##### 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 March 31, 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
    
    71-0918189
(I.R.S. Employer Identification No.)Incorporation or Organization)
 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
 
    3Condensed Consolidated Balance Sheets  March 31, 2009 and December
31, 2008 (unaudited)
 
    3Condensed Consolidated Statements of Income (unaudited)  Three months ended
March 31, 2009 and 2008
 
    4Condensed Consolidated Statements of Changes in Stockholders Equity (unaudited)
 
    5Condensed Consolidated Statements of Cash Flows (unaudited)  Three months ended
March 31, 2009 and 2008
 
    6Notes to Condensed Consolidated Financial Statements (unaudited)
 
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 
    17Item 3. Quantitative and Qualitative Disclosure About Market Risk
 
    26Item 4. Controls and Procedures
 
    27Signatures
 
    29EX-31.1EX-31.2EX-32
  2




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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)
  March 31,
    
    
    December 31,2009
    
    
    2008ASSETSCurrent assets:Cash
    
    $
    5,195
    
    
    $
    3,511Receivables:Patient accounts receivable, less allowance for uncollectible
accounts of $10,413 and $9,976, respectively
    
    
    65,008
    
    
    
    61,524Other receivables
    
    
    2,862
    
    
    
    2,317Amounts due from governmental entities
    
    
    1,804
    
    
    
    2,434Total receivables, net
    
    
    69,674
    
    
    
    66,275Deferred income taxes
    
    
    5,560
    
    
    
    4,959Assets held for sale
    
    
    450
    
    
    
    Prepaid expenses and other current assets
    
    
    5,809
    
    
    
    6,464Total current assets
    
    
    86,688
    
    
    
    81,209Property, building and equipment, net
    
    
    17,715
    
    
    
    16,348Goodwill
    
    
    120,713
    
    
    
    112,572Intangible assets, net
    
    
    32,559
    
    
    
    29,975Other assets
    
    
    3,970
    
    
    
    3,296Total assets
    
    $
    261,645
    
    
    $
    243,400LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable and other accrued liabilities
    
    $
    15,923
    
    
    $
    15,422Salaries, wages, and benefits payable
    
    
    22,147
    
    
    
    16,400Amounts due to governmental entities
    
    
    6,023
    
    
    
    6,023Income taxes payable
    
    
    4,966
    
    
    
    10,682Current portion of long-term debt and capital lease obligations
    
    
    523
    
    
    
    583Total current liabilities
    
    
    49,582
    
    
    
    49,110Deferred income taxes
    
    
    7,172
    
    
    
    5,718Long-term debt, less current portion
    
    
    4,399
    
    
    
    4,483Other long-term obligations
    
    
    104
    
    
    
    145Stockholders equity:LHC Group, Inc. stockholders equity:Common stock  $0.01 par value; 40,000,000 shares authorized;
20,925,957 and 20,853,463 shares issued and 17,954,763 and 17,895,832
shares outstanding, respectively
    
    
    179
    
    
    
    179Treasury stock  2,971,194 and 2,957,631 shares at cost, respectively
    
    
    (3,356
    )
    
    
    (3,072
    )Additional paid-in capital
    
    
    86,202
    
    
    
    85,404Retained earnings
    
    
    105,419
    
    
    
    94,310Total LHC Group, Inc. stockholders equity
    
    
    188,444
    
    
    
    176,821Noncontrolling interest
    
    
    11,944
    
    
    
    7,123Total equity
    
    
    200,388
    
    
    
    183,944Total liabilities and stockholders equity
    
    $
    261,645
    
    
    $
    243,400
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LHC GROUP, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
 (Dollars in thousands, except share and per share data)
  Three Months EndedMarch 31,2009
    
    
    2008Net service revenue
    
    $
    124,622
    
    
    $
    83,473Cost of service revenue
    
    
    62,221
    
    
    
    41,272Gross margin
    
    
    62,401
    
    
    
    42,201Provision for bad debts
    
    
    1,183
    
    
    
    3,686General and administrative expenses
    
    
    38,897
    
    
    
    27,497Operating income
    
    
    22,321
    
    
    
    11,018Interest expense
    
    
    (59
    )
    
    
    (148
    )Non-operating (loss) income
    
    
    (460
    )
    
    
    402Income from continuing operations before income taxes and
noncontrolling interests
    
    
    21,802
    
    
    
    11,272Income tax expense
    
    
    6,739
    
    
    
    3,363Income from continuing operations
    
    
    15,063
    
    
    
    7,909Loss from discontinued operations (net of income tax benefit of $84)
    
    
    
    
    
    
    131Net income
    
    
    15,063
    
    
    
    7,778Less net income attributable to noncontrolling interests
    
    
    3,982
    
    
    
    2,440Net income
attributable to LHC Group, Inc.
    
