March 1st 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:

“I have been watching what is going on in Washington and their attitude toward home care and it is not a pretty picture.”  Val Halamandaris, President, National Association for Home Care & Hospice

Hot off the Press: President Obama’s 2015 budget once again calls for the introduction of a home health copay – as well as further cuts to post-acute care providers, including home health care.      Obama Budget

The Stoneridge Partners Home Health Index (HH Index) drops 1.2%

After ending 2013 at a 2 1/2 year high, our HH Index dropped over 4% in January,  and then dropped another 1.2% in February.  We are now off 5.7% for the year, while the S&P 500 is up just slightly for the year.

Our Stoneridge Partners Home Health Index (HH Index) now sits at 19.66.  The high for our HH Index was set in September, 2008 at 41.75.

On a continued positive note…..our HH Index is up 25.26% from one year ago, beating the S&P 500, up 22.76%.

Here are the results:

Company

2/28/14

% Month

2/28/13

% Year Ago

Almost Family 27.42 -9.83% 20.59 33.17%
Amedisys 16.96 12.39% 11.36 49.30%
Gentiva 10.71 -5.72% 10.52 1.81%
LHC Group 23.56 2.70% 20.32 15.94%
Home Health Index 19.66 -1.44% 15.70 25.26%
S&P 500 1859.45 4.31% 1514.68 22.76%
Addus 28.76 21.66% 8.81 226.45%

As you can see, these results are a mixed bag.  Almost Family, after a three month tear following their SunCrest acquisition, is now down 15.2% for the year, while Amedisys, following the exit of their CEO, William Borne, was up over 12% for the month, and is now up close to 16% for the year.    Gentiva was down for the month and LHC Group was up.  As I said, a mixed bag

The company that continues to surprise us is Addus, up another 21.7% for the month.  In October 2013 they set their all time high at over 32 and it looks like they now are headed right back.  Considering that a year ago the stock was at a little over 8 this is truly remarkable.

Because Addus has very little Medicare revenue, they are not included in our index.

 GRAPHS:  This first graph shows the HH Index compared to the actual prices of the individual companies that make up the chart through February, 2014.

(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 for over 11 years,  going back to November, 2002.  It has been quite a ride. [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, 2014. [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”]

AMEDISYS:  This past month it was announced that William (Bill) F Borne, CEO and Chairman stepped down and was named Chairman Emeritus.

Mr. Bourne founded Amedisys in 1982 and grew it into over a billion dollar company.  A true example of the American spirit.  We have had the pleasure of meeting with Bill on several occasions and have always enjoyed his enthusiasm, humor and insight.  We applaud Bill and wish him the best.

Also at Amedisys we recently caught up with Maxine Hochhauser, former CEO of AllianceCare.   She is now the Senior VP of Business Operations.

LHC GROUP recently announced their purchase of Deaconess HomeCare and Elk Valley Health Services with annual revenues of approximately $72.6 million. The purchase price was approximately $60 million.  This transaction will add 33 locations across 27 states

Their combined service area includes 121 counties for home health, 30 counties for hospice and 95 counties for community-based services in the states of Mississippi, Tennessee, Kentucky, Illinois, and Nebraska.

GENTIVA:  Last September Gentiva announced their acquisition of Harden Healthcare, with revenue of about $475 million, consisting of 49% home health, 41% hospice and 10% community care.

On September 1, 2013, just prior to that announcement, Gentiva stock was selling for $11.47.  It closed out February at $10.71, down 6.6%.

ALMOST FAMILY:  On November 5, 2013 Almost Family announced their acquisition of SunCrest Healthcare with approximate revenue of $150 million.  The purchase price was approximately $75.5 million.

On November 1st, just prior to the acquisition Almost Family stock was selling for $19.23.  It quickly rose to over $33 but has since settled back, closing out February at 27.42, down 17% from that high.

