EX-99.2 2 d739724dex992.htm EX-99.2 EX-99.2

Exhibit 99.2

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial information is based on the historical financial information of LHC Group, Inc. (“LHCG” or the “Company”) and has been prepared to reflect the acquisition of Deaconess HomeCare, LLC, (“Deaconess”) a subsidiary of BioScrip, Inc. (“BioScrip”). The pro forma data in the unaudited pro forma condensed combined balance sheets as of March 31, 2014 assume that the acquisition of Deaconess by LHCG was completed on that date. The data in the unaudited pro forma condensed combined statements of income for the year ended December 31, 2013 and the three months ended March 31, 2014 assume the acquisition was completed at the beginning of each period.

The Company accounts for business combinations under Generally Accepted Accounting Principles (“GAAP”) pursuant to ASC 805. In accordance with ASC 805, the Company recognizes, separately from goodwill, the identifiable assets acquired, the liabilities assumed, and any noncontrolling interests in an acquiree, generally at the acquisition date fair value as defined by ASC 805. Goodwill as of the acquisition date is measured as the amount (if any) by which the consideration transferred, which is generally measured at fair value, exceeds the net of the acquisition date fair value amounts of the identifiable assets acquired and the liabilities assumed.

The Company has made significant assumptions and estimates in determining the preliminary allocation of the purchase price for purposes of preparing the unaudited pro forma condensed combined financial statements. These preliminary estimates and assumptions are subject to change during the measurement period (up to one year from the acquisition date) as the Company finalizes the valuation of certain tangible and intangible assets acquired and liabilities assumed in connection with the acquisition. These changes could result in material variances between the Company’s future financial results and the amounts presented in these unaudited pro forma condensed combined financial statements, including variances in fair values recorded, as well as expenses associated with these items.

The unaudited pro forma condensed combined financial statements are not intended to represent or be indicative of the Company’s consolidated results of operations or financial position that would have been reported had the acquisition been completed as of the dates presented, and should not be taken as a representation of the Company’s future consolidated results of operations or financial position. The unaudited pro forma condensed combined financial statements also do not reflect operating efficiencies and associated cost savings that the Company may achieve with respect to the combined companies. The unaudited pro forma condensed combined financial statements should be read in conjunction with the Company’s historical consolidated financial statements and accompanying notes included in its Annual Report on Form 10-K for the year ended December 31, 2013.


LHC GROUP, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEETS

MARCH 31, 2014

(Amounts in thousands)

 

     LHCG     Deaconess      Pro Forma
adjustments related
to Acquisition
          Pro
Forma
 
ASSETS            

Current assets:

           

Cash

   $ 3,395      $       $        $ 3,395   

Receivables:

           

Patient accounts receivable, net

     84,470        12,014         (771     (a     95,713   

Other receivables

     730                         730   

Amounts due from governmental entities

     1,166                         1,166   
  

 

 

   

 

 

    

 

 

     

 

 

 

Total receivables, net

     86,366        12,014         (771       97,609   

Deferred income taxes

     9,655                         9,655   

Prepaid income taxes

     3,821                    3,821   

Prepaid expenses

     7,361        242         (6     (a     7,597   

Other current assets

     4,186                         4,186   
  

 

 

   

 

 

    

 

 

     

 

 

 

Total current assets

     114,784        12,256         (777       126,263   

Property, building and equipment, net

     31,273        402                  31,675   

Goodwill

     196,358        237         (237     (c  
          28,395        (d     224,753   

Intangible assets, net

     62,047        15,400         (15,400     (c  
          22,678        (a     84,725   

Other assets

     63,638        28         (59,500     (e     4,166   
  

 

 

   

 

 

    

 

 

     

 

 

 

Total assets

   $ 468,100      $ 28,323       $ (24,841     $ 471,582   
  

 

 

   

 

 

    

 

 

     

 

 

 

LIABILITIES AND STOCKHOLDERS’

EQUITY

           

Current liabilities:

           

Accounts payable and other accrued liabilities

   $ 17,587      $ 1,033       $ 178        (a   $ 18,798   

Salaries, wages and benefits payable

     24,521        2,295         (24     (a     26,792   

Self insurance reserve

     6,502                         6,502   

Current portion of long-term debt

     222                         222   

Amounts due to governmental entities

     3,664                         3,664   
  

 

 

   

 

 

    

 

 

     

 

 

 

Total current liabilities

     52,496        3,328         154          55,978   

Deferred income taxes

     29,859        4,273         (4,273     (f     29,859   

Income tax payable

     3,415                         3,415   

Revolving credit facility

     70,000                         70,000   

Long-term debt, less current portion

     953                         953   
  

 

 

   

 

 

    

 

 

     

 

 

 

