Indicate by check mark whether the ~~registrant:~~registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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. ☐.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒.

As of ~~October~~April 30, ~~2020,~~2021, Addus HomeCare Corporation had ~~15,808,708~~15,903,434 shares of Common Stock outstanding.


	September 30, 2020		December 31, 2019		March 31, 2021		December 31, 2020
Assets
Current assets
Cash	$	170,331	$	111,714	$	125,547	$	145,078
Accounts receivable, net		118,623		149,680		138,806		132,650
Prepaid expenses and other current assets		10,426		7,993		10,787		9,969
Total current assets		299,380		269,387		275,140		287,697
Property and equipment, net of accumulated depreciation and amortization		19,305		12,156		19,322		19,749
Other assets
Goodwill		286,552		275,368		469,036		469,072
Intangibles, net of accumulated amortization		52,873		57,079		69,395		71,549
Deferred tax assets, net		1,479		1,647		6,359		6,524
Operating lease assets, net		35,842		21,111		38,325		37,991
Total other assets		376,746		355,205		583,115		585,136
Total assets	$	695,431	$	636,748	$	877,577	$	892,582
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	17,270	$	19,641	$	23,459	$	23,705
Accrued payroll		26,315		30,587		20,255		35,815
Accrued expenses		33,395		22,429		38,654		37,564
Government stimulus advances						20,368		32,087
Accrued workers' compensation insurance		14,668		14,143		14,380		13,759
Current portion of long-term debt		2,095		728		972		971
Total current liabilities		93,743		87,528		118,088		143,901
Long-term liabilities
Long-term debt, less current portion, net of debt issuance costs		59,561		59,164		193,839		193,901
Long-term operating lease liabilities		33,977		14,301		35,623		35,516
Other long-term liabilities		550		163		117		588
Total long-term liabilities		94,088		73,628		229,579		230,005
Total liabilities	$	187,831	$	161,156	$	347,667	$	373,906
Stockholders' equity
Common stock—$.001 par value; 40,000 authorized and 15,801 and 15,617 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively	$	16	$	15
Common stock—$.001 par value; 40,000 authorized and 15,903 and 15,826 shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively					$	16	$	16
Additional paid-in capital		366,868		359,545		371,835		369,495
Retained earnings		140,716		116,032		158,059		149,165
Total stockholders' equity		507,600		475,592		529,910		518,676
Total liabilities and stockholders' equity	$	695,431	$	636,748	$	877,577	$	892,582

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,						For the Three Months Ended March 31,
	2020			2019			2020			2019			2021			2020
Net service revenues	$	193,987		$	168,993		$	568,779		$	456,415		$	205,302		$	190,216
Cost of service revenues		137,686			123,817			401,646			334,719			144,105			134,381
Gross profit		56,301			45,176			167,133			121,696			61,197			55,835
General and administrative expenses		40,733			35,085			125,470			94,109			45,426			42,287
Depreciation and amortization		3,045			2,756			8,872			7,365			3,601			2,887
Total operating expenses		43,778			37,841			134,342			101,474			49,027			45,174
Operating income from continuing operations		12,523			7,335			32,791			20,222
Operating income														12,170			10,661
Interest income		(87	)		(786	)		(576	)		(1,096	)		(22	)		(334	)
Interest expense		680			866			2,309			2,164			1,216			908
Total interest expense, net		593			80			1,733			1,068			1,194			574
Income from continuing operations before income taxes		11,930			7,255			31,058			19,154
Income before income taxes														10,976			10,087
Income tax expense		2,811			1,769			6,374			4,080			2,082			1,429
Net income from continuing operations		9,119			5,486			24,684			15,074
Net loss from discontinued operations		—			(574	)		—			(574	)
Net income	$	9,119		$	4,912		$	24,684		$	14,500		$	8,894		$	8,658
Net income per common share
Basic income per share													$	0.57		$	0.56
Continuing operations	$	0.58		$	0.40		$	1.59		$	1.14
Discontinued operations		—			(0.04	)		—			(0.04	)
Basic income per share	$	0.58		$	0.36		$	1.59		$	1.10
Diluted income per share
Continuing operations	$	0.57		$	0.39		$	1.55		$	1.10
Discontinued operations		—			(0.04	)		—			(0.04	)
Diluted income per share	$	0.57		$	0.35		$	1.55		$	1.06		$	0.55		$	0.54
Weighted average number of common shares and potential common shares outstanding:
Basic		15,618			13,766			15,573			13,271			15,694			15,519
Diluted		15,957			14,203			15,934			13,687			16,069			15,907

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2021 and 2020

	For the Three Months Ended September 30, 2020											Common Stock					Additional Paid-in		Retained		Total Stockholders'
	Common Stock					Additional Paid-in Capital		Retained Earnings		Total Stockholders’ Equity		Shares			Amount		Capital		Earnings		Equity
	Shares			Amount
Balance at July 1, 2020		15,665		$	16	$	363,248	$	131,597	$	494,861
Balance at January 1, 2021													15,826		$	16	$	369,495	$	149,165	$	518,676
Issuance of shares of common stock under restricted stock award agreements		81			—		—		—		—		75			—		—		—		—
Stock-based compensation		—			—		1,462		—		1,462		—			—		2,239		—		2,239
Shares issued for exercise of stock options		55			—		2,158		—		2,158		2			—		101		—		101
Net income		—			—		—		9,119		9,119		—			—		—		8,894		8,894
Balance at September 30, 2020		15,801		$	16	$	366,868	$	140,716	$	507,600

	For the Nine Months Ended September 30, 2020
Balance at March 31, 2021													15,903		$	16	$	371,835	$	158,059	$	529,910
	Common Stock					Additional Paid-in Capital		Retained Earnings		Total Stockholders' Equity
Balance at January 1, 2020		15,617		$	15	$	359,545	$	116,032	$	475,592		15,617		$	15	$	359,545	$	116,032	$	475,592
Issuance of shares of common stock under restricted stock award agreements		81			—		—		—		—
Forfeiture of shares of common stock under restricted stock award agreements		(6	)		—		—		—		—		(5	)		—		—		—		—
Stock-based compensation		—			—		3,987		—		3,987		—			—		1,407		—		1,407
Shares issued for exercise of stock options		109			1		3,336		—		3,337		48			1		1,150		—		1,151
Net income		—			—		—		24,684		24,684		—			—		—		8,658		8,658
Balance at September 30, 2020		15,801		$	16	$	366,868	$	140,716	$	507,600

Balance at March 31, 2020													15,660		$	16	$	362,102	$	124,690	$	486,808

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three ~~and Nine~~ Months Ended ~~September 30, 2019~~March 31, 2021 and 2020

For the Three Months Ended September 30, 2019

Common Stock

Additional
Paid-in
Capital

Retained
Earnings

Total
Stockholders'
Equity

Balance at July 1, 2019

13,219

$
13

$
181,111

$
100,383

$
281,507

Issuance of shares of common stock under
   restricted stock award agreements

1

—

—

—

—

Forfeiture of shares of common stock under
   restricted stock award agreements

(4
)

—

—

—

—

Stock-based compensation

—

—

1,470

—

1,470

Shares issued for exercise of stock options

43

—

1,365

—

1,365

Shares issued in Public Offering, net of offering costs

2,300

2

172,943

—

172,945

Net income

—

—

—

4,912

4,912

Balance at September 30, 2019

15,559

$
15

$
356,889

$
105,295

$
462,199

For the Nine Months Ended September 30, 2019

Common Stock

Additional
Paid-in
Capital

Retained
Earnings

Total
Stockholders'
Equity

Balance at January 1, 2019

13,126

$
13

$
177,683

$
90,795

$
268,491

Issuance of shares of common stock under
   restricted stock award agreements

64

—

—

—

—

Forfeiture of shares of common stock under
   restricted stock award agreements

(4
)

—

—

—

—

Stock-based compensation

—

—

4,186

—

4,186

Shares issued for exercise of stock options

73

—

2,077

—

2,077

Shares issued in Public Offering, net of offering costs

2,300

2

172,943

—

172,945

Net income

—

—

—

14,500

14,500

Balance at September 30, 2019

15,559

$
15

$
356,889

$
105,295

$
462,199

	For the Three Months
	Ended March 31,
	2021			2020
Cash flows from operating activities:
Net income	$	8,894		$	8,658
Adjustments to reconcile net income to net cash (used in) provided by operating activities, net of acquisitions:
Depreciation and amortization		3,601			2,887
Deferred income taxes		165			42
Stock-based compensation		2,239			1,407
Amortization of debt issuance costs under the credit facility		184			186
Provision for doubtful accounts		252			224
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(6,397	)		8,777
Prepaid expenses and other current assets		(1,007	)		973
Government stimulus		(11,719	)		—
Accounts payable		(290	)		(1,976	)
Accrued payroll		(15,313	)		5,228
Accrued expenses and other long-term liabilities		1,025			(5,964	)
Net cash (used in) provided by operating activities		(18,366	)		20,442
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired		—			(87	)
Purchases of property and equipment		(1,021	)		(2,747	)
Net cash used in investing activities		(1,021	)		(2,834	)
Cash flows from financing activities:
Payments on term loan — credit facility		(245	)		—
Payments on financing lease obligations		—			(10	)
Cash received from exercise of stock options		101			1,151
Net cash (used in) provided by financing activities		(144	)		1,141
Net change in cash		(19,531	)		18,749
Cash, at beginning of period		145,078			111,714
Cash, at end of period	$	125,547		$	130,463
Supplemental disclosures of cash flow information:
Cash paid for interest	$	1,174		$	731
Cash paid for income taxes		—			1,954

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Nine Months

Ended September 30,

2020

2019

Cash flows from operating activities:

Net income

$
24,684

$
14,500

Adjustments to reconcile net income to net cash provided by operating
activities, net of acquisitions:

Depreciation and amortization

8,872

7,365

Deferred income taxes

51

105

Stock-based compensation

3,987

4,186

Amortization of debt issuance costs under the credit facility

554

533

Provision for doubtful accounts

681

168

Loss (gain) of disposal of assets and asset impairment

1,242

(90
)
Changes in operating assets and liabilities, net of acquisitions:

Accounts receivable

30,746

(19,957
)
Prepaid expenses and other current assets

(2,592
)

2,822

Accounts payable

(2,496
)

1,856

Accrued expenses and other long-term liabilities

7,570

(3,404
)
Net cash provided by operating activities

73,299

8,084

Cash flows from investing activities:

Purchases of property and equipment

(5,893
)

(3,077
)
Acquisitions of businesses, net of cash acquired

(11,869
)

(53,224
)
Proceeds from disposal of assets

255

—

Net cash used in investing activities

(17,507
)

(56,301
)
Cash flows from financing activities:

Proceeds from issuance of common stock, net of offering costs

—

172,945

Borrowings on revolver — credit facility

—

23,458

Borrowings on term loan — credit facility

—

19,600

Payments on term loan — credit facility

(490
)

(245
)
Payments for debt issuance costs under the credit facility

—

(361
)
Payments on financing lease obligations

(22
)

(54
)
Cash received from exercise of stock options

3,337

2,077

Net cash provided by financing activities

2,825

217,420

Net change in cash

58,617

169,203

Cash, at beginning of period

111,714

70,406

Cash, at end of period

$
170,331

$
239,609

Supplemental disclosures of cash flow information:

Cash paid for interest

$
1,869

$
1,594

Cash paid for income taxes

9,119

5,808

Supplemental disclosures of non-cash investing and financing activities:

Leasehold improvements acquired through tenant allowances

$
4,871

$
682

~~See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)~~

1. Nature of Operations, Consolidation, and Presentation of Financial Statements

Addus HomeCare Corporation (“Holdings”) and its subsidiaries (together with Holdings, the “Company”, “we”, “us” or “our”) operate as a multi-state provider of 3 distinct but related business segments providing in-home services. In its personal care services segment, the Company provides non-medical assistance with activities of daily living, primarily to persons who are at increased risk of hospitalization or institutionalization, such as the elderly, chronically ill or disabled. In its hospice segment, the Company provides physical, emotional and spiritual care for people who are terminally ill as well as related services for their families. In its home health segment, the Company provides services that are primarily medical in nature to individuals who may require assistance during an illness or after hospitalization and include skilled nursing and physical, occupational and speech therapy. The Company’s payors include federal, state and local governmental agencies, managed care organizations, commercial insurers and private individuals.

The accompanying Unaudited Condensed Consolidated Financial Statements and related notes have been prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for Quarterly Reports on Form 10-Q. The accompanying balance sheet as of December 31, ~~2019~~2020 has been derived from the Company’s audited financial statements for the year ended December 31, ~~2019~~2020 previously filed with the SEC. Accordingly, these financial statements do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America (“GAAP”) for annual financial statements and should be read in conjunction with our consolidated financial statements and notes thereto for the year ended December 31, ~~2019~~2020 included in our Annual Report on Form 10-K, which includes information and disclosures not included herein.

In the opinion of management, these financial statements reflect all adjustments of a normal, recurring nature necessary for the fair statement of our financial position, results of operations, and cash flows for the interim periods presented in conformity with GAAP. Our results for any interim period are not necessarily indicative of results for a full year or any other interim period.

These Unaudited Condensed Consolidated Financial Statements include the accounts of Addus HomeCare Corporation, and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The financial statements are prepared by management in conformity with ~~GAAP~~U.S. Generally Accepted Accounting Principles (“GAAP”) and include estimated amounts and certain disclosures based on assumptions about future events. The Company’s critical accounting estimates include the following areas: revenue recognition, allowance for doubtful accounts, ~~receivable~~intangible assets acquired in business combinations and, ~~allowances and~~when required, the quantitative impairment assessment of goodwill and indefinite lived intangible assets. Actual results could differ from those estimates.

Diluted net income per common share, calculated on the treasury stock method, is based on the weighted average number of shares outstanding during the period. The Company’s outstanding securities that may potentially dilute the common stock are stock options and restricted stock awards.

As of ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ dilutive stock options outstanding were approximately ~~523,000~~503,000 and ~~650,000,~~585,000, respectively, and dilutive restricted stock awards outstanding were approximately ~~149,000~~168,000 and ~~147,000,~~77,000, respectively.

Included in the Company’s calculation of diluted earnings per share for the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, dilutive stock options outstanding were approximately ~~301,000 and 303,000, respectively.~~311,000. In addition, dilutive restricted stock awards outstanding were ~~approximately 38,000 and 58,000~~64,000 for the three ~~and nine~~ months ended ~~September 30, 2020, respectively.~~March 31, 2021.

Included in the Company’s calculation of diluted earnings per share for the three ~~and nine~~ months ended ~~September 30, 2019, were approximately 359,000 and 335,000~~March 31, 2020, dilutive stock options outstanding ~~respectively.~~were approximately 311,000. In addition, dilutive restricted stock awards outstanding were ~~approximately 78,000 and 81,000~~84,000 for the three ~~and nine~~ months ended ~~September 30, 2019, respectively.~~March 31, 2020.

~~In June 2016, the FASB issued ASU 2016-13,~~ ~~Financial Instruments—Credit Losses (Topic 326)~~: ~~Measurement of Credit Losses on Financial Instruments.~~ ASU 2016-13 changes the impairment model for most financial assets and certain other instruments. Under the new standard, entities holding financial assets and net investment in leases that are not accounted for at fair value through net income are to be presented at the net amount expected to be collected. An allowance for credit losses will be a valuation account that will be deducted from the amortized cost basis of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. We have reviewed our provision for doubtful accounts process as required by ASU 2016-13. Management estimates allowances on accounts receivable based upon historical experience and other factors, including an aging of accounts receivable, evaluation of expected adjustments, past adjustments and collection experience in relation to amounts billed, current contract and reimbursement terms, shifts in payors and other current relevant information. The Company recorded a provision for doubtful accounts of $0.2 million and $0.7 million for the three and nine months ended September 30, 2020, respectively. Allowance for doubtful accounts was $0.8 million and $1.0 million as of September 30, 2020 and December 31, 2019, respectively. Adoption of the new standard did not have a significant impact on our results of operations or liquidity.

~~In January 2017, the FASB issued ASU 2017-04,~~ ~~Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.~~ The new guidance eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on the current Step 1). Adoption of the new standard did not have a significant impact on our results of operations or liquidity.

~~In August 2018, the FASB issued ASU 2018-15,~~ ~~Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer~~’~~s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract~~. ASU 2018-15 requires customers in a hosting arrangement that is a service contract to follow the internal-use software guidance in Accounting Standards Codification (“ASC”) 350-40 to determine which implementation costs to capitalize as assets or expense as incurred. Adoption of the new standard did not have a significant impact on our results of operations or liquidity.

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. ASU 2019-12 ~~intends to simplify~~simplifies various aspects related to accounting for income taxes and removes certain exceptions to the general guidance in ASC 740. In addition, the ASU clarifies and amends existing guidance to improve consistent application of its requirements. The ASU ~~is effective for fiscal years, including interim periods within those fiscal years, beginning after December 15, 2020. Early adoption is permitted. Adoption~~was adopted as of ~~the new standard is~~January 1, 2021 and did not ~~expected to~~ have an impact on ~~our~~the Company’s results of operations or liquidity.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contract modifications and hedging relationships, and other transactions subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. The ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. Therefore, it will be in effect for a limited time through December 31, 2022. The ASU can be adopted no later than December 1, 2022 with early adoption permitted. The Company is evaluating the effect of adopting this new accounting guidance.

In connection with management finalizing their financial reporting close process for the year ended December 31, 2019, management identified certain immaterial errors impacting the current period and previous periods dating back to periods prior to 2017, including interim periods within those years. Specifically, management determined there were certain errors in the information utilized to accurately estimate the implicit price concessions necessary to reduce net service revenues to the amount expected to be collected. Accordingly, management determined that our accounts receivable allowance was understated. The correction reflects the impact on the Company’s income tax provision and related accounts as a result of correcting for the error as discussed above. Additionally, the Company identified and corrected other immaterial unrelated income tax items impacting deferred tax assets ~~and other immaterial items~~.

Management evaluated the impact of the errors on all previously issued financial statements and concluded such previously issued financial statements were not materially misstated; however, to reflect such corrections in the quarter ended December 31, 2019 financial statements would materially misstate the 2019 fiscal year. Accordingly, management revised previously issued financial statements to correct for the impact of the errors. The Company’s consolidated financial statements have been revised from the amounts previously reported to correct these immaterial errors as shown in the tables below and are reflected throughout the financial statements and related notes, as applicable.

~~The Consolidated Statements of Income has been revised to reflect the correction for the three and nine months ended September 30, 2019 as follows (amounts in thousands, except per share data):~~

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2019

2019

As

As

Previously

As

Previously

As

Reported

Revision

Revised

Reported

Revision

Revised

Net service revenues

$
169,803

$
(810
)

$
168,993

$
458,749

$
(2,334
)

$
456,415

Gross profit

45,986

(810
)

45,176

124,030

(2,334
)

121,696

General and administrative expenses

35,950

(865
)

35,085

95,429

(1,320
)

94,109

Total operating expenses

38,706

(865
)

37,841

102,794

(1,320
)

101,474

Operating income from continuing operations

7,280

55

7,335

21,236

(1,014
)

20,222

Income from continuing operations before income taxes

7,200

55

7,255

20,168

(1,014
)

19,154

Income tax expense

1,759

10

1,769

4,347

(267
)

4,080

Net income from continuing operations

5,441

45

5,486

15,821

(747
)

15,074

Net income

$
4,867

$
45

$
4,912

$
15,247

$
(747
)

$
14,500

Basic income per share

$
0.36

$
—

$
0.36

$
1.15

$
(0.05
)

$
1.10

Diluted income per share

$
0.34

$
0.01

$
0.35

$
1.12

$
(0.06
)

$
1.06

~~Additionally, the Consolidated Statement of Cash Flows has been revised to reflect the correction for the nine months ended September 30, 2019 as follows:~~

We have historically entered into operating leases for local branches, our corporate headquarters and certain equipment. The Company’s current leases have expiration dates through 2031. Certain of our arrangements have free rent periods and/or escalating rent payment provisions. We recognize rent expense on a straight-line basis over the lease term. Certain of the Company’s leases include termination options and renewal options for periods ranging from one to five years. Because we are not reasonably certain to exercise these renewal options, the options generally are not considered in determining the lease term, and payments associated with the option years are excluded from lease payments.

