##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2009
 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 Its 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, LA 70503
(Address of Principal Executive Offices Including Zip Code)
 (337) 233-1307
(Registrants Telephone Number, Including Area Code)
  þ o
  o o
  Large accelerated filer o

    
    Accelerated filer þ
    
    Non-accelerated filer o
(Do not check if a smaller reporting company)
    
    Smaller reporting company o
  o þ




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##### 



LHC GROUP, INC.
 INDEX
 PagePart I. Financial Information
    
    
    3Item 1. Condensed Consolidated Financial Statements (unaudited)
    
    
    3Condensed Consolidated Balance Sheets  June 30, 2009 and December 31, 2008
    
    
    3Condensed Consolidated Statements of Income  Three and six months ended June 30, 2009 and 2008
    
    
    4Condensed Consolidated Statement of Changes in Stockholders Equity
    
    
    5Condensed Consolidated Statements of Cash Flows Six months ended June 30, 2009 and 2008
    
    
    6Notes to Condensed Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20Item 3. Quantitative and Qualitative Disclosure About Market Risk
    
    
    32Item 4. Controls and Procedures
    
    
    33Part II. Other Information
    
    
    33Item 1. Legal Proceedings
    
    
    33Item 1A. Risk Factors
    
    
    33Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    33Item 3. Defaults Upon Senior Securities
    
    
    33Item 4. Submission of Matters to a Vote of Security Holders
    
    
    34Item 5. Other Information
    
    
    34Item 6. Exhibits
    
    
    34Signatures
    
    
    36EX-31.1EX-31.2EX-32.1
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS.
 LHC GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS  (Dollars in thousands, except share data and per share data)
 June 30,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent assets:Cash
    
    $
    1,223
    
    
    $
    3,511Receivables:Patient accounts receivable, less allowance for uncollectible accounts of
$10,386 and $9,976, respectively
    
    
    65,753
    
    
    
    61,524Other receivables
    
    
    3,657
    
    
    
    2,317Amounts due from governmental entities
    
    
    1,432
    
    
    
    2,434Total receivables, net
    
    
    70,842
    
    
    
    66,275Deferred income taxes
    
    
    5,360
    
    
    
    4,959Assets held for sale
    
    
    450
    
    
    
    Prepaid income taxes
    
    
    3,522
    
    
    
    Prepaid expenses and other current assets
    
    
    6,608
    
    
    
    6,464Total current assets
    
    
    88,005
    
    
    
    81,209Property, building and equipment, net
    
    
    18,338
    
    
    
    16,348Goodwill
    
    
    124,141
    
    
    
    112,572Intangible assets, net
    
    
    35,958
    
    
    
    29,975Other assets
    
    
    3,155
    
    
    
    3,296Total assets
    
    $
    269,597
    
    
    $
    243,400LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and other accrued liabilities
    
    
    20,499
    
    
    
    15,422Salaries, wages, and benefits payable
    
    
    19,815
    
    
    
    16,400Amounts due to governmental entities
    
    
    3,219
    
    
    
    6,023Income taxes payable
    
    
    
    
    
    
    10,682Current portion of long-term debt and capital lease obligations
    
    
    463
    
    
    
    583Total current liabilities
    
    
    43,996
    
    
    
    49,110Deferred income taxes
    
    
    8,125
    
    
    
    5,718Long-term debt, less current portion
    
    
    4,314
    
    
    
    4,483Other long-term obligations
    
    
    77
    
    
    
    145Stockholders equity:LHC Group, Inc. stockholders equity:Common stock  $0.01 par value; 40,000,000 shares authorized; 20,933,407 and
20,853,463 shares issued and 17,961,857 and 17,895,832 shares outstanding,
respectively
    
    
    179
    
    
    
    179Treasury stock 2,971,550 and 2,957,631 shares at cost, respectively
    
    
    (3,364
    )
    
    
    (3,072
    )Additional paid-in capital
    
    
    86,982
    
    
    
    85,404Retained earnings
    
    
    115,702
    
    
    
    94,310Total LHC Group, Inc. stockholders equity
    
    
    199,499
    
    
    
    176,821Noncontrolling interest
    
    
    13,586
    
    
    
    7,123Total equity
    
    
    213,085
    
    
    
    183,944Total liabilities and stockholders equity
    
    $
    269,597
    
    
    $
    243,400
  3




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##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME  (Dollars in thousands, except share and per share data)
 Three Months Ended June 30,
    
    
    Six Months Ended June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net service revenue
    
    $
    132,593
    
    
    $
    90,115
    
    
    $
    257,215
    
    
    $
    173,588Cost of service revenue
    
    
    66,588
    
    
    
    44,935
    
    
    
    128,809
    
    
    
    86,207Gross margin
    
    
    66,005
    
    
    
    45,180
    
    
    
    128,406
    
    
    
    87,381Provision for bad debts
    
    
    1,807
    
    
    
    3,623
    
    
    
    2,990
    
    
    
    7,309General and administrative expenses
    
    
    43,520
    
    
    
    29,347
    
    
    
    82,417
    
    
    
    56,844Operating income
    
    
    20,678
    
    
    
    12,210
    
    
    
