Indicate by check mark whether the 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 July ~~31, 2020,~~30, 2021, Addus HomeCare Corporation had ~~15,664,952~~15,916,799 shares of Common Stock outstanding.


	June 30, 2020		December 31, 2019		June 30, 2021		December 31, 2020
Assets
Current assets
Cash	$	158,549	$	111,714	$	139,400	$	145,078
Accounts receivable, net		126,389		149,680		138,270		132,650
Prepaid expenses and other current assets		11,398		7,993		12,740		9,969
Total current assets		296,336		269,387		290,410		287,697
Property and equipment, net of accumulated depreciation and amortization		14,707		12,156		18,708		19,749
Other assets
Goodwill		275,433		275,368		469,476		469,072
Intangibles, net of accumulated amortization		53,073		57,079		67,247		71,549
Deferred tax assets, net		1,547		1,647		6,128		6,524
Operating lease assets, net		19,825		21,111		37,191		37,991
Total other assets		349,878		355,205		580,042		585,136
Total assets	$	660,921	$	636,748	$	889,160	$	892,582
Liabilities and stockholders’ equity
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	17,201	$	19,641	$	23,942	$	23,705
Accrued payroll		28,787		30,587		33,836		35,815
Accrued expenses		32,674		22,429		35,717		37,564
Accrued workers’ compensation insurance		14,075		14,143
Government stimulus advances						8,094		32,087
Accrued workers' compensation insurance						14,382		13,759
Current portion of long-term debt		948		728		973		971
Total current liabilities		93,685		87,528		116,944		143,901
Long-term liabilities
Long-term debt, less current portion, net of debt issuance costs		59,048		59,164		193,714		193,901
Long-term operating lease liabilities		12,672		14,301		34,339		35,516
Other long-term liabilities		655		163		108		588
Total long-term liabilities		72,375		73,628		228,161		230,005
Total liabilities	$	166,060	$	161,156	$	345,105	$	373,906
Stockholders’ equity
Common stock—$.001 par value; 40,000 authorized and 15,665 and 15,617 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively	$	16	$	15
Stockholders' equity
Common stock—$.001 par value; 40,000 authorized and 15,917 and 15,826 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively					$	16	$	16
Additional paid-in capital		363,248		359,545		374,383		369,495
Retained earnings		131,597		116,032		169,656		149,165
Total stockholders’ equity		494,861		475,592
Total liabilities and stockholders’ equity	$	660,921	$	636,748
Total stockholders' equity						544,055		518,676
Total liabilities and stockholders' equity					$	889,160	$	892,582

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,						For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2020			2019			2020			2019			2021			2020			2021			2020
Net service revenues	$	184,576		$	148,915		$	374,792		$	287,422		$	217,893		$	184,576		$	423,195		$	374,792
Cost of service revenues		129,579			109,222			263,960			210,902			149,083			129,579			293,188			263,960
Gross profit		54,997			39,693			110,832			76,520			68,810			54,997			130,007			110,832
General and administrative expenses		42,450			29,767			84,737			59,024			48,175			42,450			93,601			84,737
Depreciation and amortization		2,940			2,535			5,827			4,609			3,587			2,940			7,188			5,827
Total operating expenses		45,390			32,302			90,564			63,633			51,762			45,390			100,789			90,564
Operating income		9,607			7,391			20,268			12,887			17,048			9,607			29,218			20,268
Interest income		(155	)		(95	)		(489	)		(310	)		(31	)		(155	)		(53	)		(489	)
Interest expense		721			680			1,629			1,298			1,262			721			2,478			1,629
Total interest expense, net		566			585			1,140			988			1,231			566			2,425			1,140
Income before income taxes		9,041			6,806			19,128			11,899			15,817			9,041			26,793			19,128
Income tax expense		2,134			1,514			3,563			2,311			4,220			2,134			6,302			3,563
Net income	$	6,907		$	5,292		$	15,565		$	9,588		$	11,597		$	6,907		$	20,491		$	15,565
Net income per common share
Basic income per share	$	0.44		$	0.41		$	1.00		$	0.74		$	0.74		$	0.44		$	1.30		$	1.00
Diluted income per share	$	0.43		$	0.39		$	0.98		$	0.71		$	0.72		$	0.43		$	1.28		$	0.98
Weighted average number of common shares and potential common shares outstanding:
Basic		15,582			13,044			15,551			13,019			15,738			15,582			15,716			15,551
Diluted		15,916			13,433			15,917			13,413			16,043			15,916			16,063			15,917

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

												For the Three Months Ended June 30, 2021
												Common Stock					Additional Paid-in Capital		Retained Earnings		Total Stockholders’ Equity
												Shares			Amount
Balance at April 1, 2021													15,903		$	16	$	371,835	$	158,059	$	529,910
Issuance of shares of common stock under restricted stock award agreements													13			—		—		—		—
Stock-based compensation													—			—		2,525		—		2,525
Shares issued for exercise of stock options													1			—		23		—		23
Net income													—			—		—		11,597		11,597
Balance at June 30, 2021													15,917		$	16	$	374,383	$	169,656	$	544,055

												For the Six Months Ended June 30, 2021
												Common Stock					Additional Paid-in Capital		Retained Earnings		Total Stockholders’ Equity
												Shares			Amount
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													88			—		—		—		—
Stock-based compensation													—			—		4,764		—		4,764
Shares issued for exercise of stock options													3			—		124		—		124
Net income													—			—		—		20,491		20,491
Balance at June 30, 2021													15,917		$	16	$	374,383	$	169,656	$	544,055

	For the Three Months Ended June 30, 2020											For the Three Months Ended June 30, 2020
	Common Stock					Additional Paid-in Capital		Retained Earnings		Total Stockholders’ Equity		Common Stock					Additional Paid-in Capital		Retained Earnings		Total Stockholders’ Equity
	Shares			Amount								Shares			Amount
Balance at April 1, 2020		15,660		$	16	$	362,102	$	124,690	$	486,808		15,660		$	16	$	362,102	$	124,690	$	486,808
Forfeiture of shares of common stock under restricted stock award agreements		(1	)		—		—		—		—		(1	)		—		—		—		—
Stock-based compensation		—			—		1,118		—		1,118		—			—		1,118		—		1,118
Shares issued for exercise of stock options		6			—		28		—		28		6			—		28		—		28
Net income		—			—		—		6,907		6,907		—			—		—		6,907		6,907
Balance at June 30, 2020		15,665		$	16	$	363,248	$	131,597	$	494,861		15,665		$	16	$	363,248	$	131,597	$	494,861
	For the Six Months Ended June 30, 2020
	Common Stock					Additional Paid-in Capital		Retained Earnings		Total Stockholders’ Equity		For the Six Months Ended June 30, 2020
												Common Stock					Additional Paid-in Capital		Retained Earnings		Total Stockholders’ Equity
												Shares			Amount
Balance at January 1, 2020		15,617		$	15	$	359,545	$	116,032	$	475,592		15,617		$	15	$	359,545	$	116,032	$	475,592
Forfeiture of shares of common stock under restricted stock award agreements		(6	)		—		—		—		—		(6	)		—		—		—		—
Stock-based compensation		—			—		2,525		—		2,525		—			—		2,525		—		2,525
Shares issued for exercise of stock options		54			1		1,178				1,179		54			1		1,178		—		1,179
Net income		—			—		—		15,565		15,565		—			—		—		15,565		15,565
Balance at June 30, 2020		15,665		$	16	$	363,248	$	131,597	$	494,861		15,665		$	16	$	363,248	$	131,597	$	494,861
	For the Three Months Ended June 30, 2019
	Common Stock					Additional Paid-in Capital		Retained Earnings		Total Stockholders’ Equity
Balance at April 1, 2019		13,178		$	13	$	178,916	$	95,091	$	274,020
Issuance of shares of common stock under restricted stock award agreements		11			—		—		—		—
Stock-based compensation		—			—		1,482		—		1,482
Shares issued for exercise of stock options		30			—		713		—		713
Net income		—			—		—		5,292		5,292
Balance at June 30, 2019		13,219		$	13	$	181,111	$	100,383	$	281,507
	For the Six Months Ended June 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		63			—		—		—		—
Stock-based compensation		—			—		2,715		—		2,715
Shares issued for exercise of stock options		30			—		713		—		713
Net income		—			—		—		9,588		9,588
Balance at June 30, 2019		13,219		$	13	$	181,111	$	100,383	$	281,507

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

	For the Six Months						For the Six Months
	Ended June 30,						Ended June 30,
	2020			2019			2021			2020
Cash flows from operating activities:
Net income	$	15,565		$	9,588		$	20,491		$	15,565
Adjustments to reconcile net income to net cash provided by (used in) operating activities, net of acquisitions:
Adjustments to reconcile net income to net cash (used in) provided by operating activities, net of acquisitions:
Depreciation and amortization		5,827			4,609			7,188			5,827
Deferred income taxes		100			(154	)		396			100
Stock-based compensation		2,525			2,715			4,764			2,525
Amortization of debt issuance costs under the credit facility		370			347			368			370
Provision for doubtful accounts		436			106			529			436
Loss (gain) of disposal of assets		352			(51	)		—			352
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		23,342			(17,360	)		(6,232	)		23,342
Prepaid expenses and other current assets		(3,608	)		328			(3,004	)		(3,608	)
Government stimulus advances								(23,993	)		—
Accounts payable		(2,700	)		641			111			(2,700	)
Accrued payroll								(1,900	)		(1,800	)
Accrued expenses and other long-term liabilities		8,678			(4,847	)		(2,039	)		10,478
Net cash provided by (used in) operating activities		50,887			(4,078	)
Net cash (used in) provided by operating activities								(3,321	)		50,887
Cash flows from investing activities:
Purchases of property and equipment		(4,842	)		(1,996	)		(1,847	)		(4,842	)
Acquisitions of businesses, net of cash acquired		(295	)		(29,808	)		(81	)		(295	)
Proceeds from disposal of assets		172			—			—			172
Net cash used in investing activities		(4,965	)		(31,804	)		(1,928	)		(4,965	)
Cash flows from financing activities:
Borrowings on term loan — credit facility		—			19,600
Payments on term loan — credit facility		(245	)		—			(490	)		(245	)
Payments on financing lease obligations		(21	)		(45	)
Cash received from exercise of stock options		1,179			713			124			1,179
Net cash provided by financing activities		913			20,268
Other								(63	)		(21	)
Net cash (used in) provided by financing activities								(429	)		913
Net change in cash		46,835			(15,614	)		(5,678	)		46,835
Cash, at beginning of period		111,714			70,406			145,078			111,714
Cash, at end of period	$	158,549		$	54,792		$	139,400		$	158,549
Supplemental disclosures of cash flow information:
Cash paid for interest	$	992		$	904		$	2,136		$	992
Cash paid for income taxes		6,414			3,474			10,950			6,414
Supplemental disclosures of non-cash investing and financing activities:
Leasehold improvements acquired through tenant allowances	$	—		$	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 June 30, ~~2020~~2021 and ~~2019,~~2020, dilutive stock options outstanding were approximately ~~579,000~~526,000 and ~~695,000,~~579,000, respectively, and dilutive restricted stock awards outstanding were approximately 172,000 and 72,000, respectively.

Included in the Company’s calculation of diluted earnings per share for the three and ~~154,000,~~six months ended June 30, 2021, dilutive stock options outstanding were approximately 286,000 and 298,000, respectively. In addition, dilutive restricted stock awards outstanding were approximately 20,000 and 49,000 for the three and six months ended June 30, 2021, respectively.

Included in the Company’s calculation of diluted earnings per share for the three and six months ended June 30, 2020, dilutive stock options outstanding were approximately 296,000 and 304,000, respectively. In addition, dilutive restricted stock awards outstanding were approximately 37,000 and 63,000 for the three and six months ended June 30, 2020, respectively.

Included in the Company’s calculation of diluted earnings per share for the three and six months ended June 30, 2019, were approximately 327,000 and 316,000 dilutive stock options outstanding , respectively. In addition, dilutive restricted stock awards outstanding were approximately 62,000 and 78,000 for the three and six months ended June 30, 2019, respectively.