    
    11,081
    
    
    
    5,338Redeemable noncontrolling interest
    
    
    28
    
    
    
    101Net income available to LHC Group, Inc.s common stockholders
    
    $
    11,109
    
    
    $
    5,439Earnings per
share  basic and dilutive:Income from continuing operations attributable to LHC Group,
Inc.
    
    $
    0.62
    
    
    $
    0.31Loss from
discontinued operations, attributable to LHC Group, Inc.
    
    
    
    
    
    
    (0.01
    )Net income
attributable to LHC Group, Inc.
    
    
    0.62
    
    
    
    0.30Redeemable noncontrolling interest
    
    
    
    
    
    
    0.01Net income
attributable to LHC Group, Inc.s common stockholders
    
    $
    0.62
    
    
    $
    0.31Weighted average shares outstanding:Basic
    
    
    17,924,238
    
    
    
    17,800,066Diluted
    
    
    17,991,618
    
    
    
    17,813,967
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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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,081
    
    
    
    3,982
    
    
    
    15,063Transfer of noncontrolling
interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    181
    
    
    
    
    
    
    
    1,228
    
    
    
    1,409Acquired noncontrolling
interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,970
    
    
    
    2,970Noncontrolling interest
distributions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,359
    )
    
    
    (3,359
    )Nonvested stock compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    457
    
    
    
    
    
    
    
    
    
    
    
    457Issuance of vested
restricted stock
    
    
    
    
    
    
    68,418
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Treasury shares redeemed to
pay income tax
    
    
    
    
    
    
    
    
    
    
    (284
    )
    
    
    13,563
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (284
    )Excess tax benefits from
issuance of vested stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    21Issuance of common stock
under Employee Stock
Purchase Plan
    
    
    
    
    
    
    4,076
    
    
    
    
    
    
    
    
    
    
    
    139
    
    
    
    
    
    
    
    
    
    
    
    139Recording noncontrolling
interest in joint venture
at redemption value
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    28Balances at March 31, 2009
    
    $
    179
    
    
    
    20,925,957
    
    
    $
    (3,356
    )
    
    
    2,971,194
    
    
    $
    86,202
    
    
    $
    105,419
    
    
    $
    11,944
    
    
    $
    200,388
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LHC GROUP, INC. AND SUBSIDIARIES
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 ( Dollars in thousands)
  Three Months EndedMarch 31,2009
    
    
    2008Operating activitiesNet income attributable to LHC Group, Inc.
    
    $
    11,081
    
    
    $
    5,338Net income attributable to noncontrolling interest
    
    
    3,982
    
    
    
    2,330Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization expense
    
    
    1,118
    
    
    
    877Provision for bad debts
    
    
    1,183
    
    
    
    4,040Stock-based compensation expense
    
    
    457
    
    
    
    385Deferred income taxes
    
    
    853
    
    
    
    (86
    )Loss on impairment of intangible assets
    
    
    542
    
    
    
    Gain on sale of assets
    
    
    
    
    
    
    (346
    )Changes in operating assets and liabilities, net of acquisitions:Receivables
    
    
    (5,496
    )
    
    
    (2,817
    )Prepaid expenses and other assets
    
    
    184
    
    
    
    472Income taxes payable
    
    
    (5,715
    )
    
    
    1,529Accounts payable and accrued expenses
    
    
    6,173
    
    
    
    4,583Net amounts due to/from governmental entities
    
    
    630
    
    
    
    210Net cash provided by operating activities
    
    
    14,992
    
    
    
    16,515Investing activitiesPurchases of property, building and equipment
    
    
    (1,857
    )
    
    
    (5,527
    )Proceeds from sale of assets
    
    
    
    
    
