##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K/A
 Amendment No. 1
 þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For
the transition period from                  to
 Commission file number: 0-8082
 LHC GROUP, INC.
 (Exact Name of Registrant as Specified in Charter)
 Delaware(State or Other Jurisdiction of 
Incorporation or Organization)
    
    71-0918189(I.R.S. Employer
Identification No.)
 420 West Pinhook Rd, Suite A
Lafayette, Louisiana 70503  (Address of principal executive offices)
 (337) 233-1307
(Registrants telephone number, including area code)
 Securities registered pursuant to Section 12(b) of the Exchange Act:
 Common Stock, par value $.001 per share
    
    NASDAQ Global Select Market(Title of each class)
    
    (Name of each exchange on which registered)
 Securities registered pursuant to Section 12(g) of the Exchange Act:
None
 o þ
 o þ
 þ o
 o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE




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##### Table of Contents



EXPLANATORY NOTE




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##### 



PART IV
 Item 15. Exhibits, Financial Statement Schedules
   Report of Independent Registered Public Accounting Firm
    
    F-1Consolidated Balance Sheets as of December 31, 2007 and 2006
    
    F-2For each of the three years in the period ended December 31, 2007, 2006 and 2005:Consolidated Statements of Income
    
    F-3Consolidated Statements of Changes in Stockholders Equity
    
    F-4Consolidated Statements of Cash Flows
    
    F-5Notes to the Consolidated Financial Statements
    
    F-6EX-21.1 SUBSIDIARIES OF THE REGISTRANTEX-23.1 CONSENT OF ERNST & YOUNG LLPEX-31.1 CERTIFICATION OF KEITH G. MYERSEX-31.2 CERTIFICATION OF PETER J. ROMANEX-32.1 SECTION 906 CERTIFICATIONS OF THE CEO AND CFO




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
     Accounting for Uncertainty in Income Taxes  an
Interpretation of FASB Statement No. 109 Share-Based Payment
 Internal Control-Integrated
Framework
  
 F-1




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##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 CONSOLIDATED BALANCE SHEETS
 As of December 31,2007
    
    
    2006ASSETSCurrent assets:Cash
    
    $
    1,155
    
    
    $
    26,877Receivables:Patient accounts receivable, less allowance for uncollectible
accounts of $8,953 and $5,769 at December 31, 2007 and 2006,
respectively
    
    
    70,033
    
    
    
    50,029Other receivables
    
    
    2,425
    
    
    
    3,401Amounts due from governmental entities
    
    
    1,459
    
    
    
    2,51873,917
    
    
    
    55,948Deferred income taxes
    
    
    2,946
    
    
    
    1,935Prepaid expenses and other current assets
    
    
    4,423
    
    
    
    4,120Assets held for sale
    
    
    556
    
    
    
    1,171Total current assets
    
    
    82,997
    
    
    
    90,051Property, building and equipment, net
    
    
    12,523
    
    
    
    11,705Goodwill
    
    
    62,227
    
    
    
    39,681Intangible assets, net
    
    
    14,055
    
    
    
    8,262Other assets
    
    
    3,183
    
    
    
    2,995Total assets
    
    $
    174,985
    
    
    $
    152,694LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and other accrued liabilities
    
    $
    6,103
    
    
    $
    5,903Salaries, wages and benefits payable
    
    
    11,303
    
    
    
    10,572Amounts due to governmental entities
    
    
    3,162
    
    
    
    3,223Income taxes payable
    
    
    863
    
    
    
    1,219Current portion of capital lease obligations
    
    
    88
    
    
    
    211Current portion of long-term debt
    
    
    433
    
    
    
    428Total current liabilities
    
    
    21,952
    
    
    
    21,556Deferred income taxes
    
    
    3,243
    
    
    
    2,104Capital lease obligations, less current portion
    
    
    63
    
    
    
    147Long-term debt, less current portion
    
    
    2,847
    
    
    
    3,051Minority interests subject to exchange contracts and/or put options
    
    
    121
    
    
    
    317Other minority interests
    
    
    3,388
    
    
    
    3,630Stockholders equity:Common stock  $0.01 par value: 40,000,000 shares authorized;
20,725,713 and 20,682,317 shares issued and 17,775,284 and
17,732,258 shares outstanding at December 31, 2007 and 2006,
respectively
    
    
    177
    
    
    
    177Treasury stock  2,950,429 and 2,950,059 shares at cost at
December 31, 2007 and 2006, respectively
    
    
    (2,866
    )
    
    
    (2,856
    )Additional paid-in capital
    
    
    81,983
    
    
    
    80,273Retained earnings
    
    
    64,077
    
    
    
    44,295Total stockholders equity
    
    
    143,371
    
    
    
    121,889Total liabilities and stockholders equity
    
    $
    174,985
    
    
    $
    152,694
  F-2




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##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)
 For the Year Ended December 31,2007
    
    
    2006
    
    
    2005Net service revenue
    
    $
    298,031
    
    
    $
    218,535
    
    
    $
    155,687Cost of service revenue
    
    
    152,577
    
    
    
    112,095
    
    
    
    82,996Gross margin
    
    
    145,454
    
    
    
    106,440
    
    
    
    72,691General and administrative expenses
    
    
    106,795
    
    
    
    71,115
    
    
    
    46,519Equity-based compensation expense(1)
    
    
    
    
    
    
    
    
    
    
    3,856Operating income
    
    
    38,659
    
    
    
    35,325
    
    
    