    42,999
    
    
    
    23,228Interest expense
    
    
    (39
    )
    
    
    (80
    )
    
    
    (98
    )
    
    
    (228
    )Non-operating (loss) income
    
    
    84
    
    
    
    407
    
    
    
    (376
    )
    
    
    808Income from continuing operations before income taxes and
noncontrolling interests
    
    
    20,723
    
    
    
    12,537
    
    
    
    42,525
    
    
    
    23,808Income tax expense
    
    
    6,415
    
    
    
    3,907
    
    
    
    13,153
    
    
    
    7,270Income from continuing operations
    
    
    14,308
    
    
    
    8,630
    
    
    
    29,372
    
    
    
    16,538Loss from discontinued operations (net of income tax
benefit of $50, $24, $50
and $108, respectively)
    
    
    80
    
    
    
    37
    
    
    
    80
    
    
    
    167Net income
    
    
    14,228
    
    
    
    8,593
    
    
    
    29,292
    
    
    
    16,371Less net income attributable to noncontrolling interests
    
    
    3,966
    
    
    
    2,259
    
    
    
    7,948
    
    
    
    4,698Net income attributable to LHC Group, Inc
    
    
    10,262
    
    
    
    6,334
    
    
    
    21,344
    
    
    
    11,673Redeemable noncontrolling interest
    
    
    20
    
    
    
    (36
    )
    
    
    48
    
    
    
    65Net income available to LHC Group, Inc.s common
stockholders
    
    $
    10,282
    
    
    $
    6,298
    
    
    $
    21,392
    
    
    $
    11,738Earnings per share  basic and diluted:Income from continuing operations attributable to LHC
Group, Inc.
    
    $
    0.57
    
    
    $
    0.35
    
    
    $
    1.19
    
    
    $
    0.66Loss from discontinued operations, attributable to LHC
Group, Inc.
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.01
    )Net income attributable to LHC Group, Inc.
    
    
    0.57
    
    
    
    0.35
    
    
    
    1.19
    
    
    
    0.65Redeemable noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0.01Net income attributable to LHC Group, Inc.s common
stockholders
    
    $
    0.57
    
    
    $
    0.35
    
    
    $
    1.19
    
    
    $
    0.66Weighted average shares outstanding:Basic
    
    
    17,959,823
    
    
    
    17,849,820
    
    
    
    17,942,119
    
    
    
    17,824,895Diluted
    
    
    18,030,373
    
    
    
    17,883,964
    
    
    
    17,992,331
    
    
    
    17,875,527
  4




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##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY  ( Dollars in thousands except share data )
 Common Stock
    
    
    AdditionalIssued
    
    
    Treasury
    
    
    Paid-In
    
    
    Retained
    
    
    NoncontrollingAmount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Capital
    
    
    Earnings
    
    
    Interest
    
    
    TotalBalances at December 31, 2008
    
    $
    179
    
    
    
    20,853,463
    
    
    $
    (3,072
    )
    
    
    (2,957,631
    )
    
    $
    85,404
    
    
    $
    94,310
    
    
    $
    7,123
    
    
    $
    183,944Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,344
    
    
    
    7,948
    
    
    
    29,292Transfer of noncontrolling
interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    181
    
    
    
    
    
    
    
    1,228
    
    
    
    1,409Acquired noncontrolling
interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,466
    
    
    
    4,466Noncontrolling interest
distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,179
    )
    
    
    (7,179
    )Nonvested stock compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,101
    
    
    
    
    
    
    
    
    
    
    
    1,101Issuance of vested restricted
stock
    
    
    
    
    
    
    69,448
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Treasury shares redeemed to pay
income tax
    
    
    
    
    
    
    
    
    
    
    (292
    )
    
    
    (13,919
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (292
    )Excess tax benefits from
issuance of vested stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    21Issuance of common stock under
Employee Stock Purchase Plan
    
    
    
    
    
    
    10,496
    
    
    
    
    
    
    
    
    
    
    
    275
    
    
    
    
    
    
    
    
    
    
    
    275Recording noncontrolling
interest in joint venture at
redemption value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48
    
    
    
    
    
    
    
    48Balances at June 30, 2009
    
    $
    179
    
    
    
    20,933,407
    
    
    $
    (3,364
    )
    
    
    (2,971,550
    )
    
    $
    86,982
    
    
    $
    115,702
    
    
    $
    13,586
    
    
    $
    213,085
  5




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##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS  ( Dollars in thousands)
 Six Months EndedJune 30,2009
    
    
    2008Operating activitiesNet income
    
    $
    29,292
    
    
    $
    16,218Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization expense
    
    
    2,286
    
    
    
    1,757Provision for bad debts
    
    
    3,035
    
    
    
    7,663Stock-based compensation expense
    
    
    1,101
    
    
    
    816Deferred income taxes
    
    
    1,256
    
    
    
    829Loss on impairment of intangible assets
    
    
    542
    
    
    
    Gain on sale of assets
    
    
    
    
    
    
    (339
    )Changes in operating assets and liabilities, net of acquisitions:Receivables
    
    
    (8,605
    )
    
    
    1,240Prepaid expenses, income taxes and other assets
    
    
    (3,255
    )
    