    
    3,081Cash paid for acquisitions, primarily goodwill, intangible assets and advance
payments on acquisitions
    
    
    (8,170
    )
    
    
    (14,031
    )Net cash used in investing activities
    
    
    (10,027
    )
    
    
    (16,477
    )Financing activitiesProceeds from line of credit
    
    
    16,857
    
    
    
    5,442Payments on line of credit
    
    
    (16,857
    )
    
    
    (5,442
    )Proceeds from debt issuance
    
    
    
    
    
    
    5,050Principal payments on debt
    
    
    (119
    )
    
    
    (2,932
    )Payments on capital leases
    
    
    (37
    )
    
    
    (23
    )Excess tax benefits from vesting of restricted stock
    
    
    95
    
    
    
    33Proceeds from employee stock purchase plan
    
    
    139
    
    
    
    134Noncontrolling interest distributions
    
    
    (3,359
    )
    
    
    (2,383
    )Net cash used in financing activities
    
    
    (3,281
    )
    
    
    (121
    )Change in cash
    
    
    1,684
    
    
    
    (83
    )Cash at beginning of period
    
    
    3,511
    
    
    
    1,155Cash at end of period
    
    $
    5,195
    
    
    $
    1,072Supplemental disclosures of cash flow informationInterest paid
    
    $
    59
    
    
    $
    148Income taxes paid
    
    $
    11,583
    
    
    $
    1,885
 Supplemental disclosure of non-cash transactions:
   6




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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
  Critical Accounting Policies
  Principles of Consolidation
 7




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Three Months EndedMarch 31,2009
    
    2008Equity joint ventures
    
    
    50.2
    %
    
    
    49.4
    %Wholly-owned subsidiaries
    
    
    46.1
    
    
    
    46.7License leasing arrangements
    
    
    2.1
    
    
    
    2.0Management services
    
    
    1.6
    
    
    
    1.9100.0
    %
    
    
    100.0
    %
   Equity Joint Ventures
  License Leasing Arrangements
  Management Services
  Revenue Recognition
   8




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##### Table of Contents



2009
    
    2008Payor:Medicare
    
    
    82.9
%
    
    
    82.4
    %Medicaid
    
    
    3.7
    
    
    
    5.2Other
    
    
    13.4
    
    
    
    12.4100.0
    %
    
    
    100.0
    %
  2009
    
    2008Home-based services
    
    
    87.7
    %
    
    
    81.9
    %Facility-based services
    
    
    12.3
    
    
    
    18.1100.0
    %
    
    
    100.0
    %
 Medicare
 Home-Based Services
 Home Nursing Services
  Hospice Services.
  Management Services
  Facility-Based Services
 Long-Term Acute Care Services (LTACHs).
 9




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Medicaid, managed care and other payors
  Accounts Receivable and Allowances for Uncollectible Accounts
     10




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Other Significant Accounting Policies
 Earnings Per Share
 Earnings Per Share
  Three Months EndedMarch 31,2009
    
    2008Weighted average number of shares outstanding for basic per share
calculation
    
    
    17,924,238
    
    
    
    17,800,066Effect of dilutive potential shares:Options
    
    
    6,058
    
    
    
    3,291Restricted stock
    
    
    61,322
    
    
    
    10,610Adjusted weighted average shares for diluted per share calculation
    
    
    17,991,618
    
    
    
    17,813,967
 Adoption of New Accounting Standards
 Business Combinations
 Accounting for
Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies Accounting for Contingencies
 11




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##### Table of Contents



Noncontrolling Interests in
Consolidated Financial Statements  An Amendment of ARB No. 51
  2009
    
    
    2008Amounts attributable to LHC Group Inc.s common stockholders:Income from continuing operations, net of tax
    
    $
    11,081
    
    
    $
    5,534Discontinued operations, net of tax benefit
    
    
    
    
    
    
    (196
    )Net income
    
    $
    11,081
    
    
    $
    5,338
 3. Acquisitions
   Consideration (in thousands)Cash
    
    $
    7,500Equity instruments (The Company exchanged a noncontrolling ownership
interest in three of its entities)
    
    
    1,409Fair value of total consideration transferred
    
    $
    8,909Recognized amounts of identifiable assets acquired and liabilities
assumedProperty, plant and equipment
    