    22,316Interest expense
    
    
    376
    
    
    
    325
    
    
    
    1,067Non-operating (income) loss, including gain or loss on
sales of assets
    
    
    (1,073
    )
    
    
    (2,033
    )
    
    
    (574
    )Income from continuing operations before income taxes
and minority interest and cooperative endeavor
allocations
    
    
    39,356
    
    
    
    37,033
    
    
    
    21,823Income tax expense
    
    
    12,147
    
    
    
    10,817
    
    
    
    6,052Minority interest and cooperative endeavor allocations
    
    
    5,984
    
    
    
    4,795
    
    
    
    4,545Income from continuing operations
    
    
    21,225
    
    
    
    21,421
    
    
    
    11,226Loss from discontinued operations (net of income tax
benefit of $239, $897 and $688 in 2007, 2006 and 2005,
respectively)
    
    
    (1,667
    )
    
    
    (1,464
    )
    
    
    (1,124
    )Gain on sale of discontinued operations (net of income
taxes of $20 and $390 in 2007 and 2006, respectively)
    
    
    31
    
    
    
    637
    
    
    
    Net income
    
    
    19,589
    
    
    
    20,594
    
    
    
    10,102Change in the redemption value of redeemable minority
interests
    
    
    193
    
    
    
    1,163
    
    
    
    (1,476
    )Net income available to common stockholders
    
    $
    19,782
    
    
    $
    21,757
    
    
    $
    8,626Earnings per share  basic:Income from continuing operations
    
    $
    1.19
    
    
    $
    1.25
    
    
    $
    0.77Loss from discontinued operations, net
    
    
    (0.09
    )
    
    
    (0.09
    )
    
    
    (0.08
    )Gain on sale of discontinued operations, net
    
    
    
    
    
    
    0.04
    
    
    
    Net income
    
    
    1.10
    
    
    
    1.20
    
    
    
    0.69Change in the redemption value of redeemable minority
interests
    
    
    0.01
    
    
    
    0.07
    
    
    
    (0.10
    )Net income available to common shareholders
    
    $
    1.11
    
    
    $
    1.27
    
    
    $
    0.59Earnings per share  diluted:Income from continuing operations
    
    $
    1.19
    
    
    $
    1.25
    
    
    $
    0.77Loss from discontinued operations, net
    
    
    (0.09
    )
    
    
    (0.09
    )
    
    
    (0.08
    )Gain on sale of discontinued operations, net
    
    
    
    
    
    
    0.04
    
    
    
    Net income
    
    
    1.10
    
    
    
    1.20
    
    
    
    0.69Change in the redemption value of redeemable minority
interests
    
    
    0.01
    
    
    
    0.07
    
    
    
    (0.10
    )Net income available to common shareholders
    
    $
    1.11
    
    
    $
    1.27
    
    
    $
    0.59Weighted average shares outstanding:Basic
    
    
    17,760,432
    
    
    
    17,090,583
    
    
    
    14,628,737Diluted
    
    
    17,827,444
    
    
    
    17,104,660
    
    
    
    14,684,639
 
 (1)
    
    Equity-based compensation is allocated as follows: 2007
    
    
    2006
    
    
    2005Cost of service revenue
    
    $
    
    
    
    $
    
    
    
    $
    565General and administrative expenses
    
    
    
    
    
    
    
    
    
    
    3,291Total equity-based compensation expense
    
    $
    
    
    
    $
    
    
    
    $
    3,856
  F-3




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##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
(Amounts in thousands, except share and per share data)
 Common Stock
    
    
    AdditionalIssued
    
    
    Treasury
    
    
    Paid-In
    
    
    RetainedAmount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Capital
    
    
    Earnings
    
    
    TotalBalances at January 1, 2005
    
    $
    121
    
    
    
    15,000,004
    
    
    $
    (2,242
    )
    
    
    2,914,850
    
    
    $
    4,421
    
    
    $
    14,051
    
    
    $
    16,351Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    10,102
    
    
    
    10,102Dividends to stockholders ($0.009 per share)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (139
    )
    
    
    (139
    )Sale of 3,500,000 shares of common stock at the initial public
offering price of $14 per share, net of underwriting discount and
offering costs of $7,393
    
    
    35
    
    
    
    3,500,000
    
    
    
    
    
    
    
    
    
    
    
    41,572
    
    
    
    
    
    
    
    41,607Issuance of common stock to two joint venture partners upon
conversion of their equity interests into shares of common stock
    
    
    5
    
    
    
    518,036
    
    
    
    
    
    
    
    
    
    
    
    7,247
    
    
    
    
    
    
    
    7,252Issuance of common stock upon conversion of outstanding KEEP units
    
    
    5
    
    
    
    481,680
    
    
    
    
    
    
    
    
    
    
    
    5,239
    
    
    
    
    
    
    
    5,244Issuance of nonvested stock
    
    
    
    
    
    
    8,167
    
    
    
    
    
    
    
    
    
    
    
    117
    
    
    
    
    
    
    
    117Treasury shares redeemed for payment of income taxes
    
    
    
    
    
    
    
    
    
    
    (614
    )
    
    
    35,209
    
    
    
    
    
    
    
    
    
    
    
    (614
    )Recording minority interest in joint venture at redemption value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,476
    )
    
    
    (1,476
    )Balances at December 31, 2005
    
    
    166
    
    
    
    19,507,887
    
    
    
    (2,856
    )
    
    
    2,950,059
    
    
    
