April 1st 2013 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….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.

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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 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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