    
    (728
    )Accounts payable and accrued expenses
    
    
    (2,847
    )
    
    
    4,282Net amounts due to/from governmental entities
    
    
    (1,802
    )
    
    
    210Net cash provided by operating activities
    
    
    21,003
    
    
    
    31,948Investing activitiesPurchases of property, building and equipment
    
    
    (3,741
    )
    
    
    (6,467
    )Proceeds from sale of assets
    
    
    
    
    
    
    3,090Cash paid for acquisitions, primarily goodwill and intangible assets
    
    
    (12,176
    )
    
    
    (32,855
    )Net cash used in investing activities
    
    
    (15,917
    )
    
    
    (36,232
    )Financing activitiesProceeds from line of credit
    
    
    18,134
    
    
    
    30,057Payments on line of credit
    
    
    (18,134
    )
    
    
    (21,976
    )Payment of deferred financing fees
    
    
    (260
    )
    
    
    Proceeds from debt issuance
    
    
    
    
    
    
    5,050Principal payments on debt
    
    
    (240
    )
    
    
    (3,050
    )Payments on capital leases
    
    
    (65
    )
    
    
    (49
    )Excess tax benefits from vesting of restricted stock
    
    
    95
    
    
    
    33Proceeds from employee stock purchase plan
    
    
    275
    
    
    
    253Noncontrolling interest distributions
    
    
    (7,179
    )
    
    
    (4,309
    )Net cash (used in) provided by financing activities
    
    
    (7,374
    )
    
    
    6,009Change in cash
    
    
    (2,288
    )
    
    
    1,725Cash at beginning of period
    
    
    3,511
    
    
    
    1,155Cash at end of period
    
    $
    1,223
    
    
    $
    2,880Supplemental disclosures of cash flow informationInterest paid
    
    $
    98
    
    
    $
    228Income taxes paid
    
    $
    26,040
    
    
    $
    8,485
 Supplemental disclosure of non-cash transactions:
   6




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##### Table of Contents



LHC GROUP, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 1. Organization
  Unaudited Interim Financial Information
    2. Significant Accounting Policies
 Use of Estimates
  Reclassifications
  7




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##### Table of Contents



Critical Accounting Policies
  Principles of Consolidation
   Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Equity joint ventures
    
    
    51.7
    %
    
    
    46.9
    %
    
    
    51.4
    %
    
    
    48.1
    %Wholly-owned subsidiaries
    
    
    44.7
    %
    
    
    49.2
    %
    
    
    45.0
    %
    
    
    48.0
    %License leasing arrangements
    
    
    2.5
    %
    
    
    2.1
    %
    
    
    2.3
    %
    
    
    2.1
    %Management services
    
    
    1.1
    %
    
    
    1.8
    %
    
    
    1.3
    %
    
    
    1.8
    %100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
   Equity Joint Ventures
  License Leasing Arrangements
  Management Services
  8




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##### Table of Contents



Revenue Recognition
   Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Payor:Medicare
    
    
    82.2
    %
    
    
    82.9
    %
    
    
    82.5
    %
    
    
    82.7
    %Medicaid
    
    
    3.0
    %
    
    
    5.4
    %
    
    
    3.3
    %
    
    
    5.3
    %Other
    
    
    14.8
    %
    
    
    11.7
    %
    
    
    14.2
    %
    
    
    12.0
    %100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Home-based services
    
    
    88.7
    %
    
    
    84.8
    %
    
    
    88.2
    %
    
    
    83.4
    %Facility-based services
    
    
    11.3
    %
    
    
    15.2
    %
    
    
    11.8
    %
    
    
    16.6
    %100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 Medicare
 Home-Based Services
 Home Nursing Services
  Hospice Services.
 9




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##### Table of Contents



Management Services
  Facility-Based Services
 Long-Term Acute Care Services (LTACHs).
 Medicaid, managed care and other payors
  Accounts Receivable and Allowances for Uncollectible Accounts
  10




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##### Table of Contents



Other Significant Accounting Policies
 Earnings Per Share
 Earnings Per Share
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Weighted average number of shares outstanding for basic per
share calculation
    
    
    17,959,823
    
    
    
    17,849,820
    
    
    
    17,942,119
    
    
    
    17,824,895Effect of dilutive potential shares:Options
    
    
    5,342
    
    
    
    2,379
    
    
    
    5,720
    
    
    
    2,789Restricted stock
    
    
    65,208
    
    
    
    31,765
    
    
    
    44,492
    
    
    
    47,843Adjusted weighted average shares for diluted per share calculation
    
    
    18,030,373
    
    
    
    17,883,964
    
    
    
    17,992,331
    
    
    
    17,875,527
 Recently Issued Accounting Pronouncements
 The FASB Accounting Standards Codification and
the Hierarchy of Generally Accepted Accounting Principlesa replacement of FASB Statement No.
162 . FASB Accounting Standards Codification
 11




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##### Table of Contents



Adoption of New Accounting Standards
 Interim
Disclosures about Fair Value of Financial Instruments Disclosures about
Fair Value of Financial Instruments Interim
Financial Reporting.
 Subsequent Events available to be issued,
 Business Combinations
 Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from Contingencies Accounting for Contingencies )
 12