~~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 $0.4 million for the three and six months ended June 30, 2020, respectively. Allowance for doubtful accounts was $0.9 million and $1.0 million as of June 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 six months ended June 30, 2019 as follows (amounts in thousands, except per share data):~~

For the Three Months Ended June 30,

For the Six Months Ended June 30,

2019

2019

As

As

Previously

As

Previously

As

Reported

Revision

Revised

Reported

Revision

Revised

Net service revenues

$
149,692

$
(777
)

$
148,915

$
288,946

$
(1,524
)

$
287,422

Gross profit

40,470

(777
)

39,693

78,044

(1,524
)

76,520

General and administrative expenses

30,222

(455
)

29,767

59,479

(455
)

59,024

Total operating expenses

32,757

(455
)

32,302

64,088

(455
)

63,633

Operating income

7,713

(322
)

7,391

13,956

(1,069
)

12,887

Income before income taxes

7,128

(322
)

6,806

12,968

(1,069
)

11,899

Income tax expense

1,610

(96
)

1,514

2,588

(277
)

2,311

Net income

$
5,518

$
(226
)

$
5,292

$
10,380

$
(792
)

$
9,588

Basic income per share

$
0.42

$
(0.01
)

$
0.41

$
0.80

$
(0.06
)

$
0.74

Diluted income per share

$
0.41

$
(0.02
)

$
0.39

$
0.77

$
(0.06
)

$
0.71

~~The cumulative effect of the adjustments on all prior periods decreased retained earnings as of January 1, 2019, April 1, 2019 and June 30, 2019 as reflected below (amounts in thousands):~~

~~Additionally, the Consolidated Statement of Cash Flows has been revised to reflect the correction for the six months ended June 30, 2019 as follows (amounts in thousands):~~

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 2026. 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 June 30, ~~2020~~2021 and ~~Audited Consolidated Balance Sheets as of~~ December 31, ~~2019~~2020 for our operating leases were as follows:

	June 30, 2020		December 31, 2019		June 30, 2021		December 31, 2020
	(Amounts in Thousands)				(Amounts in Thousands)
Operating lease assets, net	$	19,825	$	21,111	$	37,191	$	37,991

Short-term operating lease liabilities (in accrued expenses)		7,402		7,234		9,621		9,283
Long-term operating lease liabilities		12,672		14,301		34,339		35,516
Total operating lease liabilities	$	20,074	$	21,535	$	43,960	$	44,799

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

	For the Three Months Ended June 30, (Amounts in Thousands)				For the Six Months Ended June 30, (Amounts in Thousands)				For the Three Months Ended June 30, (Amounts in Thousands)						For the Six Months Ended June 30, (Amounts in Thousands)
	2020		2019		2020		2019		2021			2020			2021			2020
Operating lease costs	$	2,120	$	1,558	$	4,238	$	3,204	$	2,775		$	2,120		$	5,552		$	4,238
Short-term lease costs		161		96		428		160		194			161			375			428
Total lease cost	$	2,281	$	1,654	$	4,666	$	3,364
Less: sublease income										(152	)		(74	)		(303	)		(149	)
Total lease costs, net									$	2,817		$	2,207		$	5,624		$	4,517

~~Weighte~~dWeighted average remaining lease terms and discount rates were as follows:

	June 30, 2020			December 31, 2019			June 30, 2021			December 31, 2020
Operating leases:
Weighted average remaining lease term		3.20			3.42			6.72			6.97
Weighted average discount rate		4.98	%		5.14	%		4.03	%		4.18	%

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

	Operating Leases			Operating Leases
	(Amounts in Thousands)			(Amounts in Thousands)
Due in the 12-month period ended June 30,
2021	$	8,034
2022		6,462		$	10,967
2023		3,795			9,012
2024		2,140			7,109
2025		1,259			4,960
2026					3,289
Thereafter		104			15,095
Total future minimum rental commitments		21,794			50,432
Less: Imputed interest		(1,720	)		(6,472	)
Total lease liabilities	$	20,074		$	43,960

	For the Six Months Ended June 30, (Amounts in Thousands)				For the Six Months Ended June 30, (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	$	4,321	$	3,465	$	5,313	$	4,321

Right-of-use assets obtained in exchange for lease obligations:
Operating leases		2,441		3,743		3,919		2,441

~~Some of our financing leases include provisions to purchase the asset at the conclusion of the lease. Financing leases were not material as of June 30, 2020 and December 31, 2019.~~

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 ~~October 1, 2019, the Company~~December 4, 2020, we completed the acquisition of ~~the assets of~~Queen City Hospice, ~~Partners of America,~~ LLC (“and its affiliate Miracle City Hospice, ~~Partners”~~LLC (together “Queen City Hospice”). The purchase price was approximately ~~$135.6 million.~~$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 ~~Partners~~ was funded ~~through a portion of~~with 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”).Company’s revolving credit facility and available cash. With the purchase of Queen City Hospice, ~~Partners, we~~the Company expanded ~~our~~its hospice ~~operations through 21 locations~~services in ~~Idaho, Kansas, Missouri, Oregon, Texas and Virginia.~~the state of Ohio. The related integration costs were ~~$0.7~~$0.8 million and ~~$1.4~~$1.7 million for the three and six months ended June 30, ~~2020,~~2021, 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, 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	$	111,897		$	169,356
Identifiable intangible assets		18,090			20,015
Cash		5,473			15,444
Property and equipment		164			759
Accounts receivable		7,185			5,835
Operating lease assets, net		2,425			3,028
Other assets		702			94
Accounts payable		(1,764	)		(2,257	)
Accrued expenses		(4,339	)		(503	)
Accrued payroll		(1,110	)		(1,555	)
Deferred tax liability		(1,540	)
Long-term operating lease liabilities		(1,615	)		(2,765	)
Government stimulus advances					(12,694	)
Total purchase price	$	135,568		$	194,757

Identifiable intangible assets acquired ~~consist of $9.5~~included $11.0 million in trade names and $1.5 million of non-competition agreements with estimated useful lives of fifteen years ~~$2.5 million in non-competition agreements with estimated useful lives of three to~~and five years, respectively, and ~~$6.1~~$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, with the assistance of a valuation specialist.~~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 $13.1 million and $27.3 million of net service revenues and $2.9 million and $6.0 million of operating income for the three and six months ended June 30,On November 1, 2020, ~~respectively.~~

~~On August 1, 2019, the Company~~we completed the acquisition of ~~all of the assets of Alliance Home Health Care (“Alliance”).~~County Homemakers. The purchase price was approximately ~~$23.5 million.~~$15.8 million, including the amount of acquired excess cash held by County Homemakers at the closing of the acquisition (approximately $1.1 million). The purchase of ~~Alliance~~County Homemakers was funded ~~through~~with the Company’s ~~revolving credit facility and~~ available cash. With the purchase of ~~Alliance,~~County Homemakers, the Company expanded its personal care ~~home health and hospice operations~~services in the state of ~~New Mexico.~~Pennsylvania. The related integration costs were ~~$0.1 million and~~ $0.2 million for the ~~three and~~ six months ended June 30, ~~2020, respectively.~~ 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 ~~final~~ 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	$	16,972		$	13,457
Identifiable intangible assets		5,422			474
Cash		177			1,104
Property and equipment					52
Accounts receivable		1,693			1,396
Operating lease assets, net					485
Other assets					40
Accounts payable		(316	)		(122	)
Other liabilities		(490	)
Accrued expenses					(37	)
Accrued payroll					(543	)
Long-term operating lease liabilities					(485	)
Total purchase price	$	23,458		$	15,821

Identifiable intangible assets acquired ~~consist of $1.1~~included approximately $0.3 million in state licenses ~~subject to amortization,~~and $0.1 million in trade names with an estimated useful ~~life~~lives of ~~ten~~eight years and ~~$4.3 million of indefinite lived state licenses.~~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, with the assistance of a valuation specialist.~~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 Alliance acquisition accounted for $4.0 million and $8.7 million of net service revenues and $0.9 million and $1.9 million of operating income for the three and six months ended June 30, 2020, respectively.

On ~~June~~July 1, ~~2019, the Company~~2020, we completed the acquisition of ~~all of the assets of VIP~~A Plus Health Care, ~~Services~~Inc. (“~~VIP”~~A Plus”). The purchase price was approximately ~~$29.9 million.~~$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 ~~VIP~~A Plus was funded ~~through a combination of~~with the Company’s ~~delayed draw term loan portion of its credit facility and~~ available cash. With the purchase of ~~VIP,~~A Plus, the Company expanded its personal care ~~operations~~services in the state of ~~New York and into the New York City metropolitan area. The related acquisition costs were $0.2 million for the three and six months ended June 30, 2019.~~

Montana. The related integration costs were $0.1 million for the ~~three and~~ six months ended June 30, ~~2020 and 2019, respectively.~~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 final valuations, the fair values of the assets and liabilities acquired are as follows:

	Total (Amounts in Thousands)			Total (Amounts in Thousands)
Goodwill	$	11,936		$	9,732
Identifiable intangible assets		15,370			1,523
Cash		130			2,819
Accounts receivable		4,730			1,009
Operating lease assets, net		2,278			180
Other assets		30			26
Property and equipment		27
Accounts payable		(540	)		(34	)
Accrued expenses		(770	)		(353	)
Accrued payroll		(1,742	)		(275	)
Long-term operating lease liabilities		(1,531	)		(100	)
Total purchase price	$	29,918		$	14,527

Identifiable intangible assets acquired ~~consist of $10.7~~included $1.4 million in ~~state licenses, subject to amortization, and $4.7 million in customer relationships,~~trade names with an estimated useful ~~lives~~life of ~~six and eight years, respectively.~~fifteen years. 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, with the assistance of a valuation specialist.~~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 December 1, 2020, we completed the acquisition ~~accounted~~of SunLife Home Care (“SunLife”) for ~~$9.3~~approximately $1.7 million and ~~$4.4 million~~recorded goodwill of ~~net service revenues~~$1.6 million. With the purchase of SunLife, we expanded our personal care services in the state of Arizona. Goodwill generated from the acquisition is primarily attributable to expected synergies with existing Company operations and the goodwill acquired is deductible for the three months ended June 30, 2020 and 2019, respectively, and $20.8 million and $4.4 million for the six months ended June 30, 2020 and 2019, respectively, and $0.7 million of operating loss and $0.3 million of operating income for the three and six months ended June 30, 2020 and 2019, respectively.tax purposes.

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

	For the Three Months Ended June 30, (Amounts in Thousands)		For the Six Months Ended June 30, (Amounts in Thousands)
	2019		2019		For the Three Months Ended June 30, 2020 (Amounts in Thousands)		For the Six Months Ended June 30, 2020 (Amounts in Thousands)
Net service revenues	$	177,488	$	348,976	$	203,465	$	412,434
Operating income		10,038		18,407		11,344		23,941
Net income		7,378		13,999		8,354		18,661
Net income per common share
Basic income per share	$	0.57	$	1.08	$	0.54	$	1.20
Diluted income per share					$	0.52	$	1.17

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~~County Homemakers and ~~VIP~~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 $469.5 million and $469.1 million as of June 30, 2021 and December 31, 2020, respectively.

A summary of the goodwill activity for the six months ended June 30, ~~2020~~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.~~

For the three and six months ended June 30, 2020, adjustments to the previously recorded goodwill are primarily adjustments to accounts receivable based on the final valuations. During the three months ended June 30, 2020, the Company divested certain branches and their related net assets including $1.2 million of related goodwill. The Company recognized a $0.4 million loss on the disposition, reflected as a reduction in general and administrative expense for the three and six months ended June 30, 2020.

The carrying amount and accumulated amortization of each identifiable intangible asset category consisted of the following as of June 30, ~~2020:~~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			30,566			4,655			12,020			95,269			44,672			42,926			6,225			12,507			106,330
Accumulated amortization		(36,730	)		(14,109	)		(2,570	)		(2,083	)		(55,492	)		(35,391	)		(17,106	)		(3,336	)		(4,041	)		(59,874	)
Intangible assets subject to amortization, net		11,298			16,457			2,085			9,937			39,777			9,281			25,820			2,889			8,466			46,456
Total intangible assets at June 30, 2020	$	11,298		$	16,457		$	2,085		$	23,233		$	53,073
Total intangible assets at June 30, 2021																$	9,281		$	25,820		$	2,889		$	29,257		$	67,247

Amortization expense related to the identifiable intangible assets amounted to $2.1 million and $4.3 million for the three and six months ended June 30, 2021, respectively, and $1.8 million and $3.5 million for the three and six months ended June 30, 2020, ~~respectively, and $1.4 million and $2.7 million for the three and six months ended June 30, 2019,~~ respectively. The weighted average remaining useful lives of identifiable intangible assets as of June 30, ~~2020~~2021 is ~~8.6~~9.5 years.

