8-K/A

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K/A

 

 

AMENDMENT NO. 1 TO

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event Reported): April 5, 2018 (April 1, 2018)

 

 

LHC GROUP, INC

(Exact Name of Registrant as Specified in Charter)

 

 

 

Delaware   001-33989   71-0918189

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification Number)

901 Hugh Wallis Road South, Lafayette, LA 70508

(Address of Principal Executive Offices) (Zip Code)

(337) 233-1307

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company  ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

 

 


Introductory Note

In this Current Report on Form 8-K/A, the “Company” and “LHCG” refers to LHC Group, Inc., a Delaware corporation, and its consolidated subsidiaries.

On April 2, 2018, the Company filed a Current Report on Form 8-K (the “Original Filing”) in connection with the completion, on April 1, 2018, of the merger of equals business combination with Almost Family, Inc. (“Almost Family”) as contemplated by that certain agreement and plan of merger, dated as of November 15, 2017 (the “Merger Agreement”), by and among the Company, Almost Family and Hammer Merger Sub, Inc., a wholly owned subsidiary of the Company (“Merger Sub”). On April 1, 2018 and pursuant to the Merger Agreement, Merger Sub merged with and into Almost Family (the “Merger”), with Almost Family continuing as the surviving entity in the Merger and a wholly owned subsidiary of the Company.

This Current Report on Form 8-K/A amends the Original Filing to include the financial statements and pro forma information required by Item 9.01 of Form 8-K. Except for the filing of such financial statements and pro forma information, this Form 8-K/A does not modify or update other disclosures in, or exhibits to, the Original Filing.

 

Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired.

The audited consolidated financial statements of Almost Family required by Item 9.01(a) of Form 8-K and accompanying notes are filed as Exhibit 99.1 to this Current Report on Form 8-K/A.

(b) Pro Forma Financial Information.

The pro forma financial information required by Item 9.01(b) of Form 8-K in relation to the Merger is filed as Exhibit 99.2 to this Current Report on Form 8-K/A and is incorporated herein by reference.

(d) Exhibits:

 

23.1    Consent of Ernst & Young LLP, independent registered public accounting firm of Almost Family.*
99.1    Audited Historical Consolidated Financial Statements and Related Notes, and Financial Statement Schedule of Almost Family (incorporated by reference to the Annual Report on Form 10-K for the year ended December 29, 2017 filed by Almost Family (SEC File No. 001-09848) on February 27, 2018).
99.2    Unaudited Pro Forma Condensed Consolidated Balance Sheet as of December 31, 2017 and the Unaudited Pro Forma Condensed Consolidated Statement of Income for the year ended December 31, 2017.*

 

* Filed herewith.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

Dated: April 5, 2018

   

LHC GROUP, INC.

(Registrant)

    /s/ JOSHUA L. PROFFITT
   

Joshua L. Proffitt

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

EX-23.1

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the registration statements No. 333-207584 on Form S-3 and Nos. 333-168977,

333-130600, 333-125713, 333-190688 and 333-224140 on Form S-8 of LHC Group, Inc. of our reports dated February 27, 2018, with respect to the consolidated financial statements and schedule of Almost Family, Inc. and Subsidiaries and the effectiveness of internal control over financial reporting of Almost Family, Inc. and Subsidiaries included in the Annual Report (Form 10-K) of Almost Family, Inc. for the year ended December 29, 2017.

 

LOGO

Louisville, Kentucky

April 5, 2018

EX-99.2

Exhibit 99.2

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

As previously disclosed in the Current Report on Form 8-K of LHC Group, Inc. (“LHC” or the “Company”), LHC closed its previously announced merger of equals business combination with Almost Family as contemplated by that certain Agreement and Plan of Merger, dated as of November 15, 2017 (the “Merger Agreement”), by and among the Company, Almost Family, Inc. (“Almost Family”) and Hammer Merger Sub, Inc., a wholly owned subsidiary of the Company (“Merger Sub”). On April 1, 2018 and pursuant to the Merger Agreement, Merger Sub merged with and into Almost Family (the “merger”), with Almost Family continuing as the surviving entity in the merger and as a wholly owned subsidiary of LHC.

