February 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:

“If Congress leaves the current laws unchanged, the debt will be 77% of GDP by the end of the decade.  At that level our country would be incurring costs and bearing risks that we have not had in our history except for a few years around the end of World War II.”

Congressional Budget Office (CBO), a nonpartisan agency that advises Congress.

UPDATE:  The Stoneridge Partners Home Health Index Drops Again!

While the S&P 500 had its best January since 1997, (the dot.com boom) up over 5%,  unfortunately our Stoneridge Partners Index (HH Index) dropped 1.58%.  Note that, although we are up 21% for the trailing 12 months, we are down 7.9% for the past 10 months.  The S&P 500 is up 6.4% for that same 10 month period.

Here are the results:

Company Stock Price 12/31/12 Stock Price 01/31/13 Change in % Mos Change in % Trailing 12 Mos Change in % Trailing 10 Mos
Almost Family 20.26 20.02 -1.18% +6.26% -23.03%
Amedisys 11.31 11.12 -1.68% +5.90% -23.1%
Gentiva 10.05 9.91 -1.39% +36.50% +13.26%
LHC Group 21.79 21.36 -1.97% +44.32% 15.27%
Home Health Index 15.85 15.60 -1.58% +21.42% -7.88%
S&P 500 1426.19 1498.11 +5.04% +14.15% +6.36%

On the bright side, both LHC Group and Gentiva are up nicely over the last 10 months, and over the last 12 months LHC Group leads, up over 44%.

This past month all four stocks in our index were down, while the S&P 500 was up nicely.

The high for our Index was set in September, 2008 at 41.75….now 15.6 and dropping.

We also note that on February 1,  Addus HealthCare’s stock was  at 8.28 up a sparkling 120% for the trailing 12 months.  Impressive. They are a public company (NASDAQ:ADUS), but, because they are not heavily dependent upon Medicare revenue, they are not in our HH Index.

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

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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 January, 2013.

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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 January, 2013.

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INDUSTRY GROWTH – In a recent column we had a chart that showed third quarter results for the previous three years showing virtually no revenue growth while actual gross profit dollars actually decreased by 9%.

In this upcoming month we will see year-end earnings reports.  First up is going to be Gentiva on February 7.  We will be watching closely, and will have a complete summary in next month’s column.

MERGER & ACQUISITION ACTIVITY

As we predicted, December brought a rush of sales as companies attempted to get transactions closed in 2012 in order to beat the increase in capital gains.  We had two substantial sales that closed after 5 pm on December 31.

Here are is a rundown of a few:

Closed by Stoneridge:

Recovery Home Care- Florida
Partners in Care – North Carolina
Premier Care – Ohio
Carefree Homecare – Arizona
Allied Home Care – Florida – merger

Other Announcements of Agencies and Hospices Sold

Home Healthcare Connection – Kansas
Excella Healthcare – Northeast
American Senior Care – Virginia
Community Homecare and Hospice – North Carolina and Texas
Sante Pediatric Services
SolAmor Hospice Care
Hospice Advantage – Michigan – Recapitalization
Homecare Advantage – California

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

Capital Gains:  Regarding the increase in Capital Gains tax….it is said that this increase affects only the wealthy;  a 5% increase for those couples with taxable incomes over $450,000, and another 3.8% tax tied to the Affordable Health Care Act that affects couples with taxable incomes over $250,000. (Affordable?)

This change however may result in a tax increase of over 30% from 2012 levels.  Not peanuts.  See our complete article regarding taxes on the sale of businesses on this web site under the tab marked “Articles”.

Multiples of Economic Value EBITDA from earning results through the 3rd quarter 2012 with stock prices as of January 31, 2013.

Company Multiple of EBITDA
Almost Family 5.3
Amedisys 5.3
Gentiva 7.8

FREE WEBINAR:  On Wednesday, February 13 at 2 pm Eastern Time we will be giving our presentation on Building the Value of a Home Health Agency – For M&A Purposes.  We have given a similar presentation at NAHC’s annual conference.  This will be updated to give you the latest information on market conditions.  To register just hit the link at the top of this page.

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:

13_02_03 Off Leash

 

And for your general amusement from the student who flunked his exam

Q1. In which battle did Napoleon die?
* his last battle

Q2. Where was the Declaration of Independence signed?
* at the bottom of the page

Q3. River Ravi flows in which state?
* liquid

Q4. What is the main reason for divorce?
* marriage

Q5. What is the main reason for failure?
* exams

Q6. What can you never eat for breakfast?
* Lunch & dinner

Q7. What looks like half an apple?
* The other half

Q8. If you throw a red stone into the blue sea what it will become?
* It will become wet

Q9. How can a man go eight days without sleeping?
* No problem, he sleeps at night.

Q10. How can you lift an elephant with one hand?
* You will never find an elephant that has only one hand..

Q11. If it took eight men ten hours to build a wall, how long would it take four men to
build it?
* No time at all, the wall is already built.

Q12. How can u drop a raw egg onto a concrete floor without cracking it?
*Any way you want, concrete floors are very hard to crack

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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