When available, we use the rate implicit in the lease to discount lease payments to present value; however, most of our leases do not provide a readily determinable implicit rate. Therefore, we must estimate our incremental borrowing rate to discount the lease payments based on information available at lease commencement.

Amounts reported in the Company’s Unaudited Condensed Consolidated Balance Sheets as of ~~September 30, 2020~~March 31, 2021 and ~~Audited Consolidated Balance Sheets as of~~ December 31, ~~2019~~2020 for our operating leases were as follows:

	September 30, 2020		December 31, 2019		March 31, 2021		December 31, 2020
	(Amounts in Thousands)				(Amounts in Thousands)
Operating lease assets, net	$	35,842	$	21,111	$	38,325	$	37,991

Short-term operating lease liabilities (in accrued expenses)		8,057		7,234		9,498		9,283
Long-term operating lease liabilities		33,977		14,301		35,623		35,516
Total operating lease liabilities	$	42,034	$	21,535	$	45,121	$	44,799

~~The Company signed an~~ ~~eleven-year~~ lease agreement to expand its Frisco corporate headquarters from 31,000 square feet to approximately 75,000 square feet which resulted in an increase in the operating lease asset, net, and operating lease liability by approximately $17.3 million and $22.2 million, respectively, during the three and nine months ended September 30, 2020.

Components of lease cost were reported in general and administrative expenses in the Company’s Unaudited Condensed Consolidated Statements of Income as follows:

	For the Three Months Ended September 30, (Amounts in Thousands)				For the Nine Months Ended September 30, (Amounts in Thousands)				For the Three Months Ended March 31, (Amounts in Thousands)
	2020		2019		2020		2019		2021			2020
Operating lease costs	$	2,285	$	1,897	$	6,524	$	5,101	$	2,777		$	2,118
Short-term lease costs		147		222		575		382		181			266
Total lease cost	$	2,432	$	2,119	$	7,099	$	5,483
Less: sublease income										(151	)		(74	)
Total lease cost, net									$	2,807		$	2,310

	September 30, 2020			December 31, 2019			March 31, 2021			December 31, 2020
Operating leases:
Weighted average remaining lease term		7.24			3.42			6.83			6.97
Weighted average discount rate		4.33	%		5.14	%		4.04	%		4.18	%

A summary of our remaining operating lease payments as of ~~September 30, 2020~~March 31, 2021 were as follows:

	Operating Leases			Operating Leases
	(Amounts in Thousands)			(Amounts in Thousands)
Due in the 12-month period ended September 30,
2021	$	9,176
Due in the 12-month period ended March 31,
2022		8,704		$	10,919
2023		6,366			9,228
2024		4,704			7,308
2025		3,549			5,424
2026					3,266
Thereafter		16,783			15,771
Total future minimum rental commitments		49,282			51,916
Less: Imputed interest		(7,248	)		(6,795	)
Total lease liabilities	$	42,034		$	45,121

	For the Nine Months Ended September 30, (Amounts in Thousands)				For the Three Months Ended March 31, (Amounts in Thousands)
	2020		2019		2021		2020
Supplemental Cash Flows Information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	6,472	$	5,393	$	2,517	$	2,171

Right-of-use assets, net obtained in exchange for lease obligations:
Right-of-use assets obtained in exchange for lease obligations:
Operating leases		21,399		5,536		2,675		1,439

The Company’s acquisitions have been accounted for in accordance with ASC Topic 805, Business Combinations, and the resulting goodwill and other intangible assets were accounted for under ASC Topic 350, Goodwill and Other Intangible Assets. Under business combination accounting, the assets and liabilities are generally recognized at their fair values and the difference between the consideration transferred, excluding transaction costs, and the fair values of the assets and liabilities is recognized as goodwill. The results of each business acquisition are included on the Unaudited Condensed Consolidated Statements of Income from the date of the acquisition.

Management’s assessment of qualitative factors affecting goodwill for each acquisition includes estimates of market share at the date of purchase, ability to grow in the market, synergy with existing Company operations and the payor profile in the markets.

On December 4, 2020, we completed the acquisition of Queen City Hospice, LLC and its affiliate Miracle City Hospice, LLC (together “Queen City Hospice”). The purchase price was approximately $194.8 million, including the amount of acquired excess cash held by Queen City Hospice at the closing of the acquisition (approximately $15.4 million). The purchase of Queen City Hospice was funded with the Company’s revolving credit facility and available cash. With the purchase of Queen City Hospice, the Company expanded its hospice services in the state of Ohio. The related integration costs were $0.9 million for the three months ended March 31, 2021. These costs were included in general and administrative expenses on the Unaudited Condensed Consolidated Statements of Income and were expensed as incurred.

~~A Plus Health Care~~Based upon management’s valuations, which are preliminary and subject to completion of working capital adjustments, the fair values of the assets and liabilities acquired are as follows:

Identifiable intangible assets acquired included $11.0 million in trade names, $1.5 million of non-competition agreements with estimated useful lives of fifteen years and five years, respectively, and $7.5 million of indefinite lived state licenses. The preliminary estimated fair value of identifiable intangible assets was determined with the assistance of a valuation specialist, using Level 3 inputs as defined under ASC Topic 820. The fair value analysis and related valuations reflect the conclusions of management. All estimates, key assumptions, and forecasts were either provided by or reviewed by the Company. The goodwill and intangible assets acquired are deductible for tax purposes.

On ~~July~~November 1, 2020, we completed the acquisition of ~~A Plus Health Care, Inc. (“A Plus”).~~County Homemakers. The purchase price was approximately ~~$12.2~~$15.8 million, ~~plus~~including the amount of acquired excess cash held by ~~A Plus~~County Homemakers at the closing of the acquisition (approximately ~~$2.8~~$1.1 million). The purchase of ~~A Plus~~County Homemakers was funded with the Company’s available cash. With the purchase of ~~A Plus,~~County Homemakers, the Company expanded its personal care services in the state of ~~Montana.~~Pennsylvania. The related ~~acquisition~~integration costs were ~~$0.3~~$0.1 million for the three ~~and nine~~ months ended ~~September 30, 2020~~.March 31, 2021. These costs were included in general and administrative expenses on the Unaudited Condensed Consolidated Statements of Income and were expensed as incurred.

Based upon management’s valuations, which are preliminary and subject to completion of working capital adjustments, the fair values of the assets and liabilities acquired are as follows:

Identifiable intangible assets acquired included approximately $0.3 million in state licenses and $0.1 million in trade names with estimated useful lives of eight years and one year, respectively. The preliminary estimated fair value of identifiable intangible assets was determined with the assistance of a valuation specialist, using Level 3 inputs as defined under ASC Topic 820. The fair value analysis and related valuations reflect the conclusions of management. All estimates, key assumptions, and forecasts were either provided by or reviewed by the Company. The goodwill and intangible assets acquired are deductible for tax purposes.

On July 1, 2020, we completed the acquisition of A Plus Health Care, Inc. (“A Plus”). The purchase price was approximately $14.5 million, including the amount of acquired excess cash held by A Plus at the closing of the acquisition (approximately $2.8 million). The purchase of A Plus was funded with the Company’s available cash. With the purchase of A Plus, the Company expanded its personal care services in the state of Montana. The related integration costs were $0.1 million for the three months ended March 31, 2021. These costs were included in general and administrative expenses on the Unaudited Condensed Consolidated Statements of Income and were expensed as incurred.

Based upon management’s valuations, which are preliminary and subject to completion of working capital adjustments, the fair values of the assets and liabilities acquired are as follows:

	Total (Amounts in Thousands)			Total (Amounts in Thousands)
Goodwill	$	11,252		$	9,711
Identifiable intangible assets		1,523			1,523
Cash		2,819			2,819
Accounts receivable		1,075			1,075
Operating lease assets, net		180			180
Other assets		23			26
Accounts payable		(18	)		(34	)
Accrued expenses		(202	)		(362	)
Accrued payroll		(303	)		(311	)
Current portion of long-term debt		(577	)
Long-term debt		(1,145	)
Long-term operating lease liabilities		(100	)		(100	)
Total purchase price	$	14,527		$	14,527

Identifiable intangible assets acquired included $1.4 million in trade names with an estimated useful life of fifteen years. The preliminary estimated fair value of identifiable intangible assets was determined with the assistance of a valuation specialist, using Level 3 inputs as defined under ASC Topic 820. The fair value analysis and related valuations reflect the conclusions of management. All estimates, key assumptions, and forecasts were either provided by or reviewed by the Company. The goodwill and intangible assets acquired are deductible for tax purposes.

~~The A Plus acquisition accounted for $2.6 million of net service revenues and $0.5 million of operating income for the three and nine months ended September 30,~~On December 1, 2020, ~~respectively.~~

~~On October 1, 2019, the Company~~we completed the acquisition of ~~the assets~~SunLife Home Care (“SunLife”) for approximately $1.7 million and recorded goodwill of ~~Hospice Partners of America, LLC (“Hospice Partners”). The purchase price was approximately $135.6~~$1.6 million. ~~The purchase of Hospice Partners was funded through a portion of the net proceeds of our~~ public offering of an aggregate 2,300,000 shares of common stock, par value $0.001 per share, including 300,000 shares of common stock sold pursuant to the exercise in full by the underwriters of their option to purchase additional shares at a public offering price of $79.50 per share, which the Company completed on September 9, 2019 (the “Public Offering”). With the purchase of ~~Hospice Partners,~~SunLife, we expanded our hospice operations through 21 locations in Idaho, Kansas, Missouri, Oregon, Texas and Virginia. The related integration costs were $1.5 million for the nine months ended September 30, 2020. These costs were included in general and administrative expenses on the Unaudited Condensed Consolidated Statements of Income and were expensed as incurred.

~~Based upon management’s final valuations, the fair values of the assets and liabilities are as follows:~~

Identifiable intangible assets acquired consist of $9.5 million in trade names with estimated useful lives of fifteen years, $2.5 million in non-competition agreements with estimated useful lives of three to five years and $6.1 million of indefinite lived state licenses. The estimated fair value of identifiable intangible assets was determined with the assistance of a valuation specialist, using Level 3 inputs as defined under ASC Topic 820. The fair value analysis and related valuations reflect the conclusions of management. All estimates, key assumptions, and forecasts were either provided by or reviewed by the Company. The goodwill and intangible assets acquired are deductible for tax purposes.

The Hospice Partners acquisition accounted for $13.0 million and $40.3 million of net service revenues and $3.5 million and $9.5 million of operating income for the three and nine months ended September 30, 2020, respectively.

On August 1, 2019, the Company completed the acquisition of all of the assets of Alliance Home Health Care (“Alliance”). The purchase price was approximately $23.5 million. The purchase of Alliance was funded through the Company’s revolving credit facility and available cash. With the purchase of Alliance, the Company expanded its personal care ~~home health and hospice operations~~services in the state of ~~New Mexico. The related~~Arizona. Goodwill generated from the acquisition ~~costs were $0.3 million for~~is primarily attributable to expected synergies with existing Company operations and the ~~three and nine months ended September 30, 2019. The related integration costs were $0.2 million for the nine months ended September 30, 2020.~~ ~~These costs were included in general and administrative expenses on the Unaudited Condensed Consolidated Statements of Income and were expensed as incurred.~~

~~Based upon management’s final valuations, the fair values of the assets and liabilities are as follows:~~

~~Identifiable intangible assets~~goodwill acquired consist of $1.1 million in state licenses, subject to amortization, with an estimated useful life of ten years and $4.3 million of indefinite lived state licenses. The estimated fair value of identifiable intangible assets was determined with the assistance of a valuation specialist, using Level 3 inputs as defined under ASC Topic 820. The fair value analysis and related valuations reflect the conclusions of management. All estimates, key assumptions, and forecasts were either provided by or reviewed by the Company. The goodwill and intangible assets acquired areis deductible for tax purposes.

The Alliance acquisition accounted for $3.3 million and $3.4 million of net service revenues for the three months ended September 30, 2020 and 2019, respectively, and $12.0 million and $3.4 million for the nine months ended September 30, 2020 and 2019, respectively. Operating income accounted for $0.7 million and $0.8 million for the three months ended September 30, 2020 and 2019, respectively, and $2.7 million and $0.8 million for the nine months ended September 30, 2020 and 2019, respectively.

On June 1, 2019, the Company completed the acquisition of all of the assets of VIP Health Care Services (“VIP”). The purchase price was approximately $29.9 million. The purchase of VIP was funded through a combination of the Company’s delayed draw term loan portion of its credit facility and available cash. With the purchase of VIP, the Company expanded its personal care operations in the state of New York and into the New York City metropolitan area. The related acquisition costs were $0.3 million for the nine months ended September 30, 2019. The related integration costs were $0.2 million for the nine months ended September 30, 2020, and $0.2 million and $0.3 million for the three and nine months ended September 30, 2019, respectively. These costs were included in general and administrative expenses on the Unaudited Condensed Consolidated Statements of Income and were expensed as incurred.

~~Based upon management’s valuations, the fair values of the assets and liabilities are as follows:~~

Identifiable intangible assets acquired consist of $10.7 million in state licenses, subject to amortization, and $4.7 million in customer relationships, with estimated useful lives of six and eight years, respectively. The estimated fair value of identifiable intangible assets was determined ~~with the assistance of a valuation specialist~~, using Level 3 inputs as defined under ASC Topic 820. The fair value analysis and related valuations reflect the conclusions of management. All estimates, key assumptions, and forecasts were either provided by or reviewed by the Company. The goodwill and intangible assets acquired are deductible for tax purposes.

The VIP acquisition accounted for $9.7 million and $13.2 million of net service revenues for the three months ended September 30, 2020 and 2019, respectively, and $30.5 million and $17.6 million for the nine months ended September 30, 2020 and 2019, respectively, and $0.4 million of operating loss for each of the three months ended September 30, 2020 and 2019, and $1.1 million and $0.1 million of operating loss for the nine months ended September 30, 2020 and 2019, respectively.

The following table contains unaudited pro forma condensed consolidated income statement information of the Company for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2020 ~~and 2019~~ as if each of the acquisitions of Queen City Hospice, ~~Partners, Alliance, VIP~~County Homemakers and A Plus closed on January 1, ~~2019.~~2020.

The pro forma disclosures in the table above include adjustments for amortization of intangible assets, tax expense and acquisition costs to reflect results that are more representative of the combined results of the transactions as if Queen City Hospice, ~~Partners, Alliance, VIP~~County Homemakers and A Plus had been acquired effective January 1, ~~2019.~~2020. This pro forma information is presented for illustrative purposes only and may not be indicative of the results of operations that would have actually occurred. In addition, future results may vary significantly from the results reflected in the pro forma information. The unaudited pro forma financial information does not reflect the impact of future events that may occur after the acquisition, such as anticipated cost savings from operating synergies.

The goodwill for the Company was $469.0 million and $469.1 million as of March 31, 2021 and December 31, 2020, respectively.

A summary of the goodwill activity for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 is provided below:

The Company’s identifiable intangible assets consist of customer and referral relationships, trade names and trademarks, non-competition agreements and ~~non-competition agreements.~~state licenses. Amortization is computed using straight-line and accelerated methods based upon the estimated useful lives of the respective assets, which range from ~~three~~one to twenty-five years. Customer and referral relationships are amortized systematically over the periods of expected economic benefit, which range from five to ten years. ~~Goodwill and certain state licenses are not amortized pursuant to ASC Topic 350.~~

~~The Company recognized goodwill in the personal care segment of $11.3 million related to the acquisition of A Plus during the nine months ended September 30, 2020.~~For the three and nine months ended September 30, 2020, adjustments to previously recorded goodwill are primarily adjustments to accounts receivable based on the final valuations for the acquisitions of Hospice Partners, Alliance and VIP. During the nine months ended September 30, 2020, the Company divested certain branches and their related net assets including $1.2 million of related goodwill. The Company recognized $0.3 million loss on the disposition, reflected as a reduction in general and administrative expense for the nine months ended September 30, 2020.

The carrying amount and accumulated amortization of each identifiable intangible asset category consisted of the following as of ~~September 30, 2020:~~March 31, 2021:

	Customer and referral relationships			Trade names and trademarks			Non- competition agreements			State Licenses			Total			Customer and referral relationships			Trade names and trademarks			Non- competition agreements			State Licenses			Total
	(Amounts in Thousands)															(Amounts in Thousands)
Intangible assets with indefinite lives		—			—			—			13,296			13,296		$	—		$	—		$	—		$	20,791		$	20,791
Intangible assets subject to amortization:
Gross carrying amount		48,028			31,946			4,655			12,164			96,793			44,672			42,926			6,225			12,507			106,330
Accumulated amortization		(37,263	)		(14,671	)		(2,716	)		(2,566	)		(57,216	)		(34,915	)		(16,152	)		(3,111	)		(3,548	)		(57,726	)
Intangible assets subject to amortization, net		10,765			17,275			1,939			9,598			39,577			9,757			26,774			3,114			8,959			48,604
Total intangible assets at September 30, 2020	$	10,765		$	17,275		$	1,939		$	22,894		$	52,873
Total intangible assets at March 31, 2021																$	9,757		$	26,774		$	3,114		$	29,750		$	69,395

~~During the nine months ended September 30, 2020, the Company acquired a trade name of $1.4 million related to the acquisition of A Plus.~~Amortization expense related to the identifiable intangible assets amounted to ~~$1.7~~$2.2 million and ~~$5.3~~$1.8 million for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~respectively, and $1.8 million and $4.4 million for the three and nine months ended September 30, 2019,~~ respectively. The weighted average remaining useful lives of identifiable intangible assets as of ~~September 30, 2020~~March 31, 2021 is ~~8.7~~9.6 years.

	September 30, 2020		December 31, 2019		March 31, 2021		December 31, 2020
	(Amounts in Thousands)				(Amounts in Thousands)
Income tax receivable	$	2,533	$	—
Workers’ compensation insurance receivable		2,186		1,989
Workers' compensation insurance receivable					$	1,924	$	1,860
Prepaid workers' compensation and liability insurance		1,792		2,040		1,875		2,838
Health insurance receivable		426		1,567		1,379		528
Other		3,489		2,397		5,609		4,743
Total prepaid expenses and other current assets	$	10,426	$	7,993	$	10,787	$	9,969

In total, the CARES Act and other relief legislation include over $178 billion in funding to be distributed through the Provider Relief Fund to eligible providers, including public entities and Medicare- and/or Medicaid-enrolled providers. In November 2020, the Company received grants in an aggregate principal amount of $13.7 million from the Provider Relief Fund, for which we had previously applied. The Company utilized $0.9 million of these funds for healthcare related expenses attributable to COVID-19 that were unreimbursed by other sources in the three months ended March 31, 2021 and, in accordance with the current guidance issued by HHS, expects to utilize additional funds through June 30, 2021, at which point any unused funds will be returned. We are required to properly and fully document the use of such funds in reports to HHS. The Company’s ability to utilize and retain some or all of such funds will depend on the magnitude, timing and nature of the impact of the COVID-19 pandemic, as well as the terms and conditions of the funds received. Queen City Hospice intends to administer retention payments of $1.9 million to caregivers in the second quarter of 2021, which we believe to be necessary to secure and maintain adequate personnel. Commercial organizations that receive and expend annual total awards of $750,000 or more in federal funding, including payments received through the Provider Relief Fund, are subject to federal audit requirements.