	June 30, 2020		December 31, 2019		June 30, 2021		December 31, 2020
	(Amounts in Thousands)				(Amounts in Thousands)
Accrued payroll taxes ⁽¹⁾	$	8,345	$	1,843
Current portion of operating lease liabilities		7,402		7,234	$	9,621	$	9,283
Payor advances (1)						6,375		4,206
Accrued health insurance		5,007		4,140		5,010		5,607
Accrued professional fees		3,773		2,517		3,729		4,220
Accrued payroll taxes						1,812		4,543
Other		8,147		6,695		9,170		9,705
Total accrued expenses	$	32,674	$	22,429	$	35,717	$	37,564

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 $10.4 million and $11.3 million of these funds for the three and six months ended June 30, 2021, respectively, for healthcare related expenses, including retention payments, attributable to COVID-19 that were unreimbursed by other sources. In accordance with the current guidance issued by HHS, the Company expects to utilize additional funds through December 31, 2021, at which point we anticipate any unused funds will be returned. We are required to properly and fully document the use of such funds in reports to HHS, which must be submitted no later than March 31, 2022. 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 administered retention payments totaling $1.9 million to caregivers for the three and six months ended June 30, 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 its 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 the fourth quarter of 2021.

	June 30, 2020			December 31, 2019			June 30, 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		18,620			18,865			17,640			18,130
Financing leases		1			21
Less unamortized issuance costs		(2,083	)		(2,452	)		(1,411	)		(1,716	)
Total	$	59,996		$	59,892		$	194,687		$	194,872
Less current maturities		(948	)		(728	)		(973	)		(971	)
Long-term debt	$	59,048		$	59,164		$	193,714		$	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~~$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 June 30, ~~2020,~~2021, the Company was in compliance with all financial covenants under the Credit Agreement.

~~However,~~On September 12, 2019, the Company ~~was unable~~entered into a First Amendment (the “Amendment”) to timely file its Annual Report on Form 10-K, which would have included its audited financial statements for the year ended December 31, 2019. The Company is required to deliver annual audited financial statements under the affirmative covenants of its Credit Agreement. The ~~Company obtained consent from~~Amendment increased the ~~Required Lenders (as defined~~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 ~~Credit Agreement) to extend~~revolving loan commitments. The Amendment further provides that the ~~timeline~~proceeds of ~~the audited financials~~such $50.0 million incremental revolving loans may be used for, ~~the year ended December 31, 2019 to not later than October 31, 2020.~~among other things, general corporate purposes.

On July 30, 2021, the Company entered into a Second Amendment (the “Second Amendment”) to its Credit Agreement, see Note 12 for additional information.

During the six months ended June 30, 2021 and 2020, the Company had 0 draws under its credit facility.

As of June 30, ~~2020,~~2021, the Company had a total of ~~$43.5~~$178.5 million of revolving loans, with an interest rate of ~~1.92%~~2.08%, and ~~$18.6~~$17.6 million of term loans, with an interest rate of ~~1.93%~~2.09%, outstanding on its credit facility. After giving effect to the amount drawn on its credit facility, approximately ~~$9.6~~$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 ~~$223.5~~$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~~were 26.7% and 23.6% ~~and 22.2%~~ for the three months ended June 30, 2021 and 2020, respectively. The difference between our federal statutory and ~~2019, respectively. For~~effective income tax rates is principally due to the ~~three~~inclusion of state taxes and non-deductible compensation partially offset by the use of federal employment tax credits.

The effective income tax rates were 23.5% and 18.6% for the six months ended June 30, 2021 and 2020, ~~and 2019,~~respectively. For the six months ended June 30, 2021, 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~~credits and excess tax ~~rates are~~ ~~18.6% and 19.4% for the six months ended June 30, 2020 and 2019, respectively.~~benefit. For the six months ended June 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 effective tax rates are lower than the federal statutory rate primarily due to the inclusion of a 7.5% and 6.5% excess tax benefit for~~For the six months ended June 30, 2021 and 2020, the effective tax rates were inclusive of an excess tax benefit of 3.0% and ~~2019,~~7.5%, respectively.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, the Company is subject to legal and/or administrative proceedings incidental to its 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 continues to ~~spread throughout~~impact the United States and other parts of the world. ~~It is impossible to predict the effect and ultimate impact of the COVID-19 pandemic as the situation is rapidly evolving.~~

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. In

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. For example, the laws temporarily lift 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 extend sequestration through 2030). This Medicare sequester relief resulted in an increase of $0.1 million and $0.2 million to home health net service revenues, and $0.7 million and $1.4 million, to hospice net service revenues for the three and six months ended June 30, 2021, respectively. For the three months ended June 30, 2020, the Medicare sequester relief resulted in an increase of $0.3 million and $0.1 million, respectively, to hospice and home health net service revenues. 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 up to 4% in fiscal year 2022, in addition to the existing sequestration requirements of the Budget Control Act of 2011. We cannot currently determine if, or to what extent, our business, results of operations, financial condition or liquidity will ultimately be impacted by mandated sequestration triggers under the PAYGO Act, or if the mandated sequestration will occur.

~~In April 2020,~~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 as the situation continues to evolve. See Note 6 for additional information regarding government stimulus advances the Company has received.

From time to time, the Company is subject to legal and/or administrative proceedings incidental to its business.

On June 2, 2021, the Company received ~~grants~~a $6.5 million Request for Repayment from Palmetto, GBA, LLC (“Palmetto”), a Medicare administrative contractor, regarding Ambercare Hospice Inc. (“Ambercare”), our subsidiary that provides hospice services in ~~an aggregate principal amount~~New Mexico. The Centers for Medicare and Medicaid Services Office of ~~$6.9 million,~~Inspector General’s Office of Audit Services (“OAS”) had in 2018 initiated a clinical review of certain hospice claims billed during a timeframe from January 1, 2016 to December 31, 2017. The OAS review concluded that certain payments to Ambercare for ~~which it did not apply,~~hospice services during the review period were made in error. The Company acquired Ambercare in May 2018 and has a contractual right to full indemnification from any potential losses from the ~~Relief Fund as part~~OAS review through the terms of the ~~automatic general distributions by HHS.~~Ambercare purchase agreement. The Company ~~returned these funds in June 2020. The CARES Act includes provisions relating to refundable payroll tax credits, deferral~~disputes the results of the ~~employer portion~~OAS review and related asserted billing errors and is in the process of ~~certain payroll taxes, net operating loss carrybacks, and other areas. The payroll tax deferral requires~~filing administrative appeals. At this stage, the Company cannot predict the ultimate outcome of the appeal process.

It is the opinion of management that the ~~deferred payroll taxes be paid over two years, with half~~outcome of ~~the amount required to be paid by December 31, 2021 and the other half by December 31, 2022. The Company deferred $7.1 million of payroll taxes, which are included in accrued expenses in~~pending legal and/or administrative proceedings will not have a material effect on the Company’s Unaudited Condensed Consolidated Balance Sheets ~~at June 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 six months ended June 30, ~~2020~~2021 and ~~2019~~2020, along with the items necessary to reconcile the segment information to the totals reported in the accompanying ~~consolidated financial statements.~~Unaudited 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 June 30, 2020								For the Three Months Ended June 30, 2021
	(Amounts in Thousands)								(Amounts in Thousands)
	Personal Care		Hospice		Home Health		Total		Personal Care		Hospice		Home Health		Total
Net service revenues	$	156,268	$	24,525	$	3,783	$	184,576	$	176,267	$	36,909	$	4,717	$	217,893
Cost of services revenues		115,822		10,924		2,833		129,579		127,258		18,912		2,913		149,083
Gross profit		40,446		13,601		950		54,997		49,009		17,997		1,804		68,810
General and administrative expenses		14,603		6,297		883		21,783		16,358		8,673		968		25,999
Segment operating income	$	25,843	$	7,304	$	67	$	33,214	$	32,651	$	9,324	$	836	$	42,811

	For the Three Months Ended June 30, 2019								For the Three Months Ended June 30, 2020
	(Amounts in Thousands)								(Amounts in Thousands)
	Personal Care		Hospice		Home Health		Total		Personal Care		Hospice		Home Health		Total
Net service revenues	$	137,477	$	8,437	$	3,001	$	148,915	$	156,268	$	24,525	$	3,783	$	184,576
Cost of services revenues		102,829		4,322		2,071		109,222		115,822		10,924		2,833		129,579
Gross profit		34,648		4,115		930		39,693		40,446		13,601		950		54,997
General and administrative expenses		12,777		1,548		656		14,981		14,603		6,297		883		21,783
Segment operating income	$	21,871	$	2,567	$	274	$	24,712	$	25,843	$	7,304	$	67	$	33,214

For the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020, the Company’s revenue by payor type was as follows:

	Hospice																				Personal Care
	For the Three Months Ended June 30,										For the Six Months Ended June 30,										For the Three Months Ended June 30,										For the Six Months Ended June 30,
	2020					2019					2020					2019					2021					2020					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			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues
Medicare	$	22,753		92.8	%	$	7,808		92.6	%	$	45,971		92.4	%	$	15,199		92.9	%
State, local and other governmental programs																					$	88,382		50.2	%	$	78,054		50.0	%	$	169,231		49.6	%	$	157,398		49.7	%
Managed care organizations		1,198		4.9			474		5.6			2,578		5.2			835		5.1			78,865		44.7			69,282		44.3			154,321		45.2			141,393		44.6
Private pay																						5,046		2.9			4,986		3.2			9,949		2.9			10,257		3.2
Commercial insurance																						2,676		1.5			2,394		1.5			5,022		1.5			4,970		1.6
Other		574		2.3			155		1.8			1,188		2.4			320		2.0			1,298		0.7			1,552		1.0			2,612		0.8			2,915		0.9
Total hospice segment net service revenues	$	24,525		100.0	%	$	8,437		100.0	%	$	49,737		100.0	%	$	16,354		100.0	%
Total personal care segment net service revenues																					$	176,267		100.0	%	$	156,268		100.0	%	$	341,135		100.0	%	$	316,933		100.0	%

	Home Health																				Hospice
	For the Three Months Ended June 30,										For the Six Months Ended June 30,										For the Three Months Ended June 30,										For the Six Months Ended June 30,
	2020					2019					2020					2019					2021					2020					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			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues
Medicare	$	3,010		79.6	%	$	2,436		81.2	%	$	6,480		79.8	%	$	4,635		81.4	%	$	34,452		93.3	%	$	22,753		92.8	%	$	68,437		93.8	%	$	45,971		92.4	%
Managed care organizations		688		18.2			477		15.9			1,495		18.4			891		15.6			1,395		3.8			1,198		4.9			2,882		3.9			2,578		5.2
Other		85		2.2			88		2.9			147		1.8			171		3.0			1,062		2.9			574		2.3			1,684		2.3			1,188		2.4
Total home health segment net service revenues	$	3,783		100.0	%	$	3,001		100.0	%	$	8,122		100.0	%	$	5,697		100.0	%
Total hospice segment net service revenues																					$	36,909		100.0	%	$	24,525		100.0	%	$	73,003		100.0	%	$	49,737		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 six months ended June 30, ~~2020~~2021 and ~~2019~~2020 were as follows:

	Personal Care																				Personal Care
	For the Three Months Ended June 30,										For the Six Months Ended June 30,										For the Three Months Ended June 30,										For the Six Months Ended June 30,
	2020					2019					2020					2019					2021					2020					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			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues
Illinois	$	69,052		44.2	%	$	59,114		43.0	%	$	140,598		44.4	%	$	115,963		43.7	%	$	84,788		48.0	%	$	69,052		44.2	%	$	158,172		46.3	%	$	140,598		44.4	%
New York		27,244		17.4			23,020		16.7			59,082		18.6			40,833		15.4			25,535		14.5			27,244		17.4			53,110		15.6			59,082		18.6
New Mexico		21,831		14.0			18,135		13.2			42,525		13.4			35,343		13.3			25,484		14.5			21,831		14.0			49,077		14.4			42,525		13.4
All other states		38,141		24.4			37,208		27.1			74,728		23.6			73,232		27.6			40,460		23.0			38,141		24.4			80,776		23.7			74,728		23.6
Total personal care segment net service revenues	$	156,268		100.0	%	$	137,477		100.0	%	$	316,933		100.0	%	$	265,371		100.0	%	$	176,267		100.0	%	$	156,268		100.0	%	$	341,135		100.0	%	$	316,933		100.0	%

	Home Health																				Hospice
	For the Three Months Ended June 30,										For the Six Months Ended June 30,										For the Three Months Ended June 30,										For the Six Months Ended June 30,
	2020					2019					2020					2019					2021					2020					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			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues
Ohio																					$	14,694		39.8	%	$	—		—	%	$	28,808		39.4	%	$	—		—	%
New Mexico	$	3,783		100.0	%	$	3,001		100.0	%	$	8,122		100.0	%	$	5,697		100.0	%		8,717		23.6			11,443		46.7			17,948		24.6			22,452		45.1
Total home health segment net service revenues	$	3,783		100.0	%	$	3,001		100.0	%	$	8,122		100.0	%	$	5,697		100.0	%
All other states																						13,498		36.6			13,082		53.3			26,247		36.0			27,285		54.9
Total hospice segment net service revenues																					$	36,909		100.0	%	$	24,525		100.0	%	$	73,003		100.0	%	$	49,737		100.0	%

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

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 ~~37.4%~~38.9%, and ~~39.6%~~37.4% of our net service revenues for the three months ended June 30, ~~2020,~~2021, and ~~2019,~~2020, respectively, and accounted for ~~37.5%~~37.4% and ~~40.3%~~37.5% of our net service revenues for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. The Illinois Department on Aging, the largest payor program for the Company’s Illinois personal care operations, accounted for ~~23.2%~~22.6% and ~~27.6%~~23.2% of the Company’s net service revenues for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and accounted for ~~23.2%~~21.5% and ~~28.3%~~23.2% of the Company’s net service revenues for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

The related receivables due from the Illinois Department on Aging represented ~~23.0%~~16.7% and ~~25.1%~~15.9% of the Company’s net accounts receivable at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively.