    $
    98Trade name
    
    
    2,515Other identifiable intangible assets
    
    
    166Total identifiable assets
    
    $
    2,779Noncontrolling interest
    
    $
    2,970Goodwill, including noncontrolling interest
    
    $
    9,100
 12




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##### Table of Contents



4. Goodwill and Intangibles
  Three MonthsEndedMarch 31,2009(in thousands)Home-based services segment:Balance at December 31, 2008
    
    $
    107,108Goodwill acquired from acquisitions
    
    
    6,316Goodwill related to noncontrolling interest
    
    
    2,275Goodwill classified as held for sale
    
    
    (450
    )Balance at March 31, 2009
    
    $
    115,249Facility-based services segment:Balance at December 31, 2008
    
    $
    5,464Goodwill acquired from acquisitions
    
    
    Balance at March 31, 2009
    
    $
    5,464Consolidated balance at March 31, 2009
    
    $
    120,713
 Accounting
for the Impairment of Disposal of Long-Lived Assets
  13




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##### Table of Contents



5. Credit Arrangements
    6. Stockholders Equity
 Share Based Compensation
   Stock Options
  Nonvested Stock
  14




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##### Table of Contents



WeightedaverageNumber of
    
    grant dateShares
    
    fair valueNonvested shares outstanding at December 31, 2008
    
    
    306,406
    
    
    $
    22.45Granted
    
    
    234,483
    
    
    $
    19.93Vested
    
    
    (68,418
    )
    
    $
    20.47Forfeited
    
    
    (1,062
    )
    
    $
    17.00Nonvested shares outstanding at March 31, 2009
    
    
    471,409
    
    
    $
    21.65
  Employee Stock Purchase Plan
  7. Commitments and Contingencies
 Contingencies
  Joint Venture Buy/Sell Provisions
  Compliance
  15




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##### Table of Contents



8. Segment Information
  Three Months Ended March 31, 2009Home-Based
    
    
    Facility-BasedServices
    
    
    Services
    
    
    Total(in thousands)Net service revenue
    
    $
    109,348
    
    
    $
    15,274
    
    
    $
    124,622Cost of service revenue
    
    
    53,586
    
    
    
    8,635
    
    
    
    62,221Provision for bad debts
    
    
    1,029
    
    
    
    154
    
    
    
    1,183General and administrative expenses
    
    
    34,912
    
    
    
    3,985
    
    
    
    38,897Operating income
    
    
    19,821
    
    
    
    2,500
    
    
    
    22,321Interest expense
    
    
    (52
    )
    
    
    (7
    )
    
    
    (59
    )Non-operating income (loss)
    
    
    (474
    )
    
    
    14
    
    
    
    (460
    )Income from continuing operations before income
taxes and noncontrolling interest
    
    
    19,295
    
    
    
    2,507
    
    
    
    21,802Noncontrolling interest
    
    
    3,498
    
    
    
    484
    
    
    
    3,982Income from continuing operations before income taxes
    
    $
    15,797
    
    
    $
    2,023
    
    
    $
    17,820Total assets
    
    $
    239,131
    
    
    $
    22,514
    
    
    $
    261,645
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Three Months Ended March 31, 2008Home-Based
    
    
    Facility-BasedServices
    
    
    Services
    
    
    Total(in thousands)Net service revenue
    
    $
    68,363
    
    
    $
    15,110
    
    
    $
    83,473Cost of service revenue
    
    
    32,848
    
    
    
    8,424
    
    
    
    41,272Provision for bad debts
    
    
    3,246
    
    
    
    440
    
    
    
    3,686General and administrative expenses
    
    
    23,692
    
    
    
    3,805
    
    
    
    27,497Operating income (loss)
    
    
    8,577
    
    
    
    2,441
    
    
    
    11,018Interest expense
    
    
    (101
    )
    
    
    (47
    )
    
    
    (148
    )Non-operating income
    
    
    285
    
    
    
    117
    
    
    
    402Income from continuing operations before income
taxes and noncontrolling interest
    
    
    8,761
    
    
    
    2,511
    
    
    
    11,272Noncontrolling interest
    
    
    1,740
    
    
    
    700
    
    
    