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##### Table of Contents



Noncontrolling Interests in
Consolidated Financial Statements  An Amendment of ARB No. 51
 3. Acquisitions and Disposals
  
    Consideration (in thousands)Cash
    
    $
    12,712Equity instruments (the Company exchanged a noncontrolling
ownership interest in three of its entities)
    
    
    1,409Fair value of total consideration transferred
    
    $
    14,121Acquisition-related costs(included in general and administrative
expenses in the Companys statements of income for the six months
ending June 30, 2009)
    
    $
    282Recognized amounts of identifiable assets acquired and
liabilities assumedProperty, plant and equipment
    
    $
    299Trade name
    
    
    4,693Certificate of need/License
    
    
    1,237Other identifiable intangible assets
    
    
    167Total identifiable assets
    
    $
    6,396Noncontrolling interest
    
    $
    4,466Goodwill, including noncontrolling interest of ($2.9 million)
    
    $
    12,191
 13




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##### Table of Contents



Accounting for the Impairment of Disposal of
Long-Lived Assets
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net service revenue
    
    $
    736
    
    
    $
    
    
    
    $
    736
    
    
    $
    52Costs of services and G&A expenses
    
    
    (866
    )
    
    
    (87
    )
    
    
    (866
    )
    
    
    (480
    )Noncontrolling interest
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    153Loss from discontinued operations
before noncontrolling interest
and income taxes
    
    
    (130
    )
    
    
    (61
    )
    
    
    (130
    )
    
    
    (275
    )Income tax benefit
    
    
    50
    
    
    
    24
    
    
    
    50
    
    
    
    108Loss from discontinued operations
LHC Group Inc.s common
stockholders
    
    $
    (80
    )
    
    $
    (37
    )
    
    $
    (80
    )
    
    $
    (167
    )
  4. Goodwill and Intangibles
  14




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##### Table of Contents



Six Months EndedJune 30, 2009(in thousands)Home-based services segment:Balance at December 31, 2008
    
    $
    107,108Goodwill from acquisitions
    
    
    8,858Goodwill related to noncontrolling interest
    
    
    2,708Goodwill classified as held for sale
    
    
    (450
    )Other adjustments
    
    
    (187
    )Balance at June 30, 2009
    
    $
    118,037Facility-based services segment:Balance at December 31, 2008
    
    $
    5,464Goodwill from acquistions
    
    
    469Goodwill related to noncontrolling interest
    
    
    156Goodwill acquired from redemption of noncontrolling interest
    
    
    15Balance at June 30, 2009
    
    $
    6,104Consolidated balance at June 30, 2009
    
    $
    124,141
   Certificate of
    
    
    OtherTrade Names
    
    
    Need/License
    
    
    Intangibles
    
    
    TotalBalance at December 31, 2008
    
    $
    27,233
    
    
    $
    2,001
    
    
    $
    741
    
    
    $
    29,975Additions
    
    
    4,693
    
    
    
    1,237
    
    
    
    167
    
    
    
    6,0972008 Acquisition Adjustments
    
    
    119
    
    
    
    542
    
    
    
    
    
    
    
    661License Impairment
    
    
    
    
    
    
    (542
    )
    
    
    
    
    
    
    (542
    )Amortization Expense
    
    
    
    
    
    
    
    
    
    
    (233
    )
    
    
    (233
    )Balance at June 30, 2009
    
    $
    32,045
    
    
    $
    3,238
    
    
    $
    675
    
    
    $
    35,958
  5. Credit Arrangements
  15




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##### Table of Contents



6. Stockholders Equity
 Share Based Compensation
   Stock Options
  Nonvested Stock
   WeightedNumber of
    
    average grantShares
    
    date fair valueNonvested shares outstanding at December 31, 2008
    
    
    306,406
    
    
    $
    22.45Granted
    
    
    234,483
    
    
    $
    19.93Vested
    
    
    (69,448
    )
    
    $
    20.65Forfeited
    
    
    (3,769
    )
    
    $
    18.60Nonvested shares outstanding at June 30, 2009
    
    
    467,672
    
    
    $
    21.65
 16




---



##### Table of Contents



Employee Stock Purchase Plan
  7. Commitments and Contingencies
 Contingencies
  Joint Venture Buy/Sell Provisions
  Compliance
   17




---



##### Table of Contents



8. Fair Value of Financial Instruments
  18




---



##### Table of Contents



9. Segment Information
  Three Months Ended June 30, 2009Home-Based
    
    
    Facility-BasedServices
    
    
    Services
    
    
    Total(in thousands)Net service revenue
    
    $
    117,608
    
    
    $
    14,985
    
    
    $
    132,593Cost of service revenue
    
    
    57,376
    
    
    
    9,212
    
    
    
    66,588Provision for bad debts
    
    
    1,807
    
    
    
    
    
    
    
    1,807General and administrative expenses
    
    
    39,954
    
    
    
    3,566
    
    
    
    43,520Operating income
    
    
    18,471
    
    
    
    2,207
    
    
    
    20,678Interest expense
    
    
    (34
    )
    
    
    (5
    )
    
