthly.

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Quote of the Month:

“Get big or get out”

For years this has been a catchphrase of the Great Plains farmer, and most small farmers have gotten out.  Philip Caputo, The Longest Road

The Stoneridge Partners Home Health Index Hits 16 Month High!

What a way to end the month.  Our headline last month was that the Stoneridge Partners Home Health Index (HH Index) hit a one year low.  Talk about surprising news.  In July our index hit 16.33, a 16 month high, going back to March of 2012 (I had to use my fingers to count the months).  Sure, the whole market was up with the S&P 500 gaining 5%, but our Index was up 8.5%

What a turn around, and a surprise to us, given all of the bad news out there.   More on this turn of events later in this column, but for now here are the results:

Here are the results for our HH  Index:

Company Price 7/31/13 Change in %,  Month Change in %,  YTD Price 7/31/12 Change in %, year
Almost Family 19.13 .21% -5.77% 22.01 -12.89%
Amedisys 12.51 7.84% 2.56% 12.19 2.57%
Gentiva 10.74 7.83% -0.90% 6.66 58.87%
LHC Group 22.94 17.16% -10.14% 17.89 29.78%
Home Health Index 16.33 8.45% -5.01% 14.69 11.20%
S&P 500 1685.73 4.95% 12.63% 1379.32 22.49%
Addus 19.64 -0.51% 176.08% 4.43 309.78%

Last month all of the stocks in our index were down.  This month all were up with LHC Group leading, up over 17%.

However when looking back one year it is hard to generalize.  Gentiva is up over 58% from one year ago, while Almost Family is down close to 13%.

The high for our HH Index was set in September, 2008 at 41.75, and then, within five months it dropped to $21.  It now sits at about $16.33.   As a comparison, since 2008, the S&P 500 is up about 75%.

GRAPHS:  This first graph shows the HH Index compared to the actual prices of the individual companies that make up the chart through July, 2013.

(Note that by hovering your pointer over a spot, you will get the price at that point.  For the past decade, it’s been quite a ride)

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi.html” width=”604″ height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index vs. S&P 500 Index

This second chart compares the percentage change of the HH index to the percentage change in the S&P 500 index going back to November, 2002.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-vs-sp.html” height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index 12 Months Trailing

This third graph is a 12 month trailing chart of the HH Index compared to the actual prices of the individual companies that make up the chart, through July, 2013.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-12.html” height=”450″ scrolling=”no”]

Regarding stock market performance over the past year, clearly the big news continues to be Addus HealthCare.  Because they have very little Medicare revenue, they are not included in our HH Index  (NASDAQ:ADUS), but talk about a stock on a tear….up over 300% from one year ago.

Under their trademarked program called Addus Dual Advantage, they are focusing on the  dual eligible population, which they state is the top 5% in terms of resource and expenditures.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-addus.html” width=”604″ height=”450″ scrolling=”no”]

At the close of July Amedisys, Gentiva and Addus released their 2nd quarter numbers.  Here is a thumbnail sketch compared to the 2nd quarter of 2012 and the 1st quarter of 2013.  We will follow up next month with the results of Almost Family and LHC Group.  As a note this is the first quarter that has included the 2% Medicare sequestration cut.

Amedisys 2nd Qtr 2013 1st Qtr 2013 2nd Qtr 2012
Revenue
 Home Health 248,600 79.4% 272,300 80.3% 290,600 80.0%
 Hospice 64,500 20.6% 66,900 19.7% 72,500 19.5%
   Total Revenue 313,100 100.0% 339,200 100.0% 363,100 100.0%
Gross Profit
% of GP
 Home Health 106,600 42.9% 115,200 42.3% 125,300 43.1%
 Hospice 30,400 47.1% 31,500 47.1% 35,200 48.6%
   Total Gross Profit 137,000 43.8% 146,700 43.2% 160,500 44.2%
G&A Expenses 133,278 42.6% 142,531 42.0% 145,100 40.0%
Operating Income 3,722 1.2% 4,169 1.2%  15,400 4.2%
 
Gentiva 2nd Qtr 2013 1st Qtr 2013 2nd Qtr 2012
Revenue
  Home Health 235,200 56.8% 236,100 56.8% 235,700 55.1%
  Hospice 179,200 43.2% 179,500 43.2% 192,000 44.9%
    Total Revenue 414,400 100.0% 415,600 100.0% 427,700 100.0%
Gross Profit % of GP
 Home Health 115,600 49.1% 114,800 48.6% 117,500 49.9%
 Hospice 79,900 44.6% 79,200 44.1% 87,500 45.6%
   Total Gross Profit 195,500 47.2% 194,000 46.7% 205,000 47.9%
G&A Expenses 161,900 39.1% 159,900 38.5% 163,900 38.3%
Operating Income 33,600 8.1% 34,100 8.2% 41,100 9.6%
 
Addus 2nd Qtr 2013 1st Qtr 2013 2nd Qtr 2012
Revenue 65,755 100.0% 62,998 100.0% 60,440 100.0%
Gross Profit 16,613 25.3% 15,739 25.1% 15,807 26.2%
G&A Expenses  12,092 18.4% 11,510 18.3% 11,959 19.8%
Operating Income 2,582 3.9% 2,687 4.3% 1,835 3.0%

Results:  Both Amedisys and Gentiva show a substantial drop in profit from one year ago.  What is interesting to note is that both stocks are up from one year ago.

What is further surprising is that, with all of the bad news, the sequestration cuts and the proposal for 3.5% rate cuts each year for the next four years….all stocks were up for the month.  It is enough to make one wonder what the market telling us….that things are not as bad as we think, or that these companies will be left standing while many of their smaller competitors go out of business.