MERGER & ACQUISITION ACTIVITY:

On the Horizon: We were recently interviewed by Amy Or of the Wall Street Journal regarding merger & acquisition activity in home care and hospice.  Private equity groups typically have a holding period of five to seven years for their platform companies.  She gave examples of a couple of pretty good size platform companies that are on the market (how did she get this confidential information?).

At any rate it will be no surprise to hear announcements of some sizable transactions.  It would seem that the large strategic home care companies are the  natural buyers.  Stay tuned.

LHC GROUP announced that in addition to the large Deaconess transaction, they have also acquired two home health providers and has entered into a definitive asset purchase agreement to acquire one hospice provider.

The transactions include a home health and community-based service provider in Tompkinsville, Ky., a home health provider in Valley, Ala., And a hospice provider located in New Orleans, La.  Combined annual revenue for these providers is approximately $1.5 million.

HOSPICE ADVANTAGE:  Rod Hildebrant, President, announced the merger of its Birmingham, Alabama location with Life Care Hospice of Gardendale

STONERIDGE PARTNERS:  We had three announced sales this past month

  • SuCasa Healthcare Services of New Mexico sold to a national health care provider.
  • The Domestic Agency, a San Antonio home care agency sold to a national healthcare provider
  • Good Health Services, a North Carolina agency sold to a national healthcare provider.

In all three transactions Stoneridge Partners provided sell-side advisory services.

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.   Selling Price = Enterprise Value = EV
But take a good look at Addus….amazing!
Company EV as % of Revenue
Almost Family 65%
Amedisys 35%
Gentiva 67%
LHC Group 69%
Addus 108%

MULTIPLES OF EBITDA 

Company Multiple of EV/EBITDA
Almost Family 10.06
Amedisys 6.68
Gentiva 6.99
LHC Group 7.32
Addus 14.40

The above calculations are based on Enterprise Value (EV), with data provided by Capital IQ.  EV has been calculated based on stock prices January 31.  EBITDA is calculated using methodology that may differ from that used by a company it is reporting.

NEW COMPANIES EXCLUSIVELY LISTED FOR SALE BY STONERIDGE:

  • Home Care & Hospice – Medicare certified & accredited, located in a southern CON state with large urban population.  Over $9 million in revenue.  Call Rhonda Gronberg and refer to file # S-5265.
  • Diversified, Medicare certified and accredited covering 28 Ohio counties.  $2.3 million in revenue, 54% Medicare, 23% Medicaid, 23% private pay.  Call Rhonda Gronberg and refer to file #S-5258.
  • Medicare certified and accredited home care agency with CONs covering nine Georgia counties.  Current run rate approximately $4 million.  Call Brian Bruenderman and refer to file # S-5270.
  • Medicare home care agency in CON state West Virginia.  $3 million in revenue, growing with new CON territories being developed.  Strong management team, call Cory Mertz and refer to file # S-5261.
  • Medicaid Home Care Agency in Midwest with over $10 million in revenue. Call Kevin Taggart and refer to file # S-5257
  • Hospice for sale in Central Indiana.  $3.2 million in revenue servicing 26 counties.  Professional management team in place.  Call Cory Mertz and refer to file # S-5277
  •  Medicaid home care agency located in Southeast USA with over $4 million in revenue and approx. $800K in EBITDA.  This is a division of a $10 million  agency, and the owner would consider selling the entire company to the right buyer. Call Kevin Taggart and refer to file #S-5263
  • Medicare certified Florida home care agency with $4 million in revenue serving five counties.  Profitable with strong growth.  Call Cory Mertz and refer to File # S-5272.

To see more home care agencies and hospices exclusively list for sale by Stoneridge Partners go to our home page then click tab “Agencies for Sale”

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.

From the Wall Street Journal….notice the executives are all pictured as old, fat and bald…..what’s with that?

14_03 financing

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”  don@stoneridgepartners.com

Previous editions of this monthly newsletter can be searched for below.

 

 

 

 

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