    
    (39
    )Non-operating income
    
    
    64
    
    
    
    20
    
    
    
    84Income from continuing operations before income
taxes and noncontrolling interest
    
    
    18,501
    
    
    
    2,222
    
    
    
    20,723Noncontrolling interest
    
    
    3,603
    
    
    
    363
    
    
    
    3,966Income from continuing operations before income taxes
    
    $
    14,898
    
    
    $
    1,859
    
    
    
    16,757Total assets
    
    $
    245,503
    
    
    $
    24,094
    
    
    $
    269,597
 Three Months Ended June 30, 2008Home-Based
    
    
    Facility-BasedServices
    
    
    Services
    
    
    Total(in thousands)Net service revenue
    
    $
    76,419
    
    
    $
    13,696
    
    
    $
    90,115Cost of service revenue
    
    
    36,912
    
    
    
    8,023
    
    
    
    44,935Provision for bad debts
    
    
    3,085
    
    
    
    538
    
    
    
    3,623General and administrative expenses
    
    
    25,589
    
    
    
    3,758
    
    
    
    29,347Operating income
    
    
    10,833
    
    
    
    1,377
    
    
    
    12,210Interest expense
    
    
    (62
    )
    
    
    (18
    )
    
    
    (80
    )Non-operating income (loss)
    
    
    360
    
    
    
    47
    
    
    
    407Income from continuing operations before income
taxes and noncontrolling interest
    
    
    11,131
    
    
    
    1,406
    
    
    
    12,537Noncontrolling interest
    
    
    1,978
    
    
    
    281
    
    
    
    2,259Income from continuing operations before income taxes
    
    $
    9,153
    
    
    $
    1,125
    
    
    $
    10,278Total assets
    
    $
    181,362
    
    
    $
    22,781
    
    
    $
    204,143
 19




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##### Table of Contents



Six Months Ended June 30, 2009Home-Based
    
    
    Facility-BasedServices
    
    
    Services
    
    
    Total(in thousands)Net service revenue
    
    $
    226,956
    
    
    $
    30,259
    
    
    $
    257,215Cost of service revenue
    
    
    110,962
    
    
    
    17,847
    
    
    
    128,809Provision for bad debts
    
    
    2,836
    
    
    
    154
    
    
    
    2,990General and administrative expenses
    
    
    74,866
    
    
    
    7,551
    
    
    
    82,417Operating income
    
    
    38,292
    
    
    
    4,707
    
    
    
    42,999Interest expense
    
    
    (86
    )
    
    
    (12
    )
    
    
    (98
    )Non-operating income (loss)
    
    
    (410
    )
    
    
    34
    
    
    
    (376
    )Income from continuing operations before income
taxes and noncontrolling interest
    
    
    37,796
    
    
    
    4,729
    
    
    
    42,525Noncontrolling interest
    
    
    7,101
    
    
    
    847
    
    
    
    7,948Income from continuing operations before income taxes
    
    $
    30,695
    
    
    $
    3,882
    
    
    $
    34,577Total assets
    
    $
    245,503
    
    
    $
    24,094
    
    
    $
    269,597
 Six Months Ended June 30, 2008Home-Based
    
    
    Facility-BasedServices
    
    
    Services
    
    
    Total(in thousands)Net service revenue
    
    $
    144,782
    
    
    $
    28,806
    
    
    $
    173,588Cost of service revenue
    
    
    69,760
    
    
    
    16,447
    
    
    
    86,207Provision for bad debts
    
    
    6,331
    
    
    
    978
    
    
    
    7,309General and administrative expenses
    
    
    49,281
    
    
    
    7,563
    
    
    
    56,844Operating income
    
    
    19,410
    
    
    
    3,818
    
    
    
    23,228Interest expense
    
    
    (163
    )
    
    
    (65
    )
    
    
    (228
    )Non-operating income
    
    
    645
    
    
    
    163
    
    
    
    808Income from continuing operations before income
taxes and noncontrolling interest
    
    
    19,892
    
    
    
    3,916
    
    
    
    23,808Noncontrolling interest
    
    
    3,717
    
    
    
    981
    
    
    
    4,698Income from continuing operations before income taxes
    
    
    16,175
    
    
    
    2,935
    
    
    
    19,110Total assets
    
    $
    181,362
    
    
    $
    22,781
    
    
    $
    204,143
 
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
  20




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##### Table of Contents



§
    
    our expectations regarding financial condition or results of operations for periods after June 30, 2009;§
    
    our critical accounting policies;§
    
    our business strategies and our ability to grow our business;§
    
    our participation in the Medicare and Medicaid programs;§
    
    the impact of the Presidents budget proposal;§
    
    the reimbursement levels of Medicare and other third-party payors;§
    
    the prompt receipt of payments from Medicare and other third-party payors;§
    
    our future sources of and needs for liquidity and capital resources;§
    
    the effect of any changes in market rates on our operations and cash flows;§
    
    our ability to obtain financing;§
    
    our ability to make payments as they become due;§
    
    the outcomes of various routine and non-routine governmental reviews, audits and investigations;§
    
    our expansion strategy, the successful integration of recent acquisitions and, if
necessary, the ability to relocate or restructure our current facilities;§
    
    the value of our proprietary technology;§
    
    the impact of legal proceedings;§
    
    our insurance coverage;§
    
    the costs of medical supplies;§
    
    our competitors and our competitive advantages;§
    
    the price of our stock;§
    
    our compliance with environmental, health and safety laws and regulations;§
    
    our compliance with health care laws and regulations;§
    
    our compliance with Securities and Exchange Commission laws and regulations and
Sarbanes-Oxley requirements;§
    
    the impact of federal and state government regulation on our business; and§
    
    the impact of changes in our future interpretations of fraud, anti-kickbacks or other laws.
  21