We go back to our quote of the month…”Get big or get out”.  This phrase has appled to many businesses, with the mom & pop drug store an example.  Is this the direction we will be going in home care?

Selling Price as a Percent of Revenue:  For many years the selling price of good Medicare agencies was generalized at about 100% of revenue.  Clearly that is no longer the case.  These public companies are now selling for considerably less.  The following percentages are based on Enterprise Value (EV), with data provided by Capital IQ.

Company EV as % of Revenue
Almost Family 43%
Amedisys 30%
Gentiva 65%
LHC Group 68%
Addus 81%

Multiples of EBITDA which are based on Enterprise Value (EV).  Data provided by Capital IQ.

Company Multiple of EV/EBITDA
Almost Family 5.24
Amedisys 5.34
Gentiva 6.09
LHC Group 6.96
Addus 10.86

MERGER & ACQUISITION ACTIVITY – In all of the following transactions we were the exclusive merger and acquisition firm.

  • Almost Family announced their acquisition of the assets of the Medicare-certified home health agencies owned by Indiana Home Care Network, or IHCN, for $12.5M.  IHCN dba  Innovative Home Health, a provider of home health services that operates six home health locations, primarily in northern Indiana.  Our group at Stoneridge Partners provided brokerage/advisory services.
  • Cole Home Health, a large Texas Medicare home care company sold to a large regional home care provider.  Our group at Stoneridge Partners provided brokerage/advisory services.
  • Virginia based All Heart Home Health Agency & Hospice, a Medicare provider, sold to a large national health care provider. Our group at Stoneridge Partners provided brokerage/advisory services.

Do you know of any acquisitions that have taken place?  We would be interested in your comments. At the end of this column we have added a section for comments.  These can be sent anonymously.  The return email address can be left blank.  We are interested in what you have to say, or acquisitions that you know about.

Presentation:  On September 10th in Columbus, Ohio we will be giving our presentation titled “Selling a Home Health Agency….how to successfully value, structure and execute a merger or sale  of a home health agency”.  Go to our home page for further information.

MORE:  And for additional musings on the state of homecare and what’s going on at Stoneridge Partners, visit our blog, which is updated regularly:stoneridgepartners.com/blog

Final Note:  I am writing this from Sun Valley, Idaho where I am escaping Florida’s heat, humidity and rain.  If any of our readers happens to be here give me a call…..I’ll buy you lunch.  Don Cummins  239-980-7456

Cartoon of the Month, from The New Yorker
commentsforten

Links to Google Finance: Almost Family | Amedisys | Gentiva | LHC Group

 

 

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July 1st Update

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This Home Health Index (HH Index) measures the performance of four publicly traded home health companies, all listed on the NASDAQ — Almost Family (AFAM), LHC Group (LHCG), Gentiva (GTIV) and Amedisys (AMED). This index is updated monthly.

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Quote of the Month:

“Agencies across the country are faced with looming budget cuts, the possibility of more cost shifting onto beneficiaries(co-pay), diminishing margins, and increasingly stringent – and often confusing new regulations.”  Bill Dombi, Executive Director, NAHC.

The Stoneridge Partners Home Health Index Hits a Seven Month Low!

What a way to end the month.  On June 27 CMS released their proposed Medicare home health payment rates for 2014 which set re-basing at the maximum reduction of 3.5% for each of the next four years.   Although this is just a proposal it sent a shock wave to the stocks in our Stoneridge Partners Home Health Index, causing the index to drop over 10% in just a few hours, something we have not seen in our ten years of tracking.

Until then our HH Index had been up, however we are now down about 7% for the month and 5% YTD.  On the good news front, our index is still up from a year ago.

And look at Addus, which continues its tear, up over 9% last month, and now up over 300% from a year ago. Really remarkable.

Here are the results for our HH  Index:

Company Price 6/30/13 Change in %,  Month Change in %,  YTD Price 6/30/12 Change in %, year
Almost Family 19.09 -3.44% -5.77% 22.34 -14.55%
Amedisys 11.16 -5.84% +2.56% 12.45 -6.83%
Gentiva 9.96 -6.57% -0.90% 6.93 +43.72%
LHC Group 19.58 -10.96% -10.14% 16.96 +15.45%
Home Health Index 15.06 -6.97% -5.01% 14.67 +2.64%
S&P 500 1606.28 -1.50% +12.63% 1362.18 +17.92%
Addus 19.74 +9.73% +176.08% 4.91 +302.04%

All of our stocks were down in June, with LHC Group leading.  However when looking back one year it becomes hard to generalize.  Gentiva is up over 40% from one year ago, while Almost Family and Amedisys are both down.

The high for our HH Index was set in September, 2008 at 41.75, and then, within five months it dropped to $21.  It now sits at about $15, a seven month low.   As a comparison, since 2008, the S&P 500 is up about 70%.

GRAPHS:  This first graph shows the HH Index compared to the actual prices of the individual companies that make up the chart through June, 2013.

(Note that by hovering your pointer over a spot, you will get the price at that point.  For the past decade, it’s been quite a ride)

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi.html” width=”604″ height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index vs. S&P 500 Index

This second chart compares the percentage change of the HH index to the percentage change in the S&P 500 index going back to November, 2002.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-vs-sp.html” height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index 12 Months Trailing

This third graph is a 12 month trailing chart of the HH Index compared to the actual prices of the individual companies that make up the chart, through June, 2013.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-12.html” height=”450″ scrolling=”no”]

Regarding stock market performance, clearly the big news continues to be Addus HealthCare.  Because they have very little Medicare revenue, they are not included in our HH Index  (NASDAQ:ADUS), but talk about a stock on a tear….even with the bad news from CMS they were up 10% last month, and over 300% from one year ago.