The following unaudited pro forma combined financial information is presented to illustrate the estimated effects of the merger based on the historical financial statements and accounting records of LHC and Almost Family after giving effect to the merger and the merger-related pro forma adjustments as described in the notes below.

The unaudited pro forma combined balance sheet combines the historical consolidated balance sheets of LHC and Almost Family, giving effect to the merger as if it had been consummated on December 31, 2017. The unaudited pro forma combined statements of income for the year ended December 31, 2017 combine the historical consolidated statements of income of LHC and Almost Family, giving effect to the merger as if it had been consummated on January 1, 2017, the beginning of the earliest period presented. The historical consolidated financial statements of Almost Family have been adjusted to reflect certain reclassifications in order to conform with LHC’s financial statement presentation.

The unaudited pro forma combined financial statements were prepared using the acquisition method of accounting for business combinations pursuant to the provisions of Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”), with LHC considered the acquirer of Almost Family for accounting purposes. Accordingly, consideration given by LHC to complete the merger will be allocated to the assets and liabilities of Almost Family based upon their estimated fair values as of the date of completion of the merger. As of the date of this Current Report on Form 8-K/A, LHC has not completed the detailed valuation studies necessary to arrive at the required estimates of the fair value of the Almost Family assets to be acquired and the liabilities to be assumed and the related allocations of merger consideration, nor has it identified all adjustments necessary to conform Almost Family’s accounting policies to LHC’s accounting policies. A final determination of the fair value of Almost Family’s assets and liabilities will be based on the actual net tangible and intangible assets and liabilities of Almost Family that exist as of the date of completion of the merger and therefore cannot be made prior to the completion of the transaction. Accordingly, the pro forma merger consideration allocation and adjustments are preliminary and are subject to further adjustments as additional information becomes available and as additional analyses are performed. The preliminary pro forma merger consideration allocation and adjustments have been made solely for the purpose of providing the unaudited pro forma combined financial statements presented below. Increases or decreases in the fair value of relevant balance sheet amounts will result in adjustments to the balance sheet and/or statements of income until the allocation of merger consideration is finalized. There can be no assurance that such finalization will not result in material changes.

These unaudited pro forma combined financial statements have been developed from and should be read in conjunction with the audited consolidated financial statements of each of LHC and Almost Family contained in their respective Annual Reports on Form 10-K for the fiscal year ended December 31, 2017 and December 29, 2017, respectively. The unaudited pro forma combined financial statements are provided for illustrative purposes only and do not purport to represent what the actual consolidated results of operations or the consolidated financial position of LHC would have been had the merger occurred on the dates assumed, nor are they necessarily indicative of future consolidated results of operations or consolidated financial position.

Pro forma adjustments are included only to the extent they are (i) directly attributable to the merger, (ii) factually supportable and (iii) with respect to the unaudited pro forma combined statement of income, expected to have a continuing impact on the combined results. LHC expects to incur significant costs associated with integrating the operations of LHC and Almost Family. The unaudited pro forma combined financial statements do not reflect the costs of any integration activities or benefits that may result from realization of future cost savings from operating efficiencies or revenue synergies expected to result from the merger.

 

1


Unaudited Pro Forma Combined Balance Sheet

At December 31, 2017

(amounts in thousands)

 

     LHC
Group,
Inc.
    Almost
Family, Inc.
(as of

December 29,
2017)
    Pro Forma
Adjustments
    Notes      Pro Forma
Surviving
Corporation
 

ASSETS

           

Current assets:

           

Cash

   $ 2,849     $ 11,310       —          $ 14,159  

Receivables:

           

Patient accounts receivable, net

     161,898       125,860       —            287,758  

Other receivables

     3,163       —         —            3,163  

Amounts due from governmental entities

     830       —         —            830  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total receivables, net

     165,891       125,860       —            291,751  

Prepaid income taxes

     7,006       —         3,121       2,3a        10,127  

Prepaid expenses

     13,042       14,514       (5,875     2        21,681  

Other current assets

     12,177       —         3,351       2        15,528  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total current assets

     200,965       151,684       597          353,246  

Property, building and equipment, net

     46,453       15,246       —            61,699  

Goodwill

     392,601       390,754       289,626       3b        1,072,981  

Intangible assets, net

     134,610       145,522       45,874       3c        326,006  

Other assets

     19,073       10,812       —            29,885  

Assets held for sale

     —         3,800       —            3,800  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total assets