The CARES Act expanded the Medicare Accelerated and Advance Payment Program to increase cash flow to providers impacted by the COVID-19 pandemic. Hospice and home health providers were able to request an advance or accelerated payment of up to 100% of the Medicare payment amount for a three-month period (not including Medicare Advantage payments). The Medicare Accelerated and Advance Payment Program payments are a loan that providers must repay. In April 2020, Queen City Hospice received an amount equal to $10.8 million pursuant to the Medicare Accelerated and Advance Payment Program. Queen City Hospice did 0t repay the funds prior to the completion of our acquisition of Queen City Hospice. However, Queen City Hospice repaid such funds following such acquisition in March 2021, prior to any CMS recoupment and before any interest accrual.

The CARES Act also provides for certain federal income and other tax changes, including allowing for the deferral of the employer portion of Social Security payroll taxes through December 31, 2020. The Company received a cash benefit of approximately $7.1 million related to the deferral of employer payroll taxes for 2020 under the CARES Act, for the period April 2, 2020 through June 30, 2020. Effective July 1, 2020, the Company began paying its deferred portion of employer Social Security payroll taxes and expects to repay the $7.1 million in 2021.

	September 30, 2020			December 31, 2019			March 31, 2021			December 31, 2020
	(Amounts in Thousands)						(Amounts in Thousands)
Revolving loan under the credit facility	$	43,458		$	43,458		$	178,458		$	178,458
Term loan under the credit facility		18,375			18,865			17,885			18,130
Other debt		1,722			—
Financing leases		—			21
Less unamortized issuance costs		(1,899	)		(2,452	)		(1,532	)		(1,716	)
Total	$	61,656		$	59,892		$	194,811		$	194,872
Less current maturities		(2,095	)		(728	)		(972	)		(971	)
Long-term debt	$	59,561		$	59,164		$	193,839		$	193,901

On October 31, 2018, the Company entered into the Amended and Restated Credit Agreement, dated as of October 31, 2018, with certain lenders and Capital One, National Association, as a lender and as agent for all lenders (as amended by the Amendment (as hereinafter defined), the “Credit Agreement”)~~, which amended and restated the Company’s existing credit agreement.~~. This credit facility totaled $269.6 million, inclusive of a $250.0 million revolving loan and a $19.6 million delayed draw term loan, and is evidenced by the Credit Agreement. This credit facility amended and restated the Company’s existing senior secured credit facility totaling $250.0 million. As used throughout this Quarterly Report on Form 10-Q, “credit facility” shall mean the credit facility evidenced by the Credit Agreement. The maturity of this credit facility is May 8, 2023. Interest on the Company’s credit facility may be payable at (x) the sum of (i) an applicable margin ranging from 0.75% to 1.50% based on the applicable senior net leverage ratio plus (ii) a base rate equal to the greatest of (a) the rate of interest last quoted by The Wall Street Journal as the “prime rate,” (b) the sum of the federal funds rate plus a margin of 0.50% and (c) the sum of the adjusted LIBOR that would be applicable to a loan with an interest period of one month advanced on the applicable day (not to be less than 0.00%) plus a margin of 1.00% or (y) the sum of (i) an applicable margin ranging from 1.75% to 2.50% based on the applicable senior net leverage ratio plus (ii) the offered rate per annum for similar dollar deposits for the applicable interest period that appears on Reuters Screen LIBOR01 Page (not to be less than zero). Swing loans may not be LIBOR loans. The availability of additional draws under this credit facility is conditioned, among other things, upon (after giving effect to such draws) the Total Net Leverage Ratio (as defined in the Credit Agreement) not exceeding 3.75:1.00. In certain circumstances, in connection with a Material Acquisition (as defined in the Credit Agreement), the Company can elect to increase its Total Net Leverage Ratio compliance covenant to 4.25:1.00 for the then current fiscal quarter and the three succeeding fiscal quarters. ~~In connection with this amended and restated credit facility, the Company incurred approximately $0.9 million of debt issuance costs.~~

Addus HealthCare, Inc. (“Addus HealthCare”) is the borrower, and its parent, Holdings, and substantially all of Holdings’ subsidiaries are guarantors under this ~~amended and restated~~ credit facility, and it is collateralized by a first priority security interest in all of the Company’s and the other credit parties’ current and future tangible and intangible assets, including the shares of stock of the borrower and subsidiaries. The Credit Agreement contains affirmative and negative covenants customary for credit facilities of this type, including limitations on the Company with respect to liens, indebtedness, guaranties, investments, distributions, mergers and acquisitions and dispositions of assets.

On September 12, 2019, the Company entered into a First Amendment (the “Amendment”) to its Credit Agreement. The Amendment increased the Company’s credit facility by $50.0 million in incremental revolving loans, for an aggregate $300.0 million in revolving loans. The Amendment provides that future incremental loans may be for term loans or an increase to the revolving loan commitments. The Amendment further provides that the proceeds of the incremental revolving loan commitments may be used for, among other things, general corporate purposes. In connection with the modification of this Amendment, the Company incurred approximately $0.4 million of debt issuance costs.

The Company pays a fee ranging from 0.20% to 0.35% based on the applicable senior net leverage ratio times the unused portion of the revolving loan portion of the ~~amended and restated~~ credit facility.

The Credit Agreement contains customary affirmative covenants regarding, among other things, the maintenance of records, compliance with laws, maintenance of permits, maintenance of insurance and property and payment of taxes. The Credit Agreement also contains certain customary financial covenants and negative covenants that, among other things, include a requirement to maintain a minimum Interest Coverage Ratio (as defined in the Credit Agreement), a requirement to stay below a maximum Total Net Leverage Ratio (as defined in the Credit Agreement) and a requirement to stay below a maximum permitted amount of capital ~~expenditures, as well as~~expenditures. The Credit Agreement also contains restrictions on guarantees, indebtedness, liens, investments and loans, subject to customary carve outs, a restriction on dividends (provided that Addus HealthCare may make distributions to the Company in an amount that does not exceed $7.5 million in any year absent of an event of default, plus limited exceptions for tax and administrative distributions), a restriction on the ability to consummate acquisitions (without the consent of the lenders) under its credit facility subject to compliance with the Total Net Leverage Ratio (as defined in the Credit Agreement thresholds), restrictions on mergers, dispositions of assets, and affiliate transactions, and restrictions on fundamental changes and lines of business. As of ~~September 30, 2020,~~March 31, 2021, the Company was in compliance with all financial covenants under the Credit Agreement.

During the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, the Company had 0 draws under its credit facility.

At March 31, 2021, the Company had a total of ~~$43.4~~$178.5 million of revolving loans, with an interest rate of ~~1.89%~~1.86% and ~~$18.4~~$17.9 million of term loans, with an interest rate of ~~1.89%~~1.86%, outstanding on its credit facility. After giving effect to the amount drawn on its credit facility, approximately ~~$9.3~~$8.7 million of outstanding letters of credit and borrowing limits based on an advance multiple of adjusted EBITDA (as defined in the Credit Agreement), the Company had ~~$219.0~~$112.8 million available for borrowing under its credit facility.

As of December 31, ~~2019,~~2020, the Company had a total of ~~$43.4~~$178.5 million of revolving loans, with an interest rate of ~~3.44%~~1.90%, and ~~$18.9~~$18.1 million of term loans, with an interest rate of ~~3.45%~~1.90%, outstanding on its credit facility. After giving effect to the amount drawn on its credit facility, approximately $10.0 million of outstanding letters of credit and borrowing limits based on an advance multiple of adjusted EBITDA (as defined in the Credit Agreement), the Company had ~~$191.4 million available for borrowing under its credit facility.~~

The effective income tax ~~rates are 23.6%~~rate was 19.0% and ~~24.4%~~14.2% for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. ~~For the three months ended September 30, 2020 and 2019, the~~The difference between our federal statutory and effective income tax rates ~~was~~is principally due to ~~the inclusion of state taxes and non-deductible compensation, partially offset by an excess tax benefit and the use of federal employment tax credits.~~

~~The effective income tax rates are~~ ~~20.5~~% and 21.3% for the nine months ended September 30, 2020 and 2019, respectively. For the nine months ended September 30, 2020 and 2019, the difference between our federal statutory and effective income tax rates was principally due to the inclusion of an excess tax benefit and the use of federal employment tax credits, ~~partially~~ offset by the inclusion of state taxes and non-deductible compensation.The excess tax benefit is a discrete item, related to the vesting of equity shares, which requires the Company to recognize the benefit fully in the period. An excess tax benefit results if the Company’s income tax deduction exceeds the cumulative costs of the award recognized on the Unaudited Condensed Consolidated Statements of Income.

From time to time, we are subject to legal and/or administrative proceedings incidental to our business. It is the opinion of management that the outcome of pending legal and/or administrative proceedings will not have a material effect on the Company’s Unaudited Condensed Consolidated Balance Sheets and Unaudited Condensed Consolidated Statements of Income.

On January 31, 2020, the Secretary of the U.S. Department of Health and Human Services (“HHS”) declared a national public health emergency due to a novel coronavirus. In March 2020, the World Health Organization declared the outbreak of COVID-19, a disease caused by this novel coronavirus, a pandemic. This disease ~~has spread throughout~~continues to impact the United States and other parts of the world, and COVID-19 cases have recently been increasing in the United States and Europe. It is impossible to predict the effect and ultimate impact of the COVID-19 pandemic as the situation continues to rapidly evolve.

In recognition of the significant threat to the liquidity of financial markets posed by the COVID-19 pandemic, the Federal Reserve and Congress have taken dramatic actions to provide liquidity to businesses and the banking system in the United States. For example, on March 27, 2020, the ~~President signed into law the~~ CARES Act, a sweeping stimulus bill intended to bolster the U.S. ~~economy. On~~economy, was enacted. The PPPHCE Act and the CAA both expansions of the CARES Act, were signed into law on April 24, 2020 ~~the Paycheck Protection Program~~ and ~~Health Care Enhancement Act (“PPPHCE Act”) was enacted, an expansion of the CARES Act. Together,~~December 27, 2020, respectively. In total, the CARES Act, ~~and~~ the PPPHCE Act and CAA authorize ~~$175~~$178 billion in funding to be distributed to health care providers through the Provider Relief Fund. This funding is intended to support healthcare providers by reimbursing them for healthcare-related expenses or lost revenues attributable to COVID-19. On March 11, 2021, the ARPA was signed into law, another COVID-19 relief package with numerous provisions that affect healthcare providers, including additional funding targeted to specified healthcare providers and to improve coronavirus testing and vaccine-related activities.

In addition to ~~relief funding,~~the Provider Relief Fund, the CARES Act ~~includes~~and related laws include temporary changes to Medicare and Medicaid payment rules and relief from certain accounting ~~provisions.~~

~~In April~~provisions, for example temporarily lifting the Medicare sequester, which would have otherwise reduced payments to Medicare providers by 2% as required by the Budget Control Act of 2011, from May 1, 2020, the Company received grants in an aggregate principal amount of $6.9 million, for which it did not apply, from the Relief Fund as part of the automatic general distributions by HHS. The Company returned these funds in June 2020. The CARES Act includes provisions relating to refundable payroll tax credits, deferral of the employer portion of certain payroll taxes, net operating loss carrybacks, and other areas. The payroll tax deferral requires that the deferred payroll taxes be paid over two years, with half of the amount required to be paid bythrough December 31, 2021 (but also extending sequestration through 2030). This Medicare sequester relief resulted in an increase of $0.1 million to home health net service revenues and $0.7 million to hospice net service revenues for the ~~other half~~three months ended March 31, 2021. However, the ARPA increases the federal budget deficit in a manner that triggers an additional statutorily mandated sequestration under the Pay-As-You-Go Act of 2010 (“PAYGO Act”). As a result, absent congressional action, Medicare spending will be reduced by ~~December 31, 2022. The~~up to 4 percentage points in fiscal year 2022, in addition to the existing sequestration requirements of the Budget Control Act of 2011. We cannot currently determine the extent to which our business, results of operations, financial condition or liquidity will ultimately be impacted by mandated sequestration triggers under the PAYGO Act.

While conditions related to the COVID-19 pandemic have improved in recent months in the United States as vaccinations have become more widely available, it is impossible to predict the effect and ultimate impact of the COVID-19 pandemic on the Company ~~elected~~as the situation continues to ~~defer payroll taxes during~~evolve. See Note 6 for additional information regarding government stimulus advances the ~~quarter ended June 30, 2020 and ceased~~Company has received.

From time to time, the ~~deferral election effective June 30, 2020. The~~ Company ~~deferred $7.1 million~~is subject to legal and/or administrative proceedings incidental to its business. It is the opinion of ~~payroll taxes, which are included in accrued expenses in~~management that the outcome of pending legal and/or administrative proceedings will not have a material effect on the Company’s Unaudited Condensed Consolidated Balance Sheets ~~at September 30, 2020.~~and Unaudited Condensed Consolidated Statements of Income.

Operating segments are defined as components of a company that engage in business activities from which it may earn revenues and incur expenses, and for which separate financial information is available and is regularly reviewed by the Company’s chief operating decision makers, to assess the performance of the individual segments and make decisions about resources to be allocated to the segments. The Company operates as a multi-state provider of 3 distinct but related business segments providing in-home services.

In its personal care segment, the Company provides non-medical assistance with activities of daily living, primarily to persons who are at increased risk of hospitalization or institutionalization, such as the elderly, chronically ill or disabled. In its hospice segment, the Company

provides physical, emotional and spiritual care for people who are terminally ill as well as related services for their families. In its home health segment, the Company provides services that are primarily medical in nature to individuals who may require assistance during an illness or after hospitalization and include skilled nursing and physical, occupational and speech therapy.

The tables below set forth information about the Company’s reportable segments for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ along with the items necessary to reconcile the segment information to the totals reported in the accompanying condensed consolidated financial statements. Segment assets are not reviewed by the Company’s chief operating decision maker function and therefore are not disclosed below.

Segment operating income consists of revenue generated by a segment, less the direct costs of service revenues and general and administrative expenses that are incurred directly by the segment. Unallocated general and administrative costs are those costs for functions performed in a centralized manner and therefore not attributable to a particular segment. These costs include accounting, finance, human resources, legal, information technology, corporate office support and facility costs and overall corporate management.

	For the Three Months Ended September 30, 2020								For the Three Months Ended March 31, 2021
	(Amounts in Thousands)								(Amounts in Thousands)
	Personal Care		Hospice		Home Health		Total		Personal Care		Hospice		Home Health		Total
Net service revenues	$	165,916	$	23,986	$	4,085	$	193,987	$	164,868	$	36,094	$	4,340	$	205,302
Cost of services revenues		124,493		10,508		2,685		137,686		122,839		18,596		2,670		144,105
Gross profit		41,423		13,478		1,400		56,301		42,029		17,498		1,670		61,197
General and administrative expenses		14,837		5,904		925		21,666		15,283		8,463		965		24,711
Segment operating income	$	26,586	$	7,574	$	475	$	34,635	$	26,746	$	9,035	$	705	$	36,486

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ the Company’s revenue by payor type was as follows:

	Personal Care																				Personal Care
	For the Three Months Ended September 30,										For the Nine Months Ended September 30,										For the Three Months Ended March 31,
	2020					2019					2020					2019					2021					2020
	Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues
State, local and other governmental programs	$	85,344		51.5	%	$	75,176		48.9	%	$	242,751		50.3	%	$	221,450		52.8	%	$	80,849		49.0	%	$	79,346		49.4	%
Managed care organizations		71,700		43.2			68,438		44.5			213,087		44.1			170,004		40.6			75,456		45.8			72,110		44.9
Private pay		5,193		3.1			5,720		3.7			15,449		3.2			15,912		3.8			4,903		3.0			5,270		3.3
Commercial insurance		2,498		1.5			2,683		1.8			7,468		1.5			6,569		1.6			2,346		1.4			2,576		1.6
Other		1,181		0.7			1,736		1.1			4,094		0.9			5,189		1.2	%		1,314		0.8			1,363		0.8
Total personal care segment net service revenues	$	165,916		100.0	%	$	153,753		100.0	%	$	482,849		100.0	%	$	419,124		100.0		$	164,868		100.0	%	$	160,665		100.0	%

	Home Health																				Home Health
	For the Three Months Ended September 30,										For the Nine Months Ended September 30,										For the Three Months Ended March 31,
	2020					2019					2020					2019					2021					2020
	Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues
Medicare	$	3,188		78.0	%	$	3,338		76.5	%	$	9,667		79.2	%	$	7,948		79.0	%	$	3,502		80.7	%	$	3,470		80.0	%
Managed care organizations		829		20.3			959		22.0			2,325		19.0			1,872		18.6			798		18.4			807		18.6
Other		68		1.7			69		1.5			215		1.8			243		2.4			40		0.9			62		1.4
Total home health segment net service revenues	$	4,085		100.0	%	$	4,366		100.0	%	$	12,207		100.0	%	$	10,063		100.0	%	$	4,340		100.0	%	$	4,339		100.0	%

The Company derives a significant amount of its revenue from its operations in Illinois, New York and New Mexico. The percentages of segment revenue for each of these significant states for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ were as follows:

	Personal Care																				Personal Care
	For the Three Months Ended September 30,										For the Nine Months Ended September 30,										For the Three Months Ended March 31,
	2020					2019					2020					2019					2021					2020
	Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues
Illinois	$	74,448		44.9	%	$	61,633		40.1	%	$	215,047		44.6	%	$	178,449		42.5	%	$	73,385		44.5	%	$	71,545		44.5	%
New York		28,381		17.1			34,730		22.6			87,463		18.1			75,330		18.0			27,575		16.7			31,838		19.8
New Mexico		21,878		13.2			19,559		12.7			64,402		13.3			54,701		13.1			23,593		14.3			20,694		12.9
All other states		41,209		24.8			37,831		24.6			115,937		24.0			110,644		26.4			40,315		24.5			36,588		22.8
Total personal care segment net service revenues	$	165,916		100.0	%	$	153,753		100.0	%	$	482,849		100.0	%	$	419,124		100.0	%	$	164,868		100.0	%	$	160,665		100.0	%

A substantial portion of the Company’s revenue and accounts receivable are derived from services performed for federal, state and local governmental agencies. We derive a significant amount of our net service revenues in Illinois, which represented ~~38.5%~~35.8%, and ~~36.4%~~37.7% of our net service revenues for the three months ended ~~September 30,~~March 31, 2021, and 2020, ~~and 2019, respectively and accounted for 37.8% and 39.1% of our net service revenues for the nine months ended September 30, 2020 and 2019,~~ respectively. The Illinois Department on Aging, the largest payor program for the Company’s Illinois personal care operations, accounted for ~~22.9%~~20.4% and ~~22.1%~~23.2% of the Company’s net service revenues for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and accounted for 23.1% and 26.0% of the Company’s net service revenues for the nine months ended September 30, 2020 and 2019,~~ respectively.

The related receivables due from the Illinois Department on Aging represented ~~18.5%~~23.8% and ~~25.1%~~15.9% of the Company’s net accounts receivable at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively.

On November 1, 2020, we completed the acquisition of County Homemakers Incorporated (“County Homemakers”) for approximately $14.6 million, with funding provided by cash on hand. With the purchase of County Homemakers, we expanded our personal care services in the state of Pennsylvania. The Company is currently assessing the fair value of identifiable net assets acquired.