    58,596
    
    
    
    22,538
    
    
    
    78,444Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    20,594
    
    
    
    20,594Sale of 1,150,000 shares of common stock at $19.25 per share, net
of underwriting discount and offering costs of $1,403
    
    
    11
    
    
    
    1,150,000
    
    
    
    
    
    
    
    
    
    
    
    20,711
    
    
    
    
    
    
    
    20,722Stock option compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    128
    
    
    
    
    
    
    
    128Exercise of stock options
    
    
    
    
    
    
    8,000
    
    
    
    
    
    
    
    
    
    
    
    165
    
    
    
    
    
    
    
    165Nonvested stock compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    484
    
    
    
    
    
    
    
    484Issuance of nonvested stock
    
    
    
    
    
    
    1,167
    
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    23Issuance of nonvested stock
    
    
    
    
    
    
    8,167
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock under Employee Stock Purchase Plan
    
    
    
    
    
    
    7,096
    
    
    
    
    
    
    
    
    
    
    
    166
    
    
    
    
    
    
    
    166Change in redemption value of redeemable minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,163
    
    
    
    1,163Balances at December 31, 2006
    
    
    177
    
    
    
    20,682,317
    
    
    
    (2,856
    )
    
    
    2,950,059
    
    
    
    80,273
    
    
    
    44,295
    
    
    
    121,889Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    19,589
    
    
    
    19,589Exercise of stock options
    
    
    
    
    
    
    527
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Nonvested stock compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,125
    
    
    
    
    
    
    
    1,125Issuance of nonvested stock
    
    
    
    
    
    
    25,976
    
    
    
    
    
    
    
    
    
    
    
    62
    
    
    
    
    
    
    
    62Treasury shares redeemed to pay income tax
    
    
    
    
    
    
    
    
    
    
    (10
    )
    
    
    370
    
    
    
    
    
    
    
    
    
    
    
    (10
    )Excess tax benefit  vesting of nonvested stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    104
    
    
    
    
    
    
    
    104Issuance of common stock under Employee Stock Purchase Plan
    
    
    
    
    
    
    16,893
    
    
    
    
    
    
    
    
    
    
    
    419
    
    
    
    
    
    
    
    419Change in redemption value of redeemable minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    193
    
    
    
    193Balances at December 31, 2007
    
    $
    177
    
    
    
    20,725,713
    
    
    $
    (2,866
    )
    
    
    2,950,429
    
    
    $
    81,983
    
    
    $
    64,077
    
    
    $
    143,371
  F-4




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##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
 For the Year Ended December 31,2007
    
    
    2006
    
    
    2005Operating activitiesNet income
    
    $
    19,589
    
    
    $
    20,594
    
    
    $
    10,102Adjustments to reconcile net income to net cash provided by
operating activities:Depreciation and amortization expense
    
    
    3,026
    
    
    
    2,427
    
    
    
    1,751Provision for bad debts
    
    
    13,817
    
    
    
    4,778
    
    
    
    3,188Equity based compensation expense
    
    
    
    
    
    
    
    
    
    
    3,856Stock based compensation expense
    
    
    1,187
    
    
    
    635
    
    
    
    177Minority interest in earnings of subsidiaries
    
    
    5,312
    
    
    
    4,471
    
    
    
    4,527Deferred income taxes
    
    
    127
    
    
    
    (1,253
    )
    
    
    673Gain on divestitures and sale of assets
    
    
    
    
    
    
    (979
    )
    
    
    (211
    )Changes in operating assets and liabilities, net of acquisitions:Receivables
    
    
    (31,786
    )
    
    
    (15,625
    )
    
    
    (14,478
    )Prepaid expenses, other assets
    
    
    (769
    )
    
    
    (1,466
    )
    
    
    (196
    )Accounts payable and accrued expenses
    
    
    1,676
    
    
    
    6,036
    
    
    
    (2,509
    )Net amounts due governmental entities
    
    
    (61
    )
    
    
    2,144
    
    
    
    (105
    )Net cash provided by operating activities
    
    
    12,118
    
    
    
    21,762
    
    
    
    6,775Investing activitiesPurchases of property, building and equipment
    
    
    (3,346
    )
    
    
    (3,938
    )
    
    
    (2,134
    )Proceeds from sale of property and equipment
    
    
    
    
    
    
    7
    
    
    
    Proceeds from sale of entities
    
    
    
    
    
    
    1,440
    
    
    
    730Cost of acquisitions, primarily goodwill, intangible assets and
patient accounts receivable
    
    
    (28,935
    )
    
    
    (25,009
    )
    
    
    (11,137
    )Net cash used in investing activities
    
    
    (32,281
    )
    
    
    (27,500
    )
    
    
    (12,541
    )Financing activitiesIssuance of common stock, net of underwriting discounts of
$1,104 in 2006 and $3,430 in 2005
    
    
    
    
    
    
    21,033
    
    
    
    45,570Dividends paid
    
    
    
    
    
    
    
    
    
    
    (227
    )Principal payments on debt
    
    
    (199
    )
    
    
    (1,201
    )
    
    
    (2,937
    )Payments on capital leases
    
    
    (207
    )
    
    
    (389
    )
    
    
    (1,105
    )Proceeds from issuance of debt
    
    
    
    
    
    
    
    
    
    
    24Net (payments) proceeds from lines of credit and revolving debt
arrangements
    
    
    
    
    
    
    
    
    
    
    (14,288
    )Offering costs incurred
    
    
    