   $ 793,702     $ 717,818     $ 336,097        $ 1,847,617  
  

 

 

   

 

 

   

 

 

      

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

           

Current liabilities:

           

Accounts payable and other accrued liabilities

   $ 39,750     $ 22,049       —          $ 61,799  

Accrued other liabilities

     —         50,182       (42,843     2        7,339  

Salaries, wages, and benefits payable

     44,747       —         28,499       2        73,246  

Self-insurance reserve

     12,450       —         14,344       2        26,794  

Current portion of long-term debt

     286       4,961       —            5,247  

Amounts due to governmental entities

     5,019       —         —            5,019  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total current liabilities

     102,252       77,192       —            179,444  

Deferred income taxes

     27,466       18,595       12,432       3d        58,493  

Revolving credit facility

     144,000       100,254       —            244,254  

Seller’s Notes

     —         7,800       —            7,800  

Other Liabilities

     —         7,424       (3,728     2        3,696  

Income tax payable

     —         —         3,728       2        3,728  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total liabilities

     273,718       211,265       12,432          497,415  

Noncontrolling interest — redeemable

     13,393       2,256       —            15,649  

Stockholders’ equity:

           

Stockholders’ equity:

           

Preferred Stock

     —         —         —            —    

Common stock

     226       1,425       (1,296     3e        355  

Treasury stock

     (42,249     (10,453     10,453       3e        (42,249

Additional paid-in capital

     126,490       294,448       499,712       3e        920,650  

Retained earnings

     364,401       184,309       (185,204     3e        363,506  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total stockholders’ equity

     448,868       469,729       323,665          1,242,262  

Noncontrolling interest — non-redeemable

     57,723       34,568       —            92,291  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total equity

     506,591       504,297       323,665          1,334,553  
  

 

 

   

 

 

   

 

 

      

 

 

 

Total liabilities and equity

   $ 793,702     $ 717,818     $ 336,097        $ 1,847,617  
  

 

 

   

 

 

   

 

 

      

 

 

 

The accompanying notes are an integral part of the unaudited pro forma combined financial statements.

 

2


Unaudited Pro Forma Combined Statement of Income

For the Year Ended December 31, 2017

(amounts in thousands, except per share data)

 

     LHC
Group,
Inc.
    Almost
Family, Inc.
(December 29,
2017)
    Pro Forma
Adjustments
    Notes      Pro Forma
Surviving
Corporation
 

Net service revenue

   $ 1,072,086     $ 796,965     $ —          $ 1,869,051  

Cost of service revenue

     675,810       419,394       —            1,095,204  
  

 

 

   

 

 

   

 

 

      

 

 

 

Gross margin

     396,276       377,571       —            773,847  

Provision for bad debts

     9,484       —         14,526       2        24,010  

General and administrative expenses

     310,539       348,353       (13,034     2,4a        645,858  

Impairment of intangibles and other

     1,511       —         —            1,511  

Loss on disposal of assets

     60       —         —            60  
  

 

 

   

 

 

   

 

 

      

 

 

 

Operating income

     74,682       29,218       (1,492        102,408  

Interest expense

     (3,876     (7,391     —            (11,267

Non-operating income

     524       —         —            524  
  

 

 

   

 

 

   

 

 

      

 

 

 

Income before income taxes and noncontrolling interest

     71,330       21,827       (1,492        91,665  

Income tax expense (benefit)

     10,944       (2,110     (597     4b        8,237  
  

 

 

   

 

 

   

 

 

      

 

 

 

Net income

     60,386       23,937       (895        83,428  

Less net income attributable to noncontrolling interests

     10,274       3,523       —            13,797  
  

 

 

   

 

 

   

 

 

      

 

 

 

Net income attributable to common stockholders

   $ 50,112     $ 20,414     $ (895      $ 69,631  
  

 

 

   

 

 

   

 

 

      

 

 

 

Earnings per share attributable to common stockholders:

           

Basic

   $ 2.83     $ 1.51         4c      $ 2.28  

Diluted

   $ 2.79     $ 1.48         4c      $ 2.24  

Weighted average shares outstanding:

           

Basic

     17,716       13,539         4c        30,594  

Diluted

     17,961       13,757         4c        31,033  

The accompanying notes are an integral part of the unaudited pro forma combined financial statements.