You should read the following discussion together with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this quarterly report on Form 10-Q. This discussion contains forward-looking statements about our business and operations. Statements that are predictive in nature, that depend upon or refer to future events or conditions or that include words like “believes,” “belief,” “expects,” “plans,” “anticipates,” “intends,” “projects,” “estimates,” “may,” “might,” “would,” “should” and similar expressions are intended to be forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, the anticipated impact to our business ~~operations~~ with respect to developments related to the COVID-19 pandemic, including, without limitation, those related to the length and severity of the pandemic, as well as the timing, availability and ~~availability~~adoption of effective medical treatments and vaccines; the pandemic’s impact on our ~~business~~ operations, reimbursement and our consumer population; measures we are taking to respond to the pandemic; the impact of government regulation and stimulus measures, including the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), Paycheck Protection Program and Health Care Enhancement Act (“PPPHCE Act”), the Consolidated Appropriations Act, 2021 (“CAA”), the Covid-Related Tax Relief Act of 2020, the American Rescue Plan of 2021 (“ARPA”) and other ~~enacted legislation;~~stimulus legislation, along with the related uncertainties regarding the implementation of such stimulus measures and any future stimulus measures related to COVID-19; increased expenses related to personal protective equipment (“PPE”), labor, supply chain, or other expenditures; and workforce disruptions and supply shortages and disruptions; ~~uncertainty regarding the implementation of the CARES Act, the PPPHCE Act, and any other future stimulus measures related to COVID-19;~~ changes in operational and reimbursement processes and payment structures at the state or federal levels; changes in Medicaid, Medicare, other government program and managed care organizations policies and payment rates; changes in, or our failure to comply with, existing, federal and state laws or regulations, or our failure to comply with new government laws or regulations on a timely basis; competition in the healthcare industry; the geographical concentration of our operations; changes in the case mix of consumers and payment methodologies; operational changes resulting from the assumption by managed care organizations of responsibility for managing and paying for our services to consumers; the nature and success of future financial and/or delivery system reforms; changes in estimates and judgments associated with critical accounting policies; our ability to maintain or establish new referral sources; our ability to renew significant agreements or groups of agreements; our ability to attract and retain qualified personnel; federal, city and state minimum wage pressure, including any failure of Illinois or any other governmental entity to enact a minimum wage offset and/or the timing of any such enactment; changes in payments and covered services due to the overall economic conditions,, including economic and business conditions resulting from the COVID-19 pandemic, and deficit spending by federal and state governments; cost containment initiatives undertaken by state and other third-party payors; our ability to access financing through the capital and credit markets; our ability to meet debt service requirements and comply with covenants in debt agreements; business disruptions due to natural disasters, acts of terrorism, pandemics, riots, civil insurrection or social unrest, looting, protests, strikes or street demonstrations; our ability to integrate and manage our information systems; our ability to prevent cyber-attacks or security breaches to protect our computer systems and confidential consumer data; our expectations regarding the size and growth of the market for our services; the acceptance of privatized social services; our expectations regarding changes in reimbursement rates; eligibility standards and limits on services imposed by state governmental agencies; the potential for litigation; discretionary determinations by government officials; our ability to successfully implement our business model to grow our business; our ability to continue identifying, pursuing, consummating and integrating acquisition opportunities and expand into new geographic markets; the impact of acquisitions and dispositions on our business, including the potential inability to realize the benefits of the acquisition of Queen City Hospice, ~~Partners;~~LLC and its affiliate Miracle City Hospice, LLC (together “Queen City Hospice”); the potential impact of the discontinuation or modification of LIBOR; the effectiveness, quality and cost of our services; our ability to successfully execute our growth strategy; changes in tax rates; the impact of public health ~~emergencies;~~emergencies, including the COVID-19 pandemic; the impact of inclement weather or natural ~~disasters, including the COVID-19 pandemic;~~disasters; and various other matters, many of which are beyond our control. In addition, the risk factors set forth in Part I, Item 1A of our Annual Report on Form 10-K for the period ended December 31, ~~2019,~~2020, filed with the SEC on ~~August 10, 2020~~March 1, 2021 may result in these differences. You should carefully review all of these factors. Moreover, our business may be materially adversely affected by factors that are not currently known to us, by factors that we currently consider immaterial or by factors that are not specific to us, such as general economic conditions. These forward-looking statements were based on information, plans and estimates at the date of this report, and we assume no obligation to update any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes, except as may be required by law.

The unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2019 have been revised to correct prior period errors as discussed in Note 3, “Revision of Previously Issued Financial Statements” to the Notes to Consolidated Financial Statements and in Note 2, “Revision of Previously Issued Financial Statements” and Note 17, “Unaudited Summarized Quarterly Financial Information” to our consolidated financial statements included in Part II, Item 8—“Financial Statements and Supplementary Data,” of our Annual Report on Form 10-K for the period ended December 31, 2019, filed on August 10, 2020. Accordingly, this MD&A reflects the impact of those revisions.

We are a home care services provider operating in three segments: personal care, hospice and home health. Our services are principally provided in-home under agreements with federal, state and local government agencies, managed care organizations, commercial insurers and private individuals. Our consumers are predominantly “dual eligible,” meaning they are eligible to receive both Medicare and Medicaid benefits. Managed care revenues accounted for ~~38.0%~~37.9% and ~~41.4%~~39.1% of our ~~revenue~~net service revenues during the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and 38.5% and 38.0% of our revenue during the nine months ended September 30, 2020 and 2019,~~ respectively.

A summary of our financial results for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ is provided in the table below.

As of ~~September 30, 2020,~~March 31, 2021, we provided our services in 2422 states through ~~193~~208 offices. For the ~~nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ we served approximately ~~59,000~~50,000 and ~~57,000~~49,000 discrete individuals, respectively. Our personal care segment also includes staffing services, with clients including assisted living facilities, nursing homes and hospice facilities.

~~On January 31, 2020, the HHS Secretary declared a national public health emergency due to a novel coronavirus. In March 2020, the World Health Organization declared the outbreak of~~ COVID-19, the disease caused by ~~this~~a novel coronavirus ~~a pandemic. This disease has spread~~continues to be widespread throughout the United States and other parts of the ~~world, with a recent increase in cases in the United States~~world. Governments and ~~Europe. State and local governments, together with~~ public health officials ~~have recommended~~continue to recommend and ~~mandated~~mandate precautions to mitigate the spread of the virus, including closures of and limitations on ~~public facilities, parks, schools, restaurants,~~ many businesses and ~~other locations~~places of public assembly. As a result, COVID-19 has significantly affected and continues to affect the overall economic conditions in the United States. ~~Although~~However, the number of cases of COVID-19 has decreased in the United States in recent months, and many of the restrictions related to the COVID-19 pandemic in the United States have ~~eased~~been relaxed as the result of such decrease. Moreover, vaccines are expected to be widely available in the second quarter of 2021 and are currently being distributed across the ~~country, some areas are re-imposing closures and other restrictions as a result of increasing rates of COVID-19 infection.~~country. The FDA continues to facilitate the development of therapeutics to combat COVID-19 as well as provide oversight for the development of ~~a vaccine. There are no reliable estimates of~~additional vaccines. It is difficult to predict how long the pandemic will last, how many people are likely to be affected by it or the duration or types of restrictions that will be imposed or re-imposed as the situation is continuously evolving. For ~~that reason,~~these and other reasons, we are unable to predict the long-term impact of the pandemic on our business at this time.

We continue to monitor the impacts on our operations, and have taken precautions intended to minimize the risk to our employees and patients. We have created a COVID-19 Response Team that is responsible for creating and communicating policy, training and the latest COVID-19 updates to all employees. Most employees in our headquarters in Frisco, TX, and in Downers’ Grove, IL, continue to work remotely, and do not believe this arrangement has had a material impact on our ability to maintain business operations.

For the three ~~and nine~~ months ended ~~September 30, 2020, COVID-19 related costs~~March 31, 2021, COVID-19-related expenses were approximately ~~$2.5~~$2.1 million, ~~and $4.8 million, respectively,~~ which were ~~mostly~~ offset by $1.8 million of temporary rate increases from certain payors in our personal care segment and $0.9 million related to the utilization of ~~$1.8 million~~a portion of the funds received from the Provider Relief Fund in November 2020 and ~~$3.6 million during~~included in cost of service revenues on the ~~three and nine months ended September 30, 2020.~~Condensed Consolidated Statements of Income. As of ~~September 30, 2020, $3.0~~March 31, 2021, the Company deferred the recognition of $5.1 million of payments received from payors for COVID-19 ~~reimbursements have been recorded as deferred revenue and~~reimbursement, included within accrued expenses, which will be recognized as we incur specific expenses related ~~expenses on behalf of the payor. Three of our primary markets, New Mexico, New York and Illinois, have been significantly affected by~~to the pandemic, with high numbers of cases reported. However, relevant authorities have universally designated our services as “essential services,” exempting our services and service providers from many of the restrictions described above. In addition, the impact of the restrictions on the Company’s operations for our consumer population has been minimal. For example, in our personal care services segment, we provide non-medical assistance with activities of daily living, primarily to persons who are at increased risk of hospitalization or institutionalization, such as ~~the elderly, chronically ill~~expenses related to acquiring additional PPE, or ~~disabled. Most of these consumers~~will be returned if COVID-19-related expenses are largely confined to their homes, and a significant number of our caregivers provide services to only one consumer, often a family member. We have implemented several new procedures to further reduce the risk of COVID-19 transmission, including a new screening process for both the caregiver and the consumer and the expansion of the use of personal protective equipment from our hospice and home health segments to include our personal care segment.not incurred. We are not able to reasonably predict the total ~~amount of~~ costs we will incur related to the COVID-19 pandemic, and such costs could be substantial. ~~According to the Centers for Disease Control and Prevention, older adults and people with certain underlying medical conditions are at a higher risk for serious illness from COVID-19.~~

Prior to the widespread impacts of COVID-19, the primary limitation on our growth had been the difficulty to attract and retain sufficient caregivers in an environment of very low unemployment rates. Under the CARES Act, all states provide 13 additional weeks of federally funded Pandemic Emergency Unemployment Assistance benefits to people who exhaust their regular state benefits, followed by additional weeks of federally funded unemployment benefits in states with high unemployment (up to 13 or 20 weeks depending on state laws). With the widespread adverse impacts of the COVID-19 pandemic on the hospitality and other labor-intensive industries, we continue to believe we will have an opportunity to increase our hiring of new ~~caregivers.~~caregivers for such period of time as the pandemic continues to have a negative impact on employment in the United States. However, in the near term, ~~the~~ enhanced unemployment benefits ~~offered by several states~~ have suppressed the opportunity to ~~tap into~~attract this new pool of potential ~~caregivers in these states.~~caregivers. For example, ~~in September~~the Continued Assistance for Unemployed Workers Act, signed into law on December 27, 2020, ~~the state~~provides up to 50 weeks of ~~New York announced the Lost Wages Assistance (“LWA”) program, which provides~~unemployment benefits plus an additional $300 per week in ~~weekly benefits~~supplemental benefits. Moreover, in the event that conditions related to ~~unemployed individuals.~~the pandemic significantly improve and we return to a period of low unemployment in the United States, these conditions may hinder our ability to attract and retain sufficient caregivers.

~~For the three and nine months ended September 30, 2020,~~As the COVID-19 pandemic had limited impact on our reimbursements. Although we experienced some consumers suspending their personal care services due to health concerns, many of these consumers resumed our services within weeks. This reduction was partially offset by an increase in demand for our services by patients recovering from COVID-19 who have been released from the hospital but are still suffering lingering effects of the virus.

The economic slowdown caused by the COVID-19 pandemic pose significant risks to states’ budgets for the 2021 fiscal year, which began July 1 in most states. Depending on the severity and length of a downturn, sales tax collections and income tax withholdings couldprogresses, federal agencies continue to ~~be depressed in fiscal 2021~~issue related regulations and ~~potentially, future fiscal years. States could face significant fiscal challenges~~guidance, and ~~may have no choice but to revise~~

their revenue forecasts and adjust their budgets for fiscal 2021 and, potentially, future fiscal years, accordingly. Indeed, Illinois, New York and New Mexico, our top three markets, have revised revenue estimates down for the 2021 fiscal year. In New York, which started its fiscal year April 1, the state comptroller recently estimated that the state would collect at least $10 billion less than originally forecasted, the first year-to-year cut since 2011. The current New York fiscal plan authorizes the state of New York to issue up to $8 billion in short-term bonds to provide funds in case of reduced revenues during the fiscal year. The state issued $1.1 billion of bonds on October 28, 2020. The New York fiscal plan also allows two state authorities to provide the state with a $3 billion line of credit in the new fiscal year. Congress could provide additional relief with additional stimulus and relief legislation, including extension of unemployment benefits and relief for states. We cannot determine the impact that COVID-19 may have on states budgets for 2021 or beyond, however, such impacts could have a material adverse effect on our financial condition, results of operations and cash flows.

At September 30, 2020, we had $170.3 million of cash on hand and $219.0 million of available, unused committed capacity under our credit facility. Our credit facility requires us to maintain a total net leverage ratio not exceeding 3.75:1.00. As of September 30, 2020, our total net leverage ratio was zero. Although we believe our liquidity position remains strong, we can provide no assurance that we will remain in compliance with the covenants in our Credit Agreement, and in the future, it may prove necessary to seek an amendment with the bank lending group under our credit facility. The COVID-19 pandemic has resulted in, and may continue to result in, significant disruption of financial and capital markets, and there can be no assurance that we will be able to raise additional funds on terms acceptable to us, if at all.

~~The impact of the COVID-19 pandemic is fluid and~~public health emergency continues to evolve, and, therefore, we cannot currently predict with certainty the extent to which our business, results of operations, financial condition or liquidity will ultimately be ~~impacted. Given~~impacted. We continue to assess the potential impact of COVID-19 and government responses to the pandemic, including the enactment and implementation of the CARES Act, the PPPHCE Act, the CAA, the ARPA and other stimulus legislation, on our business, results of operations, financial condition and cash flows. Given the dynamic nature of these circumstances, the related financial effect cannot be reasonably estimated at this time but is not expected to materially adversely impact our business. See ~~“Part~~Part I, Item 1A 1A—“Risk ~~Factors—~~Factors — The COVID-19 pandemic could negatively affect our operations, business and financial condition, and our liquidity could also be negatively impacted, particularly if the U.S. economy remains unstable for a significant amount of time” of our Annual Report on Form 10-Kfor the period ended December 31, ~~2019,~~2020, filed ~~on August 10, 2020.~~

~~In recognition of~~with the significant threat to the liquidity of financial markets posed by the COVID-19 pandemic, the Federal Reserve and Congress have taken dramatic actions to provide liquidity to businesses and the banking system in the U.S. For example,SEC on March ~~27, 2020, the President signed into law the CARES Act, a sweeping stimulus bill intended~~1, 2021.

See “Liquidity and Capital Resources” below for additional information regarding funds received related to bolster the U.S. economy. On April 24, 2020, the Paycheck Protection Program and Health Care Enhancement Act (“PPPHCE Act”) was enacted, an expansion of the CARES Act. Together, the CARES Act and the PPPHCE Act authorize $175 billion in funding to be distributed to health care providers through the Relief Fund. This ~~funding is intended to support healthcare providers by reimbursing them for healthcare-related expenses or lost revenues attributable to COVID-19.~~ COVID-19 relief.~~In addition to relief funding, the CARES Act includes temporary changes to~~ ~~Medicare and Medicaid payment rules and relief from certain accounting provisions~~. There can be no assurance that these governmental interventions will ultimately be successful or that any future interventions will prove successful, and the financial markets may experience significant contractions in available liquidity. In April 2020, we received grants in an aggregate principal amount of $6.9 million, for which we did not apply, from the Relief Fund as part of the automatic general distributions by HHS. The Company returned these funds in June 2020. While we may receive further financial, tax or other relief and other benefits under and as a result of the CARES Act, the PPPHCE Act and other stimulus measures, it is not possible to estimate at this time the need, availability, extent or impact of any such relief.

In addition to our organic growth, we have grown through acquisitions that have expanded our presence in current markets or facilitated our entry into new markets where in-home care has been moving to managed care organizations.

On June 1, 2019, we completed the acquisition of VIP for approximately $29.9 million. With the purchase of VIP, we expanded our personal care services in the state of New York and into the New York City metropolitan area. We funded this acquisition through the delayed draw term loan portion of our credit facility and cash on hand.

On August 1, 2019, we completed the acquisition of Alliance for approximately $23.5 million. Additionally, we acquired the assets of Foremost Home Care (“Foremost”) for approximately $1.4 million. We funded these acquisitions through a combination of our revolving credit facility and available cash. With the purchase of Alliance, we expanded our personal care, home health and hospice operations in the state of New Mexico. The addition of Foremost will support our growth strategy in the New York City market area.

On October 1, 2019, we completed the acquisition of Hospice Partners for approximately $135.6 million. We funded the acquisition with a portion of the net proceeds of our Public Offering. With the purchase of Hospice Partners, we expanded our hospice operations through 21 locations in Idaho, Kansas, Missouri, Oregon, Texas and Virginia. Hospice Partners also launched a palliative care program in Texas in 2018.

On July 1, 2020, we completed the acquisition of A Plus for approximately ~~$12.2~~$14.5 million,~~plus~~ including the amount of excess cash held by A Plus at the closing of the acquisition (approximately $2.8 million), with funding provided by ~~cash on hand.~~available cash. With the purchase of A Plus, we expanded our personal care services in the state of Montana.

On November 1, 2020, we completed the acquisition of County Homemakers for approximately ~~$14.6~~$15.8 million, including the amount of acquired excess cash held by County Homemakers at the closing of the acquisition (approximately $1.1 million), with funding provided by available cash ~~on hand.~~. With the purchase of County Homemakers, we expanded our personal care services in the state of Pennsylvania. ~~The Company is currently assessing~~

On December 4, 2020, we completed the ~~fair value~~acquisition of ~~identifiable net assets acquired.~~Queen City Hospice for approximately $194.8 million, including the amount of acquired excess cash held by Queen City Hospice at the closing of the acquisition (approximately $15.4 million). With the purchase of Queen City Hospice, we expanded our hospice services in the state of Ohio. Additionally, on December 1, 2020, we completed the acquisition of SunLife Home Care for approximately $1.7 million. With the purchase of SunLife Home Care, we expanded our personal care services in the state of Arizona. We funded these acquisitions through a combination of our revolving credit facility and available cash.

Our payor clients are principally federal, state and local governmental agencies and managed care organizations. The federal, state and local programs under which the agencies operate are subject to legislative, budgetary and other risks that can influence reimbursement rates. We are experiencing a transition of business from government payors to managed care organizations, which we believe aligns with our emphasis on coordinated care and the reduction of the need for acute care.