Under their trademarked program called Addus Dual Advantage, they are focusing on the  dual eligible population, which they state is the top 5% in terms of resource and expenditures.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-addus.html” width=”604″ height=”450″ scrolling=”no”]

Medicare Rate Cuts:  CMS estimates that the total cut in 2014 will amount to 1.5%….this in addition to the 2% sequestration cut already in place as of April 1st of this year.

As a result of this announcement,  private equity firm RW Baird downgraded the stocks of all of the companies in our HH Index as a group from “neutral to “underperform”,  and our index took a steep nosedive.

Selling Price as a Percent of Revenue:  For many years the selling price of good Medicare agencies was generalized at about 100% of revenue.  Clearly that is no longer the case.  These public companies are now selling for considerably less.  The following percentages are based on Enterprise Value (EV), with stock prices as of June 30, 2013.

Company EV as % of Revenue
Almost Family 42%
Amedisys 30%
Gentiva 63%
LHC Group 58%
Addus 79%

Multiples of EBITDA which are based on Enterprise Value (EV) from their earning results through the 1st quarter 2013 with stock prices as of June 30, 2013.

Company Multiple of EV/EBITDA
Almost Family 5.07
Amedisys 5.35
Gentiva 5.91
LHC Group 5.97
Addus 10.52

MERGER & ACQUISITION ACTIVITY

  • Just announced and effective July 3:  LCS®, a national leader in senior lifestyle services and senior living community development and management, and CareSouth®, a leading regional provider of home health services, announced a joint venture partnership in Health at Home™, an LCS Company.   CareSouth will manage the operations of the existing 17 Health at Home locations in 11 states, currently serving over 1,400 clients.
  • Mercer Street Friends, Trenton, New Jersey, announced that they have signed an agreement to transfer the assets and services of Mercer Street Home Health, a Medicare agency, to Ocean Healthcare, a network of family-owned and operated healthcare centers headquartered in Lakewood, New Jersey.  This transaction is expected to be finalized within 6 to 8 weeks.  Cory Mertz, one of our Stoneridge partners, is providing sell-side advisory services.
  • A subsidiary of Kindred has signed a definitive agreement to acquire the assets of All Heart Home Health Agency and Hospice, Inc. (“All Heart”).  All Heart is a Medicare home health and hospice provider that operates two locations in Norfolk, Virginia. All Heart currently generates annualized revenues of approximately $5.5 million. This transaction is subject to several regulatory approvals and other conditions to closing and is expected to close in the third quarter of 2013.   Rhonda Gronberg with Stoneridge Partners is providing advisory services.
  • A subsidiary of Kindred has signed a definitive agreement to acquire the assets of Arrowhead Home Health, Inc. and Arrowhead Hospice Centers, Inc. (“Arrowhead”). Arrowhead is a home health and hospice provider that operates two locations in the greater Phoenix market. Arrowhead currently generates annualized revenues of approximately $2.2 million. This transaction is subject to several regulatory approvals and other conditions to closing and is expected to close in the third quarter of 2013.
  • LHC Group Inc. (NASDAQ: LHCG) has completed the previously announced acquisition of AseraCare Home Health. The transaction represents LHC Group’s initial home health entry into the states of Minnesota, Wisconsin and Pennsylvania and expands LHC Group’s geographical footprint to 310 locations across 26 states.The acquisition includes four home health agencies located in Atlanta, Ga.; Bloomington, Minn.; Milwaukee, Wis.; and Pittsburgh, Pa.  Annual revenue is approximately $5 million.

Do you know of any acquisitions that have taken place?  We would be interested in your comments. At the end of this column we have added a section for comments.  These can be sent anonymously.  The return email address can be left blank.  We are interested in what you have to say, or acquisitions that you know about.

Webinar:

On Thursday, June 11 at 2 pm ET, we will be giving an informative and entertaining webinar on “The Process of Selling a Hospice”  To learn more go to the link on our home page.

Cartoon of the Month, from The New Yorker

NewDanBrownNovel

MORE:  And for additional musings on the state of homecare and what’s going on at Stoneridge Partners, visit our blog, which is updated regularly:stoneridgepartners.com/blog 

Links to Google Finance: Almost Family | Amedisys | Gentiva | LHC Group

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June 1st Update

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This Home Health Index (HH Index) measures the performance of four publicly traded home health companies, all listed on the NASDAQ — Almost Family (AFAM), LHC Group (LHCG), Gentiva (GTIV) and Amedisys (AMED). This index is updated monthly.

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Quote of the Month:

“The landscape is shifting.  States are shifting responsibility for care to health plans and managed care.  Focus on managing and coordinating care for the costly dual eligible population”.  Addus HealthCare, whose stock is up 350% from a year ago.

UPDATE:  The Stoneridge Partners Home Health Shows an Uptick!

For the month of May our Stoneridge Partners Home Health Index showed an increase of 4.4%, and the S&P 500 continued its increase….up 2.1%.

All of our stocks were up, however the increase was primarily on the back of Amedisys.  After hitting a low that goes back to 2003 of $10.04, the stock jumped 22.7% to 12.32.  If you will remember in last month’s column we ruminated as to whether or not it was, at that low point, a buy.

The high for our HH Index was set in September, 2008 at 41.75, and then, within five months it dropped to $21.  It now sits at $16.19, down 61%.  As a comparison, during this same time period the S&P 500 is up about 75%.

Out HH Index is now up 2.1% year-to-date (YTD) while the S&P 500 is up 14.3%.  Almost Family is the only stock that is down, both YTD and from one year ago, and Gentiva leads the parade, up 90% from one year ago.

Here are the results for our HH  Index….take a look at the remarkable results from Addus…more on this later.