    
    
    
    (311
    )
    
    
    (2,224
    )Proceeds from exercise of stock options
    
    
    
    
    
    
    135
    
    
    
    Proceeds from issuance of common stock under ESPP
    
    
    419
    
    
    
    140
    
    
    
    Minority interest contributions, net of (distributions)
    
    
    (5,572
    )
    
    
    (4,190
    )
    
    
    (4,560
    )Net cash provided by (used in) financing activities
    
    
    (5,559
    )
    
    
    15,217
    
    
    
    20,253Change in cash
    
    
    (25,722
    )
    
    
    9,479
    
    
    
    14,487Cash at beginning of period
    
    
    26,877
    
    
    
    17,398
    
    
    
    2,911Cash at end of period
    
    $
    1,155
    
    
    $
    26,877
    
    
    $
    17,398Supplemental disclosures of cash flow informationInterest paid
    
    $
    376
    
    
    $
    342
    
    
    $
    1,068Income taxes paid
    
    $
    12,052
    
    
    $
    9,370
    
    
    $
    5,821
 Supplemental disclosure of non-cash transactions:
    F-5




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##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 1. Organization
    Plan of Merger and Recapitalization
   Initial Public Offering
  2. Significant Accounting Policies
 Use of Estimates
  F-6




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##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Critical Accounting Policies
  Principles of Consolidation
    Equity Joint Ventures
  License Leasing Arrangements
  Management Services
   2007
    
    2006
    
    2005Wholly owned subsidiaries
    
    
    46.4
    %
    
    
    41.7
    %
    
    
    36.0
    %Equity joint ventures
    
    
    43.7
    
    
    
    46.3
    
    
    
    49.7License leasing arrangements
    
    
    7.8
    
    
    
    9.5
    
    
    
    11.3Management services
    
    
    2.1
    
    
    
    2.5
    
    
    
    3.0100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 F-7




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##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Revenue Recognition
        2007
    
    2006
    
    2005Home-based services
    
    
    81.9
    %
    
    
    75.4
    %
    
    
    67.8
    %Facility-based services
    
    
    18.1
    
    
    
    24.6
    
    
    
    32.2100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 F-8




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##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  2007
    
    2006
    
    2005Payor:Medicare
    
    
    81.7
    %
    
    
    82.6
    %
    
    
    86.4
    %Medicaid
    
    
    5.5
    
    
    
    5.7
    
    
    
    4.9Other
    
    
    12.8
    
    
    
    11.7
    
    
    
    8.7100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 Home-Based Services
 Home Nursing Services.
   Hospice Services.
 Facility-Based Services
 Long-Term Acute Care Services.
 F-9




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##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Outpatient Rehabilitation Services.
 Accounts Receivable and Allowances for Uncollectible Accounts
    Goodwill and Intangible Assets
     F-10




---



##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Other Significant Accounting Policies
 Due to/from Governmental Entities
  Property, Building and Equipment
   Long-Lived Assets
  Income Taxes
  Accounting for Uncertainty in Income
Taxes  an Interpretation of FASB Statement No. 109
 Minority Interest
  F-11




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##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
   Minority Interest Subject to Exchange Contracts and/or Put Options
     Equity-Based Compensation Expense
    F-12




---



##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  Stock-based Compensation
 Share-Based Payment Accounting for Stock-Based Compensation
 Accounting for
Stock Issued to Employees
  2005Net income, as reported
    
    $
    10,102Redeemable minority interests
    
    
    (1,476
    )Net income available to common stockholders, as reported
    
    
    8,626Adjustments:Stock-based compensation expense included in reported net income
    
    
    Stock-based compensation expense determined under fair value method
    
    
    (53
    )Pro forma income available to common stockholders
    
    $
    8,573Net income per common share:As reported:Basic
    
    $
    0.69Diluted
    
    $
    0.69Pro Forma:Basic
    
    $
    0.69Diluted
    
    $
    0.68Net income available to common stockholders per common share:As reported:Basic
    
    $
    0.59Diluted
    
    $
    0.59Pro Forma:Basic
    
    $
    0.59Diluted
    
    $
    0.58
 F-13




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##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  December 31,2005Risk free interest rate
    
    
    3.72-4.54
    %Expected life (years)
    
    
    5Volatility
    
    
    41.62-43.50Expected annual dividend yield
    
    
    
 Earnings Per Share
   2007
    
    2006
    
    2005Weighted average number of shares outstanding for basic per share
calculation
    
    
    17,760,432
    
    
    
    17,090,583
    
    
    
    14,628,737Effect of dilutive potential shares:Options
    
    
    6,461
    
    
    
    2,399
    
    
    
    790Restricted stock
    
    
    60,551
    
    
    
    11,678
    
    
    
    1,112KEEP Units
    
    
    
    
    
    
    
    
    
    
    54,000Adjusted weighted average shares for diluted per share calculation
    
    
    17,827,444
    
    
    
    17,104,660
    
    
    
    14,684,639
 Recently Issued Accounting Pronouncements
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities, Including an Amendment to SFAS 115
 Business Combinations
 Noncontrolling Interests in Consolidated Financial
Statements  an Amendment of ARB No. 51
 F-14




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##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  3. Acquisitions and Divestitures
  2007 Acquisitions
  2007 Divestitures
   2006 Acquisitions
   2006 Divestitures
  F-15




---



##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
  2005 Acquisitions
    2005 Divestitures
    2007
    