For the three ~~and nine~~ months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ our revenue by payor and significant states by segment were as follows:

	Personal Care																				Personal Care
	For the Three Months Ended September 30,										For the Nine Months Ended September 30,										For the Three Months Ended March 31,
	2020					2019					2020					2019					2021					2020
	Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues
State, local and other governmental programs	$	85,344		51.5	%	$	75,176		48.9	%	$	242,751		50.3	%	$	221,450		52.8	%	$	80,849		49.0	%	$	79,346		49.4	%
Managed care organizations		71,700		43.2			68,438		44.5			213,087		44.1			170,004		40.6			75,456		45.8			72,110		44.9
Private pay		5,193		3.1			5,720		3.7			15,449		3.2			15,912		3.8			4,903		3.0			5,270		3.3
Commercial insurance		2,498		1.5			2,683		1.8			7,468		1.5			6,569		1.6			2,346		1.4			2,576		1.6
Other		1,181		0.7			1,736		1.1			4,094		0.9			5,189		1.2	%		1,314		0.8			1,363		0.8
Total personal care segment net service revenues	$	165,916		100.0	%	$	153,753		100.0	%	$	482,849		100.0	%	$	419,124		100.0		$	164,868		100.0	%	$	160,665		100.0	%
Illinois																					$	73,385		44.5	%	$	71,545		44.5	%
New York																						27,575		16.7			31,838		19.8
New Mexico																						23,593		14.3			20,694		12.9
All other states																						40,315		24.5			36,588		22.8
Total personal care segment net service revenues																					$	164,868		100.0	%	$	160,665		100.0	%

	Hospice																					Hospice
	For the Three Months Ended September 30,											For the Nine Months Ended September 30,										For the Three Months Ended March 31,
	2020					2019						2020					2019					2021					2020
	Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)			% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues
Medicare	$	22,404		93.4	%	$	10,045			92.4	%	$	68,372		92.8	%	$	25,243		92.7	%	$	33,985		94.2	%	$	23,219		92.1	%
Managed care organizations		1,130		4.7			584	��		5.4			3,710		5.0			1,419		5.2			1,487		4.1			1,385		5.5
Other		452		1.9			245			2.2			1,641		2.2			566		2.1			622		1.7			608		2.4
Total hospice segment net service revenues	$	23,986		100.0	%	$	10,874			100.0	%	$	73,723		100.0	%	$	27,228		100.0	%	$	36,094		100.0	%	$	25,212		100.0	%
Ohio																						$	14,114		39.1	%	$	—		—	%
New Mexico	$	10,979		45.8	%	$	10,874			100.0	%	$	33,431		45.3	%	$	27,228		100.0	%		9,230		25.6			11,009		43.7
All other states		13,007		54.2			—			—			40,292		54.7			—		—			12,750		35.3			14,203		56.3
Total hospice segment net service revenues	$	23,986		100.0	%	$	10,874			100.0	%	$	73,723		100.0	%	$	27,228		100.0	%	$	36,094		100.0	%	$	25,212		100.0	%

Home Health

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2020

2019

2020

2019

Amount
(in Thousands)

% of
Segment
Net Service
Revenues

Amount
(in Thousands)

% of
Segment
Net Service
Revenues

Amount
(in Thousands)

% of
Segment
Net Service
Revenues

Amount
(in Thousands)

% of
Segment
Net Service
Revenues

Medicare

$
3,188

78.0

%

$
3,338

76.5

%

$
9,667

79.2

%

$
7,948

79.0

%
Managed care organizations

829

20.3

959

22.0

2,325

19.0

1,872

18.6

Other

68

1.7

69

1.5

215

1.8

243

2.4

Total Home Health segment
net service revenues

$
4,085

100.0

%

$
4,366

100.0

%

$
12,207

100.0

%

$
10,063

100.0

%
New Mexico

$
4,085

100.0

%

$
4,366

100.0

%

$
12,207

100.0

%

$
10,063

100.0

%
Total Home Health segment
net service revenues

$
4,085

100.0

%

$
4,366

100.0

%

$
12,207

100.0

%

$
10,063

100.0

%

With the acquisition of Queen City Hospice, the Company expanded our hospice services in the state of Ohio.

Personal Care

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2020

2019

2020

2019

Amount
(in Thousands)

% of
Segment
Net Service
Revenues

Amount
(in Thousands)

% of
Segment
Net Service
Revenues

Amount
(in Thousands)

% of
Segment
Net Service
Revenues

Amount
(in Thousands)

% of
Segment
Net Service
Revenues

Illinois

$
74,448

44.9

%

$
61,633

40.1

%

$
215,047

44.6

%

$
178,449

42.5

%
New York

28,381

17.1

34,730

22.6

87,463

18.1

75,330

18.0

New Mexico

21,878

13.2

19,559

12.7

64,402

13.3

54,701

13.1

All other states

41,209

24.8

37,831

24.6

115,937

24.0

110,644

26.4

Total personal care segment
net service revenues

$
165,916

100.0

%

$
153,753

100.0

%

$
482,849

100.0

%

$
419,124

100.0

%

	Home Health
	For the Three Months Ended March 31,
	2021					2020
	Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues
Medicare	$	3,502		80.7	%	$	3,470		80.0	%
Managed care organizations		798		18.4			807		18.6
Other		40		0.9			62		1.4
Total home health segment net service revenues	$	4,340		100.0	%	$	4,339		100.0	%
New Mexico	$	4,340		100.0	%	$	4,339		100.0	%
Total home health segment net service revenues	$	4,340		100.0	%	$	4,339		100.0	%

We derive a significant amount of our net service revenues in Illinois, which represented ~~38.5%~~35.8% and ~~36.4%~~37.7% of our net service revenues for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and accounted for 37.8% and 39.1% of our net service revenues for the nine months ended September 30, 2020 and 2019,~~ respectively.

A significant amount of our ~~revenue is~~net service revenues are derived from one payor client, the Illinois Department on Aging, the largest payor program for our Illinois personal care operations, which accounted for ~~22.9%~~20.4% and ~~22.1%~~23.2% of our net service revenues for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively,~~ ~~and accounted for 23.1% and 26.0% of the Company’s net service revenues for the nine months ended September 30, 2020 and 2019,~~ respectively.The Illinois Department on Aging’s payments for non-Medicaid consumers have been delayed in the past and may continue to be delayed in the future due to budget disputes. The state of Illinois did not adopt comprehensive budgets for fiscal years 2016 or 2017, ended June 30, 2016 and June 30, 2017, respectively. On July 6, 2017, the state of Illinois passed a budget for the state fiscal year 2018, which began on July 1, 2017, authorizing the Illinois Department on Aging to pay for our services rendered to non-Medicaid consumers provided in prior fiscal years. On June 4, 2018, the state of Illinois passed a budget for state fiscal year 2019, which began on July 1, 2018.On June 6, 2019, the state of Illinois passed a budget for state fiscal year 2020, which began on July 1, 2019. On June 10, 2020, the state of Illinois passed a budget for the state fiscal year 2021, which will take effect July 1, 2020. In December 2014, the Chicago City Council passed an ordinance that, over a period of years, raised the minimum wage for Chicago workers, resulting in an increase ~~equal to $13 per hour on July 1, 2019, with increases adjusted based on the Consumer Price Index in subsequent years.~~

On November 26, 2019, the ~~Chicago~~ City ~~Council~~of Chicago voted to approve additional increases in the Chicago minimum wage to $14 per hour beginning July 1, 2020 ~~and~~ to $15 per hour beginning July 1, 2021.

The State of Illinois finalized its fiscal year 2020 budget with the inclusion of an appropriation to raise in-home care rates to offset the costs of previous minimum wage increases in Chicago and other areas of the state that were imposed beginning on July 1, 2018. These rates were originally set to be effective July 1, 2019, with in-home care rates to be initially increased by 10.9% to $20.28 from $18.29 to partially offset the costs of the minimum wage hikes. Rates were then further increased on January 1, 2020 by an additional 7.7% to $21.84, providing full funding for both the Chicago minimum wage increases and a statewide raise for all current in-home caregivers.

On November 15, 2019, the State of Illinois received and announced official CMS approval for both rate increases, with the first increase to be effective on December 1, 2019, and the second increase to be effective on January 1, 2020. In addition, the Illinois Department on Aging, in conjunction with Illinois’ Health Care and Family Services, announced that the new rates would become effective retroactive to July 1, 2019 for services covered by managed care organizations. On January 15, 2020, the Department on Aging announced confirmation that a one-time bonus payment would be paid to providers who have provided services to clients not enrolled in a ~~managed care organization~~, for the time period of July 1, 2019 through November 30, 2019 using an updated hourly rate of $20.28. The bonus payment of $6.8 million was recognized as net service revenues as of December 31, 2019.

~~On June 10, 2020, the State~~ of Illinois finalized its fiscal year 2021 budget, with in-home care rates to be increased by 7.1% to $23.40 from $21.84, effective January 1, 2021, contingent upon federal CMS approval. Although federal CMS approval was obtained by the state, as a result of on-going state revenue declines due to COVID-19 and the failure of the November 2020 referendum to revise the Illinois income tax code, on December 15, 2020, the Governor of Illinois announced a delay in the implementation of the scheduled rate increase to April 1, 2021, at which time such rate increase went into effect.

On February 17, 2021, the Governor of Illinois introduced his fiscal year 2022 proposed budget, including a statewide rate increase from $23.40 to $24.96 effective January 1, 2022. State trade associations are advocating to accelerate the rate increase to July 1, 2021 (the beginning of the state’s next fiscal year), to coincide with the increase of the minimum wage to $15 per hour, because the ARPA provides for a 10 percentage point increase in federal matching funds for Medicaid home and community-based services from April 1, 2021, through March 30, 2022, provided the state satisfies certain conditions, but there can be no assurances that this will occur.

Our business will benefit from the rate increases noted above, but there is no assurance that additional offsetting rate increases will be adopted in Illinois for fiscal years beyond fiscal year ~~2020,~~2021, and our financial performance will be adversely impacted for any periods in which an additional offsetting reimbursement rate increase is not in effect.

In June 2019, CMS began the Review Choice Demonstration for Home Health Services demonstration in Illinois to identify and prevent fraud, reduce the number of Medicare appeals, and improve provider compliance with Medicare program requirements. The Review Choice Demonstration began phasing in home health agencies in Ohio and Texas in August 2018 and January 2020, respectively. Home health agencies may initially select from the following claims review and approval processes: pre-claim review, post-payment review, or a minimal post-payment review with a 25% payment reduction. Home health agencies that maintain high compliance levels will be eligible for additional, less burdensome options. In March 2020, CMS paused certain claims processing requirements for the Review Choice Demonstration due to the COVID-19 pandemic. CMS announced that it would discontinue exercising enforcement discretion beginning in August 2020, regardless of the status of the public health emergency, and also began phasing in home health agencies in North Carolina and Florida. Following the resumption of the demonstration, MACs will conduct post-payment review on claims that were submitted and paid during the pause. We are currently unable to predict what impact, if any, this program may have on our result of operations or financial position.

Home health services provided to Medicare beneficiaries are paid under the Medicare Home Health Prospective Payment System (“HHPPS”). Historically, the HHPPS was based on 60-day episodes of care and used a case-mix system that relied on the number of visits to determine payment. Effective January 1, 2020, CMS began using a 30-day episode of care for home health payments and implemented the Patient-Driven Groupings Model (“PDGM”) as part of the shift toward value-based care. The PDGM classifies patients based on clinical characteristics and other patient information into payment categories and eliminates the use of therapy service thresholds. Also effective January 1, 2020, CMS finalized a policy allowing therapy assistants to provide maintenance therapy services in the home and modified certain requirements relating to the home health plan of care.

CMS updates the HHPPS payment rates each calendar year. Effective ~~January 1, 2020,~~calendar year 2021, HHPPS rates increased by ~~1.3%~~2.0%, which reflects a ~~1.5% payment~~2.3% market basket update, ~~as mandated by the Bipartisan Budget Act of 2018, offset~~reduced by a ~~0.2~~multifactor productivity adjustment of 0.3 percentage points. CMS expects Medicare payments to home health agencies in 2021 to increase in the aggregate by 1.9% after accounting for a 0.1 percentage point decrease in payments to home health agencies due to changes in the rural add-on percentages ~~also~~ mandated by the Bipartisan Budget Act of ~~2018, among other adjustments. CMS requires both home health and hospice providers to submit quality reporting data each year.~~2018. Home health providers that do not comply with quality data reporting requirements are subject to a 2 percentage point reduction to their market basket update.

Historically, CMS ~~has~~ paid home health providers 50% to 60% of anticipated payment at the beginning of a patient’s care episode through a request for anticipated payment (“RAP”). However, to address potential program integrity risks, CMS ~~is currently phasing~~has phased out RAP payments. ~~For calendar year 2020, CMS reduced RAP payments to 20% of the anticipated payment and limited those payments to existing home health providers.~~ In calendar year 2021, CMS will not provide any up-front payments in response to a RAP but will continue to require home health providers to submit streamlined RAPs as notice that a beneficiary is under a home health period of care. ~~CMS will further reduce the administrative burden on providers in~~In calendar year 2022, ~~replacing~~CMS will replace the RAP with a “Notice of Admission.”

Hospice services provided to Medicare beneficiaries are paid under the Medicare Hospice Prospective Payment System, under which CMS sets a daily rate for each day a patient is enrolled in the hospice benefit. CMS updates these rates each federal fiscal year. Effective October 1, 2020, CMS increased hospice payment rates by 2.4%. This reflected a 2.4% market basket increase reduced by the multifactor productivity adjustment of ~~0.04~~0.0 percentage ~~points as required by the ACA.~~points. Additionally, the aggregate cap, which limits the total Medicare reimbursement that a hospice may receive based on an annual per-beneficiary cap amount and the number of Medicare patients served, was updated to $30,683.93 for federal fiscal year 2021. ~~This amount reflects the hospice payment update of 2.4%.~~ If a hospice’s Medicare payments exceed its aggregate cap, it must repay Medicare the excess amount.

AsOn February 11, 2021, the state of New York announced its initial selection of parties to enter into contracts as a ~~result~~Lead Fiscal Intermediary under its previously announced Request for Offer (“RFO”) process related to its Consumer Directed Personal Assistance Program (“CDPAP”), in which the Company currently participates as a provider. The Company was not one of the ~~COVID-19 pandemic, federal~~selected entities in the initial RFO process. The announcement followed an extended RFO process first begun in 2019, with responses originally due in February 2020. Management believes changes are unlikely to occur during an estimated nine to 12 month transition period and ~~state governments have passed legislation, promulgated regulations,~~does not expect a financial impact in 2021. Based on its current run rate, the Company estimates it will receive $52 million and ~~taken other administrative actions intended to assist healthcare providers~~$4 million in ~~providing care to COVID-19 patients~~revenue and ~~other patients during~~operating income, respectively, from the ~~public health emergency. These temporary measures include relief from Medicare conditions of participation requirements~~program for healthcare providers, relaxation of licensure requirements for healthcare professionals, relaxation of privacy restrictions for telehealth remote communications, promoting use of telehealth by expanding the scope of services for which Medicare reimbursement is available, and limited waivers of fraud and abuse laws for activities related to COVID-19 during the emergency period. The current federal public health emergency declaration expires January 21,year ended December 31, 2021. The ~~HHS Secretary may renew the declaration for successive 90-day periods for as long as the emergency~~Company continues to ~~exist~~explore its options, including appeals, other arrangements under which the Company may continue to provide these services, and ~~may terminate the declaration whenever he determines that the emergency no longer exists.~~

~~One~~expense reductions to minimize any potential final impact of the ~~primary sources~~RFO process.

On April 6, 2021, the New York Legislature finalized the fiscal year 2022 state budget. Among the actions taken since the Governor’s proposed budget, the legislature included a provision to add one or two entities per county to those awarded the Lead Fiscal Intermediary, based on the scoring of ~~relief~~the original RFO. As scoring of RFOs was not publicly released, it is unknown at this time if the Company’s score ranked high enough to qualify for ~~healthcare providers is~~these additional awards. In the ~~CARES Act,~~meantime, we continue to pursue other arrangements including our protest of the award, which was ~~expanded by the PPPHCE Act. Together, the CARES Act~~filed and the PPPHCE Act include $175 billion in funding to be distributed through the Relief Fund to eligible providers, including public entities and Medicare- and/or Medicaid-enrolled providers. Relief Fund paymentsaccepted on March 19, 2021. We are ~~intended to compensate healthcare providers for lost revenues and health care related expenses incurred in~~awaiting a response to the COVID-19 pandemic and are not required to be repaid, provided that recipients attest to and comply with certain terms and conditions, including limitations on balance billing and not using funds received from the Relief Fund to reimburse expenses or losses that other sources are obligated to reimburse. In April 2020, the Company received grants in an aggregate principal amount of $6.9 million, for which it did not apply, from the Relief Fund as part of the automatic general distributions by HHS. The Company returned these funds in June 2020.

In addition, the CARES Act expands the Medicare Accelerated and Advance Payment Program to increase cash flow to providers impacted by the COVID-19 pandemic. Hospice and home health providers were able to request an advance or accelerated payment of up to 100% of the Medicare payment amount for a three-month period (not including Medicare Advantage payments). Effective October 8, 2020, CMS is no longer accepting applications for accelerated or advance payments. The Medicare Accelerated and Advanced Payment Program payments are a loan that providers must pay back. Recoupment of these payments was due to begin in August, but CMS has delayed the recoupment process for these payments, based on amended repayment terms imposed by the Continuing Appropriations Act, 2021 and Others Extension Act, enacted October 1, 2020, until one year after payment was issued. Beginning one year from the date payment was issued and continuing for eleven months, Medicare payments owed to providers and suppliers will be recouped at a rate of 25%. After the eleven months end, Medicare payments owed to providers and suppliers will be recouped at a rate of 50% for another six months. After the six months end, a letter for any remaining balance will be issued. If the remaining balance is not paid within thirty days, interest will accrue at a rate of 4%.

The CARES Act also includes other provisions offering financial relief, for example temporarily lifting the Medicare sequester from May 1 through December 31, 2020, which would have otherwise reduced payments to Medicare providers by 2% ~~(but also extending sequestration through 2030)~~. ~~The Medicare sequester relief resulted in an increase of $0.1 million and $0.2 million, respectively, to home health net service~~formal protest.

~~revenues and $0.5 million and $0.8 million to hospice net service revenues, respectively, for the three and nine months ended September��30, 2020.~~

Due to the recent enactment of the CARES Act, the PPPHCE Act and other enacted legislation, there is still a high degree of uncertainty surrounding their implementation. Further, the federal government is considering additional stimulus measures, federal agencies continue to issue related regulations and guidance, and the public health emergency continues to evolve. We continue to assess the potential impact of the CARES Act, the PPPHCE Act and other laws, regulations, and guidance related to COVID-19 on our business, results of operations, financial condition and cash flows.

We generate net service revenues by providing our services directly to consumers and primarily on an hourly ~~basis.~~basis in our personal care segment, on a daily basis in our hospice segment and on an episodic basis in our home health segment. We receive payment for providing such services from our payor clients, including federal, state and local governmental agencies, managed care organizations, commercial insurers and private pay consumers. ~~Net~~

In our personal care segment, net service revenues are principally provided based on authorized hours, determined by the relevant agency, at an hourly rate, which is either contractual or fixed by legislation, and are recognized at the time services are rendered. In our hospice segment, net service revenues are provided based on daily rates for each of the levels of care and are recognized as services are provided. In our home health segment, net service revenues are based on an episodic basis at a stated rate and recognized based on the number of days elapsed during a period of care within the reporting period. We also record estimated implicit price concessions (based primarily on historical collection experience) related to uninsured accounts to record ~~self-pay revenues at the estimated amounts we expect to collect.~~revenues.

We incur direct care wages, payroll taxes and benefit-related costs in connection with providing our services. We also provide workers’ compensation and general liability coverage for our employees.

Employees are also reimbursed for their travel time and related travel costs in certain instances.

Our general and administrative expenses include our costs for operating our network of local agencies and our administrative offices. Our agency expenses consist of costs for supervisory personnel, our community care supervisors and office administrative costs. Personnel costs include wages, payroll taxes, and employee benefits. Facility costs include rents, utilities, and postage, telephone and office expenses. Our corporate and support center expenses include costs for accounting, information systems, human resources, billing and collections, contracting, marketing and executive leadership. These expenses consist of compensation, including stock-based compensation, payroll taxes, employee benefits, legal, accounting and other professional fees, travel, general insurance, rents, provision for doubtful accounts and related facility costs. Expenses related to streamlining our operations such as costs related to terminated employees, termination of professional services relationships, other contract termination costs and asset write-offs are also included in general and administrative expenses.