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##### Table of Contents



OVERVIEW
  Segments
  Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Home-based services
    
    
    88.7
    %
    
    
    84.8
    %
    
    
    88.2
    %
    
    
    83.4
    %Facility-based services
    
    
    11.3
    %
    
    
    15.2
    %
    
    
    11.8
    %
    
    
    16.6
    %100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
  Type of Service
    
    LocationsHome Health
    
    
    220Hospice
    
    
    21Diabetes Management
    
    
    2Private Duty
    
    
    4Specialty Services
    
    
    3Management Companies
    
    
    4254
  22




---



##### Table of Contents



Recent Developments
 Home-Based Services
 Home Nursing.
  Hospice .
  Facility-Based Services
 LTACHs.
 23




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##### Table of Contents



24




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##### Table of Contents



Office of Inspector General
  Results of Operations
 Accounts Receivable and Allowance for Uncollectible Accounts
   0-90
    
    
    91-180
    
    
    181-365
    
    
    Over 365
    
    
    Total(in thousands)PayorMedicare
    
    $
    40,079
    
    
    $
    9,631
    
    
    $
    4,962
    
    
    $
    987
    
    
    $
    55,659Medicaid
    
    
    2,366
    
    
    
    834
    
    
    
    509
    
    
    
    124
    
    
    
    3,833Other
    
    
    12,000
    
    
    
    2,120
    
    
    
    2,217
    
    
    
    310
    
    
    
    16,647Total
    
    $
    54,445
    
    
    $
    12,585
    
    
    $
    7,688
    
    
    $
    1,421
    
    
    $
    76,139Allowance as a percentage of receivables
    
    
    6.5
    %
    
    
    16.1
    %
    
    
    45.3
    %
    
    
    96.3
    %
    
    
    13.6
    %
   0-90
    
    
    91-180
    
    
    181-365
    
    
    Over 365
    
    
    Total(in thousands)PayorMedicare
    
    $
    41,772
    
    
    $
    6,806
    
    
    $
    2,678
    
    
    $
    1,305
    
    
    $
    52,561Medicaid
    
    
    2,807
    
    
    
    1,081
    
    
    
    1,108
    
    
    
    946
    
    
    
    5,942Other
    
    
    7,656
    
    
    
    3,239
    
    
    
    1,219
    
    
    
    883
    
    
    
    12,997Total
    
    $
    52,235
    
    
    $
    11,126
    
    
    $
    5,005
    
    
    $
    3,134
    
    
    $
    71,500Allowance as a percentage of receivables
    
    
    6.9
    %
    
    
    15.8
    %
    
    
    33.0
    %
    
    
    94.3
    %
    
    
    14.0
    %
 Consolidated Net Service Revenue
  25




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##### Table of Contents



Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,2009
    
    2008
    
    2009
    
    2008Home-based services
    
    
    88.7
    %
    
    
    84.8
    %
    
    
    88.2
    %
    
    
    83.4
    %Facility-based services
    
    
    11.3
    %
    
    
    15.2
    %
    
    
    11.8
    %
    
    
    16.6
    %100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
 Home-Based Services.
     Three Months Ended June 30, 2009 (in thousands except census and episode data)
 Organic
    
    
    
    
    
    
    
    
    
    Total GrowthSame Store(1)
    
    De Novo(2)
    
    Organic(3)
    
    Growth %
    
    Acquired (4)
    
    Total
    
    %Revenue
    
    $
    94,409
    
    
    $
    710
    
    
    $
    95,119
    
    
    
    24.5
    %
    
    $
    22,489
    
    
    $
    117,608
    
    
    
    53.9
    %Revenue Medicare
    
    $
    79,799
    
    
    $
    619
    
    
    $
    80,418
    
    
    
    26.7
    %
    
    $
    18,106
    
    
    $
    98,524
    
    
    
    55.3
    %Average Census
    
    
    23,899
    
    
    
    329
    
    
    
    24,228
    
    
    
    18.4
    %
    
    
    4,954
    
    
    
    29,182
    
    
    
    42.6
    %Average Medicare
Census
    
    
    19,691
    
    
    
    273
    
    
    
    19,964
    
    
    
    20.7
    %
    
    
    3,628
    
    
    
    23,592
    
    
    
    42.6
    %Episodes
    
    
    34,797
    
    
    
    350
    
    
    
    35,147
    
    
    
    19.9
    %
    
    
    6,266
    
    
    
    41,413
    
    
    
    41.3
    %
 
 (1)
    
    Same store  location that has been in service with the Company for greater than 12 months.(2)
    