Company Price 5/31/13 Change in %,  Month Change in %,  YTD Price 5/31/12 Change in %, year
Almost Family 19.77 +0.15% -2.42% 22.23 -11.07%
Amedisys 12.32 +22.71% +8.93% 10.97 +12.31%
Gentiva 10.66 +1.62% +6.07% 5.61 +90.02%
LHC Group 21.99 +1.24% +0.92% 16.75 +31.28%
Home Health Index 16.19% +4.44% +2.10% 13.89 +16.52%
S&P 500 1630.74 +2.08% +14.34% 1310.33 +24.45%
Addus 17.99 +51.94% +151.61% 3.99 +350.88%

 GRAPHS:  This first graph shows the HH Index compared to the actual prices of the individual companies that make up the chart through May, 2013.

(Note that by hovering your pointer over a spot, you will get the price at that point.  For the past decade, it’s been quite a ride)

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi.html” width=”604″ height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index vs. S&P 500 Index

This second chart compares the percentage change of the HH index to the percentage change in the S&P 500 index through May, 2013.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-vs-sp.html” height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index 12 Months Trailing

This third graph is a 12 month trailing chart of the HH Index compared to the actual prices of the individual companies that make up the chart, through May, 2013.

Notice the nice upward trend of LHC Group and Gentiva.

 

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-12.html” height=”450″ scrolling=”no”]

 Addus:

Regarding stock market performance, clearly the big news is Addus HealthCare.  Because they have very little Medicare revenue, they are not included in our HH Index  (NASDAQ:ADUS), but talk about a stock on a tear….they are up over 50% last month, up 151% year-to-date and over 350% from one year ago.

Under their trademarked program called Addus Dual Advantage, they are focusing on the  dual eligible population, which they state is the top 5% in terms of resource and expenditures.

A few numbers from their latest Form 8-K:

  • Dual represents 36% of total Medicare spending and 39% of total Medicaid spending.
  • Twenty six States have indicated they will participate over the next three years.
  • $300 billion in annual spending for dual elibible in 2007.
  • Funding is administered by the State.
  • Approximately nine million are “Duals”

Clearly the stock market likes their game plan.  To see the complete report go to the following link:      Addus Form 8-K

Addus Stock Price for the Past Two Years

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-addus.html” width=”604″ height=”450″ scrolling=”no”]

What follows are the results for the HH Index companies for the first quarter

(in thousands) 2013 2012 Change % Change
Almost Family
Revenue 86,858 89,950 -3,092 -3.4%
Gross Profit 40,538 44,191 -3,653 -8.3%
Gross Profit % 46.7% 49.1% -2.4 -4.9%
Operating Income 5,164 7,998 -2,834 –35.4%
EBITDA 6,086 8,891 -2,805 -31.5%
Amedisys
Revenue
Homecare 272,300 301,400 -29,100 -9.7%
Hospice 66,900 69,400 -2,500 -3.6%
Revenue-Total 339,175 370,833 -31,658 -8.5%
Gross Profit 146,671 162,327 -15,656 -9.6%
Gross Profit % 43.2% 43.8% -0.6 -1.4%
Income-Operating 4,169 12,457 -8,288 -66.5%
Gentiva
Revenue
Homecare 236,100 240,000 -3,900 -1.6%
Hospice 179,500 195.700 -16,200 -8.3%
Revenue-Total 415,591 435,652 -20,061 -4.6%
Gross Profit 194,018 202,791 -8,773 -4.3%
Gross Profit % 46.7% 46.5% +0.2 +0.4%
Income-Operating 34,141 29,084 5,057 +17.4%
LHC Group
Revenue 161,953 158,761 +3,192 +2.0%
Gross Profit 68,705 68,902 -197 -0.3%
Gross Profit % 42.4% 43.4% -1.0 -2.3%
Income-Operating 13,165 15,259 -2,094 -13.7%
TOTALS
Revenue 1,003,577 1,055,196 -51,619 -4.9%
Gross Profit 449,932 478,211 -28,279 -5.9%
Gross Profit % 44.8% 45.3% -0.5 -1.1%
Income-Operating 56,639 64,798 -8,159 -12.5%

Gentiva was the only company that ended up with an increase in their operating income, due to their reduction in G&A expenses of close to $14 million for the quarter.

But the total of the four companies tells the story:  revenue, gross profit dollars & percentage, and operating income….all down.  With the 2% sequestration cut sticking around like Velcro, can we really expect much improvement in these numbers in the second quarter?

While 2% may appear to be a minor blip on the screen, unfortunately it results in a big hit to bottom line profits.  On a typical $5 million revenue agency with a 15% bottom line, if all expenses stay the same, it reduces that bottom line by $100,000 or 13.3%.  Attach a selling multiple of 5 to that and you have a potential decrease in selling price of $500,000.  Not exactly chump change.

(As a bit of a sequestration side note, I don’t believe that the  salaries or benefits of our congresspeople have been affected on iota.)

MERGER & ACQUISITION ACTIVITY

Again, not much in announced acquisitions from these public companies.

LHC Group announced that they have entered into an agreement to acquire the assets of AseraCare Home Health, which includes four locations and about $5 million in annual revenue.  The transaction is expected to close on or around June 28.  This leaves AseraCare with a substantial presence in hospice.

Kindred’s subsidiary has signed a definitive agreement to acquire QStaff Home Healthcare and Advanced Care Hospice (“QStaff”). Terms of the transaction were not disclosed. QStaff is a high-quality provider of home health and hospice services that operates one location in the Houston, Texas market and provides services in five counties.  They generate annualized revenues of approximately $2 million. The transaction is expected to close in the second quarter of 2013.

Kindred’s subsidiary also signed a definitive agreement to acquire Caring Hearts Home Health, with locations in Big Springs and Odessa, Texas.  They generate about $1.6 million in revenue.  This transaction is also expected to close in the second quarter of 2013.