    
    2006
    
    
    2005(In thousands)Net service revenue
    
    $
    2,979
    
    
    $
    5,261
    
    
    $
    6,863Costs, expenses and minority interest and cooperative endeavor
allocations
    
    
    4,885
    
    
    
    7,622
    
    
    
    8,675Loss from discontinued operations before income taxes
    
    
    (1,906
    )
    
    
    (2,361
    )
    
    
    (1,812
    )Income taxes
    
    
    239
    
    
    
    897
    
    
    
    688Loss from discontinued operations
    
    $
    (1,667
    )
    
    $
    (1,464
    )
    
    $
    (1,124
    )
  2007
    
    
    2006(In thousands)Home-based services segment:Balances at beginning of period
    
    $
    35,740
    
    
    $
    21,692Goodwill acquired during the period from acquisitions
    
    
    22,192
    
    
    
    13,603Goodwill retired during the period
    
    
    (48
    )
    
    
    (50
    )Goodwill acquired during the period from purchase of minority interest
    
    
    
    
    
    
    495Balance at end of period
    
    $
    57,884
    
    
    $
    35,740Facility-based services segment:Balance at beginning of period
    
    $
    3,941
    
    
    $
    4,411
 F-16




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##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 2007
    
    
    2006(In thousands)Goodwill retired during the period
    
    
    
    
    
    
    (1,046
    )Goodwill classified (to) from held for sale during the period
    
    
    402
    
    
    
    (402
    )Goodwill acquired during the period from redemption of minority interest
    
    
    
    
    
    
    978Balance at end of period
    
    $
    4,343
    
    
    $
    3,941
  4. Income taxes
  2007
    
    
    2006(In thousands)Deferred tax liabilities:Amortization of intangible assets
    
    $
    (2,166
    )
    
    $
    (842
    )Tax in excess of book depreciation
    
    
    (1,563
    )
    
    
    (1,407
    )Prepaid expenses
    
    
    (1,095
    )
    
    
    (931
    )Non-accrual experience accounting method
    
    
    (861
    )
    
    
    (633
    )Conversion from cash basis accounting
    
    
    (11
    )
    
    
    (61
    )Deferred tax liabilities
    
    
    (5,696
    )
    
    
    (3,874
    )Deferred tax assets:Allowance for uncollectible accounts
    
    
    3,392
    
    
    
    2,045Accrued employee benefits
    
    
    1,005
    
    
    
    791Stock compensation
    
    
    495
    
    
    
    181NOL carry forward
    
    
    505
    
    
    
    Accrued self-insurance
    
    
    508
    
    
    
    688Valuation allowance
    
    
    (505
    )
    
    
    Deferred tax assets
    
    
    5,400
    
    
    
    3,705Net deferred tax liability
    
    $
    (296
    )
    
    $
    (169
    )
  2007
    
    
    2006
    
    
    2005(In thousands)Current:Federal
    
    $
    10,542
    
    
    $
    10,139
    
    
    $
    4,604State
    
    
    1,478
    
    
    
    1,931
    
    
    
    77512,020
    
    
    
    12,070
    
    
    
    5,379Deferred:Federal
    
    
    111
    
    
    
    (1,053
    )
    
    
    580State
    
    
    16
    
    
    
    (200
    )
    
    
    93127
    
    
    
    (1,253
    )
    
    
    673Total provision for income taxes
    
    $
    12,147
    
    
    $
    10,817
    
    
    $
    6,052
  F-17




---



##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 2007
    
    
    2006
    
    
    2005(In thousands)Income taxes computed at federal statutory tax rate
    
    $
    11,680
    
    
    $
    11,283
    
    
    $
    6,047State income taxes, net of federal benefit
    
    
    1,001
    
    
    
    967
    
    
    
    516Gulf Opportunity Act tax credit
    
    
    (662
    )
    
    
    (1,027
    )
    
    
    (164
    )Nondeductible expenses
    
    
    128
    
    
    
    54
    
    
    
    73Tax exempt proceeds from life insurance
    
    
    
    
    
    
    (380
    )
    
    
    Tax exempt interest income
    
    
    
    
    
    
    (80
    )
    
    
    (78
    )Tax benefit on compensation charge
    
    
    
    
    
    
    
    
    
    
    (342
    )Total provision for income taxes
    
    $
    12,147
    
    
    $
    10,817
    
    
    $
    6,052
 5. Credit Arrangements
 Long-Term Debt
  December 31,2007
    
    
    2006(In thousands)Notes payable:Due in yearly installments of $50,000 through August 2010 at 6.25%
    
    
    150
    
    
    
    190Due in monthly installments of $20,565 through October 2015 at LIBOR
plus 2.25% (6.71% at December 31, 2007)
    
    
    2,870
    
    
    
    2,898Due in monthly installments of $12,500 through November 2009 at 3.08%
    
    
    260
    
    
    
    3913,280
    
    
    
    3,479Less current portion of long-term debt
    
    
    433
    
    
    
    428$
    2,847
    
    
    $
    3,051
      F-18




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##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 2008
    
    $
    4332009
    
    
    4202010
    
    
    2972011
    
    
    2472012
    
    
    247Thereafter
    
    
    1,636$
    3,280
 Other Credit Arrangements
   Eurodollar
    
    Base RateLeverage Ratio
    
    Margin
    
    Margin< 1.00:1.00
    
    
    1.75
    %
    
    
    (0.25
    )%> 1.00:1.00 < 1.50:100
    
    
    2.00
    %
    
    
    0
    %> 1.50:1.00 < 2.00:1.00
    
    
    2.25
    %
    
    
    0
    %> 2.00:1.00
    
    
    2.50
    %
    
    
    0
    %
 6. Stockholders Equity
 Public Offering
  Share Based Compensation
  F-19