    De Novo  internally developed location that has been in service with the
Company for 12 months or less.(3)
    
    Organic  combination of same store and de novo.(4)
    
    Acquired  purchased location that has been in service with the Company for 12 months or less. 26




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##### Table of Contents



Six Months Ended June 30, 2009 (in thousands except census and episode data)
 Organic
    
    Acquired
    
    
    
    
    
    Total GrowthSame Store(1)
    
    De Novo(2)
    
    Organic(3)
    
    Growth %
    
    (4)
    
    Total
    
    %Revenue
    
    $
    183,351
    
    
    $
    1,472
    
    
    $
    184,823
    
    
    
    27.7
    %
    
    $
    42,133
    
    
    $
    226,956
    
    
    
    56.8
    %Revenue Medicare
    
    $
    154,940
    
    
    $
    1,255
    
    
    $
    156,195
    
    
    
    29.9
    %
    
    $
    33,408
    
    
    $
    189,603
    
    
    
    57.7
    %Average Census
    
    
    23,417
    
    
    
    309
    
    
    
    23,726
    
    
    
    20.4
    %
    
    
    4,782
    
    
    
    28,508
    
    
    
    44.6
    %Average Medicare
Census
    
    
    19,298
    
    
    
    253
    
    
    
    19,551
    
    
    
    24.4
    %
    
    
    3,427
    
    
    
    22,978
    
    
    
    46.3
    %Episodes
    
    
    66,794
    
    
    
    441
    
    
    
    67,235
    
    
    
    22.0
    %
    
    
    11,135
    
    
    
    78,370
    
    
    
    42.2
    %
 
 (1)
    
    Same store  location that has been in service with the Company for greater than 12 months.(2)
    
    De Novo  internally developed location that has been in service with the
Company for 12 months or less.(3)
    
    Organic  combination of same store and de novo.(4)
    
    Acquired  purchased location that has been in service with the Company for 12 months or less. Facility-Based Services.
   Cost of Service Revenue
   Home-Based Services.
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    
    
    
    
    2008
    
    
    
    
    
    
    2009
    
    
    
    
    
    
    2008Salaries, wages and benefits
    
    $
    48,879
    
    
    
    41.6
    %(1)
    
    $
    31,597
    
    
    
    41.3
    %
    
    $
    94,992
    
    
    
    41.9
    %(1)
    
    $
    59,702
    
    
    
    41.2
    %Transportation
    
    
    4,146
    
    
    
    3.5
    %
    
    
    2,866
    
    
    
    3.8
    %
    
    
    7,487
    
    
    
    3.3
    %
    
    
    5,072
    
    
    
    3.5
    %Supplies and services
    
    
    4,351
    
    
    
    3.7
    %
    
    
    2,449
    
    
    
    3.2
    %
    
    
    8,483
    
    
    
    3.7
    %
    
    
    4,986
    
    
    
    3.4
    %$
    57,376
    
    
    
    48.8
    %
    
    $
    36,912
    
    
    
    48.3
    %
    
    $
    110,962
    
    
    
    48.9
    %
    
    $
    69,760
    
    
    
    48.1
    %
 
 (1)
    
    Percentage of home-based net service revenue 27




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##### Table of Contents



Facility-Based Services.
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    
    
    
    
    2008
    
    
    
    
    
    
    2009
    
    
    
    
    
    
    2008Salaries, wages and benefits
    
    $
    5,686
    
    
    
    37.9
    %(1)
    
    $
    5,009
    
    
    
    36.6
    %
    
    $
    11,075
    
    
    
    36.6
    %(1)
    
    $
    10,451
    
    
    
    36.3
    %Transportation
    
    
    46
    
    
    
    0.3
    %
    
    
    98
    
    
    
    0.7
    %
    
    
    80
    
    
    
    0.3
    %
    
    
    174
    
    
    
    0.6
    %Supplies and services
    
    
    3,480
    
    
    
    23.2
    %
    
    
    2,916
    
    
    
    21.3
    %
    
    
    6,692
    
    
    
    22.1
    %
    
    
    5,822
    
    
    
    20.2
    %$
    9,212
    
    
    
    61.4
    %
    
    $
    8,023
    
    
    
    58.6
    %
    
    $
    17,847
    
    
    
    59.0
    %
    
    $
    16,447
    
    
    
    57.1
    %
 
 (1)
    
    Percentage of home-based net service revenue  Provision for Bad Debts
    General and Administrative Expenses
  
    
    Home office:
 
    
    salaries and related benefits;
    
    insurance;
    
    costs associated with advertising and other marketing activities; and
    
    rent and utilities;
 
    
    Supplies and services:
 
    
    accounting, legal and other professional services; and
office supplies;
 
    
    Depreciation; and
    
    Other:
 
    
    advertising and marketing expenses;
    
    recruitment;
    
    operating locations rent; and
    
    taxes.
 28




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##### Table of Contents



Home-Based Services.
  Facility-Based Services.
  Income Tax Expense
   Net Income Attributable to Noncontrolling Interest
    29




---



##### Table of Contents



Discontinued Operations
 Accounting for the Impairment of
Disposal of Long-Lived Assets
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net service revenue
    