On July 30, 2021, the Company entered into the Second Amendment to its Credit Agreement. The Second Amendment, among other things, reallocated and refinanced the Company’s outstanding initial term loans as revolving loans (such that the Company has 0 outstanding initial term loans and no further initial term loans may be borrowed) and increased the Company’s revolving credit facility to an aggregate amount of $600,000,000. Moreover, the Second Amendment increased the Company’s incremental loan facility to an aggregate amount $125,000,000, which incremental loan facility may be for term loans or an increase to the revolving loan commitments. The maturity of the revolving credit facility was also extended from May 8, 2023 to July 30, 2026.

On August 1, ~~2020,~~2021, we completed the acquisition of ~~A Plus Health Care, Inc.~~Armada Skilled Homecare of New Mexico LLC, Armada Hospice of New Mexico LLC and Armada Hospice of Santa Fe LLC (“~~A Plus”~~Armada”) for approximately ~~$12.2~~$29.1 million, with funding provided by ~~cash on hand.~~the revolving credit facility. With the purchase of ~~A Plus, we~~Armada, the Company expanded our ~~personal care~~home health and hospice services in the state of ~~Montana.~~New Mexico. 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~~future 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; its 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; 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, these forward-looking statements are subject to 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 may result in these differences.~~March 1, 2021. 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 six months ended June 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 ~~38.6%~~37.2% and ~~36.8%~~38.6% of our ~~revenue~~net service revenues during the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~38.8%~~37.5% and ~~35.9%~~38.8% of our ~~revenue~~net service revenues during the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

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

	For the Three Months Ended June 30,				For the Six Months Ended June 30,				For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2020		2019		2020		2019		2021		2020		2021		2020
	(Amounts in Thousands)				(Amounts in Thousands)				(Amounts in Thousands)				(Amounts in Thousands)
Net service revenues	$	184,576	$	148,915	$	374,792	$	287,422	$	217,893	$	184,576	$	423,195	$	374,792
Net income	$	6,907	$	5,292	$	15,565	$	9,588	$	11,597	$	6,907	$	20,491	$	15,565

As of June 30, ~~2020,~~2021, we provided our services in 2522 states through ~~190~~207 offices. For the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, we served approximately ~~55,000~~56,000 and ~~50,000~~55,000 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~~ continues to ~~spread~~be widespread throughout the United States and other parts of the world. ~~It is impossible to predict the effect~~Governments and ultimate impact of the COVID-19 pandemic as the situation is rapidly evolving. The spread of COVID-19 has caused many states and cities to declare states of emergency or disaster proclamations, including the state of Texas and the city of Frisco, where we are headquartered. State and local governments, together with public health officials ~~have recommended~~continue to recommend and ~~mandated~~mandate certain precautions to mitigate the spread of the ~~virus, including~~virus. The number of cases of COVID-19 has decreased in the ~~closure~~United States in recent months as vaccines have become more widely available, and a significant number of ~~public facilities~~restrictions related to the COVID-19 pandemic in the United States have been eliminated or relaxed as the result of such decrease. In connection with the decrease in the number of COVID-19 cases and ~~parks, schools, restaurants, many businesses and other locations~~the change of ~~public assembly. As a result, COVID-19 is significantly affecting overall~~restrictions in the United States, economic conditions in the United ~~States. Although many~~States have significantly improved during 2021. However in July 2021, due in part to the emergence of new variants of the ~~restrictions have eased across~~novel coronavirus, as well as low vaccination rates and an increase in the ~~country, some areas are re-imposing closures~~number of COVID-19 cases in certain parts of the United States and other ~~restrictions~~parts of the world, certain governments and public health officials in the United States and globally have begun to recommend the reinstitution of certain mitigation strategies, such as ~~a result of increasing rates of COVID-19 infection. There are no reliable estimates of how long the pandemic will last, how many people are likely to be affected by~~masking. As such, it ~~or the duration or types of restrictions that will be imposed or re-imposed. For that reason, we are unable~~is difficult to predict the ~~long-term~~future impact of the pandemic on economic conditions in the United States and our business at this time.

For the three and six months ended June 30, ~~2020, COVID-19 related costs~~2021, COVID-19-related expenses in our personal care segment were approximately ~~$2.0~~$11.4 million and ~~$2.3~~13.3 million, respectively, which were ~~mostly~~ offset by $10.4 million and $11.3 million, respectively, related to the utilization of a portion of the funds received from the Provider Relief Fund in November 2020 and included in cost of service revenues on the Condensed Consolidated Statements of Income. As of June 30, 2021, the Company deferred the recognition of the remaining Provider Relief Fund of approximately $1.0 million, which will be recognized as we incur specific expenses related to the pandemic, or we anticipate will be returned, to the extent COVID-19-related expenses are not incurred, by December 31, 2021. Additionally, we recognized revenue of $3.1 million and $4.8 million attributable to temporary rate increases from certain payors in our personal care segment ~~of $1.7 million during~~for the three and six months ended June 30, ~~2020.~~ 2021, respectively.

For the three and six months ended June 30, 2021, COVID-19-related expenses in our hospice segment were approximately $1.9 million, which were offset by $1.9 million, related to the utilization of a portion of the funds received from the Queen City Hospice Provider Relief Fund and included in cost of service revenues on the Condensed Consolidated Statements of Income.

As of June 30, ~~2020, $1.6~~2021, the Company deferred the recognition of $6.4 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. Two of our primary markets, 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 expenses related to acquiring additional PPE, or will be returned to the ~~elderly, chronically ill or disabled. Most of these consumers~~extent 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. Because our top priority is to protect our consumers and their families, and our caregivers and their families, 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 also 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~~

Due to ~~the Centers for Disease Control~~lower COVID-19 infection rates 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~~availability of ~~COVID-19,~~vaccinations, various restriction that previously limited non-essential employment opportunities in most states that we operate in have been lifted. Consequently, the ~~primary limitation~~competition for new caregivers has increased. The continuation of enhanced unemployment benefits also continues to impact our ability to attract new caregivers. For example, the Continued Assistance for Unemployed Workers Act, signed into law on December 27, 2020, provides up to 50 weeks of unemployment benefits plus an additional $300 per week in supplemental benefits. As these enhanced unemployment benefits begin to phase-out we continue to believe that the near term hiring challenges for new caregivers will alleviate to a certain degree. However, in the event that we return to a period of low unemployment in the United States, it may hinder our ~~growth had been the difficulty~~ability to attract and retain sufficient ~~caregivers in an environment of very low unemployment rates. With the widespread adverse impacts of~~caregivers.

Federal agencies continue to issue regulations and guidance related to the COVID-19 pandemic, onand the hospitality and other labor-intensive industries, however, we have had, and believe we will continue to have, opportunities to recruit new caregivers. Further, CMS and many states (including New York and Illinois) have granted temporary blanket waivers of certain onboarding requirements for new caregivers, significantly shortening the onboarding process.

~~For the three and six months ended June 30, 2020, the COVID-19 pandemic had limited impact on our reimbursements. Although we experienced some consumers suspending their personal care services due to~~public 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 could continue to be depressed in fiscal 2021 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 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, tentatively scheduled for October 2020, December 2020 and March 2021. It 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 June 30, 2020, we had $158.5 million of cash on hand and $223.5 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 June 30, 2020, our total net leverage ratio was zero. Further, we were unable to timely file our Annual Report on Form 10-K, which would have included our audited financial statements for the year ended December 31, 2019. The Company is required to deliver annual audited financial statements under the affirmative covenants of its Credit Agreement. The Company obtained consent from the Required Lenders (as defined in the Credit Agreement) to extend the timeline of the audited financials ~~for the year ended December 31, 2019~~ ~~to not later than October 31, 2020.~~ ~~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~~situation 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. We will continue to assess the impact and consequences 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 Relief Fund. This ~~funding is intended to support healthcare providers by reimbursing them for healthcare-related expenses or lost revenues attributable to COVID-19.~~ ~~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 suchCOVID-19 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, 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 $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. With the purchase of County Homemakers, we expanded our personal care services in the state of Pennsylvania.

~~While~~On December 4, 2020, we ~~continue~~completed the acquisition of 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.

On August 1, 2021, we completed the acquisition of Armada Skilled Homecare of New Mexico LLC, Armada Hospice of New Mexico LLC and Armada Hospice of Santa Fe LLC (“Armada”) for approximately $29.1 million, with funding provided by our revolving credit facility. With the purchase of Armada, we increased our clinical depth and operational strength in New Mexico and enhanced our ability to ~~identify and pursue acquisition opportunities, we are doing so with additional caution and diligence due to COVID-19 considerations.~~provide all three levels of home care in the state.

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 six months ended June 30, ~~2020~~2021 and ~~2019~~2020, our revenue by payor and significant states by segment were as follows:

	Personal Care																				Personal Care
	For the Three Months Ended June 30,										For the Six Months Ended June 30,										For the Three Months Ended June 30,										For the Six Months Ended June 30,
	2020					2019					2020					2019					2021					2020					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			Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues
State, local and other governmental programs	$	78,054		50.0	%	$	74,649		54.2	%	$	157,398		49.7	%	$	146,290		55.1	%
State, local and other government programs																					$	88,382		50.2	%	$	78,054		50.0	%	$	169,231		49.6	%	$	157,398		49.7	%
Managed care organizations		69,282		44.3			53,823		39.2			141,393		44.6			101,550		38.3			78,865		44.7			69,282		44.3			154,321		45.2			141,393		44.6
Private pay		4,986		3.2			5,202		3.8			10,257		3.2			10,192		3.8			5,046		2.9			4,986		3.2			9,949		2.9			10,257		3.2
Commercial insurance		2,394		1.5			2,029		1.5			4,970		1.6			3,885		1.5			2,676		1.5			2,394		1.5			5,022		1.5			4,970		1.6
Other		1,552		1.0			1,774		1.3			2,915		0.9			3,454		1.3	%		1,298		0.7			1,552		1.0			2,612		0.8			2,915		0.9
Total personal care segment net service revenues	$	156,268		100.0	%	$	137,477		100.0	%	$	316,933		100.0	%	$	265,371		100.0		$	176,267		100.0	%	$	156,268		100.0	%	$	341,135		100.0	%	$	316,933		100.0	%
Illinois																					$	84,788		48.0	%	$	69,052		44.2	%	$	158,172		46.3	%	$	140,598		44.4	%
New York																						25,535		14.5			27,244		17.4			53,110		15.6			59,082		18.6
New Mexico																						25,484		14.5			21,831		14.0			49,077		14.4			42,525		13.4
All other states																						40,460		23.0			38,141		24.4			80,776		23.7			74,728		23.6
Total personal care segment net service revenues																					$	176,267		100.0	%	$	156,268		100.0	%	$	341,135		100.0	%	$	316,933		100.0	%

Hospice

For the Three Months Ended June 30,

For the Six Months Ended June 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

$
22,753

92.8

%

$
7,808

92.6

%

$
45,971

92.4

%

$
15,199

92.9

%
Managed care organizations

1,198

4.9

474

5.6

2,578

5.2

835

5.1

Other

574

2.3

155

1.8

1,188

2.4

320

2.0

Total hospice segment net
service revenues

$
24,525

100.0

%

$
8,437

100.0

%

$
49,737

100.0

%

$
16,354

100.0

%
New Mexico

$
11,443

46.7

%

$
8,437

100.0

%

$
22,452

45.1

%

$
16,354

100.0

%
All other states

13,082

53.3

—

—

27,285

54.9

—

—

Total hospice segment net
service revenues

$
24,525

100.0

%

$
8,437

100.0

%

$
49,737

100.0

%

$
16,354

100.0

%

Personal Care

For the Three Months Ended June 30,

For the Six Months Ended June 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

$
69,052

44.2

%

$
59,114

43.0

%

$
140,598

44.4

%

$
115,963

43.7

%
New York

27,244

17.4

23,020

16.7

59,082

18.6

40,833

15.4

New Mexico

21,831

14.0

18,135

13.2

42,525

13.4

35,343

13.3

All other states

38,141

24.4

37,208

27.1

74,728

23.6

73,232

27.6

Total personal care segment
net service revenues

$
156,268

100.0

%

$
137,477

100.0

%

$
316,933

100.0

%

$
265,371

100.0

%

	Hospice
	For the Three Months Ended June 30,										For the Six Months Ended June 30,
	2021					2020					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
Medicare	$	34,452		93.3	%	$	22,753		92.8	%	$	68,437		93.8	%	$	45,971		92.4	%
Managed care organizations		1,395		3.8			1,198		4.9			2,882		3.9			2,578		5.2
Other		1,062		2.9			574		2.3			1,684		2.3			1,188		2.4
Total hospice segment net service revenues	$	36,909		100.0	%	$	24,525		100.0	%	$	73,003		100.0	%	$	49,737		100.0	%
Ohio	$	14,694		39.8	%	$	—		—	%	$	28,808		39.4	%	$	—		—	%
New Mexico		8,717		23.6			11,443		46.7			17,948		24.6			22,452		45.1
All other states		13,498		36.6			13,082		53.3			26,247		36.0			27,285		54.9
Total hospice segment net service revenues	$	36,909		100.0	%	$	24,525		100.0	%	$	73,003		100.0	%	$	49,737		100.0	%

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

We derive a significant amount of our net service revenues in Illinois, which represented ~~37.4%~~38.9% and ~~39.6%~~37.4% of our net service revenues for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and accounted for ~~37.5%~~37.4% and ~~40.3%~~37.5% of our net service revenues for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, 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 ~~23.2%~~22.6% and ~~27.6%~~23.2% of our net service revenues for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and accounted for ~~23.2%~~21.5% and ~~28.3%~~23.2% of the Company’s net service revenues for the six months ended June 30, 2021 and 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. 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.