 

3


Notes to Unaudited Pro Forma Combined Financial Statements

(in thousands, except per share data)

Note 1. Basis of Presentation

Under the terms of the merger agreement, at the effective time of the merger, (a) Almost Family became a wholly owned subsidiary of LHC; (b) each outstanding share of Almost Family common stock was converted into the right to receive 0.9150 shares of LHC common stock plus cash in lieu of any fractional shares of LHC common stock; and (c) Almost Family stock options and equity awards converted into stock options and equity awards with respect to LHC common stock based on the exchange ratio, subject to certain exceptions.

The unaudited pro forma combined financial statements were prepared in accordance with ASC 805, using the acquisition method of accounting with LHC considered to be the acquirer of Almost Family for accounting purposes.

The unaudited pro forma combined financial statements present the pro forma combined financial position and results of operations of the combined company based upon the historical financial statements of LHC and Almost Family, after giving effect to the merger and the adjustments described in these notes. The unaudited pro forma combined financial statements are presented for illustrative purposes only and are not intended to reflect the financial position and results of operations which would have actually resulted had the merger been completed on the dates indicated. Further, the unaudited pro forma combined financial statements do not reflect the costs of any integration activities or benefits that may result from realization of future cost savings due to operating efficiencies or revenue synergies expected to result from the merger.

The unaudited pro forma combined balance sheet gives effect to the merger as if it had been consummated on December 31, 2017 and includes estimated pro forma adjustments (to the extent they can be currently estimated) for the preliminary valuations of assets acquired and liabilities assumed. These adjustments are subject to further revision as additional information becomes available and additional analyses are performed. The unaudited pro forma combined statements of income give effect to the merger as if it had been consummated on January 1, 2017, the beginning of the earliest period presented.

The unaudited pro forma combined balance sheet has been adjusted to reflect the preliminary allocation of the merger consideration to identifiable net assets acquired and the excess merger consideration to goodwill. The merger consideration allocation in these unaudited pro forma combined financial statements is based upon aggregate merger consideration of approximately $792.8 million. This amount was calculated as described below in accordance with the merger agreement, based on the outstanding shares of Almost Family common stock, the exchange ratio of 0.9150 shares of LHC common stock for each Almost Family share and a price per LHC common share of $61.56, which represents the closing price of LHC shares of common stock on March 29, 2018. The actual number of shares of LHC common stock issued to Almost Family stockholders pursuant to the merger will be based upon the actual number of Almost Family shares outstanding at the effective time of the merger, and the valuation of those shares will be based on the trading price of LHC’s common stock at the effective time of the merger.

The preliminary merger consideration is calculated as follows:

 

Outstanding shares of Almost Family common stock as of December 29, 2017

     13,992  

Exchange ratio

     0.9150  
  

 

 

 

Shares of Surviving Corporation to be issued

     12,803  
  

 

 

 

Price per share as of March 29, 2018

   $ 61.56  

Fair value of Surviving Corporation common stock to be issued

   $ 788,133  

Fair value of vested Almost Family equity awards exchanged for Surviving Corporation equity awards

     4,664  
  

 

 

 

Preliminary merger consideration

   $ 792,797  
  

 

 

 

The total consideration amount is calculated based on (i) the closing price of LHC shares of common stock on March 29, 2018, equal to $61.56, (ii) approximately 13,992,000 shares of Almost Family common stock outstanding as of December 29, 2017, and (iii) the exchange ratio described above. Each one dollar increase (decrease) in the per share price of LHC common stock will result in an approximate $12.9 million increase (decrease) in the total consideration for the transaction, substantially all of which LHC expects would be recorded as an increase (decrease) in the amount of goodwill recorded in the transaction. The outstanding number of shares of Almost Family common stock will change prior to the closing of the merger due to transactions in the ordinary course of business, including the vesting of outstanding shares and any grants of new Almost Family equity awards. These changes are not expected to have a material impact on the unaudited pro forma financial statements.