    $
    736
    
    
    $
    
    
    
    $
    736
    
    
    $
    52Costs of services and G&A expenses
    
    
    (866
    )
    
    
    (87
    )
    
    
    (866
    )
    
    
    (480
    )Noncontrolling interest
    
    
    
    
    
    
    26
    
    
    
    
    
    
    
    153Loss from discontinued operations before
noncontrolling interest and income taxes
    
    
    (130
    )
    
    
    (61
    )
    
    
    (130
    )
    
    
    (275
    )Income tax benefit
    
    
    50
    
    
    
    24
    
    
    
    50
    
    
    
    108Loss from discontinued operations LHC Group
Inc.s common stockholders
    
    $
    (80
    )
    
    $
    (37
    )
    
    $
    (80
    )
    
    $
    (167
    )
 Liquidity and Capital Resources
  
    
    Operating Results Our net income has a significant effect on our operating cash
flows. Any significant increase or decrease in our net income could have a material effect
on our operating cash flows.
    
    Timing of Acquisitions We use our operating cash flows for acquisitions. When the
acquisitions occur at or near the end of a period, our cash outflows significantly increase.
    
    Start-Up Costs Following the completion of an acquisition, we suspend billing
Medicare and Medicaid claims until we receive the change of ownership and electronic funds
transfer approvals. We also generally incur substantial start-up costs in order to
implement our business strategy. There is generally a delay between our expenditure of
these start-up costs and the increase in net service revenue, and subsequent cash
collections, which adversely affects our cash flows from operating activities.
    
    Timing of Payroll Our employees are paid bi-weekly on Fridays; therefore, operating
cash flows decline in reporting periods that end on a Friday. Conversely, for those
reporting periods ending on a day other than Friday, our cash flows are higher because we
have not yet paid our payroll.
    
    Medical Insurance Plan Funding We are self-funded for medical insurance purposes. Any
significant changes in the amount of insurance claims submitted could have a direct effect
on our operating cash flows.
 30




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
    
    Medical Supplies A significant expense associated with our business is the cost of
medical supplies. Any increase in the cost of medical supplies, or in the use of medical
supplies by our patients, could have a material effect on our operating cash flows.
  Six MonthsEnded June 30,2009
    
    
    2008Cash provided by operating activities
    
    $
    21,003
    
    
    $
    31,948Cash used in investing activities
    
    
    (15,917
    )
    
    
    (36,232
    )Cash (used in) provided by financing activities
    
    
    (7,374
    )
    
    
    6,009Change in cash
    
    
    (2,288
    )
    
    
    1,725Cash and cash equivalents at beginning of period
    
    
    3,511
    
    
    
    1,155Cash and cash equivalents at end of period
    
    $
    1,223
    
    
    $
    2,880
     Indebtedness
   31




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Eurodollar
    
    Base RateLeverage Ratio
    
    Margin
    
    Margin<1.00:1.00
    
    
    2.25
    %
    
    
    0.50
    %31.00:1.00<1.50:1.00
    
    
    2.50
    %
    
    
    0.75
    %31.50:1.00<2.00:1.00
    
    
    2.75
    %
    
    
    1.00
    %32.00:1.00
    
    
    3.00
    %
    
    
    1.25
    %
    Contingencies
  Off-Balance Sheet Arrangements
  Critical Accounting Policies
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
   32




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ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Controls Over Financial Reporting
  
 PART II  OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS.
  
 ITEM 1A. RISK FACTORS.
  
 ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
  
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
  33




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##### Table of Contents



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
  Election of Directors
 Name of Director
    
    Votes For
    
    Votes WithheldMonica F. Azare
    
    
    16,619,188
    
    
    
    523,696John B. Breaux
    
    
    11,328,580
    
    
    
    5,814,304Dan S. Wilford
    
    
    15,184,473
    
    
    
    1,958,411
  Ratification of Appointment of Independent Auditors.
 Votes For
    
    Votes Against
    
    Abstentions16,617,053
    
    512,732
    
    13,099
 
 ITEM 5. OTHER INFORMATION.
  
 ITEM 6. EXHIBITS.
 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. as amended on December 31, 2007 (previously
filed as Exhibit 3.1 to the Form 8-K on January 4, 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 and to the form 8-K on January 4, 2008, respectively).4.3
    
    Form of Stockholder Protection Rights Agreement, between LHC Group,
Inc. and Computershare Trust Company, N.A., as Rights Agent
(previously filed as Exhibit 4.1 to the Form 8-K on March 11, 2008).10.1
    
    First Amendment to Amended and Restated Credit Agreement by and
between LHC Group, Inc, Capital One, National Associated, First
Tennessee Bank, National Association and Branch Banking and Trust
Company dated June 15, 2009 (previously filed as Exhibit 10.1 to the
Form 8-K on June 18, 2009).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.
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##### Table of Contents



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 Chief Executive Officer and Chief Financial Officer
of LHC Group, Inc. 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. 35




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##### Table of Contents



SIGNATURES
  LHC GROUP, INC.Date August 7, 2009
    /s/  Peter J. RomanPeter J. RomanExecutive Vice President and Chief Financial Officer 36