    2,440Income from continuing operations before income taxes
    
    $
    7,021
    
    
    $
    1,811
    
    
    $
    8,832Total assets
    
    $
    161,891
    
    
    $
    26,269
    
    
    $
    188,160
 
 ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
 CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
  §
    
    our expectations regarding financial condition or results of operations for periods after March 31, 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;
 17




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##### Table of Contents



§
    
    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.
      Overview
  Segments
  18




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##### Table of Contents



Type of ServiceHome Health
    
    
    209Hospice
    
    
    19Diabetes Management Company
    
    
    2Private Duty
    
    
    4Specialty Services
    
    
    3Management Companies
    
    
    4241
   Recent Developments
 Home-Based Services
 Home Nursing.
  Hospice
 19




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##### Table of Contents



Facility-Based Services
 LTACHs.
    Office of Inspector General
  20




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##### Table of Contents



Results of Operations
 Accounts Receivable and Allowance for Uncollectible Accounts
   Payor
    
    0-90
    
    
    91-180
    
    
    181-365
    
    
    365+
    
    
    Total(in thousands)Medicare
    
    $
    48,272
    
    
    $
    5,828
    
    
    $
    748
    
    
    $
    1,696
    
    
    $
    56,544Medicaid
    
    
    3,190
    
    
    
    690
    
    
    
    849
    
    
    
    1,278
    
    
    
    6,007Other
    
    
    8,806
    
    
    
    1,976
    
    
    
    1,644
    
    
    
    444
    
    
    
    12,870Total
    
    $
    60,268
    
    
    $
    8,494
    
    
    $
    3,241
    
    
    $
    3,418
    
    
    $
    75,421Allowance as a percentage of receivable
    
    
    6.8%
    
    
    
    12.8%
    
    
    
    62.8%
    
    
    
    93.5%
    
    
    
    13.8%
   Payor
    
    0-90
    
    
    91-180
    
    
    181-365
    
    
    365+
    
    
    Total(in thousands)Medicare
    
    $
    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
receivable
    
    
    6.9%
    
    
    
    15.8%
    
    
    
    33.0%
    
    
    
    94.3%
    
    
    
    14.0%
 Consolidated Net Service Revenue
  2009
    
    2008Home-based services
    
    
    87.7
    %
    
    
    81.9
    %Facility-based services
    
    
    12.3
    
    
    
    18.1100.0
    %
    
    
    100.0
    %
 Home-Based Services.
 21




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##### Table of Contents



Three Months Ended March 31, 2009 (in thousands except census and episode data)
 Same
    
    
    
    
    
    
    
    
    
    Organic
    
    
    
    
    
    
    
    
    
    TotalStore(1)
    
    De Novo(2)
    
    Organic(3)
    
    Growth %
    
    Acquired(4)
    
    Total
    
    Growth %Revenue
    
    $
    85,776
    
    
    $
    1,346
    
    
    $
    87,122
    
    
    
    27.4
    %
    
    $
    22,226
    
    
    $
    109,348
    
    
    
    60.0
    %Revenue Medicare
    
    $
    72,172
    
    
    $
    1,166
    
    
    $
    73,338
    
    
    
    29.2
    %
    
    $
    17,741
    
    
    $
    91,079
    
    
    
    60.5
    %Average Census
    
    
    22,844
    
    
    
    462
    
    
    
    23,306
    
    
    
    22.9
    %
    
    
    4,528
    
    
    
    27,834
    
    
    
    46.8
    %Average Medicare Census
    
    
    18,605
    
    
    
    386
    
    
    
    18,991
    
    
    
    27.7
    %
    
    
    3,372
    
    
    
    22,363
    
    
    
    50.3
    %Episodes
    
    
    30,722
    
    
    
    469
    
    
    
    31,191
    
    
    
    20.9
    %
    
    
    5,413
    
    
    
    36,604
    
    
    
    41.9
    %
 
 (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. Three Months Ended March 31, 2008 (in thousands except census and episode data)
 Same
    
    
    
    
    
    
    
    
    
    Organic
    
    
    
    
    
    
    
    
    
    TotalStore(1)
    
    De Novo(2)
    
    Organic(3)
    
    Growth %
    
    Acquired(4)
    
    Total
    
    Growth %Revenue
    
    $
    57,424
    
    
    $
    1,425
    
    
    $
    58,849
    
    
    
