July 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:

“All Gentiva stock owners should send a “strong signal” to Gentiva’s board by tendering their shares in support of Kindred’s increased offer”   Spokesperson for Kindred Healthcare, Inc.

If a majority of Gentiva’s shares are tendered, Kindred said it expects to amend the offer to purchase 14.9 percent of Gentiva’s shares, a move that would make it the largest shareholder and avoid triggering the poison pill measure.

The Stoneridge Partners Home Health Index (HH Index) increases by 8.2%.

Last month we saw our Stoneridge Partners Home Health Index increase by 9% and this month we are up another 8.2%.  The increases in the stock market as a whole also continue with the S&P 500 hitting all time highs, and now up five straight months.

The stock prices of the four public companies that make up our index however present a very mixed story.  A good part of this increase appears to be due to Kindred’s continued pursuit of Gentiva.  At the end of April,  Gentiva’s stock sold for $7.53.  At the close of June it was priced at 15.06 for exactly a 100% increase.

During this past month there were rumors that Gentiva is looking at Amedisys as an acquisition target.  Kindred then sent a letter to Gentiva raising concerns about this potential transaction.

On June 27th Amedisys stock made a sizable jump after announcing their second quarter earnings.  Amedisys is now up close to 23% over the last two months.

During this same two month period both Almost Family and LHC Group were up a little less than 3%.

The high for our HH Index was set in September, 2008 at 41.75.  We now sit at 18.81, down 55%.

Here are this month’s results:

Company 6/30/14 5/31/14 Mos % Change YTD % Change Year Ago % Change
Almost Family 22.08 20.54 +6.97% -31.70% +15.66%
Amedisys 16.74 14.55 +13.08% +14.42% +44.31%
Gentiva 15.06 13.63 +9.50% +21.35% +51.20%
LHC Group 21.37 20.37 +4.68% -11.11% +9.14%
HH Index 18.81 17.27 +8.19% -9.78% +24.94%
S&P 500 1960.41 19.23.57 +1.88%  +6.06% +22.05%
Addus 22.48 22.76 -1.25%  +0.13% +13.88%

On a very positive note all stocks in our index are up over one year ago with our HH Index up 25%.

IN THE NEWS:

Gentiva-Kindred: News regarding the potential Kindred – Gentiva transaction continues to dominate the home care news, and now, to make things more interesting, we have a rumor of a possible Gentiva – Amedisys transaction.  Link to article:  Kendrid – Gentiva – Amedisys

There appear to be good  synergies between Gentiva and Amedisys, and with private equity firm KK&R owning a substantial chunk of Amedisys, and also holding a seat on the board, perhaps this rumor should be taken seriously.

Will Kindred buy Gentiva or will Gentiva buy Amedisys?  Good question, but we can’t help but think that one of these possibilities will become a reality.

GRAPHS: 

This first graph shows the HH Index compared to the actual prices of the individual companies that make up the chart through June, 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 13 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 June, 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”]

PERCENT OF REVENUE & MULTIPLE OF EBITDA: 

Enterprise Value = EV
Company EV as % of Revenue
Almost Family 65%
Amedisys 51%
Gentiva 93%
LHC Group 69%
Addus 82%

MULTIPLES OF EBITDA 

Company Multiple of EV/EBITDA
Almost Family 16.96
Amedisys 19.72
Gentiva 12.93
LHC Group 8.60
Addus 12.80

The above calculations are based on Enterprise Value (EV), with data provided by Capital IQ.  EV has been calculated based on stock prices June 1.

Enterprise value is calculated as market cap plus debt, minority interest and preferred shares, minus total cash and cash equivalents.  EBITDA is calculated using methodology that may differ from that used by a company it is reporting.

MERGER & ACQUISITION ACTIVITY:

Graham Holdings-Residential Healthcare:  In one of the more interesting transactions it was recently announced that Graham Holdings, the company created from the sale of the Washington Post, has acquired a majority interest in Troy, Mich. based Residential Healthcare Group, the parent company of Residential Home Health and Residential Hospice.  Residential will continue to be run by its current CEO and its management team will remain in place.

We note that this acquisition follows the Washington Post’s purchase in Oct, 2012 of a majority of stake in Celtic Healthcare, which provides home care services in Pennsylvania and Maryland.