Depreciable assets consist principally of furniture and equipment, network administration and telephone equipment, and operating system software. Depreciable and leasehold assets are depreciated or amortized on a straight-line method over their useful lives or, if less and if

applicable, their lease terms.We amortize our intangible assets with finite lives, consisting of customer and referral relationships, trade names, trademarks and non-competition agreements, ~~principally~~ using straight line or accelerated methods based upon their estimated useful lives.

Interest expense is reported ~~in the Unaudited Condensed Consolidated Statements of Income~~ when incurred and principally consists of ~~(i)~~ interest and unused credit line fees on ~~our~~the credit ~~facility and (ii) interest on our financing lease obligations.~~facility.

All of our income is from domestic sources. We incur state and local taxes in states in which we operate. ~~For the three and nine months ended September 30, 2020 and 2019, the federal statutory rate was 21.0%.~~ The effective income tax rate was ~~23.6%~~19.0% and ~~24.4%~~14.2% for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively. For the three months ended September 30, 2020 and 2019, the~~respectively, compared to our federal statutory rate of 21%. The difference between our federal statutory and effective income tax rates was principally due to ~~the inclusion of state taxes and non-deductible compensation, partially offset by an excess tax benefit and the use of federal employment tax credits.~~

The effective income tax rates are 20.5% and 21.3% for the nine months ended September 30, 2020 and 2019, respectively. For the nine months ended September 30, 2020 and 2019, the difference between our federal statutory and effective income tax rates was principally due to the inclusion of an excess tax benefit and the use of federal employment tax credits, ~~partially~~ offset by the inclusion of state taxes and non-deductible compensation. ~~The excess tax benefit is a discrete item,~~ ~~related to the vesting of equity shares,~~ ~~which requires us to recognize the benefit fully in the period.~~ ~~An excess tax benefit results if the Company’s income tax deduction exceeds the cumulative costs of the award recognized on the Unaudited Condensed Consolidated Statements of Income.~~

Three Months Ended ~~September 30, 2020~~March 31, 2021 Compared to Three Months Ended ~~September 30, 2019~~March 31, 2020

The following table sets forth ~~for the periods indicated,~~ our unaudited condensed consolidated results of operations.

	For the Three Months Ended September 30,																					For the Three Months Ended March 31,
	2020						2019							Change								2021						2020							Change
				% Of						% Of															% Of						% Of
				Net Service						Net Service															Net Service						Net Service
	Amount			Revenues			Amount			Revenues				Amount			%					Amount			Revenues			Amount			Revenues				Amount		%
	(Amounts in Thousands, Except Percentages)																				(Amounts in Thousands, Except Percentages)
Net service revenues	$	193,987			100.0	%	$	168,993			100.0		%	$	24,994			14.8		%		$	205,302			100.0	%	$	190,216			100.0		%	$	15,086		7.9		%
Cost of service revenues		137,686			71.0			123,817			73.3				13,869			11.2					144,105			70.2			134,381			70.6				9,724		7.2
Gross profit		56,301			29.0			45,176			26.7				11,125			24.6					61,197			29.8			55,835			29.4				5,362		9.6
General and administrative expenses		40,733			21.0			35,085			20.8				5,648			16.1					45,426			22.1			42,287			22.2				3,139		7.4
Depreciation and amortization		3,045			1.6			2,756			1.6				289			10.5					3,601			1.8			2,887			1.5				714		24.7
Total operating expenses		43,778			22.6			37,841			22.4				5,937			15.7					49,027			23.9			45,174			23.7				3,853		8.5
Operating income from continuing operations		12,523			6.4			7,335			4.3				5,188			70.7
Operating income																							12,170			5.9			10,661			5.6				1,509		14.2
Interest income		(87	)		—			(786	)		(0.5	)			699			(88.9	)				(22	)		—			(334	)		(0.2	)			312		(93.4	)
Interest expense		680			0.3			866			0.5				(186	)		(21.5	)				1,216			0.6			908			0.5				308		33.9
Total interest expense, net		593			0.3			80			—				513			641.3
Income from continuing operations before income taxes		11,930			6.1			7,255			4.3				4,675			64.4
Total interest expense (income), net																							1,194			0.6			574			0.3				620		108.0
Income before income taxes																							10,976			5.3			10,087			5.3				889		8.8
Income tax expense		2,811			1.4			1,769			1.1				1,042			58.9					2,082			1.0			1,429			0.8				653		45.7
Net income from continuing operations		9,119			4.7			5,486			3.2				3,633			66.2
Net loss from discontinued operations		—			—			(574	)		(0.3	)			574			(100.0	)
Net income	$	9,119			4.7	%	$	4,912			2.9		%	$	4,207			85.6		%		$	8,894			4.3	%	$	8,658			4.5		%	$	236		2.7		%

Net service revenues increased by ~~14.8%~~7.9% to ~~$194.0~~$205.3 million for the three months ended ~~September 30, 2020~~March 31, 2021 compared to ~~$169.0~~$190.2 million for the three months ended ~~September 30, 2019.~~March 31, 2020. The increase was due to ~~an increase in same store growth of 4.8% and~~ a ~~7.7%~~3.7% increase in revenues per billable hour, partially offset by a 1.4% decrease in billable hours for the three months ended ~~September 30, 2020, partially offset by a decrease in average billable census of 1.9%~~March 31, 2021 in our personal care segment. In addition, revenue increased by ~~$13.1~~$10.9 million ~~from~~in our hospice segment, during the three months ended ~~September 30, 2020,~~March 31, 2021, compared to the same period in ~~2019, partially~~2020. The increase in our hospice segment revenue was primarily due to an increase in average daily census and revenue per patient day, mainly attributed to the ~~fiscal year 2019 acquisitions~~acquisition of Queen City Hospice ~~Partners and Alliance.~~on December 4, 2020.

Gross profit, expressed as a percentage of net service revenues, increased to ~~29.0%~~29.8% for the three months ended ~~September 30, 2020,~~March 31, 2021, compared to ~~26.7%~~29.4% for the same period in ~~2019.~~2020. The increase was mainly attributed to the full-quarter effect in 2021 of the acquisition of ~~the~~our relatively higher margin hospice segment businesses in ~~2019.~~2020.

General and administrative expenses increased to ~~$40.7~~$45.4 million for the three months ended ~~September 30, 2020~~March 31, 2021 as compared to ~~$35.1~~$42.3 million for the three months ended ~~September 30, 2019.~~March 31, 2020. The increase in general and administrative expenses was primarily due to acquisitions that resulted in an increase in administrative employee wages, taxes and benefit costs of ~~$5.3~~$2.0 million, an increase in data processing of ~~$0.4~~$0.3 million and an increase in rent expense of ~~$0.3~~$0.5 million. In addition, professional fees increased by $1.0 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019, partially offset by a decrease in acquisition related costs of $1.6 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019. General and administrative expenses, expressed as a percentage of net service revenues ~~increased~~decreased to ~~21.0%~~22.1% for the three months ended ~~September 30, 2020,~~March 31, 2021, from ~~20.8%~~22.2% for the three months ended ~~September 30, 2019.~~March 31, 2020.

Depreciation and amortization expense increased to ~~$3.0 million from $2.8~~$3.6 million for the three months ended ~~September 30,~~March 31, 2021 from $2.9 million for the three months ended March 31, 2020, ~~and 2019, respectively,~~ primarily due to the ~~increase of~~ intangible assets ~~related to~~and property and equipment acquired in the fiscal year ~~2019~~2020 acquisitions.

Interest expense increased to $1.2 million for the three months ended March 31, 2021 from $0.9 million for the three months ended March 31, 2020. The increase in interest expense was primarily due to higher outstanding borrowings under our credit facility for the three months ended March 31, 2021 compared to the three months ended March 31, 2020.

All of our income is from domestic sources. We incur state and local taxes in states in which we operate. ~~For the three months ended September 30, 2020 and 2019, the federal statutory rate was 21.0%.~~ The effective income tax rate was ~~23.6%~~19.0% and ~~24.4%~~14.2% for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively. ~~For~~The effective tax rates were lower than the ~~three months ended September 30, 2020 and 2019, the difference between our~~ federal statutory ~~and effective income tax rates was~~rate principally due to the inclusion of ~~state taxes~~a 7.4% and ~~non-deductible compensation, partially offset by an~~12.2% excess tax benefit ~~and the use of federal employment tax credits.~~

~~Nine Months Ended September 30, 2020 Compared to Nine Months Ended September 30, 2019~~

~~The following table sets forth,~~ for the ~~periods indicated, our consolidated results of operations.~~

For the Nine Months Ended September 30,

2020

2019

Change

% Of

% Of

Net Service

Net Service

Amount

Revenues

Amount

Revenues

Amount

%

(Amounts in Thousands, Except Percentages)

Net service revenues

$
568,779

100.0

%

$
456,415

100.0

%

$
112,364

24.6

%
Cost of service revenues

401,646

70.6

334,719

73.3

66,927

20.0

Gross profit

167,133

29.4

121,696

26.7

45,437

37.3

General and administrative expenses

125,470

22.0

94,109

20.7

31,361

33.3

Depreciation and amortization

8,872

1.6

7,365

1.6

1,507

20.5

Total operating expenses

134,342

23.6

101,474

22.3

32,868

32.4

Operating income from continuing operations

32,791

5.8

20,222

4.4

12,569

62.2

Interest income

(576
)

(0.1
)

(1,096
)

(0.2
)

520

(47.4
)

Interest expense

2,309

0.4

2,164

0.4

145

6.7

Total interest expense, net

1,733

0.3

1,068

0.2

665

62.3

Income from continuing operations before income taxes

31,058

5.5

19,154

4.2

11,904

62.1

Income tax expense

6,374

1.2

4,080

0.9

2,294

56.2

Net income from continuing operations

24,684

4.3

15,074

3.3

9,610

63.8

Net loss from discontinued operations

—

—

(574
)

(0.1
)

574

(100.0
)

Net income

$
24,684

4.3

%

$
14,500

3.2

$
10,184

70.2

%

~~Net service revenues increased by 24.6% to $568.8 million for the nine~~three months ended ~~September 30,~~March 31, 2021 and 2020, ~~compared to $456.4 million for the nine months ended September 30, 2019. The increase was due to an increase in same store growth of 8.8% and~~ ~~a 10.4 % increase in revenues per billable hour~~ for the nine months ended September 30, 2020, partially offset by a decrease in average billable census of 2.1% in our personal care segment. In addition, revenue increased by $46.5 million from our hospice segment during the nine months ended September 30, 2020, compared to the same period in 2019, attributed to the fiscal year 2019 acquisitions of Hospice Partners and Alliance.

Gross profit, expressed as a percentage of net service revenues, increased to 29.4% for the nine months ended September 30, 2020, compared to 26.7% for the same period in 2019. The increase was mainly attributed to the acquisition of the relatively higher margin businesses in 2019.

General and administrative expenses increased to $125.5 million for the nine months ended September 30, 2020 as compared to $94.1 million for the nine months ended September 30, 2019. The increase in general and administrative expenses was primarily due to acquisitions that resulted in an increase in administrative employee wages, taxes and benefit costs of $21.5 million, an increase in data processing of $1.7 million and an increase in rent expense of $1.6 million. In addition, professional fees increased by $3.4 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. General and administrative expenses, expressed as a percentage of net service revenues increased to 22.0% for the nine months ended September 30, 2020, from 20.7% for the nine months ended September 30, 2019.

Depreciation and amortization expense increased to $8.9 million from $7.4 million for the nine months ended September 30, 2020 and 2019, respectively, primarily due to the increase of intangible assets related to the fiscal year 2019 acquisitions.

All of our income is from domestic sources. We incur state and local taxes in states in which we operate. For the nine months ended September 30, 2020 and 2019, the federal statutory rate was 21.0%. The effective income tax rate was 20.5% and 21.3% for the nine months ended September 30, 2020 and 2019, respectively.

For the nine months ended September 30, 2020 and 2019, the difference between our federal statutory and effective income tax rates was principally due to the inclusion of an excess tax benefit and the use of federal employment tax credits, partially offset by state taxes and non-deductible compensation. The excess tax benefit is a discrete item ~~related to the vesting of equity shares,~~ which requires usthe Company to recognize the benefit fully in the ~~period.~~quarter.

The following tables and related analysis summarize our operating results and business metrics by segment:

	For the Three Months Ended September 30,																			For the Nine Months Ended September 30,																			For the Three Months Ended March 31,
	2020						2019						Change							2020						2019						Change							2021						2020						Change
Personal Care Segment	Amount			% of Segment Net Service Revenues			Amount			% of Segment Net Service Revenues			Amount			%				Amount			% of Segment Net Service Revenues			Amount			% of Segment Net Service Revenues			Amount			%				Amount			% of Segment Net Service Revenues			Amount			% of Segment Net Service Revenues			Amount			%
	(Amounts in Thousands, Except Percentages)																			(Amounts in Thousands, Except Percentages)																			(Amounts in Thousands, Except Percentages)
Operating Results
Net service revenues	$	165,916			100.0	%	$	153,753			100.0	%	$	12,163			7.9		%	$	482,849			100.0	%	$	419,124			100.0	%	$	63,725			15.2		%	$	164,868			100.0	%	$	160,665			100.0	%	$	4,203			2.6		%
Cost of services revenues		124,493			75.0			115,504			75.1			8,989			7.8				359,344			74.4			314,329			75.0			45,015			14.3				122,839			74.5			119,027			74.1			3,812			3.2
Gross profit		41,423			25.0			38,249			24.9			3,174			8.3				123,505			25.6			104,795			25.0			18,710			17.9				42,029			25.5			41,638			25.9			391			0.9
General and administrative expenses		14,837			8.9			14,737			9.6			100			0.7				45,042			9.3			40,053			9.6			4,989			12.5				15,283			9.3			15,603			9.7			(320	)		(2.1	)
Segment operating income	$	26,586			16.0	%	$	23,512			15.3	%	$	3,074			13.1		%	$	78,463			16.3	%	$	64,742			15.4	%	$	13,721			21.2		%	$	26,746			16.2	%	$	26,035			16.2	%	$	711			2.7		%
Business Metrics (Actual Numbers, Except Billable Hours in Thousands)
Location at period end																					153						153													164						151
Average billable census * ⁽¹⁾		38,589						39,342						(753	)		(1.9	)	%		38,443						39,279						(836	)		(2.1	)	%		38,327						39,170						(843	)		(2.2	)	%
Billable hours * ⁽²⁾		7,778						7,785						(7.0	)		(0.1	)			22,825						21,918						907			4.1				7,567						7,674						(107	)		(1.4	)
Average billable hours per census per month * ⁽²⁾		66.9						65.5						1.4			2.1				65.6						61.5						4.1			6.7				65.2						64.9						0.3			0.5
Billable hours per business day * ⁽²⁾		117,841						117,956						(115	)		(0.1	)			116,454						112,400						4,054			3.6				118,237						118,054						183			0.2
Revenues per billable hour * ⁽²⁾	$	21.29					$	19.76					$	1.53			7.7		%	$	21.11					$	19.13					$	1.98			10.4		%	$	21.75					$	20.97					$	0.78			3.7		%
Same store growth revenue % * ⁽³⁾		4.8	%					7.2	%												8.8	%				6.3		%
Same store revenue growth % * ⁽³⁾																																								2.4	%					14.0	%

We derive a significant amount of our net service revenues from operations in Illinois, which represented 35.8% and 37.7% of our net service revenues for the three months ended March 31, 2021 and 2020, respectively. Net service revenues from state, local and other governmental programs accounted for 49.0% and 49.4% of net service revenues for the three months ended March 31, 2021 and 2020, respectively. Managed care organizations accounted for 45.8% and 44.9% of net service revenues for the three months ended March 31, 2021 and 2020, respectively, with commercial insurance, private pay and other payors accounting for the remainder of net service revenues. One payor client, the Illinois Department on Aging, accounted for 20.4% and 23.2% of net service revenues for the three months ended March 31, 2021 and 2020, respectively.

Net service revenues increased by 2.6% for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. Net service revenues increased primarily as a result of a 3.7% increase in revenues per billable hour, mainly attributed to rate increases discussed above, partially offset by a decrease in billable hours of 1.4% for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.

Gross profit, expressed as a percentage of net service revenues, decreased to 25.5% for the three months ended March 31, 2021 from 25.9% for the three months ended March 31, 2020. This decrease was primarily due to an increase in direct payroll as a percentage of net service revenues of 0.4% for the three months ended March 31, 2021 as compared to the three months ended March 31, 2020.

General and administrative expenses decreased by approximately $0.3 million for the three months ended March 31, 2021, as compared to the three months ended March 31, 2020. The decrease in general and administrative expenses was primarily due to acquisition synergies.

	For the Three Months Ended March 31,
	2021							2020						Change
Hospice Segment	Amount				% of Segment Net Service Revenues			Amount			% of Segment Net Service Revenues			Amount		%
	(Amounts in Thousands, Except Percentages)
Operating Results
Net service revenues	$	36,094				100.0	%	$	25,212			100.0	%	$	10,882		43.2	%
Cost of services revenues		18,596				51.5			12,318			48.9			6,278		51.0
Gross profit		17,498				48.5			12,894			51.1			4,604		35.7
General and administrative expenses		8,463				23.5			6,457			25.6			2,006		31.1
Segment operating income	$	9,035				25.0	%	$	6,437			25.5	%	$	2,598		40.4	%
Business Metrics (Actual Numbers)
Locations at period end		34							34
Admissions * ⁽¹⁾		2,394							1,655						739		44.7	%
Average daily census * ⁽²⁾		2,400							1,863						537		28.8
Average discharge length of stay * ⁽³⁾		101							99						2		2.0
Patient days * ⁽⁴⁾		216,007							169,512						46,495		27.4
Revenue per patient day * ⁽⁵⁾	$	167.09						$	150.49					$	16.60		11.0	%
Same store revenue growth % * ⁽⁶⁾		(8.4	)	%					12.1	%

Net service revenues from state, local and other governmental programs accounted for 51.5% and 48.9% of net service revenues for the three months ended September 30, 2020 and 2019, respectively, and 50.3% and 52.8% of net service revenues for the nine months ended September 30, 2020 and 2019, respectively. Managed care organizations accounted for 43.2% and 44.5% of net service revenues for the three months ended September 30, 2020 and 2019, ~~and 44.1% and 40.6% of net service revenues for the nine months ended September 30, 2020 and 2019, respectively,~~ with commercial insurance, private pay and other payors accounting for the remainder of net service revenues. One payor client, the Illinois Department on Aging, accounted for 22.9% and 22.1% of net service revenues for the three months ended September 30, 2020 and 2019, respectively, ~~and accounted for 23.1% and 26.0% of net service revenues for the nine months ended September 30, 2020 and 2019, respectively~~.

Net service revenues increased by 7.9% for the three months ended September 30, 2020 compared to the three months ended September 30, 2019. Net service revenues increased primarily as a result of an increase in same store growth of 4.8% and an ~~increase in revenues per billable hour of 7.7%,~~ ~~partially offset by a decrease in average billable census of 1.9%for the three months ended September 30, 2020 as compared to the three months ended September 30, 2019.~~ ~~Net service revenues increased by 15.2% for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. Net service revenues increased primarily due to a~~ ~~result of an increase in same store growth of 8.8%, an~~ ~~increase in billable hours of 4.1% and a 10.4% increase in revenues per billable hour,~~ ~~partially offset by a decrease in average billable census of 2.1%~~ ~~for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.Revenue per billable hours increased for the three and nine months ended September 30, 2020 compared to September 30, 2019,~~ ~~mainly attributed to rate increases discussed above.~~

Hospice generates net service revenues by providing care to patients with a life expectancy of six months or less, as well as related services for their families. Hospice offers four levels of care, as defined by Medicare, to meet the varying needs of patients and their families. The four levels of hospice include routine home care, continuous home care, general inpatient care and respite care. Our Hospice segment principally provides routine home care, but with the acquisition of Queen City Hospice, the Company expanded continuous home care services.