    6.9
    %
    
    $
    9,514
    
    
    $
    68,363
    
    
    
    24.1
    %Revenue Medicare
    
    $
    47,286
    
    
    $
    1,219
    
    
    $
    48,505
    
    
    
    8.6
    %
    
    $
    8,255
    
    
    $
    56,760
    
    
    
    27.0
    %Average Census
    
    
    16,143
    
    
    
    646
    
    
    
    16,789
    
    
    
    6.9
    %
    
    
    2,169
    
    
    
    18,958
    
    
    
    20.7
    %Average Medicare Census
    
    
    12,537
    
    
    
    509
    
    
    
    13,046
    
    
    
    12.1
    %
    
    
    1,830
    
    
    
    14,876
    
    
    
    27.8
    %Episodes
    
    
    21,504
    
    
    
    658
    
    
    
    22,162
    
    
    
    27.6
    %
    
    
    3,253
    
    
    
    25,793
    
    
    
    46.4
    %
 
 (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.
 22




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##### Table of Contents



Cost of Service Revenue
  Home-Based Services.
  Three Months Ended March 31,2009
    
    
    2008Salaries, wages and benefits
    
    $
    46,113
    
    
    
    42.2
    %(1)
    
    $
    28,105
    
    
    
    41.1
    %(1)Transportation
    
    
    3,341
    
    
    
    3.1
    
    
    
    2,206
    
    
    
    3.2Supplies and services
    
    
    4,132
    
    
    
    3.7
    
    
    
    2,537
    
    
    
    3.7Total
    
    $
    53,586
    
    
    
    49.0
    %
    
    $
    32,848
    
    
    
    48.0
    %
 
 (1)
    
    Percentage of home-based net service revenue  Facility-Based Services.
  Three Months Ended March 31,2009
    
    
    2008Salaries, wages and benefits
    
    $
    5,389
    
    
    
    35.3
    %(1)
    
    $
    5,441
    
    
    
    36.0
    %(1)Transportation
    
    
    34
    
    
    
    0.2
    
    
    
    76
    
    
    
    0.5Supplies and services
    
    
    3,212
    
    
    
    21.0
    
    
    
    2,907
    
    
    
    19.3Total
    
    $
    8,635
    
    
    
    56.5
    %
    
    $
    8,424
    
    
    
    55.8
    %
 
 (1)
    
    Percentage of facility-based net service revenue Provision for Bad Debts
   General and Administrative Expenses
 23




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##### Table of Contents




    
    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.
  Home-Based Services.
 Facility-Based Services.
 Income Tax Expense
  Net Income Attributable to Noncontrolling Interest
  Liquidity and Capital Resources
  24




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##### Table of Contents




    
    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.
    
    Medical Supplies The 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.
  Three MonthsEnded March 31,2009
    
    
    2008Cash provided by operating activities
    
    $
    14,992
    
    
    $
    16,515Cash used in investing activities
    
    
    (10,027
    )
    
    
    (16,477
    )Cash used in financing activities
    
    
    (3,281
    )
    
    
    (121
    )Change in cash
    
    
    1,684
    
    
    
    (83
    )Cash and cash equivalents at beginning of period
    
    
    3,511
    
    
    
    1,155Cash and cash equivalents at end of period
    
    $
    5,195
    
    
    $
    1,072
     Indebtedness
  25




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##### Table of Contents



Eurodollar
    
    Base RateLeverage Ratio
    
    Margin
    
    Margin<1.00:1.00
    
    
    1.75
    %
    
    
    (0.25
    )%≥1.00:1.00<1.50:1.00
    
    
    2.00
    %
    
    
    0
    %≥1.50:1.00<2.00:1.00
    
    
    2.25
    %
    
    
    0
    %≥2.00:1.00
    
    
    2.50
    %
    
    
    0
    %
    Contingencies
  Off-Balance Sheet Arrangements
  Critical Accounting Policies
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 26




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##### Table of Contents



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.
  27




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##### Table of Contents



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
  ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
  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).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*
    
    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. 28




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##### Table of Contents



SIGNATURES
  LHC GROUP, INC.Date May 8, 2009
    /s/  Peter J. RomanPeter J. RomanSenior Vice President and Chief Financial Officer 29