Donald E. Graham, chairman and chief executive of Graham Holdings, said in a statement that the acquisition was part of his group’s “ongoing strategy of acquiring companies with demonstrated earnings potential and strong management teams attracted to our long-term investment horizon.”

To read the entire press release:   Graham Holdings – Residential

Black Stone: Health Services Connection Inc., a 20-year-old Toledo home health-care agency, has been acquired by Home Care by Black Stone.

“One of the main reasons we pursued this acquisition is because they serve predominantly dual-eligible PASSPORT patients both Medicare and Medicaid,” said Darren Horrigan, vice president. Health Services Connection, which has 30 employees, was founded by Kathy Crabtree in 1994.  It will become part of Nursing Resources by Black Stone.

C&M Health Services, purchased Health & Comfort Home Care Agency, a home care agency in North Brunswick, NJ that provides services throughout the state of New Jersey. The principals of the new company have years of experience in the home health care industry, including extensive familiarity with advanced technological solutions that help individuals age-in-place and provide continuity of care.

Addus Home Care (ADUS) announced their acquisition of CURA Partners, doing business as Aid & Assist at Home, which includes eight offices providing personal care services throughout Tennessee.  Annual revenues are projected at $12 to $13 million.

STONERIDGE PARTNERS TRANSACTIONS:

Greystone Health Network finalized their acquisition of Senior Solutions Home Health Care.  Cory Mertz, one of our  Stoneridge Partners, provided sell-side advisory services.

Greystone-Senior Solutions

COMPANIES EXCLUSIVELY LISTED FOR SALE BY STONERIDGE:

  • Arizona – $2 million hospice located in large Metropolitan area.  Clean surveys and no CAP issues.  Stoneridge file #S-6210.
  • Ohio – $2.5 million Medicare agency in Columbus area, 75% traditional Medicare, long history of quality care.  Stoneridge file S-5232.
  • Illinois – Profitable $5.5M revenue Medicare home care and hospice serving the northern Chicago MSA.  Mature management team in place, a diverse referral base and strong outcomes — exceeding state and national averages on 15 of 22 quality measures as measured by Medicare’s “home health compare”.  Stoneridge file S-5288.
  • Ohio – $11 million Ohio Medicaid Provider.  Experienced management team will stay with new owner.  Stoneridge file S-5283
  • Mountain west – $18 million multi location home care and hospice with over $2.7 million EBITDA.  Strong management team in place.  Stoneridge file #S-5245.
  • Georgia – Medicaid provider with over $6 million in revenue, 40% gross margin, and approx. $800K in EBITDA.  Stoneridge file S-5263.
  • Texas – Multi-location private duty home care agency, $3.4 million revenue with a consistent 40% gross profit produces 15% EBITDA.   A quality agency evidenced by their latest survey with zero deficiencies,  Stoneridge file #S-4250.
  • West Virginia – Medicare home care agency in CON state.  $3 million in revenue, growing with new CON territories being developed.  Strong management team.  Stoneridge file S-5261.
  • Texas – $3.5 million Medicare & Medicaid provider.  40% pediatric services, Gross margin of 48% and adjusted EBITDA of $400,000.  Stoneridge file #S-5231.
  • Minnesota – Medicaid home care agency.  Large and diversified with $11 million in revenue, with unique license that positions it well for growth.  Stoneridge fileS-5268.
  • Florida – Diversified Medicare/Medicaid Home Care Agency with revenue of approx. $4 million.  Professionally operated with excellent financial records.  Stoneridge file S-5280.
  • Dallas-Ft. Worth – $1.7 million of pure high-end private pay.  No Medicare/Medicaid. Professionally run and profitable.  Stoneridge file S-5281.
  • California – $8.3 Million Private Duty and Medicare Provider. Predominately a private duty provider, this agency also operates a small, but significant, Medicare operation, making it a unique opportunity.  Owner will consider selling the business lines separately. Stoneridge file S-3098.
  • East Texas – $1.3 million Medicare agency, profitable and growing.  Stoneridge file #S-5264.
  • California – Los Angeles Medicare, Medi-Cal and private pay skilled care provider.They have a long history in the local community and top-notch management that is willing to stay with a new owner.  Stoneridge file #S-3000.

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.

From the New Yorker

Alarm

 

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 –  800-218-3944

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

 

 

 

 

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