 

4


The table below represents a preliminary allocation of the total consideration to Almost Family’s tangible and intangible assets and liabilities based on LHC management’s preliminary estimate of their respective fair values (amounts in thousands):

 

Assets acquired:

  

Cash and cash equivalents

   $ 11,310  

Accounts receivable, net

     125,860  

Prepaid income taxes

     2,524  

Prepaid expenses

     8,639  

Other current assets

     3,351  

Property and equipment

     15,246  

Goodwill

     680,380  

Intangible assets

     191,396  

Other assets

     10,812  

Assets held for sale

     3,800  

Liabilities assumed:

  

Accounts payable and other accrued liabilities

     (22,049

Accrued other liabilities

     (7,339

Salaries, wages, and benefits payable

     (28,499

Self-insurance payable

     (14,344

Current portion of long-term debt

     (4,961

Long-term debt obligations

     (111,750

Deferred income taxes

     (31,027

Income tax payable

     (3,728

Redeemable noncontrolling interest

     (2,256

Non-redeemable noncontrolling interest

     (34,568
  

 

 

 

Net assets acquired

   $ 792,797  
  

 

 

 

Upon completion of the fair value assessment after the merger, it is anticipated that the ultimate allocation of merger consideration will differ from the preliminary assessment outlined above. Any changes to the initial estimates of the fair value of the assets and liabilities, which may be material, will be recorded as adjustments to those assets and liabilities and residual amounts will be allocated to goodwill. Assets and liabilities for which preliminary adjustments have been made are described in Note 3 below. Other assets and liabilities for which adjustments have not yet been reflected include, but are not limited to, the valuation of definite-lived intangible assets. Accordingly, LHC will continue to refine the identification and initial measurement of assets to be acquired and liabilities to be assumed as further information becomes available.

Note 2. Reclassification Adjustments

 

The unaudited pro forma financial information has been compiled in a manner consistent with the accounting policies adopted by LHC. Certain balances from the consolidated financial statements of Almost Family were reclassified to conform its presentation to that of LHC:

 

5


The following reclassifications were made to the unaudited pro forma combined balance sheet as of December 31, 2017 (amounts in thousands):

 

     Increase/(Decrease)  

Account description

   Reclass
Prepaid
Expenses
     Reclass
Accrued
other
liabilities
     Reclass
Other
Liabilities
     Total  

Prepaid income taxes

   $ 2,524      $ —        $ —        $ 2,524  

Prepaid expenses

     (5,875      —          —          (5,875

Other current assets

     3,351        —          —          3,351  

Accrued other liabilities

     —          (42,843      —          (42,843

Salaries, wages, and benefits payable

     —          28,499        —          28,499  

Self-insurance reserve

     —          14,344        —          14,344  

Other liabilities

     —          —          (3,728      (3,728

Income tax payable

     —          —          3,728        3,728  

A reclassification was made to the unaudited pro forma combined income statements for the twelve months ended December 31, 2017 of $14.5 million of general and administrative expenses to provision for bad debts.

Note 3. Unaudited Pro Forma Combined Balance Sheet Adjustments

The unaudited pro forma combined balance sheet reflects the following adjustments:

 

  (a) Prepaid income taxes. The income tax expense impact of the pro forma adjustments was determined by applying an estimated statutory tax rate of 40%.

 

  (b) Goodwill. Goodwill is calculated as the difference between the fair value of the aggregate merger consideration and the values assigned to the identifiable tangible and intangible assets acquired and liabilities assumed. The amount of goodwill presented in the table below reflects the estimated goodwill as a result of the merger as of December 31, 2017. The actual amount of goodwill will depend upon the final determination of fair values of the assets acquired and liabilities assumed and may differ materially from this preliminary determination. The goodwill created in the merger is not expected to be deductible for tax purposes and is subject to material revisions as the purchase price allocation is completed. The excess of the merger consideration over the estimated fair value of the identifiable net assets acquired is calculated as follows (amounts in thousands):

 

Aggregate merger consideration

   $ 792,797  

Less: estimated fair value of net assets acquired

     (112,417
  

 

 

 

Estimated goodwill arising from the merger

     680,380  

Less: book value of Almost Family existing goodwill

     (390,754
  

 

 

 

Pro forma adjustment

   $ 289,626  
  

 

 

 

 

  (c) Intangibles. Intangible assets expected to be acquired consist of the following (amounts in thousands):

 