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. 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.

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 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 Company and its trade association will be looking for additional funding in~~

Effective January 1, 2021, the ~~State~~state of Illinois fiscal year 2021 budget increased in-home care rates through the Community Care Program by 7.1%, to ~~offset~~$23.40 from $21.84. However, the ~~cost~~rate increase was delayed and did not take effect until April 1, 2021, as a result of ~~these additional minimum wage increases.~~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 June 29, 2021, the Governor announced the authorization of bonus payments to providers in an amount equivalent to the rate increase for services delivered from January 1, 2021 to March 31, 2021 for state reimbursed hours of care. The bonus payment of $3.0 million was recognized as net service revenues during the three and six months ended June 30, 2021, and is expected to be received in September 2021. On June 17, 2021, the Governor of Illinois signed the fiscal year 2022 budget, which funds an increase of in-home care rates to $24.96 effective January 1, 2022.

Our business will benefit from the rate increases noted above as planned for 2022, but there is no assurance that additional offsetting rate increases will be adopted in Illinois for fiscal years beyond fiscal year ~~2020,~~2022, 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. 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. Beginning in March 2020, CMS paused certain claims processing for the Review Choice Demonstration due to the COVID-19 pandemic. However, the agency expects to discontinue exercising enforcement discretion beginning in August 2020, regardless of the

~~status~~Impact of ~~the public health emergency. Following the resumption of the demonstration, MACs will conduct post-payment review on claims that were submitted~~Changes in Medicare and paid during the pause. Further, CMS plans to expand the Review Choice Demonstration to certain other states, including Ohio and Florida, in August 2020. We are currently unable to predict what impact, if any, this program may have on our result of operations or financial position.Medicaid Reimbursement

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, ~~2019,~~2020, CMS increased hospice payment rates by ~~2.6%~~2.4%. This reflected a ~~3.0%~~2.4% market basket increase reduced by the multifactor productivity adjustment of ~~0.4~~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 ~~$29,964.78~~$30,683.93 for federal fiscal year ~~2020. This amount reflects the hospice payment update of 2.6%.~~2021. 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.~~year ended December 31, 2021. The ~~current federal public health emergency declaration expires October 23, 2020. 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.

The New York fiscal year 2022 state budget 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 the CARES Act, which was expanded by the PPPHCE Act. Together, the CARES Act 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 payments are intended to compensate healthcare providers for lost revenues and health care related expenses incurred inthese additional awards. The Company has submitted a response to the ~~COVID-19 pandemic and are not required~~survey issued by Department of Health to determine the additional contract awards. Department of Health has published an anticipated contract start date for all awards to be ~~repaid, provided that recipients attest~~on or after November 1, 2021. In the meantime, we continue to consider other arrangements 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 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 may request an advance or accelerated payment of up to 100%pursue our protest of the ~~Medicare payment amount for~~award, which was filed and accepted on March 19, 2021. The Company has not yet received a three-month period (not including Medicare Advantage payments). The Medicare Accelerated and Advanced Payment Program payments are a loan that providers must pay back. CMS must recoup the advance payments beginning 120 days after receipt by the provider by withholding future Medicare payments for claims. However, in April 2020, CMS suspended the Advance Payment Program, which is applicable to Part B providers, and announced it would reevaluate pending and new applications from Part A providers for the Accelerated Payment Program in light of the direct payments made available through the Relief Fund. 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 $0.3 million and $0.1 million, respectively, to hospice and home health net service revenues for the three months ended June 30, 2020.~~

~~Due~~response 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.formal protest.

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 six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, the federal statutory rate was 21.0%. The effective income tax rate was ~~23.6%~~26.7% and ~~22.2%~~23.6% for the three months ended June 30, 2021 and 2020, respectively. The effective income tax rates are 23.5% and ~~2019,~~18.6% for the six months ended June 30, 2021 and 2020, respectively. ~~For~~The difference between our federal statutory and effective income tax rates is due to the inclusion of state taxes, non-deductible compensation, excess tax benefit, and the use of federal employment tax credits.

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

	For the Three Months Ended June 30,
	2021						2020							Change
				% Of						% Of
				Net Service						Net Service
	Amount			Revenues			Amount			Revenues				Amount		%
	(Amounts in Thousands, Except Percentages)
Net service revenues	$	217,893			100.0	%	$	184,576			100.0		%	$	33,317		18.1		%
Cost of service revenues		149,083			68.4			129,579			70.2				19,504		15.1
Gross profit		68,810			31.6			54,997			29.8				13,813		25.1
General and administrative expenses		48,175			22.1			42,450			23.0				5,725		13.5
Depreciation and amortization		3,587			1.6			2,940			1.6				647		22.0
Total operating expenses		51,762			23.8			45,390			24.6				6,372		14.0
Operating income		17,048			7.8			9,607			5.2				7,441		77.5
Interest income		(31	)		—			(155	)		(0.1	)			124		(80.0	)
Interest expense		1,262			0.6			721			0.4				541		75.0
Total interest expense, net		1,231			0.6			566			0.3				665		117.5
Income before income taxes		15,817			7.3			9,041			4.9				6,776		74.9
Income tax expense		4,220			1.9			2,134			1.2				2,086		97.8
Net income	$	11,597			5.3	%	$	6,907			3.7		%	$	4,690		67.9		%

Net service revenues increased by 18.1% to $217.9 million for the three months ended June 30, 2021 compared to $184.6 million for the three months ended June 30, 2020. The increase was due to a 3.7% increase in billable hours and a 6.9% increase in revenues per billable hour for the three months ended June 30, 2021 in our personal care segment. In addition, revenue increased by $12.4 million from our hospice segment during the three months ended June 30, 2021, compared to the same period in 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 acquisition of Queen City Hospice on December 4, 2020.

Gross profit, expressed as a percentage of net service revenues, increased to 31.6% for the three months ended June 30, 2021, compared to 29.8% for the same period in 2020. The increase was mainly attributed to the full-quarter effect in 2021 of the acquisition of a relatively higher margin hospice segment business in 2020.

General and administrative expenses increased to $48.2 million for the three months ended June 30, 2021, as compared to $42.5 million for the three months ended June 30, 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 $3.3 million and an increase in rent expense of $0.6 million. In addition, stock-based compensation increased by $1.4 million for the three months ended June 30, 2021 compared to the three months ended June 30, 2020. General and administrative expenses, expressed as a percentage of net service revenues decreased to 22.1% for the three months ended June 30, 2021, from 23.0% for the three months ended June 30, 2020.

Depreciation and amortization expense increased to $3.6 million from $2.9 million for the three months ended June 30, 2021 and 2020, respectively, primarily due to the intangible assets and ~~2019,~~property and equipment acquired in the fiscal year 2020 acquisitions.

Interest expense increased to $1.3 million for the three months ended June 30, 2021 from $0.7 million for the three months ended June 30, 2020. The increase in interest expense was primarily due to higher outstanding borrowings under our credit facility for the three months ended June 30, 2021 compared to the three months ended June 30, 2020.

All of our income is from domestic sources. We incur state and local taxes in states in which we operate. The effective income tax rate was 26.7% and 23.6% for the three months ended June 30, 2021 and 2020, respectively. The difference between the federal statutory and our effective income tax rates was principally due to the inclusion of state taxes and non-deductible compensation partially offset by the use of federal employment tax credits.

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

	For the Six Months Ended June 30,
	2021						2020							Change
				% Of						% Of
				Net Service						Net Service
	Amount			Revenues			Amount			Revenues				Amount		%
	(Amounts in Thousands, Except Percentages)
Net service revenues	$	423,195			100.0	%	$	374,792			100.0		%	$	48,403		12.9		%
Cost of service revenues		293,188			69.3			263,960			70.4				29,228		11.1
Gross profit		130,007			30.7			110,832			29.6				19,175		17.3
General and administrative expenses		93,601			22.1			84,737			22.6				8,864		10.5
Depreciation and amortization		7,188			1.7			5,827			1.6				1,361		23.4
Total operating expenses		100,789			23.8			90,564			24.2				10,225		11.3
Operating income		29,218			6.9			20,268			5.4				8,950		44.2
Interest income		(53	)		—			(489	)		(0.1	)			436		(89.2	)
Interest expense		2,478			0.6			1,629			0.4				849		52.1
Total interest expense, net		2,425			0.6			1,140			0.3				1,285		112.7
Income before income taxes		26,793			6.3			19,128			5.1				7,665		40.1
Income tax expense		6,302			1.5			3,563			1.0				2,739		76.9
Net income	$	20,491			4.8	%	$	15,565			4.1		%	$	4,926		31.6		%

Net service revenues increased by 12.9% to $423.2 million for the six months ended June 30, 2021 compared to $374.8 million for the six months ended June 30, 2020. The increase was due to a 0.9% increase in billable hours and a 6.7% increase in revenues per billable hour for the three months ended June 30, 2021 in our personal care segment. In addition, revenue increased by $23.3 million from our hospice segment during the six months ended June 30, 2021, compared to the same period in 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 acquisition of Queen City Hospice on December 4, 2020.

Gross profit, expressed as a percentage of net service revenues, increased to 30.7% for the six months ended June 30, 2021, compared to 29.6% for the same period in 2020. The increase was mainly attributed to the acquisition of a relatively higher margin hospice business in 2020.

General and administrative expenses increased to $93.6 million for the six months ended June 30, 2021 as compared to $84.7 million for the six months ended June 30, 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 $5.4 million and an increase in rent expense of $1.1 million. In addition, stock-based compensation increased by $2.2 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. General and administrative expenses, expressed as a percentage of net service revenues decreased to 22.1% for the six months ended June 30, 2021, from 22.6% for the six months ended June 30, 2020.

Depreciation and amortization expense increased to $7.2 million from $5.8 million for the six months ended June 30, 2021 and 2020, respectively, primarily due to the intangible assets and property and equipment acquired in the fiscal year 2020 acquisitions.

Interest expense increased to $2.5 million from $1.6 million for the six months ended June 30, 2021, as compared to the six months ended June 30, 2020. The increase in interest expense was primarily due to higher outstanding borrowings under our credit facility for the six months ended June 30, 2021, compared to the six months ended June 30, 2020.