Aurora Hospice, located in Houston, recently sold to a national homecare and hospice provider.   We provided sell-side advisory services.

Other than that we have not seen any other acquisitions announced.  We continued to expect M&A to return as a driver of growth as reimbursement visibility improves.

If you hear of any sales please let us know.  At the end of this column we have a form you can send to us that can be sent anonymously.

MULTIPLES OF EBITDA based on Enterprise Value (EV) from earning results through the 1st quarter 2013 with stock prices as of May 31, 2013.

Company Multiple of EV/EBITDA
Almost Family 5.2
Amedisys 5.6
Gentiva 5.9
LHC Group 6.8
Addus 8.5

Do you know of any acquisitions that have taken place?  We would be interested in your comments. At the end of this column we have added a section for comments.  These can be sent anonymously.  The return email address can be left blank.  We are interested in what you have to say, or acquisitions that you know about.

Cartoon of the Month, from The New Yorker

http://www.technologyinvestor.com/wp-content/uploads/2013/06/skindisese.jpg

MORE:  And for additional musings on the state of homecare and what’s going on at Stoneridge Partners, visit our blog, which is updated regularly:stoneridgepartners.com/blog 

Links to Google Finance: Almost Family | Amedisys | Gentiva | LHC Group

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May 1st 2013 Update

[pl_alertbox type=”info”]

This Home Health Index (HH Index) measures the performance of four publicly traded home health companies, all listed on the NASDAQ — Almost Family (AFAM), LHC Group (LHCG), Gentiva (GTIV) and Amedisys (AMED). This index is updated monthly.

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Quote of the Month:

“Chemed and VITAS intend to defend this lawsuit vigorously.”

This in response to the False Claims Act complaint filed by the federal government alleging that the Company submitted or caused the submission of false claims to the Medicare program.

UPDATE:  The Stoneridge Partners Home Health Index Drops Again!

While the stock market in general continued its tear with the S&P 500 showing a very nice year-to-date increase of over 12% our Stoneridge Partners’ Home Health Index (HH Index) dropped 2% in April and is now down 0.8% year-to-date.

A good part of April’s drop can be attributed to one stock, Amedisys, whose end of the month earnings call resulted in a price drop of 11%….. now down to ten dollars,  a place this company has not visited since the year 2003….back to where it was ten years ago.  Is it a buy?  More on this later in this column.

The high for our HH Index was set in September, 2008 at 41.75, and then, within five months it dropped to $21.  It now sits at $15.50, down 63%.  As a comparison, during this same time period the S&P 500 is up about 75%.  We note that only LHC Group was up for the month, and only Gentiva is up YTD.

Addus HealthCare, because they have very little Medicare revenue, is not included in our HH Index  (NASDAQ:ADUS).  Last month we discussed the meteoric rise of their stock…. up 65% YTD, but even they took a hit in April, down 11.4%.

Here are the results for our HH  Index:

Company Stock Price 4/30/13 Change in %,  Month Change in %,  YTD Stock Price 4/30/12 Change in %, year
Almost Family 19.74 -3.50% -2.57% 24.38 -20.28%
Amedisys 10.04 -10.76% -11.23% 14.73 -36.50%
Gentiva 10.49 -3.15% +4.38% 8.28 +28.15%
LHC Group 21.72 +1.01% -0.32% 17.71 +23.56%
Home Health Index 15.50% -3.03% -2.24% 16.27 -5.13%
S&P 500 1597.57 +1.78% +12.02% 1397.91 +14.62%
Addus 11.84 -11.40% +65.59 4.62 +200.56%

It is also interesting to note that,  over the past year, Amedisys and Almost Family are down substantially, while LHC Group, Gentiva and Addus are all up substantially.

 GRAPHS:  This first graph shows the HH Index compared to the actual prices of the individual companies that make up the chart through April, 2013.

Take a look at that green line of Amedisys.    Ouch!

(Note that by hovering your pointer over a spot, you will get the price at that point.  For the past decade, it’s been quite a ride)

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi.html” width=”604″ height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index vs. S&P 500 Index

This second chart compares the percentage change of the HH index to the percentage change in the S&P 500 index through April, 2013.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-vs-sp.html” height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index 12 Months Trailing

This third graph is a 12 month trailing chart of the HH Index compared to the actual prices of the individual companies that make up the chart, through April, 2013.

 

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-12.html” height=”450″ scrolling=”no”]

BALANCE SHEETS:  What follows is the summarized balance sheets for the year end 2012.

       in thousands Addus Almost Family Amedisys Gentiva LHC Group
ASSETS
Cash 1,737   26,120   14,545  207,052 9,720
Accounts Receivable 71,303   49,971 169,172  251,080 83,951
Other Assets 76,817 173,168 546,878 1,052,802 293,223
TOTAL ASSETS 149,857 249,259 730,595 1,510,934 386,894
LIABILITIES
Current Liabilities 39,190 27,098 204,787 289,899 55,210
Long-Term Liabilities 16,250 17,846  71,575 910,182
Other Liabilities   76,153 48,044
TOTAL LIABILITIES 55,440 44,944 276,362 1,276,234 103,254
STOCKHOLDERS’ EQUITY 94.417 204,315 454,233 233,162 268,181

Note:  The long term debt of Gentiva is primarily the result of their purchase of $1B hospice provider Odyssey in year 2010…..but now look at their nice cash position.

AMEDISYS: On April 30th Amedisys announced their first quarter results. While their total Medicare admissions were up 2%, their revenue dropped $32 million to $339 million, and their net income for the quarter dropped to $4 million compared to $8.6 million in 2012.

While Medicare admissions were up 2%, revenue per episode was down 3.5% to $2,782.

Hospice revenue declined 3.6%, down $2.5 million, mainly on lower average daily census.

