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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting ~~company,”~~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 30, 2021,~~April 26, 2022, Addus HomeCare Corporation had ~~15,916,799~~16,071,408 shares of Common Stock outstanding.


	June 30, 2021		December 31, 2020		March 31, 2022		December 31, 2021
Assets
Current assets
Cash	$	139,400	$	145,078	$	124,763	$	168,895
Accounts receivable, net		138,270		132,650
Accounts receivable, net of allowances						136,808		136,955
Prepaid expenses and other current assets		12,740		9,969		14,658		18,491
Total current assets		290,410		287,697		276,229		324,341
Property and equipment, net of accumulated depreciation and amortization		18,708		19,749		19,073		18,483
Other assets
Goodwill		469,476		469,072		574,086		504,392
Intangibles, net of accumulated amortization		67,247		71,549		76,300		64,321
Deferred tax assets, net		6,128		6,524
Operating lease assets, net		37,191		37,991		41,523		36,048
Total other assets		580,042		585,136		691,909		604,761
Total assets	$	889,160	$	892,582	$	987,211	$	947,585
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	23,942	$	23,705	$	21,004	$	19,358
Accrued payroll		33,836		35,815		27,720		44,083
Accrued expenses		35,717		37,564		38,820		37,077
Government stimulus advances		8,094		32,087		4,173		4,173
Accrued workers' compensation insurance		14,382		13,759		12,640		12,998
Current portion of long-term debt		973		971
Total current liabilities		116,944		143,901		104,357		117,689
Long-term liabilities
Long-term debt, less current portion, net of debt issuance costs		193,714		193,901		256,127		220,912
Long-term operating lease liabilities		34,339		35,516		39,049		32,859
Other long-term liabilities		108		588		1,900		1,781
Total long-term liabilities		228,161		230,005		297,076		255,552
Total liabilities	$	345,105	$	373,906	$	401,433	$	373,241
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
Common stock—$.001 par value; 40,000 authorized and 16,068 and 15,940 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively					$	16	$	16
Additional paid-in capital		374,383		369,495		383,001		380,037
Retained earnings		169,656		149,165		202,761		194,291
Total stockholders' equity		544,055		518,676		585,778		574,344
Total liabilities and stockholders' equity	$	889,160	$	892,582	$	987,211	$	947,585

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~

	For the Three Months Ended June 30,						For the Six Months Ended June 30,						For the Three Months Ended March 31,
	2021			2020			2021			2020			2022			2021
Net service revenues	$	217,893		$	184,576		$	423,195		$	374,792		$	226,634		$	205,302
Cost of service revenues		149,083			129,579			293,188			263,960			156,448			144,105
Gross profit		68,810			54,997			130,007			110,832			70,186			61,197
General and administrative expenses		48,175			42,450			93,601			84,737			53,152			45,426
Depreciation and amortization		3,587			2,940			7,188			5,827			3,521			3,601
Total operating expenses		51,762			45,390			100,789			90,564			56,673			49,027
Operating income		17,048			9,607			29,218			20,268			13,513			12,170
Interest income		(31	)		(155	)		(53	)		(489	)		(58	)		(22	)
Interest expense		1,262			721			2,478			1,629			1,820			1,216
Total interest expense, net		1,231			566			2,425			1,140			1,762			1,194
Income before income taxes		15,817			9,041			26,793			19,128			11,751			10,976
Income tax expense		4,220			2,134			6,302			3,563			3,281			2,082
Net income	$	11,597		$	6,907		$	20,491		$	15,565		$	8,470		$	8,894
Net income per common share
Basic income per share	$	0.74		$	0.44		$	1.30		$	1.00		$	0.54		$	0.57
Diluted income per share	$	0.72		$	0.43		$	1.28		$	0.98		$	0.53		$	0.55
Weighted average number of common shares and potential common shares outstanding:
Basic		15,738			15,582			15,716			15,551			15,811			15,694
Diluted		16,043			15,916			16,063			15,917			16,079			16,069

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

For the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~

	For the Three Months Ended June 30, 2021											For the Three Months Ended March 31, 2022
	Common Stock					Additional Paid-in Capital		Retained Earnings		Total Stockholders’ Equity		Common Stock				Additional Paid-in		Retained		Total Stockholders'
	Shares			Amount								Shares		Amount		Capital		Earnings		Equity
Balance at April 1, 2021		15,903		$	16	$	371,835	$	158,059	$	529,910
Balance at January 1, 2022													15,940	$	16	$	380,037	$	194,291	$	574,344
Issuance of shares of common stock under restricted stock award agreements		13			—		—		—		—		115		—		—		—		—
Stock-based compensation		—			—		2,525		—		2,525		—		—		2,485		—		2,485
Shares issued for exercise of stock options		1			—		23		—		23		13		—		479		—		479
Net income		—			—		—		11,597		11,597		—		—		—		8,470		8,470
Balance at June 30, 2021		15,917		$	16	$	374,383	$	169,656	$	544,055
Balance at March 31, 2022													16,068	$	16	$	383,001	$	202,761	$	585,778