All of our income is from domestic sources. We incur state and local taxes in states in which we operate. The effective income tax rate was 23.5% and 18.6% for the six months ended June 30, 2021 and 2020, respectively. For the six months ended June 30, 2021, 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~~credits and excess tax ~~rates are 18.6% and 19.4% for the six months ended June 30, 2020 and 2019, respectively.~~benefit. For the six months ended June 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 effective tax rates were lower than the federal statutory rate primarily due to the inclusion of a 7.5% and 6.5% excess tax benefit for~~For the six months ended June 30, 2021 and 2020, the effective tax rates were inclusive of an excess tax benefit of 3.0% and ~~2019,~~7.5%, respectively. The excess tax benefit is a discrete item, ~~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 June 30, 2020 Compared to Three Months Ended June 30, 2019~~

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

For the Three Months Ended June 30,

2020

2019

Change

% Of

% Of

Net Service

Net Service

Amount

Revenues

Amount

Revenues

Amount

%

(Amounts in Thousands, Except Percentages)

Net service revenues

$
184,576

100.0

%

$
148,915

100.0

%

$
35,661

23.9

%
Cost of service revenues

129,579

70.2

109,222

73.3

20,357

18.6

Gross profit

54,997

29.8

39,693

26.7

15,304

38.6

General and administrative expenses

42,450

23.0

29,767

20.0

12,683

42.6

Depreciation and amortization

2,940

1.6

2,535

1.7

405

16.0

Total operating expenses

45,390

24.6

32,302

21.7

13,088

40.5

Operating income

9,607

5.2

7,391

5.0

2,216

30.0

Interest income

(155
)

(0.1
)

(95
)

(0.1
)

(60
)

63.2

Interest expense

721

0.4

680

0.5

41

6.0

Total interest expense, net

566

0.3

585

0.4

(19
)

(3.2
)

Income before income taxes

9,041

4.9

6,806

4.6

2,235

32.8

Income tax expense

2,134

1.2

1,514

1.0

620

41.0

Net income

$
6,907

3.7

%

$
5,292

3.6

%

$
1,615

30.5

%

Net service revenues increased by 23.9% to $184.6 million for the three months ended June 30, 2020 compared to $148.9 million for the three months ended June 30, 2019. The increase was due to an increase in same store growth of 9.7% and ~~an 11.8% increase in revenues per billable hour~~ for the three months ended June 30, 2020, partially offset by a decrease in average billable census of 7.2% in our personal care segment. In addition, revenue increased by $16.1 million from our hospice segment during the three months ended June 30, 2020, compared to the same period in 2019, partially attributed to the fiscal year 2019 acquisitions of Hospice Partners and Alliance.

Gross profit, expressed as a percentage of net service revenues, increased to 29.8% for the three months ended June 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 $42.5 million for the three months ended June 30, 2020 as compared to $29.8 million for the three months ended June 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 $7.6 million, an increase in data processing of $0.5 million and an increase in rent expense of $0.6 million. In addition, acquisition related costs and professional fees increased by $1.2 million and $1.9 million, respectively, for the three months ended June 30, 2020 compared to the three months ended June 30, 2019. General and administrative expenses, expressed as a percentage of net service revenues increased to 23.0% for the three months ended June 30, 2020, from 20.0% for the three months ended June 30, 2019 mainly related to an increase in audit expenses.

~~Depreciation and amortization expense increased to $2.9 million from $2.5 million for the three months ended June 30, 2020 and 2019, respectively, primarily due to the increase of intangible assets~~ related to the ~~fiscal year 2019 acquisitions.~~

~~All~~vesting of our income is from domestic sources. We incur state and local taxes in states in which we operate. For the three months ended June 30, 2020 and 2019, the federal statutory rate was 21.0%. The effective income tax rate was 23.6% and 22.2% for the three months ended June 30, 2020 and 2019, respectively. For the three months ended June 30, 2020 and 2019, 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 following table sets forth, for the periods indicated, our consolidated results of operations.~~

For the Six Months
Ended June 30,

2020

2019

Change

% Of

% Of

Net Service

Net Service

Amount

Revenues

Amount

Revenues

Amount

%

(Amounts in Thousands, Except Percentages)

Net service revenues

$
374,792

100.0

%

$
287,422

100.0

%

$
87,370

30.4

%
Cost of service revenues

263,960

70.4

210,902

73.4

53,058

25.2

Gross profit

110,832

29.6

76,520

26.6

34,312

44.8

General and administrative expenses

84,737

22.6

59,024

20.5

25,713

43.6

Depreciation and amortization

5,827

1.6

4,609

1.6

1,218

26.4

Total operating expenses

90,564

24.2

63,633

22.1

26,931

42.3

Operating income

20,268

5.4

12,887

4.5

7,381

57.3

Interest income

(489
)

(0.1
)

(310
)

(0.1
)

(179
)

57.7

Interest expense

1,629

0.4

1,298

0.5

331

25.5

Total interest expense, net

1,140

0.3

988

0.4

152

15.4

Income before income taxes

19,128

5.1

11,899

4.1

7,229

60.8

Income tax expense

3,563

1.0

2,311

0.8

1,252

54.2

Net income

$
15,565

4.1

%

$
9,588

3.3

$
5,977

62.3

%

Net service revenues increased by 30.4% to $374.8 million for the six months ended June 30, 2020 compared to $287.4 million for the six months ended June 30, 2019. The increase was due to an increase in same store growth of 11.8% and ~~an 11.9% increase in revenues per billable hour~~ for the six months ended June 30, 2020, partially offset by a decrease in average billable census of 3.1% in our personal care segment. In addition, revenue increased by $8.6 million from our hospice segment during the six months ended June 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 29.6% for the six months ended June 30, 2020, compared to 26.6% 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 $84.7 million for the six months ended June 30, 2020 as compared to $59.0 million for the six months ended June 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 $16.2 million, an increase in data processing of $1.3 million and an increase in rent expense of $1.3 million. In addition, acquisition related costs and professional fees increased by $2.3 million and $2.4 million, respectively, for the six months ended June 30, 2020 compared to the six months ended June 30, 2019. General and administrative expenses, expressed as a percentage of net service revenues increased to 22.6% for the six months ended June 30, 2020, from 20.5% for the six months ended June 30, 2019 mainly related to an increase in audit expenses.

Depreciation and amortization expense increased to $5.8 million from $4.6 million for the six months ended June 30, 2020 and 2019, respectively, primarily due to the increase of intangible assets related to the fiscal year 2019 acquisitions.

Interest expense increased to $1.6 million from $1.3 million for the six months ended June 30, 2020 as compared to June 30, 2019. The increase in interest expense was primarily due to higher outstanding loan balance under our credit facility for the six months ended June 30, 2020 compared to the six months ended June 30, 2019.

All of our income is from domestic sources. We incur state and local taxes in states in which we operate. For the six months ended June 30, 2020 and 2019, the federal statutory rate was 21.0%. The effective income tax rate was 18.6% and 19.4% for the six months ended June 30, 2020 and 2019, respectively.

For the six months ended June 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 effective tax rates were lower than the federal statutory rate primarily due to the inclusion of a 7.5% and 6.5% excess tax benefit for the six months ended June 30, 2020 and 2019, respectively. The excess tax benefit is a discrete itemequity shares, which requires usthe Company to recognize the benefit fully in the period.

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

	For the Three Months Ended June 30,																	For the Six Months Ended June 30,																	For the Three Months Ended June 30,																	For the Six Months Ended June 30,
	2020					2019					Change							2020					2019					Change							2021					2020					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			%				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)																	(Amounts in Thousands, Except Percentages)
Operating Results
Net service revenues	$	156,268		100.0	%	$	137,477		100.0	%	$	18,791			13.7		%	$	316,933		100.0	%	$	265,371		100.0	%	$	51,562			19.4		%	$	176,267		100.0	%	$	156,268		100.0	%	$	19,999			12.8		%	$	341,135		100.0	%	$	316,933		100.0	%	$	24,202			7.6		%
Cost of services revenues		115,822		74.1			102,829		74.8			12,993			12.6				234,850		74.1			198,825		74.9			36,025			18.1				127,258		72.2			115,822		74.1			11,436			9.9				250,097		73.3			234,850		74.1			15,247			6.5
Gross profit		40,446		25.9			34,648		25.2			5,798			16.7				82,083		25.9			66,546		25.1			15,537			23.3				49,009		27.8			40,446		25.9			8,563			21.2				91,038		26.7			82,083		25.9			8,955			10.9
General and administrative expenses		14,603		9.3			12,777		9.3			1,826			14.3				30,205		9.5			25,316		9.5			4,889			19.3				16,358		9.3			14,603		9.3			1,755			12.0				31,641		9.3			30,205		9.5			1,436			4.8
Segment operating income	$	25,843		16.6	%	$	21,871		15.9	%	$	3,972			18.2		%	$	51,878		16.4	%	$	41,230		15.6	%	$	10,648			25.8		%	$	32,651		18.5	%	$	25,843		16.5	%	$	6,808			26.3		%	$	59,397		17.4	%	$	51,878		16.4	%	$	7,519			14.5		%
Business Metrics (Actual Numbers, Except Billable Hours in Thousands)
Location at period end																			150					154																													164					150
Average billable census * ⁽¹⁾		36,197					39,026					(2,829	)		(7.2	)	%		37,560					38,761					(1,201	)		(3.1	)	%		38,493					36,197					2,296			6.3		%		38,410					37,560					850			2.3		%
Billable hours * ⁽²⁾		7,374					7,269					105			1.4				15,048					14,133					915			6.5				7,650					7,374					276			3.7				15,187					15,048					139			0.9
Average billable hours per census per month * ⁽²⁾		67.5					61.6					5.9			9.6				66.3					60.3					6.0			10.0				65.9					67.5					(1.6	)		(2.4	)			65.6					66.3					(0.7	)		(1.1	)
Billable hours per business day * ⁽²⁾		113,447					111,829					1,618			1.4				115,750					109,557					6,193			5.7				117,688					113,447					4,241			3.7				117,729					115,750					1,979			1.7
Revenues per billable hour * ⁽²⁾	$	21.14				$	18.91				$	2.23			11.8		%	$	21.01				$	18.78				$	2.23			11.9		%	$	22.60				$	21.14				$	1.46			6.9		%	$	22.42				$	21.01				$	1.41			6.7		%
Same store growth revenue % * ⁽³⁾		9.7					5.8											11.8					5.7
Same store revenue growth % * ⁽³⁾																																				7.4					9.7												5.9				11.8

~~Net~~We derive a significant amount of our net service revenues from ~~state, local~~operations in Illinois, which represented 38.9% and ~~other governmental programs~~37.4% of our net service revenues for the three months ended June 30, 2021 and 2020, respectively, and accounted for ~~50.0%~~37.4% and ~~54.2%~~37.5% of our net service revenues for the six months ended June 30, 2021 and 2020, respectively. One payor client, the Illinois Department on Aging, accounted for 22.6% and 23.2% of net service revenues for the three months ended June 30, 2021 and 2020, respectively, and ~~2019, respectively,~~accounted for 21.5% and ~~49.7% and 55.1%~~23.2% of net service revenues for the six months ended June 30, 2021 and 2020, respectively.

Net service revenues from state, local and ~~2019, respectively. Managed care organizations~~other governmental payors accounted for ~~44.3%~~50.2% and ~~39.2%~~50.0% of net service revenues for the three months ended June 30, 2021 and 2020, respectively. Managed care organizations accounted for 44.7% and ~~2019,~~ ~~and 44.6% and 38.3%~~44.3% of net service revenues for the ~~six~~three months ended June 30, 2021 and 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,~~Net service revenues from state, local and other governmental payors accounted for ~~23.2%~~49.6% and ~~27.6% of net service revenues for the three months ended June 30, 2020 and 2019, respectively,~~ ~~and accounted for 23.2% and 28.3%~~49.7% of net service revenues for the six months ended June 30, 2021 and 2020, respectively. Managed care organizations accounted for 45.2% and ~~2019, respectively~~44.6.

~~Net~~% of net service revenues increased by 13.7% for the three months ended June 30, 2020 compared to the three months ended June 30, 2019. Net service revenues increased primarily as a result of an increase in same store growth of 9.7% and an ~~increase in revenues per billable hour of 11.8%,~~ ~~partially offset by a decrease in average billable census of 7.2%for the three months ended June 30, 2020 as compared to the three months ended June 30, 2019.~~ ~~Net service revenues increased by 19.4%~~ for the six months ended June 30, 2021 and 2020, ~~compared to~~respectively with commercial insurance, private pay and other payors accounting for the ~~six months ended June 30, 2019.~~ remainder of net service revenues.

Net service revenues increased ~~primarily due to a~~ ~~result of an increase in same store growth of 11.8%, an~~ ~~increase in billable hours of 6.5% and an 11.9% increase in revenues per billable hour,~~ ~~partially offset~~ by ~~a decrease in average billable census of 3.1%~~ ~~for the six months ended June 30, 2020 compared to the six months ended June 30, 2019.~~12.8% and 7.6% ~~Revenue per billable hours increased~~ for the three and six months ended June 30, ~~2020~~2021, respectively, compared to the three and six months ended June 30, ~~2019,~~2020. Net service revenues included a 6.9% and 6.7% increase in revenues per billable hour for the three and six months ended June 30, 2021, respectively, mainly attributed to rate increases discussed ~~above.~~above, as compared to the three and six months ended June 30, 2020. Due to a decrease in restrictions related to COVID-19, billable hours increased by 3.7% and 0.9% for the three and six months ended June 30, 2021, respectively, compared to the three and six months ended June 30, 2020.