They made note that the 2% sequestration cut impacted home health revenue for episodes in progress at quarter end.

In their call they also announced their intention to consolidate or divest 50 care centers…..what they term pruning the unprofitable.

We will have a complete run-down of first quarter numbers for these public companies in next month’s column

SEQUESTRATION: What we no longer seem to be hearing much about is the 2% sequestration cut that took place April 1.  Is anyone in Washington listening?  One thing for sure is that the salary and benefits of our congress people are not being affected one iota.

While 2% may appear to be a minor blip on the screen, unfortunately it results in a big hit to bottom line profits.  On a typical $5 million revenue agency with a 15% bottom line, if all expenses stay the same, it reduces that bottom line by $100,000 or 13.3%.  Attach a selling multiple of 5 to that and you have a potential decrease in selling price of $500,000.  Not exactly chump change.

MERGER & ACQUISITION ACTIVITY

Again, no announced acquisitions from these public companies.  To the contrary, as mentioned above, Amedisys plans on closing locations.

One acquisition of interest is the recent completion of Highmark and their West Penn transaction.

Highmark, a Pittsburgh based insurer closed on its acquisition of West Penn Allegheny Health System.  With this acquisition Highmark joins Kaiser Permanente as one of the nation’s largest private integrated systems with both insurance and hospital operations.

And we had a couple of nice transactions close last month:

Advanced Nursing Concepts, a nice Medicare certified home health agency in Florida was sold to a financial buyer.  Cory Mertz, one of our partners, provided sell-side advisory services.

Coastal NurseCare, a nice Georgia private duty agency, sold to a regional home care company.  Kevin Taggart, one of our partners, provided sell-side advisory services.

Other than those we have not seen any other acquisitions announced.  We continued to expect M&A to return as a driver of growth as reimbursement visibility improves.

If you hear of any sales please let us know.  At the end of this column we have a form you can send to us that can be sent anonymously.

MULTIPLES OF EBITDA based on Enterprise Value (EV) from earning results through the 4th quarter 2012 with stock prices as of April 30, 2013.

Company Multiple of EV/EBITDA
Almost Family 5.13
Amedisys 4.75
Gentiva 5.73
LHC Group 6.28

Do you know of any acquisitions that have taken place?  We would be interested in your comments. At the end of this column we have added a section for comments.  These can be sent anonymously.  The return email address can be left blank.  We are interested in what you have to say, or acquisitions that you know about.

Cartoon of the Month, from The New Yorker

http://www.technologyinvestor.com/wp-content/uploads/2013/04/GeneralPeterssen.jpg

MORE:  And for additional musings on the state of homecare and what’s going on at Stoneridge Partners, visit our blog, which is updated regularly:stoneridgepartners.com/blog 

Links to Google Finance: Almost Family | Amedisys | Gentiva | LHC Group

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April 1st 2013 Update

[pl_alertbox type=”info”]
This Home Health Index (HH Index) measures the performance of four publicly traded home health companies, all listed on the NASDAQ — Almost Family (AFAM), LHC Group (LHCG), Gentiva (GTIV) and Amedisys (AMED). This index is updated monthly.
[/pl_alertbox]

Quote of the Month….now that sequestration has hit home with their 2% rate cut, we have repeated what we feel is last month’s very appropriate quote:

“The only thing I  know for sure about sequestration is that the salaries and benefits that our congressmen, congresswomen and senators receive won’t be affected one iota by sequestration.”  Harry Newton

UPDATE:  The Stoneridge Partners Home Health Index Stagnates!

The stock market in general continued its tear with the S&P 500 showing a very nice year to date increase of over 10%.  For this first quarter however our Stoneridge Partner’s Home Health Index (HH Index) is up a paltry 0.7%.

Last month we stated that, after a free-fall from the $40 area, our HH Index had stabilized.  Perhaps a better word for it now is that  it stagnates.

Since the autumn of 2008, the S&P 500 is up 75% in what we term a stealth bull market, getting very little respect, while, during this same time period, our HH Index is down 60%.

The high for our HH Index was set in September, 2008 at 41.75, and then, within five months it dropped to $21.

One Home Care Stock Shines: 

Addus HealthCare , because they have very little Medicare revenue, is not included in our HH Index  (NASDAQ:ADUS).  On March 1 they announced the sale of substantially all of the assets of their home health division (primarily Medicare).  They state that they will now focus on the dual eligible Medicaid population.

Since that sale, in this one month period, the stock price increased from 8.81 to 13.19, up 50%.  They are now up 84% YTD.  Only one year ago they were at $5.

Here are the results for our HH  Index:

Company Stock Price 03/31/13 Change in %,  Month Change in %,  YTD Stock Price 03/31/12 Change in %, year
Almost Family 20.43 -0.78% +0.84% 26.01 -21.45%
Amedisys 11.12 -2.11% -1.68% 14.46 -23.10%
Gentiva 10.82 +2.85% +7.66% 8.75 +23.66%
LHC Group 21.15 +5.81% -1.33% 17.71 +16.03%
Home Health Index 15.97 +1.72% 0.73% 16.94 -5.73%
S&P 500 1569.19 +3.62% 10.03% 1408.47 11.41%
Addus 13.19 +49.72% +84.48 4.95 +166.46%

 GRAPHS:  This first graph shows the HH Index compared to the actual prices of the individual companies that make up the chart through March, 2013.

Note that by hovering your pointer over a spot, you will get the price at that point.  For the past decade, it’s been quite a ride

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi.html” width=”604″ height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index vs. S&P 500 Index

This second chart compares the percentage change of the HH index to the percentage change in the S&P 500 index through March, 2013.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-vs-sp.html” height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index 12 Months Trailing

This third graph is a 12 month trailing chart of the HH Index compared to the actual prices of the individual companies that make up the chart, through March, 2013.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-12.html” height=”450″ scrolling=”no”]

INDUSTRY GROWTH –What follows are the year end results for all companies in the HH Index, compared to the previous year.  By the numbers…..