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##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
     Stock Options
  Year EndedDecember 31, 2006Risk free interest rate
    
    
    5.03
    %Expected life (years)
    
    
    5Expected volatility
    
    
    38.39Expected annual dividend yield
    
    
    
  WeightedWeighted
    
    AverageAverage
    
    Remaining
    
    AggregateNumber of
    
    Exercise
    
    Contractual
    
    IntrinsicShares
    
    Price
    
    Term
    
    ValueOptions exercisable at January 1, 2007
    
    
    21,000
    
    
    
    17.44Options granted
    
    
    
    
    
    
    Options exercised
    
    
    2,000
    
    
    
    19.75Options forfeited or expired
    
    
    
    
    
    
    Options outstanding at December 31, 2007
    
    
    19,000
    
    
    
    17.20
    
    
    8.0 yearsOptions exercisable at December 31, 2007
    
    
    19,000
    
    
    
    17.20
    
    
    8.0 years
    
    $
    147,895
  F-20




---



##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Nonvested Stock
  Number
    
    Weightedof
    
    Average GrantShares
    
    Date Fair ValueNonvested shares outstanding at December 31, 2006
    
    
    86,719
    
    
    
    18.29Granted
    
    
    197,171
    
    
    
    27.83Vested
    
    
    (25,607
    )
    
    
    18.03Forfeited
    
    
    (39,951
    )
    
    
    27.35Nonvested shares outstanding at December 31, 2007
    
    
    218,332
    
    
    
    24.03
  Employee Stock Purchase Plan
  Treasury Stock
  7. Related Party Transactions
 Employee Receivables
  F-21




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##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 8. Leases
      2008
    
    $
    6,5192009
    
    
    3,5232010
    
    
    1,9022011
    
    
    1,1192012
    
    
    955Thereafter
    
    
    1,616$
    15,634
  2008
    
    $
    882009
    
    
    632010
    
    
    2011
    
    
    2012
    
    
    Thereafter
    
    
    Total minimum lease payments
    
    
    151Current portion of capital lease obligations
    
    
    88Capital lease obligations, long-term
    
    $
    63
  9. Employee Benefit Plan
  F-22




---



##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 10. Commitments and Contingencies
 Contingencies
   Compliance
      F-23




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##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 11. Concentration of Risk
  12. Segment Information
  Year Ended December 31, 2007Home-Based
    
    Facility-BasedServices
    
    Services
    
    Total(In thousands)Net service revenue
    
    $
    244,107
    
    
    $
    53,924
    
    
    $
    298,031Cost of service revenue
    
    
    118,451
    
    
    
    34,126
    
    
    
    152,577General and administrative expenses
    
    
    88,532
    
    
    
    18,263
    
    
    
    106,795Operating income
    
    
    37,124
    
    
    
    1,535
    
    
    
    38,659Interest expense
    
    
    250
    
    
    
    126
    
    
    
    376Non operating (income) loss, including gain on sale of assets
    
    
    (746
    )
    
    
    (327
    )
    
    
    (1,073
    )Income from continuing operations before income taxes and
minority interest and cooperative endeavor allocations
    
    
    37,620
    
    
    
    1,736
    
    
    
    39,356Minority interest and cooperative endeavor allocations
    
    
    5,177
    
    
    
    807
    
    
    
    5,984Income from continuing operations before income taxes
    
    
    32,443
    
    
    
    929
    
    
    
    33,372Total assets
    
    
    151,540
    
    
    
    23,445
    
    
    
    174,985
 Year Ended December 31, 2006Home-Based
    
    Facility-BasedServices
    
    Services
    
    Total(In thousands)Net service revenue
    
    $
    164,701
    
    
    $
    53,834
    
    
    $
    218,535Cost of service revenue
    
    
    79,070
    
    
    
    33,025
    
    
    
    112,095General and administrative expenses
    
    
    55,700
    
    
    
    15,415
    
    
    
    71,115Operating income
    
    
    29,931
    
    
    
    5,394
    
    
    
    35,325Interest expense
    
    
    210
    
    
    
    115
    
    
    
    325Non operating (income) loss, including gain on sale of assets
    
    
    (1,404
    )
    
    
    (629
    )
    
    
    (2,033
    )Income from continuing operations before income taxes and
minority interest and cooperative endeavor allocations
    
    
    31,125
    
    
    
    5,908
    
    
    
    37,033Minority interest and cooperative endeavor allocations
    
    
    3,075
    
    
    
    1,720
    
    
    
    4,795Income from continuing operations before income taxes
    
    
    28,050
    
    
    
    4,188
    
    
    
    32,238Total assets
    
    
    117,585
    
    
    
    35,109
    
    
    
    152,694
 F-24




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##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 Year Ended December 31, 2005Home-Based
    
    Facility-BasedServices
    
    Services
    
    Total(In thousands)Net service revenue
    
    $
    105,588
    
    
    $
    50,099
    
    
    $
    155,687Cost of service revenue
    
    
    51,255
    
    
    
    31,741
    
    
    
    82,996General and administrative expenses
    
    
    33,650
    
    
    
    12,869
    
    
    