Gross profit, expressed as a percentage of net service revenues, increased to 27.8% for the three months ended June 30, 2021 from 25.9% for the three months ended June 30, 2020 and from ~~25.2%~~26.7% for the ~~three~~six months ended June 30, ~~2019~~ ~~and from~~2021 to 25.9% for the six months ended June 30, 2020 ~~to 25.1% for the six months ended June 30, 2019~~. This increase was primarily due to a decrease in direct payroll as a percentage of net service revenues of ~~1.0%~~1.9% for the three months ended June 30, ~~2020~~2021 as compared to the three months ended June 30, ~~2019.~~2020. For the six months ended June 30, ~~2020,~~2021, the increase was due to a decrease of direct ~~service costs associated with salaries~~payroll of ~~1.4%~~0.8% as a percentage of net service revenues, compared to the six months ended June 30, ~~2019.~~2020.

General and administrative expenses increased by approximately $1.8 million and $4.9 million for the three and six months ended June 30, 2020, respectively. The increase in general and administrative expenses was primarily due to acquisitions that resulted in a $1.8 million and $4.0 million increase in administrative employee wages, taxes and benefit costs and a $0.2 million and $0.4 million increase in rent expenses forFor the three months ended June 30, 2021 and 2020, general and administrative expenses, expressed as a percentage of net service revenues, was 9.3% and for the six months ended June 30, 2021 and 2020 was 9.3% and 9.5%, respectively.

	For the Three Months Ended June 30,																	For the Six Months Ended June 30,																	For the Three Months Ended June 30,																		For the Six Months Ended June 30,
	2020					2019					Change							2020					2019					Change							2021						2020					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			%				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)																		(Amounts in Thousands, Except Percentages)
Operating Results
Net service revenues	$	24,525		100.0	%	$	8,437		100.0	%	$	16,088			190.7		%	$	49,737		100.0	%	$	16,354		100.0	%	$	33,383			204.1		%	$	36,909			100.0	%	$	24,525		100.0	%	$	12,384			50.5		%	$	73,003			100.0	%	$	49,737		100.0	%	$	23,266			46.8		%
Cost of services revenues		10,924		44.5			4,322		51.2			6,602			152.8				23,242		46.7			8,092		49.5			15,150			187.2				18,912			51.2			10,924		44.5			7,988			73.1				37,508			51.4			23,242		46.7			14,266			61.4
Gross profit		13,601		55.5			4,115		48.8			9,486			230.5				26,495		53.3			8,262		50.5			18,233			220.7				17,997			48.8			13,601		55.5			4,396			32.3				35,495			48.6			26,495		53.3			9,000			34.0
General and administrative expenses		6,297		25.7			1,548		18.3			4,749			306.8				12,754		25.6			3,138		19.2			9,616			306.4				8,673			23.5			6,297		25.7			2,376			37.7				17,136			23.5			12,754		25.6			4,382			34.4
Segment operating income	$	7,304		29.8	%	$	2,567		30.5	%	$	4,737			184.5		%	$	13,741		27.7	%	$	5,124		31.3	%	$	8,617			168.2		%	$	9,324			25.3	%	$	7,304		29.8	%	$	2,020			27.7		%	$	18,359			25.1	%	$	13,741		27.7	%	$	4,618			33.6		%
Business Metrics (Actual Numbers)
Locations at period end																			30					13																														33						30
Admissions * ⁽¹⁾		1,339					474					865			182.5		%		2,994					985					2,009			204.0		%		2,252						1,339					913			68.2		%		4,646						2,994					1,652			55.2		%
Average daily census * ⁽²⁾		1,743					611					1,132			185.3				1,803					593					1,210			204.0				2,460						1,743					717			41.1				2,430						1,803					627			34.8
Average length of stay * ⁽³⁾		103					127					(24	)		(18.8	)			101					121					(20	)		(16.5	)
Average discharge length of stay * ⁽³⁾																																				89						103					(14	)		(13.4	)			96						101					(5	)		(5.4	)
Patient days * ⁽⁴⁾		158,644					54,807					103,837			189.5				328,156					106,531					221,625			208.0				223,901						158,644					65,257			41.1				439,908						328,156					111,752			34.1
Revenue per patient day * ⁽⁵⁾	$	154.59				$	153.94				$	0.65			0.4		%	$	151.57				$	153.52				$	(1.95	)		(1.3	)	%	$	164.85					$	154.59				$	10.26			6.6		%	$	165.95					$	151.57				$	14.38			9.5		%
Same store revenue growth % * ⁽⁶⁾																																				(8.4	)					2.7												(8.4	)					2.7

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 care, continuous care, general inpatient care and respite care. Our Hospice segment principally provides routine care, but with the acquisition of Queen City Hospice, the Company expanded continuous care services.

Net service revenues from Medicare accounted for ~~92.8%~~93.3% and ~~92.6%~~92.8% and managed care organizations accounted for ~~4.9%~~3.8% and ~~5.6%~~4.9% for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Net service revenues from Medicare accounted for ~~92.4%~~93.8% and ~~92.9%~~92.4% and managed care organizations accounted for ~~5.2%~~3.9% and ~~5.1%~~5.2% for the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively.

Net service revenues increased by ~~$16.1~~$12.4 million and ~~$33.4~~$23.3 for the three and six months ended June 30, ~~2020~~2021, compared to the three and six months ended June 30, ~~2019.~~2020. For the three and six months ended June 30, ~~2020,~~2021, net service revenues increased primarily due to ~~an increase~~increases in average daily census ~~partially~~and revenue per patient day mainly attributed to the ~~acquisitions~~acquisition of ~~Alliance~~Queen City Hospice on ~~August 1, 2019 and Hospice Partners on October 1, 2019.~~December 4, 2020.

Gross profit, expressed as a percentage of net service revenues was ~~55.5%~~48.8% and ~~48.8%~~55.5% for the three months ended June 30, 2021 and 2020, ~~and 2019,~~ respectively, and ~~53.3%~~48.6% and ~~50.5%~~53.3%, for the six months ended June 30, 2021 and 2020, ~~and 2019,~~ respectively. For the three and six months ended June 30, ~~2020,~~2021, the ~~increase of gross profit~~decrease as a percentage of net service revenues was mainly attributed to ~~a decrease of direct service supply costs of 1.3%, pharmacy costs of 1.3% and medical equipment of 1.4%. For the six months ended June 30, 2020, the~~an increase ~~of gross profit as a percentage of net service revenues was mainly attributed to a decrease~~ of direct employee wages, taxes and benefit costs of ~~0.8%~~5.5% and 4.9%, ~~pharmacy costs of 1.0% and medical equipment of 1.0%.~~respectively.

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

~~25.7%~~ 23.5% and ~~18.3%~~25.7% for the three months ended June 30, 2021 and 2020, ~~and 2019,~~ respectively, and ~~25.6%~~23.5% and ~~19.2%~~25.6% for the six months ended June 30, 2021 and 2020, respectively. These decreases for the three and ~~2019, respectively~~.six months ended June 30, 2021 compared to corresponding periods in 2020 are primarily due to acquisitions synergies. The increase in general and administrative expenses was primarily due to acquisitions that resulted in a $4.1 million and $8.0 million increase in administrative employee wages, taxes and benefit costs and a $0.3 million and $0.7 million increase in rent expenses for the three and six months ended June 30, ~~2020. The hospice segment’s operating income~~2021, was ~~$7.3~~primarily due to acquisitions that resulted in a $1.7 million and ~~$2.6~~$3.2 million ~~for the three months ended June 30, 2020~~increase in administrative employee wages, taxes and ~~2019, respectively,~~ ~~and $13.7 million and $5.1 million for the six months ended June 30, 2020 and 2019, respectively~~.benefit costs.

	For the Three Months Ended June 30,																	For the Six Months Ended June 30,																	For the Three Months Ended June 30,																For the Six Months Ended June 30,
	2020					2019					Change							2020					2019					Change							2021					2020						Change					2021					2020					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			%				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)																(Amounts in Thousands, Except Percentages)
Operating Results
Net service revenues	$	3,783		100.0	%	$	3,001		100.0	%	$	782			26.1		%	$	8,122		100.0	%	$	5,697		100.0	%	$	2,425			42.6		%	$	4,717		100.0	%	$	3,783			100.0	%	$	934		24.7	%	$	9,057		100.0	%	$	8,122		100.0	%	$	935			11.5		%
Cost of services revenues		2,833		74.9			2,071		69.0			762			36.8				5,868		72.2			3,985		69.9			1,883			47.3				2,913		61.8			2,833			74.9			80		2.8			5,583		61.6			5,868		72.2			(285	)		(4.9	)
Gross profit		950		25.1			930		31.0			20			2.2				2,254		27.8			1,712		30.1			542			31.7				1,804		38.2			950			25.1			854		89.9			3,474		38.4			2,254		27.8			1,220			54.1
General and administrative expenses		883		23.3			656		21.9			227			34.6				1,905		23.5			1,343		23.6			562			41.8				968		20.5			883			23.3			85		9.6			1,933		21.3			1,905		23.5			28			1.5
Segment operating income	$	67		1.8	%	$	274		9.1	%	$	(207	)		(75.5	)	%	$	349		4.3	%	$	369		6.5	%	$	(20	)		(5.4	)	%	$	836		17.7	%	$	67			1.8	%	$	769		1,147.8	%	$	1,541		17.0	%	$	349		4.3	%	$	1,192			341.5		%
Business Metrics (Actual Numbers)
Locations at period end																			10					10																												10					10
New admissions * ⁽¹⁾		1,068					700					368			52.6		%		2,090					1,415					675			47.7		%		1,186					1,068						118		11.0	%		2,354					2,090					264			12.6		%
Recertifications * ⁽²⁾		689					543					146			26.9				1,399					1,185					214			18.1				738					689						49		7.1			1,395					1,399					(4	)		(0.3	)
Total volume * ⁽³⁾		1,757					1,243					514			41.4				3,489					2,600					889			34.2				1,924					1,757						167		9.5			3,749					3,489					260			7.5
Visits * ⁽⁴⁾		29,797					24,157					5,640			23.3		%		63,507					43,711					19,796			45.3		%		31,582					29,797						1,785		6.0	%		59,247					63,507					(4,260	)		(6.7	)	%
Same store revenue growth % * ⁽⁵⁾																																				24.7					(4.3	)										11.5					4.1

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 ~~79.6%~~81.1% and ~~81.2%~~79.6%, managed care organizations accounted for ~~18.2%~~17.4% and ~~15.9%~~18.2% and other accounted for ~~2.2%~~1.5% and ~~2.9%~~2.2% for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively. Net service revenues from Medicare accounted for ~~79.8%~~80.9% and ~~81.4%~~79.8%, managed care organizations accounted for ~~18.4%~~17.9% and ~~15.6%~~18.4% and other accounted for ~~1.8%~~1.2% and ~~3.0%~~1.8% for the six months ended June 30, 2021 and 2020, respectively. 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.~~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 for determination of payments. 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.

Net service revenues increased by ~~$0.8~~$0.9 million ~~and $2.4 million~~ for each of the three and six months ended June 30, ~~2020~~2021 compared to the three and six months ended June 30, ~~2019. For~~2020. Total visits increased for the three ~~and six~~ months ended June 30, ~~2020, net service revenues increased primarily due to an increase in total visits partially related to the acquisition~~2021, as COVID-19 restrictions ease.

Gross profit, expressed as a percentage of net service revenues was ~~25.1%~~38.2% and ~~31.0%~~25.1% for the three months ended June 30, 2021 and 2020, ~~and 2019,~~ respectively, and ~~27.8%~~38.4% and ~~30.1%~~27.8%, for the six months ended June 30, 2021 and 2020, ~~and 2019,~~ respectively. For the three and six months ended June 30, ~~2020,~~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 ~~5.8%~~11.1% and ~~2.6%~~9.0%, respectively, as a percentage of net service ~~revenues compared to~~revenues. Cost of service for the ~~three and~~ six months ended June 30, ~~2019.~~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 ~~23.3%~~20.5% and ~~21.9%, respectively,~~23.3% for the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, respectively, and ~~23.5%~~21.3% and ~~23.6%~~23.5% for the six months ended June 30, ~~2020~~2021 and ~~2019, respectively~~. The increase in general and administrative expenses was primarily due to acquisitions that resulted in a $0.3 million and $0.5 million increase in administrative employee wages, taxes and benefit costs for the three and six months ended June 30, 2020. The home health segment’s operating income was $0.1 million and $0.3 million for the three months ended June 30, 2020, ~~and 2019, respectively,~~ ~~and $0.3 million and $0.4 million for the six months ended June 30, 2020 and 2019,~~ respectively.