(In Thousands) Year 2012 Year 2011 Change % Change
Almost Family
   Revenue       348,524      339,853    +8,671     +2.6%
   Gross Profit       167,700     172, 787    -5,087     -2.9%
   Gross Profit %          48.1%         50.8%       -2.7     -5.3%
   EBITDA       32,595      38,799   -6,204   -16.0%
Amedisys
   Revenue 1,487,900 1,468,300 +19,600 +1.3%
  Gross Profit   646,800   687,700  -40,900 -5.9%
  Gross Profit %   43.5%   46.8% -3.3 -7.1%
  EBITDA  103,200
 Gentiva
   Revenue 1,712,804 1,798,778   -85,974 -4.8%
  Gross Profit    804,063   850,323   -46,260   -5.4%
  Gross Profit %    46.9% 47.3%   -0.4 –  0.8%
  EBITDA    1,638    -4,836   +6,474     NA
 LHC Group
   Revenue 637,569 633,972 +3,597 +0.5%
   Gross Profit  271,817  281,526 -9,655  -3.4%
   Gross Profit % 42.6% 44.4% -1.7 -3.9%
   EBITDA 62,100
TOTALS
Revenue 4,186,797 4,240,903 -54,106 -1.3%
Gross Profit 271,817 281,526 -9,709 -5.1%
Gross Profit % 45.15% 46.98% -1.8 -3.9%

The numbers speak for themselves.  Gentiva was the only company that was  down in revenue, a sizable $86 million, however all four companies were down in gross profit dollars, which is rather distressing.  As a result, for the total, we were down over $54 million in revenue, $9.7 million in gross profit dollars and down 3.9% in percentage of gross profit.  Not a particularly attractive picture.

To make matters even worse we have the 2% sequestration cut that took place April 1…..which we no longer hear anything about in the news.  Hopefully congress is in super secret sessions coming up with a solution.  One thing for sure, as our quote above states, their salary and benefits are not affected.

MERGER & ACQUISITION ACTIVITY

After a very busy year-end, there has been very little in announced sales.

LAFAYETTE, La. (April 2, 2013) – LHC Group Inc. (NASDAQ: LHCG) has acquired the assets of Infirmary Hospice Care in the State of Alabama, which is a Certificate of Need (CON) State for hospice services. The acquired hospice agency, located in Mobile, Alabama, will continue to operate under the name Infirmary Hospice Care through the remainder of 2013 and serve Mobile and Baldwin counties. Current annual revenue for this agency is approximately $2.5 million.

Other than that one announcement we have not seen any other acquisitions announced.  We continued to expect M&A to return as a driver of growth as reimbursement visibility improves.

If you hear of any sales please let us know.  At the end of this column we have a form you can send to us that can be sent anonymously.

MULTIPLES OF EBITDA based on Enterprise Value (EV) from earning results through the 4th quarter 2012 with stock prices as of March 28, 2013.

Company Multiple of EV/EBITDA
Almost Family 5.2
Amedisys 4.3
Gentiva 6.1
LHC Group 6.3

Do you know of any acquisitions that have taken place?  We would be interested in your comments. At the end of this column we have added a section for comments.  These can be sent anonymously.  The return email address can be left blank.  We are interested in what you have to say, or acquisitions that you know about.

Cartoon of the Month, no caption needed

http://www.technologyinvestor.com/wp-content/uploads/2013/04/DragonSlayer.jpg

He has slayed the dragon, but she complains about the blood stains…..I thought it very funny.

Early this morning, as I was writing this column (still dark outside), a frog plopped on my desk…right there on the mouse pad, came down from the bookshelf in my den, then jumped to my computer screen.  Scared me to death.  I immediately reached out and grabbed him and he of course peed in my hand.

I threw him outside and told my wife about my scary early morning confrontation with interior wildlife.  Not missing a beat she asked if I washed my hands.  ‘Till next month, Don Cummins

MORE:  And for additional musings on the state of homecare and what’s going on at Stoneridge Partners, visit our blog, which is updated regularly:stoneridgepartners.com/blog 

Links to Google Finance: Almost Family | Amedisys | Gentiva | LHC Group

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March 1st 2013 Update

[pl_alertbox type=”info”]
This Home Health Index (HH Index) measures the performance of four publicly traded home health companies, all listed on the NASDAQ — Almost Family (AFAM), LHC Group (LHCG), Gentiva (GTIV) and Amedisys (AMED). This index is updated monthly.
[/pl_alertbox]

Quote of the Month

Regarding Sequestration:

“The only thing I  know for sure (about sequestration) is that the salaries and benefits (esp. healthcare plans) that our congressmen, congresswomen and senators receive won’t be affected one iota by sequestration.”  Harry Newton

“The sky is falling, the sky is falling”  Chicken Little to Foxy Loxy as told by Rebecca Emberley

UPDATE:  The Stoneridge Partners Home Health Index Stabilizes!

The Dow Jones Industrial Average closes at a new all-time high…..it seems the stock market is not only unafraid of sequestration…..in fact the market seems to like it.

While the stock market in general continues climbing in this four year “stealth” bull market, the good news for the Stoneridge Partners Home Health Index is that it now appears to be stabilizing in the 15 dollar area…..very little change over the last six months.