Net service revenues from Medicare accounted for 94.2% and managed care organizations accounted for 4.1% for the three months ended March 31, 2021.Net service revenues increased by $10.9 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020. For the three months ended March 31, 2021, net service revenues increased primarily due to an increase in average daily census and revenue per patient day mainly attributed to the acquisition of Queen City Hospice on December 4, 2020. The increase in net service revenues was partially offset by a decrease in census in same stores related to public health restrictions in nursing homes due to the COVID-19 pandemic during the three months ended March 31, 2021, compared to the pre-COVID-19 restrictions for the three months ended March 31, 2020.

Gross profit, expressed as a percentage of net service revenues ~~increased to 25.0%~~was 48.5% and 51.1% for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~from 24.9% for~~respectively. For the three months ended ~~September 30, 2019~~ ~~and from 25.6% for~~March 31, 2021, the ~~nine months ended September 30, 2020 to 25.0% for the nine months ended September 30, 2019. This increase was primarily due to a~~ decrease ~~in direct~~ ~~employee wages, taxes and benefit costs~~ as a percentage of net service revenues was mainly attributed to an increase of ~~0.1% and 0.9% for the three and nine months ended September 30, 2020 as compared to the three months ended September 30, 2019.~~

~~General and administrative expenses increased by approximately $0.1 million and $5.0 million for the three and nine months ended September 30, 2020, respectively. Administrative~~direct employee wages, taxes and benefit costs of 3.8%, partially offset by a decrease of direct service supply costs of 0.5% and other direct expenses related to acquisition synergies.

	For the Three Months Ended September 30,																	For the Nine Months Ended September 30,																	For the Three Months Ended March 31,
	2020					2019					Change							2020					2019					Change							2021					2020						Change
Hospice Segment	Amount		% of Segment Net Service Revenues			Amount		% of Segment Net Service Revenues			Amount			%				Amount		% of Segment Net Service Revenues			Amount		% of Segment Net Service Revenues			Amount			%
Home Health Segment																																			Amount		% of Segment Net Service Revenues			Amount			% of Segment Net Service Revenues			Amount			%
	(Amounts in Thousands, Except Percentages)																	(Amounts in Thousands, Except Percentages)																	(Amounts in Thousands, Except Percentages)
Operating Results
Net service revenues	$	23,986		100.0	%	$	10,874		100.0	%	$	13,112			120.6		%	$	73,723		100.0	%	$	27,228		100.0	%	$	46,495			170.8		%	$	4,340		100.0	%	$	4,339			100.0	%	$	1			—		%
Cost of services revenues		10,508		43.8			5,495		50.5			5,013			91.2				33,749		45.8			13,587		49.9			20,162			148.4				2,670		61.5			3,036			70.0			(366	)		(12.1	)
Gross profit		13,478		56.2			5,379		49.5			8,099			150.6				39,974		54.2			13,641		50.1			26,333			193.0				1,670		38.5			1,303			30.0			367			28.2
General and administrative expenses		5,904		24.6			1,824		16.8			4,080			223.7				18,658		25.3			4,962		18.2			13,696			276.0				965		22.3			1,022			23.6			(57	)		(5.6	)
Segment operating income	$	7,574		31.6	%	$	3,555		32.7	%	$	4,019			113.1		%	$	21,316		28.9	%	$	8,679		31.9	%	$	12,637			145.6		%	$	705		16.2	%	$	281			6.4	%	$	424			150.9		%
Business Metrics (Actual Numbers)
Locations at period end																			30					14												10					10
Admissions * ⁽¹⁾		1,399					563					836			148.5		%		4,393					1,548					2,845			183.8		%
Average daily census * ⁽²⁾		1,681					791					890			112.5				1,762					659					1,103			167.4
Average length of stay * ⁽³⁾		109					121					(12	)		(9.9	)			103					122					(19	)		(15.6	)
Patient days * ⁽⁴⁾		154,609					72,261					82,348			114.0				482,765					178,792					303,973			170.0
Revenue per patient day * ⁽⁵⁾	$	155.14				$	150.48				$	4.66			3.1		%	$	152.71				$	152.29				$	0.42			0.3		%
New admissions * ⁽¹⁾																																				1,168					1,022						146			14.3		%
Recertifications * ⁽²⁾																																				657					710						(53	)		(7.5	)
Total volume * ⁽³⁾																																				1,825					1,732						93			5.4
Visits * ⁽⁴⁾																																				27,665					33,710						(6,045	)		(17.9	)	%
Same store revenue growth % * ⁽⁵⁾																																				—					19.5	%

Hospice generates net service revenues by providing care to patients with a life expectancy of six months or less, and their families. Net service revenues from Medicare accounted for 93.4% and 92.4% and managed care organizations accounted for 4.7% and 5.4% for the three months ended September 30, 2020 and 2019, respectively.~~Net service revenues from Medicare accounted for 92.8% and 92.7% and managed care organizations accounted for 5.0% and 5.2% for the nine months ended September 30, 2020 and 2019, respectively.~~

Net service revenues increased by $13.1 million and $46.5 for the three and nine months ended September 30, 2020 compared to the three and nine months ended September 30, 2019. For the three and nine months ended September 30, 2020, net service revenues increased primarily due to an increase in average daily census partially attributed to the acquisitions of Alliance on August 1, 2019 and Hospice Partners on October 1, 2019.

~~Gross profit, expressed as a percentage of net service revenues was 56.2% and 49.5% for the three months ended September 30, 2020 and 2019, respectively,~~ ~~and 54.2% and 50.1%, for the nine months ended September 30, 2020 and 2019, respectively~~. For the three months ended September 30, 2020, the increase of gross profit as a percentage of net service revenues was mainly attributed to a decrease of employee wages, taxes and benefit costs of 1.8%, pharmacy costs of 1.2%, medical equipment of 1.1% and direct service supply costs of 0.7%. For the nine months ended September 30, 2020, the increase of gross profit as a percentage of net service revenues was mainly attributed to a decrease in pharmacy costs of 1.0% and medical equipment of 1.0%.

The hospice segment’s general and administrative expenses primarily consist of administrative employee wages, taxes and benefit costs, rent, information technology and office expenses. General and administrative expenses, expressed as a percentage of net service revenues was 24.6% and 16.8% for the three months ended September 30, 2020 and 2019, respectively, ~~and 25.3% and 18.2% for the nine months ended September 30, 2020 and 2019, respectively~~. The increase in general and administrative expenses was primarily due to acquisitions that resulted in a $3.4 million and $11.4 million increase in administrative employee wages, taxes and benefit costs and a $0.3 million and $0.9 million increase in rent expenses for the three and nine months ended September 30, 2020. The hospice segment’s operating income was $7.6 million and $3.6 million for the three months ended September 30, 2020 and 2019, respectively, ~~and $21.3 million and $8.7 million for the nine months ended September 30, 2020 and 2019, respectively~~.

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

2020

2019

Change

2020

2019

Change

Home Health Segment

Amount

% of
Segment
Net Service
Revenues

Amount

% of
Segment
Net Service
Revenues

Amount

%

Amount

% of
Segment
Net Service
Revenues

Amount

% of
Segment
Net Service
Revenues

Amount

%

(Amounts in Thousands, Except Percentages)

(Amounts in Thousands, Except Percentages)

Operating Results

Net service revenues

$
4,085

100.0

%

$
4,366

100.0

%

$
(281
)

(6.4
)
%

$
12,207

100.0

%

$
10,063

100.0

%

$
2,144

21.3

%
Cost of services revenues

2,685

65.7

2,818

64.5

(133
)

(4.7
)

8,553

70.1

6,803

67.6

1,750

25.7

Gross profit

1,400

34.3

1,548

35.5

(148
)

(9.6
)

3,654

29.9

3,260

32.4

394

12.1

General and administrative expenses

925

22.6

844

19.3

81

9.6

2,831

23.2

2,187

21.7

644

29.4

Segment operating income

$
475

11.6

%

$
704

16.1

%

$
(229
)

(32.5
)
%

$
823

6.7

%

$
1,073

10.7

%

$
(250
)

(23.3
)
%
Business Metrics (Actual Numbers)

Locations at period end

10

12

New admissions * ⁽¹⁾

1,096

910

186

20.4

%

3,186

2,325

861

37.0

%
Recertifications * ⁽²⁾

607

764

(157
)

(20.5
)

2,006

1,949

57

2.9

Total volume * ⁽³⁾

1,703

1,674

29

1.7

5,192

4,274

918

21.5

Visits * ⁽⁴⁾

28,073

31,477

(3,404
)

(10.8
)
%

91,580

75,188

16,392

21.8

%

Home health generates net service revenues by providing home health services on a short-term, intermittent or episodic basis to individuals, generally to treat an illness or injury. Net service revenues from Medicare ~~accounted for 78.0%~~ and ~~76.5%,~~ managed care organizations accounted for ~~20.3%~~80.7% and ~~22.0% and other accounted for 1.7% and 1.5%~~18.4%, respectively, for the three months ended ~~September 30,~~March 31, 2021. Home health services provided to Medicare beneficiaries are paid under the Medicare Home Health Prospective Payment System (“HHPPS”). Effective January 1, 2020, CMS began using a 30-day episode of care for home health payments and ~~2019, respectively.Net service revenues from Medicare accounted for 79.2% and 79.0%, managed care organizations accounted for 19.0% and 18.6%~~implemented the Patient-Driven Groupings Model (“PDGM”) as part of the shift toward value-based care. The PDGM classifies patients based on clinical characteristics and other ~~accounted~~patient information into payment categories and eliminates the use of therapy service thresholds for ~~1.8%~~determination of payments. Also effective January 1, 2020, CMS finalized a policy allowing therapy assistants to provide maintenance therapy services in the home and ~~2.4% for the nine months ended September 30, 2020 and 2019, respectively.~~

Net service revenues decreased by $0.3 million primarily due to a decrease of recertifications and visits of 20.5% and 10.8% respectively, related to COVID-19 restrictions in New Mexico. For the nine months ended September 30, 2020, net service revenues increased primarily due to an increase in total visits partially relatedmodified certain requirements relating to the ~~acquisition~~home health plan of ~~Alliance on August 1, 2019.~~care.

Gross profit, expressed as a percentage of net service ~~revenues~~revenues was ~~34.3%~~38.5% and ~~35.5%~~30.0% for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively,~~ ~~and 29.9% and 32.4%, for the nine months ended September 30, 2020 and 2019, respectively~~.respectively. For the three ~~and nine~~ months ended ~~September 30, 2020,~~March 31, 2021, the ~~decrease of gross profit as a percentage of net service revenues~~increase was due to ~~an increase~~a decrease of direct employee wages, taxes and benefit costs of ~~1.4% and 2.7%~~7.0% as a percentage of net service revenues ~~respectively.~~compared to the three months ended March 31, 2020. Cost of service for the three months ended March 31, 2021 decreased compared to the corresponding period in 2020, due to a decrease in visits in connection with PDGM case mix.

The home health segment’s general and administrative expenses consist of administrative employee wages, taxes and benefit costs, rent, information technology and office expenses. General and administrative expenses, expressed as a percentage of net service revenues was ~~22.6%~~22.3% and ~~19.3%~~23.6%, respectively, for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively,~~ ~~and 23.2% and 21.7% for the nine months ended September 30, 2020 and 2019, respectively~~. For the nine months ended September 30, 2020, the increase in general and administrative expenses was primarily due to increases in administrative employee wages, taxes and benefit costs of $0.6 million. The home health segment’s operating income was $0.5 million and $0.7 million for the three months ended September 30, 2020 and 2019, respectively, ~~and $0.8 million and $1.1 million for the nine months ended September 30, 2020 and 2019, respectively~~.respectively.

Our primary sources of liquidity are cash on hand and cash from operations. At ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, we had cash balances of ~~$170.3~~$125.5 million and ~~$111.7~~$145.1 million, respectively.

~~During the three and nine months ended September 30, 2020, we did not draw on the term loan.~~As of September 30, 2020, we had a total of $43.4 million in revolving loans, with an interest rate of 1.89% and $18.4 million of term loans, with an interest rate of 1.89%, outstanding on our credit facility. After giving effect to the amount drawn on our credit facility, approximately $9.3 million of outstanding letters of credit and borrowing limits based on an advance multiple of adjusted EBITDA, we had $219.0 million available for borrowing under our revolving credit loan facility.

~~At December 31, 2019, we had a total of $43.4 million revolving credit loans, with an interest rate of 3.44%, and $18.9 million term loans, with an interest rate of 3.45%, outstanding on our credit facility.~~ After giving effect to the amount drawn on our credit facility, approximately $10.0 million of outstanding letters of credit and borrowing limits based on an advance multiple of adjusted EBITDA, we had $191.4 million available for borrowing under our revolving credit loan facility.

Cash flows from operating activities represent the inflow of cash from our payor clients and the outflow of cash for payroll and payroll taxes, operating expenses, interest and taxes. Due to its revenue deficiencies as well as budget and financing issues, from time to time the state of Illinois has reimbursed us on a delayed basis with respect to our various agreements including with our largest payor, the Illinois Department on Aging.The open receivable balance from the Illinois Department on Aging, ~~decreased~~the largest payor program for the Company’s Illinois personal care operation, increased by ~~$15.8~~$11.9 million from ~~$37.6~~$21.2 million as of December 31, ~~2019~~2020 to ~~$21.8~~$33.1 million as of ~~September~~March 31, 2021. The state of Illinois finalized its fiscal year 2021 budget with the inclusion of an appropriation to raise in-home care rates to offset previous minimum wage increases by the City of Chicago.

During the three months ended March 31, 2021, we did not draw on the term loan.As of March 31, 2021, we had a total of $178.5 million in revolving loans, with an interest rate of 1.86% and $17.9 million of term loans, with an interest rate of 1.86%. After giving effect to the amount drawn on our credit facility, approximately $8.7 million of outstanding letters of credit and borrowing limits based on an advance multiple of adjusted EBITDA, we had $112.8 million available for borrowing under our revolving credit loan facility. At December 31, 2020, we had a total of $178.5 million revolving credit loans, with an interest rate of 1.90%, and $18.1 million term loans, with an interest rate of 1.90%.

Our credit facility requires us to maintain a total net leverage ratio not exceeding 3.75:1.00. At March 31, 2021, we were in compliance with our financial covenants under the Credit Agreement. Although we believe our liquidity position remains strong, we can provide no assurance that we will remain in compliance with the covenants in our Credit Agreement, and in the future, it may prove necessary to seek an amendment with the bank lending group under our credit facility. The COVID-19 pandemic has resulted in, and may continue to result in, significant disruption of financial and capital markets, and there can be no assurance that we will be able to raise additional funds on terms acceptable to us, if at all.

The economic slowdown caused by the COVID-19 pandemic continues to pose risks to states’ budgets for the 2021 fiscal year, which began July 1 in most states. Depending on the severity and length of a downturn, sales tax collections and income tax withholdings could continue to be depressed in fiscal 2022 and, potentially, future fiscal years. States could face significant fiscal challenges and may have no choice but to revise their revenue forecasts and adjust their budgets for fiscal 2022 and, potentially, future fiscal years, accordingly. Indeed, Illinois, New York and New Mexico, our top three markets, have revised revenue estimates downward for the 2021 fiscal year. New York, which started its fiscal year April 1, 2021, recently estimated that the state would collect at least $5 billion more than originally forecasted, due to better than expected receipts through January 2021. The New York state comptroller initially decreased its estimate for 2021 fiscal year collections by $10 billion. Although receipts are higher than this estimate, revenues are still significantly below pre-COVID estimates. The current New York fiscal plan authorizes the state of New York to issue up to $11 billion in short-term bonds to ameliorate reduced revenues during the fiscal year. Also in response to reduced revenues, the state implemented a 1% reduction to all Medicaid providers effective January 1, 2020. Effective April 1, 2021, the recently passed budget included an additional 0.5% reduction to the Medicaid rate. We cannot determine the impact that COVID-19 may have on states’ budgets for 2022 or beyond. However, such impacts could have a material adverse effect on our financial condition, results of operations and cash flows.

As a result of the COVID-19 pandemic, federal and state governments have passed legislation, promulgated regulations, and taken other administrative actions intended to assist healthcare providers in providing care to COVID-19 patients and other patients during the public health emergency. These temporary measures include relief from Medicare conditions of participation requirements for healthcare providers, relaxation of licensure requirements for healthcare professionals, relaxation of privacy restrictions for telehealth remote communications, promoting use of telehealth by expanding the scope of services for which Medicare reimbursement is available, and limited waivers of fraud and abuse laws for activities related to COVID-19 during the emergency period. The current federal public health emergency declaration expires July 20, 2021, but HHS has indicated it will likely extend through 2021 and that HHS will provide states with 60 days’ notice prior to termination of the declaration.

One of the primary sources of relief for healthcare providers is the Provider Relief Fund, which was established by the CARES Act, which was expanded by the PPPHCE Act and the CAA. Provider Relief Fund payments are intended to compensate healthcare providers for lost revenues and health care related expenses incurred in response to the COVID-19 pandemic and are not required to be repaid, provided that recipients attest to and comply with certain terms and conditions, including limitations on balance billing and not using funds received from the Provider Relief Fund to reimburse expenses or losses that other sources are obligated to reimburse.

In November 2020, the Company received grants in an aggregate principal amount of $13.7 million from the Provider Relief Fund, for which we had previously applied. The Company utilized $0.9 million of these funds for healthcare related expenses attributable to COVID-19 that were unreimbursed by other sources in the three months ended March 31, 2021 and, in accordance with the current guidance issued by HHS, expects to utilize additional funds through June 30, 2021, at which point any unused funds will be returned. We are required to properly and fully document the use of such funds in reports to HHS. The Company’s ability to utilize and retain some or all of such funds will depend on the magnitude, timing and nature of the impact of the COVID-19 pandemic, as well as the terms and conditions of the funds received. Queen City Hospice intends to administer retention payments of $1.9 million to caregivers in the second quarter of 2021, which we believe to be necessary to secure and maintain adequate personnel. Commercial organizations that receive and expend annual total awards of $750,000 or more in federal funding, including payments received through the Provider Relief Fund, are subject to federal audit requirements.

The CARES Act and related legislation also include other provisions offering financial relief, for example temporarily lifting the Medicare sequester, which would have otherwise reduced payments to Medicare providers by 2% as required by the Budget Control Act of 2011, from May 1, 2020, through December 31, 2021 (but also extending sequestration through 2030). This Medicare sequester relief resulted in an increase of $0.1 million to home health net service revenues and $0.7 million to hospice net service revenues for the year ended March 31, 2021. However, the ARPA increases the federal budget deficit in a manner that triggers an additional statutorily mandated sequestration under the PAYGO Act. As a result, absent congressional action, Medicare spending will be reduced by up to 4 percentage points in fiscal year 2022, in addition to the existing sequestration requirements of the Budget Control Act of 2011. We cannot currently determine the extent to which our business, results of operations, financial condition or liquidity will ultimately be impacted by mandated sequestration triggers under the PAYGO Act.

OnWe entered into the Amended and Restated Credit Agreement, dated as of October 31, 2018, ~~we amended and restated our Existing Credit Agreement,~~ with certain lenders and Capital One, National Association, as a lender and ~~swing line lender and~~ as agent for all ~~lenders.~~lenders (as amended by the Amendment (as hereinafter defined), the “Credit Agreement”). This ~~amended and restated~~ credit facility ~~totals~~totaled $269.6 million, inclusive of a $250.0 million revolving loan and a $19.6 million delayed draw term loan and is evidenced by the Credit Agreement. This ~~amended and restated~~ credit facility amended and restated our existing senior secured credit facility totaling $250.0 million. As used throughout this Annual Report on Form 10-K, “credit facility” shall mean the credit facility evidenced by the Credit Agreement.