Description

   Estimated value  

Trade name

   $ 116,679  

Certificates of Need

     26,369  

Medicare licenses

     21,369  

Medicaid licenses

     11,123  

Definite intangible assets

     15,856  
  

 

 

 

Total intangible assets

     191,396  

Less: book value of Almost Family intangible assets

     (145,522
  

 

 

 

Pro forma adjustment

   $ 45,874  
  

 

 

 

 

6


The fair value estimates for intangible assets are preliminary and determined based on the assumptions that market participants would use in pricing an asset, based on the most advantageous market for the asset. Acquired intangible assets include both definite-lived assets, consisting of non-compete agreements, customer relationships, and software; however, as of the date of this joint proxy statement/prospectus, LHC does not have sufficient information to make a reasonable preliminary estimate of the estimated lives of such assets and no amortization expense has been assigned at this time, and indefinite-lived assets consisting of trade names, Certificates of Need, Medicare licenses, and Medicaid licenses, which are not amortized. The final fair value determination for intangible assets may differ materially from this preliminary determination. Any change in the amount of the final fair value of amortizable, definite-lived intangible assets, or any change in the current designation of non-amortizable indefinite-lived intangible assets, could materially affect the amount of amortization expense recorded by the combined company subsequent to the date of completion of the merger.

 

  (d) Deferred taxes. The adjustment represents an estimate of net deferred income tax liability resulting from pro forma adjustments for the assets to be acquired based on an estimated U.S. statutory rate of 27.1%. This estimate of deferred taxes was determined based on the excess fair value of intangible assets acquired over Almost Family’s book basis. The incremental deferred tax liability was calculated based on the statutory rates where fair value adjustments were estimated. This estimate of deferred income taxes is preliminary and is subject to change based upon management’s final determination of the fair value of intangible assets acquired.

 

  (e) Equity. The adjustment represents (i) the issuance of LHC stock to Almost Family’s shareholders in connection with the merger, (ii) the elimination of Almost Family’s historical equity, (iii) the estimated impact of transaction costs related to the merger, and (iv) the acceleration of certain Almost Family’s restricted stock awards upon completion of the merger. The following table details the pro forma adjustments made to various stockholders’ equity accounts (amounts in thousands):

 

     Common
Stock
     Treasury
Stock
     Additional
Paid-in-Capital
     Retained
Earnings
 

Issuance of LHC stock

   $ 128      $ —        $ 788,004      $ —    

Elimination of Almost Family’s historical equity

     (1,425      10,453        (294,448      (184,309

Transaction related costs

     —          —          1,492        (895

Acceleration of certain Almost Family’s restricted stock awards

     1        —          4,664        —    
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ (1,296    $ 10,453      $ 499,712      $ (185,204
  

 

 

    

 

 

    

 

 

    

 

 

 

Note 4. Unaudited Pro Forma Combined Statements of Income Adjustments

The unaudited pro forma combined statement of income reflects the following adjustments:

 

  (a) Share-based compensation. At completion, Almost Family awards will be converted into LHC equity awards after giving effect to the exchange ratio. Share-based compensation expense, following the completion of the merger, will reflect the fair value of the awards as of the completion date for the portion that was allocated to post-combination services. Adjustments of $1.5 million of stock-based compensation expense was recorded for the twelve months ended December 31, 2017.

 

  (b) Income tax expense. The income tax expense impact of the pro forma adjustments was determined by applying an estimated statutory tax rate of 40%.

 

  (c) Earnings per share. The pro forma combined basic and diluted earnings per share for the twelve months ended December 31, 2017, are calculated as follows (amounts in thousands, except per share data):

 

     Twelve
months ended
December 31,
2017
 

LHC’s historic average basic shares

     17,716  

Shares issued for Almost Family

     12,878  
  

 

 

 

Pro forma historic average basic shares

     30,594  

Dilutive effect of equity awards:

  

LHC’s equity awards

     245  

Almost Family’s equity awards converted to the Survivor Corporation equity awards

     194  
  

 

 

 

Pro forma diluted weighted average shares outstanding

     31,033  
  

 

 

 

Pro forma basic earnings per share

   $ 2.28  
  

 

 

 

Pro forma diluted earnings per share

   $ 2.24  
  

 

 

 

 

7