    46,519Equity-based compensation expense
    
    
    2,699
    
    
    
    1,157
    
    
    
    3,856Operating income
    
    
    17,984
    
    
    
    4,332
    
    
    
    22,316Interest expense
    
    
    690
    
    
    
    377
    
    
    
    1,067Non operating (income) loss, including gain on sale of assets
    
    
    (132
    )
    
    
    (442
    )
    
    
    (574
    )Income from continuing operations before income taxes and
minority interest and cooperative endeavor allocations
    
    
    17,426
    
    
    
    4,397
    
    
    
    21,823Minority interest and cooperative endeavor allocations
    
    
    3,142
    
    
    
    1,403
    
    
    
    4,545Income from continuing operations before income taxes
    
    
    14,284
    
    
    
    2,994
    
    
    
    17,278Total assets
    
    
    70,889
    
    
    
    33,729
    
    
    
    104,618
 13. Fair Value of Financial Instruments
   14. Allowance for Uncollectible Accounts and Property, Building and Equipment
  Beginning
    
    
    
    
    
    
    
    
    
    End ofof Year
    
    Additions and
    
    
    
    
    
    YearBalance
    
    Expenses
    
    Deductions
    
    Balance(In thousands)Year ended December 31:2007
    
    $
    5,769
    
    
    $
    13,817
    
    
    $
    10,633
    
    
    $
    8,9532006
    
    
    2,544
    
    
    
    4,778
    
    
    
    1,553
    
    
    
    5,7692005
    
    
    1,168
    
    
    
    3,188
    
    
    
    1,812
    
    
    
    2,544
  December 31,2007
    
    
    2006(In thousands)Land
    
    $
    135
    
    
    $
    135Building and improvements
    
    
    3,079
    
    
    
    2,891Transportation equipment
    
    
    3,434
    
    
    
    3,480Furniture and other equipment
    
    
    13,661
    
    
    
    10,32120,309
    
    
    
    16,827Less accumulated depreciation and amortization
    
    
    7,786
    
    
    
    5,122$
    12,523
    
    
    $
    11,705
 F-25




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##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
 15. Unaudited Summarized Quarterly Financial Information
 First Quarter
    
    Second Quarter
    
    Third Quarter
    
    Fourth Quarter2007
    
    2007
    
    2007
    
    2007(In thousands)Net service revenue
    
    $
    68,727
    
    
    $
    70,564
    
    
    $
    77,495
    
    
    $
    81,245Gross margin
    
    
    34,111
    
    
    
    34,483
    
    
    
    37,516
    
    
    
    39,344Net income
    
    
    5,786
    
    
    
    5,038
    
    
    
    6,025
    
    
    
    2,740Net income available to common
stockholders
    
    
    5,820
    
    
    
    5,160
    
    
    
    6,082
    
    
    
    2,720Basic earnings per shareNet income
    
    $
    0.33
    
    
    $
    0.28
    
    
    $
    0.34
    
    
    $
    0.15Net income available to common shareholders
    
    $
    0.33
    
    
    $
    0.29
    
    
    $
    0.34
    
    
    $
    0.15Diluted earnings per shareNet income
    
    $
    0.33
    
    
    $
    0.28
    
    
    $
    0.34
    
    
    $
    0.15Net income available to common
shareholders
    
    $
    0.33
    
    
    $
    0.29
    
    
    $
    0.34
    
    
    $
    0.15Weighted average shares outstandingBasic
    
    
    17,748,369
    
    
    
    17,754,632
    
    
    
    17,766,612
    
    
    
    17,773,116Diluted
    
    
    17,807,338
    
    
    
    17,798,952
    
    
    
    17,794,072
    
    
    
    17,817,777
  First Quarter
    
    Second Quarter
    
    Third Quarter
    
    Fourth Quarter2006
    
    2006
    
    2006
    
    2006(In thousands)Net service revenue
    
    $
    45,281
    
    
    $
    49,968
    
    
    $
    58,626
    
    
    $
    64,660Gross margin
    
    
    21,264
    
    
    
    24,870
    
    
    
    28,458
    
    
    
    31,848Net income
    
    
    4,136
    
    
    
    4,256
    
    
    
    5,271
    
    
    
    6,931Net income available to common stockholders
    
    
    4,979
    
    
    
    4,428
    
    
    
    5,199
    
    
    
    7,151Basic earnings per shareNet income
    
    $
    0.26
    
    
    $
    0.26
    
    
    $
    0.30
    
    
    $
    0.39Net income available to common shareholders
    
    $
    0.31
    
    
    $
    0.27
    
    
    $
    0.30
    
    
    $
    0.40Diluted earnings per shareNet income
    
    $
    0.26
    
    
    $
    0.26
    
    
    $
    0.30
    
    
    $
    0.39Net income available to common shareholders
    
    $
    0.31
    
    
    $
    0.27
    
    
    $
    0.30
    
    
    $
    0.40Weighted average shares outstandingBasic
    
    
    16,557,828
    
    
    
    16,561,398
    
    
    
    17,557,576
    
    
    
    17,730,698Diluted
    
    
    16,563,368
    
    
    
    16,576,068
    
    
    
    17,574,541
    
    
    
    17,751,390
 F-26




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##### Table of Contents



SIGNATURES
  LHC GROUP, INC./s/  Keith G. MyersKeith G. MyersPresident and Chief Executive Officer