Total liabilities

     156,723        7,601         (4,119       160,205   

Noncontrolling interest - redeemable

     10,797                         10,797   

Stockholders’ equity:

           

LHC Group, Inc. stockholders’ equity:

           

Common stock

     219                         219   

Treasury stock

     (35,442                      (35,442

Additional paid-in capital

     105,476                         105,476   

Retained earnings

     227,602        20,722         (20,722     (g     227,602   
  

 

 

   

 

 

    

 

 

     

 

 

 

Total LHC Group, Inc. stockholders’ equity

     297,855        20,722         (20,722       297,855   

Noncontrolling interest - non-redeemable

     2,725                         2,725   
  

 

 

   

 

 

    

 

 

     

 

 

 

Total stockholders’ equity

     300,580        20,722         (20,722       300,580   
  

 

 

   

 

 

    

 

 

     

 

 

 

Total liabilities and stockholders’ equity

   $ 468,100      $ 28,323       $ (24,841     $ 471,582   
  

 

 

   

 

 

    

 

 

     

 

 

 


LHC GROUP, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME

THREE MONTHS ENDED MARCH 31, 2014

(Amounts in thousands, except share and per share data)

 

     LHCG     Deaconess      Pro Forma
Adjustments
Related to
Acquisition
          Pro Forma  

Net service revenue

   $ 163,681      $ 17,541           $ 181,222   

Cost of service revenue

     97,334        10,637         502        (h     108,473   
  

 

 

   

 

 

    

 

 

     

 

 

 

Gross margin

     66,347        6,904         (502       72,749   

Provision for bad debts

     3,362        350             3,712   

General and administrative expenses

     54,612        5,881         167        (h  
          (267     (i  
          52        (j     60,445   
  

 

 

   

 

 

    

 

 

     

 

 

 

Operating income

     8,373        673         (454       8,592   

Interest expense

     (388             (265     (k     (653

Non-operating income

     33        2                  35   
  

 

 

   

 

 

    

 

 

     

 

 

 

Income before income taxes and noncontrolling interests

     8,018        675         (719       7,974   

Income tax expense

     2,923                (19     (b     2,904   
  

 

 

   

 

 

    

 

 

     

 

 

 

Net income

     5,095        675         (700       5,070   

Less net income attributable to noncontrolling interests

     1,027                         1,027   
  

 

 

   

 

 

    

 

 

     

 

 

 

Net income attributable to LHC Group, Inc.’s common stockholders

   $ 4,068      $ 675         (700     $ 4,043   
  

 

 

   

 

 

    

 

 

     

 

 

 

Earnings per share - basic:

           

Net income attributable to LHC Group, Inc.’s common stockholders

   $ 0.24             $ 0.24   

Earnings per share - diluted:

           

Net income attributable to LHC Group, Inc.’s common stockholders

   $ 0.24             $ 0.23   

Weighted average shares outstanding:

           

Basic

     17,148,043               17,148,043   

Diluted

     17,268,716               17,268,716   


LHC GROUP, INC. AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME

TWELVE MONTHS ENDED DECEMBER 31, 2013

(Amounts in thousands, except share and per share data)

 

 

     LHCG     Deaconess      Pro Forma
Adjustments
Related to
Acquisition
          Pro Forma  

Net service revenue

   $ 658,283      $ 72,277           $ 730,560   

Cost of service revenue

     383,464        43,260         2,176        (h     428,900   
  

 

 

   

 

 

    

 

 

     

 

 

 

Gross margin

     274,819        29,017         (2,176       301,660   

Provision for bad debts

     13,929        1,331                  15,260   

General and administrative expenses

     214,133        21,620         725        (h  
          206        (j     236,684   
  

 

 

   

 

 

    

 

 

     

 

 

 

Operating income

     46,757        6,066         (3,107       49,716   

Interest expense

     (1,995             (1,273     (k     (3,268

Non-operating income

     243        7                  250   
  

 

 

   

 

 

    

 

 

     

 

 

 

Income before income taxes and noncontrolling interests

     45,005        6,073         (4,380       46,698   

Income tax expense

     15,859                697        (b     16,556   
  

 

 

   

 

 

    

 

 

     

 

 

 

Net income

     29,146        6,073         (5,077       30,142   

Less net income attributable to noncontrolling interests

     6,804                         6,804   
  

 

 

   

 

 

    

 

 

     

 

 

 

Net income attributable to LHC Group, Inc.’s common stockholders

   $ 22,342      $ 6,073         (5,077     $ 23,338   
  

 

 

   

 

 

    

 

 

     

 

 

 

Earnings per share - basic:

           

Net income attributable to LHC Group, Inc.’s common stockholders

   $ 1.31             $ 1.37   

Earnings per share - diluted:

           

Net income attributable to LHC Group, Inc.’s common stockholders

   $ 1.30             $ 1.36   

Weighted average shares outstanding:

           

Basic

     17,049,794               17,049,794   

Diluted

     17,132,751               17,132,751   

See Notes to Unaudited Pro Forma Condensed Combined Financial Statements


Notes to the Unaudited Pro Forma Condensed Combined Financial Statements

NOTE 1. BASIS OF PRO FORMA PRESENTATION

On February 1, 2014, the Company announced that it entered into a definitive stock purchase agreement to acquire Deaconess HomeCare, LLC, (“Deaconess”) a subsidiary of BioScrip, Inc. (“BioScrip”), for $60 million in cash, subject to post-closing net working capital adjustments (as adjusted, the “Purchase Price”).

On April 1, 2014, the Company acquired 32 home health, hospice, and community-based service agencies located in Mississippi, Tennessee, Kentucky and Illinois at a final purchase price of $59.5 million in cash, subject to post-closing net working capital adjustments, from Deaconess HomeCare, LLC (the “Acquisition”).

The unaudited pro forma condensed combined financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission.

NOTE 2. PRELIMINARY PURCHASE PRICE

Pursuant to the Company’s business combinations accounting policy, the total preliminary purchase price for the Acquisition was first allocated to the acquired net tangible assets (tangible assets reduced by assumed liabilities) and intangible assets based upon their preliminary fair values as set forth below. Then, the amount by which the total preliminary purchase price exceeded the preliminary fair value of the net tangible assets and intangible assets was recorded as goodwill. This allocation of the purchase price was based upon a preliminary valuation of the acquired net tangible and intangible assets, and the Company’s estimates and assumptions are subject to change within the measurement period. Any change in the fair value of the acquired net tangible assets (tangible assets reduced by assumed liabilities) and intangible assets of the Acquisition will change the amount of the purchase price allocable to goodwill. The final purchase price allocation may differ materially from the allocation presented below.

The Company’s preliminary purchase price allocation for the Acquisition is as follows (amounts in thousands):

 

Net working capital

   $ 7,996   

Identifiable intangible assets

     22,678   

Net tangible assets (liabilities)

     431   

Goodwill

     28,395   
  

 

 

 

Total purchase price

   $ 59,500   
  

 

 

 

NOTE 3. PRO FORMA ADJUSTMENTS

The unaudited pro forma condensed combined financial statements give effect to the following pro forma adjustments:

 

  (a) Reflects changes to acquired assets and assumed liabilities in order to adjust those acquired assets and assumed liabilities to their preliminary fair value. Management has used certain estimates and assumptions in determining those preliminary fair values, however, management’s detailed analysis on the individual assets and liabilities has not yet been fully completed as of the date of this filing. Therefore, management’s determination of the final actual fair values may differ materially from these estimates of preliminary fair values.

 

  (b) Reflects the income tax effect of pro forma adjustments calculated using an estimated effective income tax rate.

 

  (c) Reflects the elimination of Deaconess’ goodwill and other intangible assets, as required under GAAP using the acquisition method of accounting.


  (d) Reflects the allocation of excess purchase price over Deaconess’ recorded assets and liabilities, as required under GAAP under the acquisition method of accounting.

 

  (e) Reflects the reclassification of the $59.5 million purchase price paid for the Acquisition.

 

  (f) Reflects the elimination of all Deaconess deferred tax liabilities as in conjunction with the Company’s tax basis elections under IRS Section 338(h)(10) the book and tax basis of the assets and liabilities acquired and assumed are the same.

 

  (g) Reflects the elimination of Deaconess’ stockholders’ equity, as required under GAAP using the acquisition method of accounting.

 

  (h) Reflects the calculation of the employer portion of self insurance costs related to the employee health insurance benefit plan for all Deaconess acquired employees who have elected to participate in the Company’s health insurance benefit plan.

 

  (i) Reflects the removal of acquisition costs related to the Acquisition, principally comprised of legal fees and third-party consulting costs which were directly attributable to the transaction itself.

 

  (j) Reflects the estimated impact on amortization for the preliminary fair value of non-compete agreements obtained for the benefit of the Company in connection with the Acquisition in the amount of $0.6 million, which will be amortized over a three year period. The Company is in the process of reviewing and evaluating the non-compete agreements. As such, the actual final fair values assigned to these assets may differ materially from the estimates of preliminary fair values. Additionally, the final impact on amortization expense may also be materially different than the estimates of amortization expense provided herein.

 

  (k) Reflects the estimated impact of additional debt incurred by the Company associated with the Acquisition, calculating interest expense using the Company’s current London Interbank Offered Interest Rate of 2.40% for the Company’s credit facility.