Almost Family (AFAM) Misses Q3 EPS by 1c; Acquires Black Stone Operations

Almost Family (NASDAQ: AFAM) reported Q3 EPS of $0.51, $0.01 worse than the analyst estimate of $0.52. Revenue for the quarter came in at $131.2 million versus the consensus estimate of $133.14 million.

Almost Family also announced that it has acquired the stock of Black Stone Operations, LLC (Black Stone) effective today. Black Stone, a provider of in-home personal care and skilled home health services has 2015 revenues approaching $50 million through service locations in the western half of Ohio and operates under the name "Home Care by Black Stone".

Strategic Rationale for the Transaction

• Provides additional scale with approximately $50 million revenue run-rate of which $29 million would be classified in the Personal Care segment and $21 million in the Visiting Nurse segment. The Personal Care segment is now expected to approach $180 million in annual revenue
• Complements existing operations in Ohio further strengthening our state-wide service capabilities
• Enhances our position as a leading provider of services to Ohio's innovative managed care programs for seniors who are dually-eligible for Medicare and Medicaid services
• On a combined basis Ohio revenues are expected to be over $120 million annually
• Offers significant synergies at both the home office and branch operations levels

Management Comments

William B. Yarmuth, Chairman and CEO of Almost Family, Inc., commented, "First, I'd like to warmly welcome the employees of Home Care by Black Stone to our growing family of home care providers. Their work and dedication to servicing patients and referral sources under the leadership of David Tramontana and his management team have created a tremendously successful business. This combination fits perfectly with our stated goal of being a dominant provider in the states in which we operate. We believe our combined Ohio organization – to be led by David and his team – will be the largest senior focused home health provider in the state. We are very excited to see the progress we can make applying Black Stone's focus on the dually-eligible senior population throughout our existing operations in the state. Finally, I'd like to take a moment to acknowledge and thank the employees and managers of Almost Family's own Ohio home health operations for building an equally successful business. As we move into the future we will seek to build on the best of both operations and be the best possible home health provider for the senior citizens of the state of Ohio."

David Tramontana, CEO and co-founder of Black Stone, commented, "We could not be any more thrilled than we are to be joining Almost Family. We had many different strategic options for the future of Black Stone but combining with Almost Family was the clear and obvious choice. We're very excited to join forces with Almost Family's existing Ohio operations to be THE leader in Ohio home care. Our management team is honored to be entrusted with the management responsibility for the Ohio operations and is excited to move forward building on the incredible foundations built by each of us."

The acquisition is expected to be accretive to EPS in 2016.

The Company's 2014 audited results included revenues of $46.7 million and branch level contribution (before home office and one-time items) of $7.5 million. For the same period, Black Stone's home office costs before one-time items were approximately $3.8 million including depreciation of $0.3 million. Almost Family expects transition of home office functions and integration activities to take place over the course of 2016. The Company expects home office synergies between $1.5 million and $2 million. Branch level synergies are expected to range between $2.0 million and $2.5 million. One-time transaction costs, severance, wind-down, lease abandonment and transition costs are expected to be between $0.5 million and $1.0 million incurred over the period from closing through mid-2016.

The total purchase price of $40 million will be funded through borrowings on the Company's bank credit facility ($27.5 million), seller notes ($5 million) and the issuance of 188,000 of Almost Family common shares.

For earnings history and earnings-related data on Almost Family (AFAM) click here.

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