The maturity of this ~~amended and restated~~ credit facility is May 8, 2023, with borrowing under the delayed draw term loan available until June 30, 2019, as extended pursuant to the consent letter, dated January 30, 2019, executed by the Required Lenders (as defined in the Credit Agreement).2023. Interest on ~~our amended and restated~~this credit facility may be payable at (x) the sum of (i) an applicable margin ranging from 0.75% to 1.50% based on the applicable senior net leverage ratio plus (ii) a base rate equal to the greatest of (a) the rate of interest last quoted by The Wall Street Journal as the “prime rate,” (b) the sum of the federal funds rate plus a margin of 0.50% and (c) the sum of the adjusted LIBOR that would be applicable to a loan with an interest period of one month advanced on the applicable day (not to be less than 0.00%) plus a margin of 1.00% or (y) the sum of (i) an applicable margin ranging from 1.75% to 2.50% based on the applicable senior net leverage ratio plus (ii) the offered rate per annum for similar dollar deposits for the applicable interest period that appears on Reuters Screen LIBOR01 Page (not to be less than zero). Swing loans may not be LIBOR loans. The availability of additional draws under this ~~amended and restated~~ credit facility is conditioned, among other things, upon (after giving effect to such draws) the Total Net Leverage Ratio (as defined in the Credit Agreement) not exceeding 3.75:1.00. In certain circumstances, in connection with a Material Acquisition (as defined in the Credit Agreement), we can elect to increase our Total Net Leverage Ratio compliance covenant to 4.25:1.00 for the then current fiscal quarter and the three succeeding fiscal quarters. ~~In connection with this amended and restated credit facility, we incurred approximately $0.9 million of debt issuance costs.~~

Addus HealthCare, Inc. (“Addus HealthCare”) is the borrower, and its parent, Holdings, and substantially all of Holdings’ subsidiaries are guarantors under this ~~amended and restated~~ credit facility, and it is ~~secured~~collateralized by a first priority security interest in all of our and the other credit parties’ current and future tangible and intangible assets, including the shares of stock of the borrower and subsidiaries. The Credit Agreement contains affirmative and negative covenants customary for credit facilities of this type, including ~~the timely delivery of audited financial statements,~~ limitations on us with respect to liens, indebtedness, guaranties, investments, distributions, mergers and acquisitions and dispositions of assets.

We pay a fee ranging from 0.20% to 0.35% based on the applicable senior net leverage ratio times the unused portion of the revolving loan portion of the ~~amended and restated~~ credit facility.

The Credit Agreement contains customary affirmative covenants regarding, among other things, the maintenance of records, compliance with laws, maintenance of permits, maintenance of insurance and property and payment of taxes. The Credit Agreement also contains certain customary financial covenants and negative covenants that, among other things, include a requirement to maintain a minimum Interest Coverage Ratio (as defined in the Credit Agreement), a requirement to stay below a maximum Total Net Leverage Ratio (as defined in the Credit Agreement) and a requirement to stay below a maximum permitted amount of capital expenditures, as well as restrictions on guarantees, indebtedness, liens, investments and loans, subject to customary carve outs, a restriction on dividends (provided that Addus HealthCare may make distributions to us in an amount that does not exceed $7.5 million in any year absent of an event of default, plus limited exceptions for tax and administrative distributions), a restriction on the ability to consummate acquisitions (without the consent of the lenders) under our credit facility subject to compliance with the Total Net Leverage Ratio (as defined in the Credit Agreement), thresholds, restrictions on mergers, dispositions of assets, and affiliate transactions, and restrictions on fundamental changes and lines of business.

At ~~September 30, 2020,~~March 31, 2021, we were in compliance with our financial covenants under the Credit Agreement.

The following table summarizes changes in our cash flows for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 and ~~2019:~~2020:

~~Nine~~Three Months Ended ~~September 30, 2020~~March 31, 2021 Compared to ~~Nine~~Three Months Ended ~~September 30, 2019~~March 31, 2020

Net cash used in operating activities was $18.4 million for the three months ended March 31, 2021, compared to net cash provided by operating activities ~~was $73.3 million for the nine months ended September 30, 2020, compared to $8.1~~of $20.4 million for the same period in ~~2019.~~2020. The ~~increase~~decrease in cash provided by operations was ~~primarily~~ due to ~~decreases in~~payroll timing and the repayment of $10.8 million of government stimulus funds for the three months ended March 31, 2021. Additionally, for the three months ended March 31, 2021, accounts receivable ~~for the state of New York,~~ related to Illinois Department of Aging ~~and a decrease~~increased $11.9 million due to an increase in days sales outstanding (“DSO”), as discussed ~~below, combined with organic growth and acquisition activity.~~below.

Net cash used in investing activities was ~~$17.5~~$1.0 million for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 compared to ~~cash used in investing activities of $56.3~~$2.8 million for the ~~nine~~three months ended ~~September 30, 2019. Our investing activities for the nine months ended September 30,~~March 31, 2020, which consisted ~~of $6.0 million in purchases~~ of property and equipment ~~primarily related to investments in our technology infrastructure.~~ ~~Our investing activities for the nine months ended September 30, 2019 consisted of $29.9 million primarily for the acquisition of VIP,$23.5 million for the acquisition of Alliance, and $3.1 million in~~ purchases ~~of property and equipment~~ primarily related to our ongoing investments in our technology infrastructure.

Net cash provided by financing activities ~~was~~ related to cash received from the exercise of stock options of ~~$3.3~~$0.1 million and $1.1 million for the ~~nine~~three months ended ~~September~~ March 31, 2021 and 2020, respectively.

Gross accounts receivable as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 were approximately ~~$118.5~~$139.5 million and ~~$150.6~~$133.4 million, respectively. Outstanding accounts receivable, net of allowance, ~~decreased~~increased by ~~$31.1~~$6.2 million as of ~~September 30, 2020~~March 31, 2021 as compared to December 31, ~~2019.~~2020. Accounts receivable for the Illinois Department on Aging ~~decreased~~increased approximately ~~$15.8~~$11.9 million during the quarter ended ~~September 30, 2020.~~March 31, 2021. Our collection procedures include review of account aging and direct contact with our payors. We have historically not used collection agencies. An uncollectible amount is written off to the allowance account after reasonable collection efforts have been exhausted.~~We received a bonus payment of $6.8 million in May of 2020.~~

We calculate our DSO by taking the trade accounts receivable outstanding, net of allowance for doubtful accounts, divided by the net service revenues for the last quarter, multiplied by the number of days in that quarter. Our DSOs were ~~56 days and 72~~61 days at ~~September 30, 2020~~each of March 31, 2021 and December 31, ~~2019, respectively.~~2020. The DSOs for our largest payor, the Illinois Department on Aging, at ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 were 4872 days and 7846 days, respectively. We may not receive payments on a consistent basis in the near term and our DSOs and the DSO for the Illinois Department on Aging may increase despite the state of Illinois’s enactment of state budgets for fiscal years 2020 and 2021.

The economic slowdown caused by the COVID-19 pandemic ~~poses significant risks~~continues to pose a risk to states’ budgets for the 2021 fiscal year, which began July 1 in most states. Depending on the severity and length of a downturn, sales tax collections and income tax withholdings could continue to be depressed in fiscal ~~2021~~2022 and, potentially, future fiscal years. States ~~could~~continue to face ~~significant~~ fiscal challenges and may have no choice but to revise their revenue forecasts and adjust their budgets for fiscal ~~2021~~2022 and, potentially, future fiscal years, accordingly. In New York, which started its fiscal year April 1, ~~the state comptroller~~2021, recently estimated that the state would collect at least ~~$10~~$5 billion ~~less~~more than originally forecasted, ~~the first year-to-year cut since 2011.~~due to better than expected receipts through January 2021. The New York state comptroller initially decreased its estimate for 2021 fiscal year collections by $10 billion. Although receipts are higher than this estimate, revenues are still significantly below pre-COVID estimates. The current New York fiscal plan authorizes the state of New York to issue up to $8$11 billion in short-term bonds to ~~provide funds in case of~~ameliorate reduced revenues during the fiscal year. ~~The state issued $1.1 billion of bonds on October 28, 2020. It also allows two state authorities~~Also in response to ~~provide the state with a $3 billion line of credit in the new fiscal year. As the state continues to deal with lower levels of funding due to the COVID-19 virus,~~reduced revenues, the state implemented a 1% reduction to all Medicaid providers effective January 1, 2020. ~~The~~Effective April 1, 2021, the recently passed budget included an additional 0.5% reduction to the Medicaid ~~rate, which also allows~~rate.

The ARPA provided $350 billion dollars in emergency funding for state, local, territorial, and Tribal governments to remedy the ~~governor to make any additional changes needed as the budget year progresses.~~

mismatch between increasing costs and decreasing revenues. We cannot determine if Congress ~~could~~will provide additional relief with additional stimulus and relief legislation, including extension of unemployment benefits and relief for states. WeAdditionally, we cannot determine the impact that COVID-19 may have on ~~states~~states’ budgets for ~~2021~~2022 or ~~beyond, however,~~beyond. However, such impacts could have a material adverse effect on our financial condition, results of operations and cash flows.

As of ~~September 30, 2020,~~March 31, 2021, we did not have any off-balance sheet guarantees or arrangements with unconsolidated entities.

There have been no material changes to our critical accounting policies and estimates previously disclosed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” set forth in Part II, Item 7 of our Annual Report on Form 10-K for the period ended December 31, ~~2019,~~2020, filed on ~~August 10, 2020.~~March 1, 2021.

Refer to Note 2 to the Notes to Condensed Consolidated Financial Statements (Unaudited) for further discussion.

We are exposed to market risk associated with changes in interest rates on our variable rate long-term debt. As of ~~September 30, 2020,~~March 31, 2021, we had outstanding borrowings of approximately ~~$61.8~~$196.3 million on our credit facility, all of such borrowings were subject to variable interest rates. If the variable rates on this debt were 100 basis points higher than the rate applicable to the borrowing during the three ~~and nine~~ months period ended ~~September 30, 2020,~~March 31, 2021, our net income would have decreased by ~~$0.1 million, or $0.01 per diluted share and~~ $0.4 million, or $0.02 per diluted ~~share, for the respective periods.~~share. We do not currently have any derivative or hedging arrangements, or other known exposures, to changes in interest rates.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of ~~September 30, 2020.~~March 31, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were ~~not~~ effective as of ~~September 30, 2020 due to the material weaknesses~~March 31, 2021.

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that ~~were disclosed in our Annual Report on Form 10-K for~~occurred during the fiscal ~~year ended December 31, 2019.~~

~~During the~~ quarter ended ~~September 30, 2020, we continued to implement the following changes to our internal control over financial reporting~~March 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As previously described in Part II, Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, our management began a remediation plan to address the material weaknesses. We have identified dedicated internal resources, supplemented with third-party specialists, to assist with formalizing a robust and detailed remediation plan and updated risk assessment, including identifying and assessing those risks commensurate with the significant changes within our company.

Because the reliability of the internal control process requires repeatable execution, the successful remediation of these material weaknesses will require review and evidence of operating effectiveness prior to concluding that the controls are effective. Although significant progress has been made, the previously identified material weaknesses continue to exist as of September 30, 2020, and will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Investing in our common stock involves a high degree of risk. You should carefully consider the risk factors discussed under the caption “Risk Factors” set forth in Part I, Item 1A, of our Annual Report on Form 10-K for the year ended December 31, ~~2019, as~~2020, filed on ~~August 10, 2020.~~March 1, 2021. There have been no material changes to the risk factors previously disclosed under the caption “Risk Factors” in our Annual Report on Form 10-K. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or operating results.

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.



Delaware		20-5340172
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

6303 Cowboys Way, Suite 600 Frisco, TX		75034
(Address of principal executive offices)		(Zip Code)

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	ADUS	The Nasdaq Global Market


PART I. FINANCIAL INFORMATION	3

Item 1. Financial Statements (Unaudited)	3

Condensed Consolidated Balance Sheets as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020	3

Condensed Consolidated Statements of Income For the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	4

Condensed Consolidated Statement of Stockholders’ Equity For the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	5

Condensed Consolidated Statements of Cash Flows For the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~	76

Notes to Condensed Consolidated Financial Statements	87

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2219

Item 3. Quantitative and Qualitative Disclosures About Market Risk	3732

Item 4. Controls and Procedures	3732

PART II. OTHER INFORMATION	3833

Item 1. Legal Proceedings	3833

Item 1A. Risk Factors	3833

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3833

Item 3. Defaults Upon Senior Securities	3833

Item 4. Mine Safety Disclosures	3833

Item 5. Other Information	3833

Item 6. Exhibits	3934

	For the Three Months Ended September 30, (Amounts in Thousands)				For the Nine Months Ended September 30, (Amounts in Thousands)
	2020		2019		2020		2019
Net service revenues	$	193,987	$	187,846	$	573,917	$	541,646
Operating income from continuing operations		12,269		9,291		32,136		26,328
Net income from continuing operations		9,458		6,922		25,663		20,518
Net income per common share from continuing operations
Basic income per share	$	0.61	$	0.50	$	1.65	$	1.55

	Goodwill
	Personal Care		Hospice			Home Health			Total
	(Amounts in Thousands)
Goodwill as of December 31, 2019	$	126,577	$	146,983		$	1,808		$	275,368
Additions for acquisition		11,252		—			—			11,252
Divestiture		—		(1,167	)		—			(1,167	)
Adjustments to previously recorded goodwill		1,438		(322	)		(17	)		1,099
Goodwill as of September 30, 2020	$	139,267	$	145,494		$	1,791		$	286,552


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the Nine Months
	Ended September 30,
	2020			2019
Cash flows from operating activities:
Net income	$	24,684		$	14,500
Adjustments to reconcile net income to net cash provided by operating activities, net of acquisitions:
Depreciation and amortization		8,872			7,365
Deferred income taxes		51			105
Stock-based compensation		3,987			4,186
Amortization of debt issuance costs under the credit facility		554			533
Provision for doubtful accounts		681			168
Loss (gain) of disposal of assets and asset impairment		1,242			(90	)
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		30,746			(19,957	)
Prepaid expenses and other current assets		(2,592	)		2,822
Accounts payable		(2,496	)		1,856
Accrued expenses and other long-term liabilities		7,570			(3,404	)
Net cash provided by operating activities		73,299			8,084
Cash flows from investing activities:
Purchases of property and equipment		(5,893	)		(3,077	)
Acquisitions of businesses, net of cash acquired		(11,869	)		(53,224	)
Proceeds from disposal of assets		255			—
Net cash used in investing activities		(17,507	)		(56,301	)
Cash flows from financing activities:
Proceeds from issuance of common stock, net of offering costs		—			172,945
Borrowings on revolver — credit facility		—			23,458
Borrowings on term loan — credit facility		—			19,600
Payments on term loan — credit facility		(490	)		(245	)
Payments for debt issuance costs under the credit facility		—			(361	)
Payments on financing lease obligations		(22	)		(54	)
Cash received from exercise of stock options		3,337			2,077
Net cash provided by financing activities		2,825			217,420
Net change in cash		58,617			169,203
Cash, at beginning of period		111,714			70,406
Cash, at end of period	$	170,331		$	239,609
Supplemental disclosures of cash flow information:
Cash paid for interest	$	1,869		$	1,594
Cash paid for income taxes		9,119			5,808
Supplemental disclosures of non-cash investing and financing activities:
Leasehold improvements acquired through tenant allowances	$	4,871		$	682

	For the Nine Months Ended September 30, (Amounts in Thousands)
	2019
	As
	Previously						As
	Reported			Revision			Revised
Net income	$	15,247		$	(747	)	$	14,500
Deferred income taxes		372			(267	)		105
Accounts receivable		(22,291	)		2,334			(19,957	)
Accrued expenses and other long-term liabilities		(2,084	)		(1,320	)		(3,404	)
Net cash provided by operating activities	$	8,084		$	—		$	8,084

	Total (Amounts in Thousands)
Goodwill	$	169,107
Identifiable intangible assets		20,015
Cash		15,444
Property and equipment		759
Accounts receivable		5,835
Operating lease assets, net		3,028
Other assets		160
Accounts payable		(2,278	)
Accrued expenses		(503	)
Accrued payroll		(1,351	)
Long-term operating lease liabilities		(2,765	)
Government stimulus advances		(12,694	)
Total purchase price	$	194,757

	Total (Amounts in Thousands)
Goodwill	$	13,403
Identifiable intangible assets		474
Cash		1,104
Property and equipment		52
Accounts receivable		1,395
Operating lease assets, net		485
Other assets		40
Accounts payable		(67	)
Accrued expenses		(37	)
Accrued payroll		(543	)
Long-term operating lease liabilities		(485	)
Total purchase price	$	15,821

	Total (Amounts in Thousands)
Goodwill	$	111,674
Identifiable intangible assets		18,090
Cash		5,489
Property and equipment		164
Accounts receivable		6,411
Operating lease assets, net		2,425
Other assets		702
Accounts payable		(1,737	)
Accrued expenses		(3,503	)
Accrued payroll		(1,110	)
Deferred tax liability		(1,422	)
Long-term operating lease liabilities		(1,615	)
Total purchase price	$	135,568

	Total (Amounts in Thousands)
Goodwill	$	17,062
Identifiable intangible assets		5,422
Cash		177
Accounts receivable		1,754
Accounts payable		(316	)
Other liabilities		(641	)
Total purchase price	$	23,458

	Total (Amounts in Thousands)
Goodwill	$	11,936
Identifiable intangible assets		15,370
Cash		130
Accounts receivable		4,730
Operating lease assets, net		2,278
Other assets		30
Property and equipment		27
Accounts payable		(540	)
Accrued expenses		(770	)
Accrued payroll		(1,742	)
Long-term operating lease liabilities		(1,531	)
Total purchase price	$	29,918

	For the Three Months Ended March 31, 2020 (Amounts in Thousands)
Net service revenues	$	208,967
Operating income		47,112
Net income		10,319
Net income per common share
Basic income per share	$	0.66
Diluted income per share	$	0.65


3.1		Amended and Restated Certificate of Incorporation of the Company dated as of October 27, 2009 (filed on November 20, 2009 as Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q (File No. 001-34504) and incorporated by reference herein).

3.2		Amended and Restated Bylaws of the Company, as amended by the First Amendment to the Amended and Restated Bylaws (filed on May 9, 2013 as Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q (File No. 001-34504) and incorporated by reference herein).

4.1		Form of Common Stock Certificate (filed on October 2, 2009 as Exhibit 4.1 to Amendment No. 4 to the Company’s Registration Statement on Form S-1 (File No. 333-160634) and incorporated by reference herein).

31.1		Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934 as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).

101.SCH		Inline XBRL Taxonomy Extension Schema Document.

101.CAL		Inline XBRL Taxonomy Calculation Linkbase Document.

101.LAB		Inline XBRL Taxonomy Label Linkbase Document.

101.PRE		Inline XBRL Presentation Linkbase Document.

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.

104		Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101).


	ADDUS HOMECARE CORPORATION

Date: ~~November 6, 2020~~May 7, 2021	By:	/s/ R. DIRK ALLISON

		R. Dirk Allison ~~President~~Chairman and Chief Executive Officer (As Principal Executive Officer)

Date: ~~November 6, 2020~~May 7, 2021	By:	/s/ BRIAN POFF

		Brian Poff Chief Financial Officer (As Principal Financial Officer)

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