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibits2.1
    
    
    Asset purchase Agreement, dated June 19, 2006, by and among the
Registrant, The Lifeline Health Group, Inc. and various
subsidiaries of The Lifeline Health Group, Inc. (previously filed
as Exhibit 2.1 to the Form 8-K on June 19, 2006).3.1
    
    
    Certificate of Incorporation of LHC Group, Inc. (previously filed
as an exhibit to the Form S-1/A (File No. 333-120792) on February
14, 2005).3.2
    
    
    Bylaws of LHC Group, Inc. (previously filed as an exhibit to the
Form S-1/A (File No. 333-120792) on May 9, 2005)3.3
    
    
    Amendment to LHC Group, Inc. Bylaws (previously filed as Exhibit
3.1 to the Form 8-K on January 4, 2008).3.4
    
    
    Certificate of Designations (previously filed as Exhibit B to
Exhibit 4.1 to the Form 8-A12B on March 11, 2008).4.1
    
    
    Specimen Stock Certificate of LHCs Common Stock, par value $0.01
per share (previously filed as an exhibit to the Form S-1/A (File
No. 333-120792) on February 14, 2005).4.2
    
    
    Reference is made to Exhibits 3.1 and 3.2 (previously filed as an
exhibit to the Form S-1/A (File No. 333-120792) on February 14,
2005 and May 9, 2005, respectively).4.3
    
    
    Stockholder Protection Rights Agreement by and between LHC Group,
Inc. and Computershare Trust Company, N.A., as rights agent
(previously filed as Exhibit 4.1 to the Form 8-A12B on March 11,
2008).10.1
    
    
    LHC 2003 Key Employee Equity Participation Plan (previously filed
as an exhibit to the Form S-1/A (File No. 333-120792) on November
26, 2004).10.2
    
    
    LHC Group, Inc. 2005 Long-Term Incentive Plan (previously filed as
an exhibit to the Form S-1/A (File No. 333-120792) on February 14,
2005).10.3
    
    
    Form of Award under LHC Group, Inc. 2005 Director Compensation
Plan. (previously filed as an exhibit to the Form S-1/A (File No.
333-120792) on February 14, 2005).10.4
    
    
    Form of Indemnity Agreement between LHC Group and directors and
certain officers (previously filed as an exhibit to the Form S-1/A
(File No. 333-120792) on February 14, 2005).10.5
    
    
    LHC Group, Inc. 2005 Director Compensation Plan (previously filed
as an exhibit to the Form S-1/A (File No. 333-120792) on February
14, 2005).10.6
    
    
    Amendment to LHC Group, Inc. 2005 Director Compensation Plan
(previously filed as Exhibit 99.1 to the Form 8-K on June 12,
2006).10.7
    
    
    LHC Group, Inc. 2006 Employee Stock Purchase Plan (previously
filed as Exhibit 99.2 to the Form 8-K on June 12, 2006).10.8
    
    
    Severance and Consulting Agreement by and between LHC Group, Inc.
and Barry E. Stewart, dated August 15, 2007 (previously filed as
Exhibit 10.1 to the Form 8-K on August 15, 2007).10.9
    
    
    Employment Agreement by and between LHC Group, Inc. and Don
Stelly, dated October 22, 2007 (previously filed as Exhibit 10.1
to the Form 8-K on October 30, 2007).10.10
    
    
    Employment Agreement between LHC Group, Inc. and Keith G. Myers
dated January 1, 2008 (previously filed as Exhibit 10.1 to the
Form 8-K on January 4, 2008 ).10.11
    
    
    Employment Agreement between LHC Group, Inc. and John L. Indest
dated January 1, 2008 (previously filed as Exhibit 10.2 to the
Form 8-K on January 4, 2008).10.12
    
    
    Employment Agreement by and between LHC Group, Inc. and Peter
Roman, dated January 1, 2008 (previously filed as Exhibit 10.3 to
the Form 8-K on January 4, 2008).




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibits10.13
    
    
    Employment Agreement between LHC Group, Inc. and Daryl Doise dated
January 1, 2008 (previously filed as Exhibit 10.4 to the Form 8-K
on January 4, 2008).10.14
    
    
    Loan Agreement by and between LHC Group, Inc., Palmetto Express,
L.L.C. and Capital One, National Association dated February 6,
2008 (previously filed as Exhibit 10.1 to the Form 8-K on February
13, 2008).10.15
    
    
    Credit Agreement by and between LHC Group, Inc. and Capital One,
National Association dated February 20, 2008 (previously filed as
Exhibit 10.1 to the Form 8-K dated February 20, 2008 on February
25, 2008).10.16
    
    
    First Amendment to Credit Agreement by and between LHC Group,
Inc., Capital One, National Association and First Tennessee Bank,
N.A. dated March 6, 2008 (previously filed as Exhibit 10.1 to the
Form 8-K on March 10, 2008).21.1
    
    
    Subsidiaries of the Registrant.23.1
    
    
    Consent of Ernst & Young LLP.31.1
    
    
    Certification of Keith G. Myers, Chief Executive Officer pursuant
to Rule 13a- 14(a)/15d-14(a), as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Peter J. Roman, Chief Financial Officer pursuant
to Rule 13a- 14(a)/15d-14(a), as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.32.1*
    
    
    Certification of the Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    This exhibit is furnished to the SEC as an accompanying document and
is not deemed to be filed for purposes of Section 18 of the
Securities Exchange Act of 1934 or otherwise subject to the
liabilities of that Section, and the document will not be deemed
incorporated by reference into any filing under the Securities Act of
1933.