Here are the results:

Company Stock Price 02/28/13 Stock Price 01/31/13 Change in %,  month Stock Price 02/29/12 Change in %, year
Almost Family 20.59 20.02 2.85% 22.88 -10.01%
Amedisys 11.36 11.12 2.16% 12.85 -11.60%
Gentiva 10.52 9.91 6.16% 7.85 +34.01%
LHC Group 20.32 21.36 -4.87% 17.02 +19.39%
Home Health Index 15.70 15.60 0.61% 15.15 +3.61%
S&P 500 1514.68 1498.11 1.11% 1365.88 10.91%

Both LHC Group and Gentiva are up nicely over this past year with Gentiva leading the pack…..up over 34% from one year ago.

The high for our HH Index was set in September, 2008 at 41.75.  It fell all the way down to 11.77 in December, 2011 and now sits at 15.70.   Its been quite a ride.

We also note that on March 1,  Addus HealthCare’s stock was  at 8.81 up a sparkling 144% from one year ago.  Impressive. They are a public company (NASDAQ:ADUS), but, because they are not dependent upon Medicare revenue, they are not included in our HH Index.

On March 1 Addus announced the sale of  substantially all of the assets of its home health division to LHC Group.  See our notes on this sale below under M&A activity.

GRAPHS:  This first graph shows the HH Index compared to the actual prices of the individual companies that make up the chart through February, 2013.

Note that by hovering your pointer over a spot, you will get the price at that point.  For the past decade, it’s been quite a ride

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi.html” width=”604″ height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index vs. S&P 500 Index

This second chart compares the percentage change of the HH index to the percentage change in the S&P 500 index through February, 2013.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-vs-sp.html” height=”450″ scrolling=”no”]

Stoneridge Partners Home Health Index 12 Months Trailing

This third graph is a 12 month trailing chart of the HH Index compared to the actual prices of the individual companies that make up the chart, through February, 2013.

[iframe_loader src=”http://stoneridgepartners.com/hhi/hhi-12.html” height=”450″ scrolling=”no”]

INDUSTRY GROWTH – In a recent column we showed a chart with third quarter results for the previous three years showing virtually no revenue growth while actual gross profit dollars, due primarily to unfavorable Medicare rate cuts, actually decreased by 9%.

Based on year-end results from two of the public companies in our HH Index, this same trend seems to be continuing, with stagnant growth and significant gross profit percentage declines.  Results from Amedisys and LHC Group will be in next month’s column.

(In Thousands) Year 2012 Year 2011 Change % Change
Almost Family
   Revenue       348,524      339,853    +8,671     +2.6%
   Gross Profit       167,700      172,787    -5,087     -2.9%
   Gross Profit %          48.1%         50.8%       -2.7     -5.3%
    EBITDA        32,595       38,799   -6,204    -16.0%
 Gentiva
   Revenue   1,712,804   1,798,778   -85,974      -4.8%
   Gross Profit     804,063      850,323   -46,260      -5.4%
   Gross Profit %         46.9%          47.3%        -0.4    –  0.8%
   EBITDA        1,638        -4,836    +6,474       NA

In addition to Medicare rate reductions, Genitva’s drop in revenue was also the result of the sale or closure of a number of branches.  We can’t help but notice a nice increase in both its EBITDA and stock price.

MERGER & ACQUISITION ACTIVITY

After a very busy year-end, there has been very little in announced sales.

We completed sell-side representation on the Ohio branch of Covenant Home Health Care, however the big news in the industry was the sale of the home health service line of Addus HomeCare to LHC Group.  In a portion of the locations that were sold, Addus retained 10% ownership.

Revenue on the locations that were sold was $36.7 million and the purchase price was $20 million.  The following is from LHC Group’s press release:

LAFAYETTE, La. (Feb. 28, 2013) – LHC Group Inc. (NASDAQ: LHCG) has completed the previously announced acquisition of the home health service line of Addus HomeCare Corp.  (NASDAQ: ADUS). The closing will be effective at 12:01 a.m. on March 1, 2013.  All conditions to closing have been satisfied.

The acquisition encompasses 19 home health agencies and two hospice agencies in five states.  Specifically, LHC Group acquired 100 percent of the assets of three home health agencies in Arkansas, one home health agency and two hospice agencies in South Carolina and one home health agency in Nevada.  The company also acquired 90 percent of the assets of eight home health agencies in Illinois and six in California, with Addus retaining a 10 percent ownership interest in those locations.  Both Arkansas and South Carolina are certificate of need states.

The estimated 65 and older population in the acquired service area totals 2.6 million.  Annual revenue is approximately $36.7 million.  Purchase price for the transaction was $20 million.  LHC Group, a national provider of post-acute care, now operates more than 300 locations in 23 states nationwide.

Mark Heaney, President and CEO of Addus HomeCare, in his press release said, “We are pleased to complete the sale of the home health assets and will focus our attention on our growing home & community business, which benefits from a significant opportunity by serving a large and growing, high cost elderly dual eligible population.”

Again, no further announcements on M&A from the public companies

Multiples of Economic Value EBITDA from earning results through the 3rd quarter 2012 with stock prices as of March 1, 2013.

Company Multiple of EV/EBITDA
Almost Family 5.6
Amedisys 5.4
Gentiva 7.9

Do you know of any acquisitions that have taken place?  We would be interested in your comments. At the end of this column we have added a section for comments.  These can be sent anonymously.  The return email address can be left blank.  We are interested in what you have to say, or acquisitions that you know about.

Cartoon of the Month:

And for your general amusement….. on differences between men and women.

ARGUMENTS
A woman has the last word in any argument.
Anything a man says after that is the beginning of a new argument.

THOUGHT FOR THE DAY
A married man forgets his mistakes. There’s no use in two people remembering the same thing!

MORE:  And for additional musings on the state of homecare and what’s going on at Stoneridge Partners, visit our blog, which is updated regularly:stoneridgepartners.com/blog 

Links to Google Finance: Almost Family | Amedisys | Gentiva | LHC Group

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