	For the Six Months Ended June 30, 2021											For the Three Months Ended March 31, 2021
	Common Stock					Additional Paid-in Capital		Retained Earnings		Total Stockholders’ Equity		Common Stock				Additional Paid-in		Retained		Total Stockholders'
	Shares			Amount								Shares		Amount		Capital		Earnings		Equity
Balance at January 1, 2021		15,826		$	16	$	369,495	$	149,165	$	518,676		15,826	$	16	$	369,495	$	149,165	$	518,676
Issuance of shares of common stock under restricted stock award agreements		88			—		—		—		—		75		—		—		—		—
Stock-based compensation		—			—		4,764		—		4,764		—		—		2,239		—		2,239
Shares issued for exercise of stock options		3			—		124		—		124		2		—		101		—		101
Net income		—			—		—		20,491		20,491		—		—		—		8,894		8,894
Balance at June 30, 2021		15,917		$	16	$	374,383	$	169,656	$	544,055

	For the Three Months Ended June 30, 2020
	Common Stock					Additional Paid-in Capital		Retained Earnings		Total Stockholders’ Equity
	Shares			Amount
Balance at April 1, 2020		15,660		$	16	$	362,102	$	124,690	$	486,808
Forfeiture of shares of common stock under restricted stock award agreements		(1	)		—		—		—		—
Stock-based compensation		—			—		1,118		—		1,118
Shares issued for exercise of stock options		6			—		28		—		28
Net income		—			—		—		6,907		6,907
Balance at June 30, 2020		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
	Shares			Amount
Balance at January 1, 2020		15,617		$	15	$	359,545	$	116,032	$	475,592
Forfeiture of shares of common stock under restricted stock award agreements		(6	)		—		—		—		—
Stock-based compensation		—			—		2,525		—		2,525
Shares issued for exercise of stock options		54			1		1,178		—		1,179
Net income		—			—		—		15,565		15,565
Balance at June 30, 2020		15,665		$	16	$	363,248	$	131,597	$	494,861
Balance at March 31, 2021													15,903	$	16	$	371,835	$	158,059	$	529,910

See accompanying Notes to Condensed Consolidated Financial Statements (Unaudited)

For the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~

	For the Six Months						For the Three Months
	Ended June 30,						Ended March 31,
	2021			2020			2022			2021
Cash flows from operating activities:
Net income	$	20,491		$	15,565		$	8,470		$	8,894
Adjustments to reconcile net income to net cash (used in) provided by operating activities, net of acquisitions:
Adjustments to reconcile net income to net cash provided by (used in) operating activities, net of acquisitions:
Depreciation and amortization		7,188			5,827			3,521			3,601
Deferred income taxes		396			100			126			165
Stock-based compensation		4,764			2,525			2,485			2,239
Amortization of debt issuance costs under the credit facility		368			370			215			184
Provision for doubtful accounts		529			436			158			252
Loss (gain) of disposal of assets		—			352
Impairment of operating lease assets								1,174			—
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		(6,232	)		23,342			7,121			(6,397	)
Prepaid expenses and other current assets		(3,004	)		(3,608	)		4,161			(1,007	)
Government stimulus advances		(23,993	)		—			—			(11,719	)
Accounts payable		111			(2,700	)		1,386			(290	)
Accrued payroll		(1,900	)		(1,800	)		(17,443	)		(15,313	)
Accrued expenses and other long-term liabilities		(2,039	)		10,478			(5,391	)		1,025
Net cash (used in) provided by operating activities		(3,321	)		50,887
Net cash provided by (used in) operating activities								5,983			(18,366	)
Cash flows from investing activities:
Acquisitions of businesses, net of cash acquired								(84,490	)		—
Purchases of property and equipment		(1,847	)		(4,842	)		(1,104	)		(1,021	)
Acquisitions of businesses, net of cash acquired		(81	)		(295	)
Proceeds from disposal of assets		—			172
Net cash used in investing activities		(1,928	)		(4,965	)		(85,594	)		(1,021	)
Cash flows from financing activities:
Payments on term loan — credit facility		(490	)		(245	)		—			(245	)
Borrowings on revolver — credit facility								35,000			—
Cash received from exercise of stock options		124			1,179			479			101
Other		(63	)		(21	)
Net cash (used in) provided by financing activities		(429	)		913
Net cash provided by (used in) financing activities								35,479			(144	)
Net change in cash		(5,678	)		46,835			(44,132	)		(19,531	)
Cash, at beginning of period		145,078			111,714			168,895			145,078
Cash, at end of period	$	139,400		$	158,549		$	124,763		$	125,547
Supplemental disclosures of cash flow information:
Cash paid for interest	$	2,136		$	992		$	1,619		$	1,174
Cash paid for income taxes		10,950			6,414