Our primary sources of liquidity are cash on hand and cash from operations. At June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had cash balances of ~~$158.5~~$139.4 million and ~~$111.7~~$145.1 million, respectively.

~~During the three and six months ended June 30, 2020, we did not draw on the term loan.~~As of June 30, 2020, we had a total of $43.5 million in revolving loans, with an interest rate of 1.92% and $18.6 million of term loans, with an interest rate of 1.93%, outstanding on our credit facility. After giving effect to the amount drawn on our credit facility, approximately $9.6 million of outstanding letters of credit and borrowing limits based on an advance multiple of adjusted EBITDA, we had $223.5 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 ~~$8.7~~$1.7 million from ~~$37.6~~$21.2 million as of December 31, ~~2019~~2020 to ~~$28.9~~$22.9 million as of June 30, ~~2020.~~2021. The state of Illinois fiscal year 2021 budget included an appropriation to raise in-home care rates to offset previous minimum wage increases by the City of Chicago. However the rate increase was delayed and did not take effect until April 1, 2021, 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 June 29, 2021, the Governor announced the authorization of bonus payments to providers in an amount equivalent to the rate increase for services delivered from January 1, 2021 to March 31, 2021 for state reimbursed hours of care. The bonus payment of $3.0 million was recognized as net service revenues during the three and six months ended June 30, 2021, and is expected to be received in September 2021.

During the three and six months ended June 30, 2021, we did not draw on the term loan.As of June 30, 2021, we had a total of $178.5 million in revolving loans, with an interest rate of 2.08% and $17.6 million of term loans, with an interest rate of 2.09%. 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 June 30, 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. Additionally, 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 revise their revenue forecasts and adjust their budgets for fiscal 2022 and, potentially, future fiscal years, accordingly. 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 uniform reductions to Medicaid payments. Effective for dates of service on or after April 2, 2020, the uniform reduction rate is 1.5%. The reduction applies to home health services but hospice services are exempt. 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 October 18, 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.

The American Rescue Plan Act of 2021, which became law on March 11, 2021, provides for $350 billion in relief funding for eligible state, local, territorial, and Tribal governments to mitigate the fiscal effects of the COVID-19 public health emergency. Additionally, the law 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. These and other federal stimulus measures may help to ease state-level budget constraints due to COVID-19.

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 $10.4 million and $11.3 million of these funds for the three and six months ended June 30, 2021, respectively, for healthcare related expenses, including retention payments, attributable to COVID-19 that were unreimbursed by other sources. In accordance with the current guidance issued by HHS, the Company expects to utilize additional funds through December 31, 2021, at which point we anticipate any unused funds will be returned. We are required to properly and fully document the use of such funds in reports to HHS, which must be submitted no later than March 31, 2022. The Company’s ability to utilize and retain some or all of such funds will depend on the terms and conditions of the funds received. Queen City Hospice administered retention payments totaling $1.9 million to caregivers for the three and six months ended June 30, 2021, which we believed 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.

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). 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 not repay the funds prior to the completion of our acquisition of Queen City Hospice. However, Queen City Hospice repaid such funds following its acquisition in March 2021, prior to any CMS recoupment and before any interest accrual.

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 and $0.2 million to home health net service revenues, and $0.7 million and $1.4 million to hospice net service revenues for the three and six months ended June 30, 2021, respectively. For the three months ended June 30, 2020, the Medicare sequester relief resulted in an increase of $0.3 million and $0.1 million, respectively, to hospice and home health net service revenues.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% in fiscal year 2022, in addition to the existing sequestration requirements of the Budget Control Act of 2011. We cannot currently determine if, or to what extent, our business, results of operations, financial condition or liquidity will ultimately be impacted by mandated sequestration triggers under the PAYGO Act, or if the mandated sequestration will occur.

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.

such $50.0 million incremental revolving loan may be used for, among other things, general corporate purposes.

On July 30, 2021, the Company entered into the Second Amendment. The Second Amendment, among other things, reallocated and refinanced the Company’s outstanding initial term loans as revolving loans (such that the Company has no outstanding initial term loans and no further initial term loans may be borrowed) and increased the Company’s revolving credit facility to an aggregate amount of $600,000,000. Moreover, the Second Amendment increased the Company’s incremental loan facility to an aggregate amount $125,000,000, which incremental loan facility may be for term loans or an increase to the revolving loan commitments. The maturity of the revolving credit facility was also extended from May 8, 2023 to July 30, 2026.

At June 30, ~~2020,~~2021, we were in compliance with our financial covenants under the Credit Agreement. However, we were unable to timely file our Annual Report on Form 10-K, which would have included our audited financial statements for the year ended December 31, 2019. The Company is required to deliver annual audited financial statements under the affirmative covenants of its Credit Agreement.Agreement The Company obtained consent from the Required Lenders (as defined in the Credit Agreement) to extend the timeline of the audited financials for the year ended December 31, 2019 to not later than October 31, 2020..

The following table summarizes changes in our cash flows for the six months ended June 30, ~~2020~~2021 and ~~2019:~~2020:

Six Months Ended June 30, ~~2020~~2021 Compared to Six Months Ended June 30, ~~2019~~2020

Net cash ~~provided by~~used in operating activities was ~~$50.9~~$3.3 million for the six months ended June 30, ~~2020,~~2021, compared to net cash ~~used~~provided by operating activities of ~~$4.1~~$50.9 million for the same period in ~~2019.~~2020. The ~~increase~~decrease in cash provided by operations was ~~primarily~~ due to ~~decreases in~~the timing of accounts receivable, of $29.5 million, and the repayment and the use of $24.0 million of government stimulus funds for the ~~state of New York and a decrease in days sales outstanding (“DSO”) as discussed below.~~six months ended June 30, 2021.

Net cash used in investing activities was $1.9 million for the six months ended June 30, 2021 compared to cash used in investing activities of $5.0 million for the six months ended June 30, 2020, ~~compared to cash used in investing activities of $31.8 million for the six months ended June 30, 2019. Our investing activities for the six months ended June 30, 2020~~which mainly consisted ~~of $4.8 million in purchases~~ of property and equipment ~~primarily related to investments in our technology infrastructure.~~ ~~Our investing activities for the six months ended June 30, 2019 consisted of $29.9 million primarily for the acquisition of VIP and $2.0 million in~~ purchases ~~of property and equipment~~ primarily related to our ongoing investments in our technology infrastructure.

Net cash ~~provided~~used by financing activities related to cash ~~received from the exercise~~payments on term loan of ~~stock options~~ ~~of $0.9~~$0.5 and $0.3 million for the six months ended June 30, 2021 and 2020.~~Our financing activities for~~ For the six months ended June 30, ~~2019 were borrowings of approximately $19.6 million on~~2020, the ~~delayed draw term loan portion of our credit facility to fund, in part, the VIP acquisition and $0.7 million in~~Company received cash ~~received~~ from the exercise of stock ~~options.~~ options of $1.2 million.

Gross accounts receivable as of June 30, ~~2020~~2021 and December 31, ~~2019~~2020 were approximately ~~$126.4~~$139.6 million and ~~$150.6~~$133.4 million, respectively. Outstanding accounts receivable, net of allowance, ~~decreased~~increased by ~~$23.3~~$5.6 million as of June 30, ~~2020~~2021 as compared to December 31, ~~2019.~~2020. Accounts receivable for the Illinois Department on Aging ~~decreased~~increased approximately ~~$8.7~~$1.7 million during the quarter ended June 30, ~~2020.~~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 6257 days and 7261 days at June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, respectively. The DSOs for our largest payor, the Illinois Department on Aging, at June 30, ~~2020~~2021 and December 31, ~~2019~~2020 were 6443 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~~2021 and ~~2021.~~2022.

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 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. InIllinois, 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, ~~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, tentatively scheduled for October 2020, December 2020 and March 2021. It also allows two state authorities~~year. 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 uniform reductions to Medicaid payments. Effective for dates of service on or after April 2, 2020, the uniform reduction rate is 1.5%. The reduction applies to home health services but hospice services are exempt. We cannot determine the impact that COVID-19 may have on states’ budgets for 2022 or beyond. However, such impacts could have a ~~1% reduction~~material adverse effect on our financial condition, results of operations and cash flows.

The ARPA provided $350 billion dollars in emergency funding for state, local, territorial, and Tribal governments to ~~all Medicaid providers effective January 1, 2020. The recently passed budget included an additional 0.5% reduction to~~remedy the ~~Medicaid rate which also allows 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 the economic slowdown caused by the COVID-19 pandemic 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 June 30, ~~2020,~~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 June 30, ~~2020,~~2021, we had outstanding borrowings of approximately ~~$62.1~~$196.1 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 six ~~months period~~month periods ended June 30, ~~2020,~~2021, our net income would have decreased by ~~$0.1 million, or $0.01 per diluted share and $0.3~~$0.4 million, or $0.02 per diluted share, ~~for the respective periods.~~and $0.7 million, or $0.05 per diluted share, respectively. 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 June 30, ~~2020.~~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 June 30, ~~2020 due to the material weaknesses in internal control over financial reporting that were disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.~~2021.

~~We continue to integrate application changes and acquisitions processes into our established internal control environment to effectively manage our risk and financial reporting efforts.~~

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 occurred during the fiscal quarter ended June 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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 our financial position and results of operations.

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.~~2020, filed on 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 June 30, ~~2020~~2021 and December 31, ~~2019~~2020	3

Condensed Consolidated Statements of Income For the Three and Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020	4

Condensed Consolidated Statement of Stockholders’ Equity For the Three and Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020	5

Condensed Consolidated Statements of Cash Flows For the Six Months Ended June 30, ~~2020~~2021 and ~~2019~~2020	6

Notes to Condensed Consolidated Financial Statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2120

Item 3. Quantitative and Qualitative Disclosures About Market Risk	3635

Item 4. Controls and Procedures	3635

PART II. OTHER INFORMATION	3736

Item 1. Legal Proceedings	3736

Item 1A. Risk Factors	3736

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3736

Item 3. Defaults Upon Senior Securities	3736

Item 4. Mine Safety Disclosures	3736

Item 5. Other Information	3736

Item 6. Exhibits	3837

	Goodwill
	Personal Care		Hospice			Home Health		Total
	(Amounts in Thousands)
Goodwill as of December 31, 2019	$	126,577	$	146,983		$	1,808	$	275,368
Divestiture		—		(1,167	)		—		(1,167	)
Adjustments to previously recorded goodwill		1,438		(243	)		37		1,232
Goodwill as of June 30, 2020	$	128,015	$	145,573		$	1,845	$	275,433

	June 30, 2021		December 31, 2020
	(Amounts in Thousands)
Prepaid workers’ compensation and liability insurance	$	2,782	$	2,838
Workers' compensation insurance receivable		1,860		1,860
Health insurance receivable		1,108		528
Other		6,990		4,743
Total prepaid expenses and other current assets	$	12,740	$	9,969


☒	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

	Common Stock				Additional Paid in Capital		Retained Earnings			Total Stockholders' Equity
	Shares		Amount
Balance at January 1, 2019		13,126	$	13	$	177,683	$	97,837		$	275,533
Revision				—		—		(7,042	)		(7,042	)
Balance at January 1, 2019, as revised		13,126	$	13	$	177,683	$	90,795		$	268,491

Balance at April 1, 2019		13,178	$	13	$	178,916	$	102,699		$	281,628
Revision				—		—		(7,608	)		(7,608	)
Balance at April 1, 2019, as revised		13,178	$	13	$	178,916	$	95,091		$	274,020

Balance at June 30, 2019		13,219	$	13	$	181,111	$	108,217		$	289,341
Revision				—		—		(7,834	)		(7,834	)
Balance at June 30, 2019, as revised		13,219	$	13	$	181,111	$	100,383		$	281,507

	For the Six Months Ended June 30,
	2019
	As
	Previously						As
	Reported			Revision			Revised
Net income	$	10,380		$	(792	)	$	9,588
Deferred income taxes		123			(277	)		(154	)
Accounts receivable		(18,884	)		1,524			(17,360	)
Net cash provided by operating activities	$	(4,078	)	$	—		$	(4,078	)


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).

10.1		Transition Agreement and Release, effective June 11, 2021, by and among Addus HealthCare, Inc. and Laurie Manning. *

10.2		Employment and Non-Competition Agreement, effective June 14, 2021, by and between Addus HealthCare, Inc. and Roberton James Stevenson. *

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: August ~~10, 2020~~4, 2021	By:	/s/ R. DIRK ALLISON

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

Date: August ~~10, 2020~~4, 2021	By:	/s/ BRIAN POFF

		Brian Poff Chief Financial Officer (As Principal Financial Officer)

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