May 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:

“He gave me the biggest thrill of my life”  

Art Sherman, 77 year old trainer of California Chrome, winner of the 140th running of the Kentucky Derby.  In a story made for Hollywood, the two working owners bred an $8,000 mare to a $2,500 stallion to produce this winner.  It was the 77 year old trainer’s first time in the Derby.

The Stoneridge Partners Home Health Index (HH Index) drops over 8%

While the stock market as a whole continues to hit record highs, our Stoneridge Partners Home Health Index (HH Index) just keeps sinking…..now down four straight months…..off over 8% in April and now down 24% year to date (YTD).

All stocks in our index were down for the month and all are down YTD.  No exceptions.

Our HH Index is now up only 2.3% from one year ago, while the S&P 500 is up 18%.

The high for our HH Index was set in September, 2008 at 41.75.

Here are the results:

Company 4/30/14 3/31/14 Mos % Change YTD % Change Year Ago % Change
Almost Family 21.47 23.1 -7.06% -33.59% +8.76%
Amedisys 13.63 14.89 -8.46% -6.84% +35.76%
Gentiva 7.53 9.12 -17.43% -39.32% -28.22%
LHC Group 20.78 22.06   -5.80% -13.56% -4.33%
HH Index 15.85 17.29 -8.33% -23.98% +2.29%
S&P 500 1883.95 1872.34   +0.62%  +1.93% +17.93%
Addus 21.62 23.05 -6.20%  -3.70% +82.60%

As you can see, all stocks in our index were down for the month with Gentiva leading the charge, now off over 39% YTD.  Almost Family is right behind, down 33.6% YTD.

Its a real mixed bag however with Amedisys up 35% from one year ago, while Gentiva is down 28%.

Addus also took another hit, now down 25% since March 1.  More on Addus later in this column.   In October 2013 they set their all time high at over 32, and they now sit at 21.6….still up 82% from a year ago.  Because they have 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 April, 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 April, 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”]

IN THE NEWS:

ADDUS:  On May 1st Addus was the first out of the block with their earnings release.                                 

                                               For Three Months Ended March 31, (in thousands)

                                    2014       2013
Same Store Acquisitions Total   Change % Change
Revenue 66,516 5,167 71,683 62,998 +8,685 +12.1%
Gross Profit 1,7004 1,664 18,668 15,798 +2,879 +15.4%
25.6% 32.2% 26.0%   25.1% 0.9% +3.4%
Operating Expenses 13,803 1,095 14,898 12,056 +2,842 +19.1%
Operating Income 3,201 569 3,770 3,742 +28 +0.01%

Stock price:  April 30, 2013 = $11.84   April 30, 2014 = $21.62

From their earnings report:  “Net income from continuing operations before taxes increased despite lost service days / hours due to inclement weather in many of our markets.  Net income was also reduced by increased investment spending on information technology and a new care system, as well as higher costs related to the Company’s Sarbanes-Oxley Act Section 404 compliance program.

The Company ended the quarter with nearly $17 million in cash and $43 million available under its revolving line of credit, with $4.2 million of free cash flow generated from operations in the quarter, before considering working capital needs and investments in the new Support Center.”

To read the entire press release go to the following link:  Addus 1st Quarter 2014 Results

For the transcript of the earnings call:  Addus Transcript

Also from CEO Mark Heaney: “We will become a sales organization.  We will position ourselves to be a leading provider to Managed Care.  We will re-engineer our system of care delivery.  We will lower our costs, drive health outcomes and connect our direct care staff and our at risk consumers to the healthcare system. Essentially we will play an important role in the shift to population management.”

ALMOST FAMILY will be reporting their first quarter results on Tuesday, May 6th before the market opens.  It will be interesting to see the effect of their fourth quarter 2013 acquisition of $155 million Suncrest.

An interesting article was recently published in Seeking Alpha. “Almost Family Positioned to Roll Up Home Health”.    Read the full article now…

AMEDISYS will host a conference call to discuss results for the first quarter on Thursday, May 8, 2014 at 10:00 a.m. Eastern Time.  The Company will issue its quarterly earnings release prior to hosting the conference call.

To participate on the conference call, please call a few minutes before 10:00 a.m. ET to either (877) 512-9171 (Toll free) or (815) 573-0979, use conference ID #35785199.  A replay of the conference call will be available through June 8, 2014.  The replay dial in number is (855) 859-2056 (Toll free) or (404) 537-3406 (Toll) and use conference ID #35785199.

A live webcast of the call will be accessible through our website on our Investor Relations section at the following web address: Amedisys for Investors

On April 23rd Amedisys announced that they finalized a settlement agreement with the government on their previously announced DOJ investigation and Stark Law self-referral.  Under the terms of the civil settlement, and as disclosed previously, Amedisys will pay a total of $150 million plus interest in two installments. The first installment of $115 million plus interest must be paid by May 2, 2014, and the remaining $35 million plus interest must be paid by October 23, 2014. The company will fund the settlement through cash on hand and draws upon its existing credit facility.  Read the full article here…

LHC GROUP plans to issue its earnings release for the first quarter after the market closes on Wednesday, May 7, 2014, and will host a conference call on Thursday, May 8, 2014, at 11:00 a.m. Eastern time.  The toll-free number to call for this interactive teleconference is (866) 393-1608 (international callers should call (973) 890-8327). A telephonic replay of the conference call will be available through midnight on Thursday, May 15, 2014, by dialing (855) 8592056 (international callers should call (404) 537-3406) and entering confirmation number 25729418.

GENITVA announced that it has scheduled a conference call and webcast on Wednesday, May 7, 2014, at 10:00 a.m. ET to discuss operating results for their first quarter.  Gentiva plans to issue its financial news release the morning of May 7, 2014 before pre-market trading.

Participants in the United States, Canada and international locations may call (973) 935-2408 and reference call # 31122421.   A replay of the call will be available on May 7, beginning at approximately 1:00 p.m. ET, and will remain available continuously through May 14.

To listen to a replay of the call from the United States, Canada or international locations dial (800) 585-8367 or (404) 537-3406 and enter the following PIN at the prompt: 31122421.

EARNINGS: We will be running a complete review of the fist quarter earnings reports in next month’s column.

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
Company EV as % of Revenue
Almost Family 69%
Amedisys 39%
Gentiva 79%
LHC Group 58%
Addus 84%

MULTIPLES OF EBITDA 

Company Multiple of EV/EBITDA
Almost Family 14.171
Amedisys 10.63
Gentiva 10.47
LHC Group 6.68
Addus 12.6

The above calculations are based on Enterprise Value (EV), with data provided by Capital IQ.  EV has been calculated based on stock prices May 1.  EBITDA is calculated using methodology that may differ from that used by a company it is reporting.

MERGER & ACQUISITION ACTIVITY:

We enjoyed the above quote from Keith Myers, CEO of LHC Group:

We’ve worked hard….to prepare for what we believe will be an unprecedented period of consolidation in the home health industry.”

And this from Bill Dombi….

“As a result of cuts in Medicare reimbursement, 70% of home health providers will be underwater.”  Bill Dombi, Vice President of Legal 

Elmhurst Memorial Home Health and Elmhurst Memorial Hospice have become part of Residential Home Health, ranked among the leading home healthcare providers in the U.S. Current patients may continue care through Residential Home Health, which will operate Elmhurst Memorial Home Health and Elmhurst Memorial Hospice with the same staff and same services.

The Ensign Group, Inc. (Nasdaq:ENSG), the parent company of the Ensign™ Group of skilled nursing, rehabilitative care services, home health and hospice care, assisted living, and urgent care companies, announced that it has acquired Life’s Doors Hospice, Life’s Doors Home Health, and Life’s Doors Home Care Solutions located in Boise, Idaho.

Wellspring Capital Partners has agreed to acquire Great Lakes Caring, a provider of hospice and home health services in Michigan, Indiana and Ohio.  The seller would be fellow private equity firm Pouschine Cook Capital Management, which first acquired Great Lakes Caring back in 2007.  Great Lakes Caring was founded in 2004 by husband-and-wife team William Deary (CEO) and Cheri Lyn Deary (COO).

NEW COMPANIES EXCLUSIVELY LISTED FOR SALE BY STONERIDGE:

  • Florida East Coast – $8 million diversified home care agency, 80% from high end private duty and 15% from traditional Medicare, accredited.  Stoneridge file S-5274
  • Diversified, Medicare certified and accredited covering 28 Ohio counties.  $2.3 million in revenue, 54% Medicare, 23% Medicaid, 23% private pay.  Stoneridge file S-5258.
  • Florida – $4 million revenue Medicare home care agency serving five counties in central Florida.  Multiple locations with strong management team in place.  Stoneridge file S-5272. 
  • Medicare home care agency in CON state West Virginia.  $3 million in revenue, growing with new CON territories being developed.  Strong management team.  Stoneridge file S-5261.
  • Medicaid home care agency in Minnesota.  Large and diversified with $11 million in revenue, with unique license that positions it well for growth.  Stoneridge fileS-5268.
  • Medicare certified and accredited home care agency, located in Maricopa County, Arizona.  Medicare census over 100.  Stoneridge file S-5262.
  • Diversified Florida Medicare/Medicaid Home Care Agency with revenue of approx. $4 million.  Professionally operated with excellent financial records.  Stoneridge file S-5280.
  •  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. Stoneridge file S-5263.
  • Medicare certified & accredited west coast Florida home care agency with $5 million in revenue.  Professional management in place, and excellent financial records.  Stoneridge Partners S-5278.
  • Dallas-Ft. Worth – $1.7 million of pure high-end private pay.  No Medicare/Medicaid. Professionally run and profitable.  Stoneridge file S-5281.

To see more home care agencies and hospices exclusively list for sale by Stoneridge Partners go to the following link:

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.

 

 

11_04_20 bean counters

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