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, ~~2020~~2021 has been derived from the Company’s audited financial statements for the year ended December 31, ~~2020~~2021 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, ~~2020~~2021 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 ~~U.S. Generally Accepted Accounting Principles (“GAAP”)~~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, intangible assets acquired~~goodwill and intangibles in business combinations and when required, the quantitative ~~impairment~~ assessment of ~~goodwill and indefinite lived intangible assets.~~goodwill. Actual results could differ from those estimates.

~~Diluted net income per~~The following table sets forth the computation of basic and diluted 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, 2021 and 2020, dilutive stock options outstanding were approximately 526,000 and 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 six~~ months ended ~~June 30, 2021, dilutive stock options outstanding were approximately 286,000~~March 31, 2022 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.~~2021:

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.

In ~~December 2019,~~November 2021, the FASB issued ASU ~~2019-12,~~ 2021-10, ~~Income Taxes~~Government Assistance (Topic ~~740)~~832): ~~Simplifying the Accounting for Income Taxes~~Disclosures by Business Entities about Government Assistance. ASU ~~2019-12 simplifies various aspects~~2021-10 requires entities to disclose certain information about the nature of certain governmental assistance received, including the nature of the transaction and the related to accounting ~~for income taxes~~policy, the financial statement line items impacted by the assistance, as well as the significant terms and ~~removes certain exceptions to~~conditions of the ~~general guidance in ASC 740. In addition, the ASU clarifies and amends existing guidance to improve consistent application of its requirements.~~transactions. The ASU was adopted as of January 1, ~~2021~~2022 and did not have an impact on 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. On July 30, 2021, the Company entered into the Second Amendment to the Credit Agreement as discussed further in Note 8. The ~~Company~~Credit Agreement contains hardwired fallback language that contemplates a transition from LIBOR, specifically identifies the secured overnight financing rate (“SOFR”) as the replacement reference rate and details the mechanism for transition at LIBOR cessation, which is ~~evaluating~~anticipated to occur on June 30, 2023. The transition to SOFR is not expected to have a material impact on the ~~effect~~Company’s results of ~~adopting this new accounting guidance.~~operations or liquidity.

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

	June 30, 2021		December 31, 2020		March 31, 2022		December 31, 2021
	(Amounts in Thousands)				(Amounts in Thousands)
Operating lease assets, net	$	37,191	$	37,991	$	41,523	$	36,048

Short-term operating lease liabilities (in accrued expenses)		9,621		9,283		10,766		9,774
Long-term operating lease liabilities		34,339		35,516		39,049		32,859
Total operating lease liabilities	$	43,960	$	44,799	$	49,815	$	42,633

Components of lease 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 March 31, (Amounts in Thousands)
	2021			2020			2021			2020			2022			2021
Operating lease costs	$	2,775		$	2,120		$	5,552		$	4,238		$	2,801		$	2,777
Short-term lease costs		194			161			375			428			751			181
Total lease costs														3,552			2,958
Less: sublease income		(152	)		(74	)		(303	)		(149	)		(177	)		(151	)
Total lease costs, net	$	2,817		$	2,207		$	5,624		$	4,517		$	3,375		$	2,807

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

	June 30, 2021			December 31, 2020			March 31, 2022			December 31, 2021
Operating leases:
Weighted average remaining lease term		6.72			6.97			6.27			6.39
Weighted average discount rate		4.03	%		4.18	%		3.80	%		3.91	%

~~A summary of our remaining~~Remaining operating lease payments as of ~~June 30, 2021~~March 31, 2022 were as follows:

	Operating Leases			Operating Leases
	(Amounts in Thousands)			(Amounts in Thousands)
Due in the 12-month period ended June 30,
2022	$	10,967
Due in the 12-month period ended March 31,
2023		9,012		$	12,329
2024		7,109			10,706
2025		4,960			8,476
2026		3,289			5,493
2027					4,574
Thereafter		15,095			14,748
Total future minimum rental commitments		50,432			56,326
Less: Imputed interest		(6,472	)		(6,511	)
Total lease liabilities	$	43,960		$	49,815

					For the Three Months Ended March 31,
	For the Six Months Ended June 30, (Amounts in Thousands)				(Amounts in Thousands)
	2021		2020		2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	5,313	$	4,321	$	3,194	$	2,517

Right-of-use assets obtained in exchange for lease obligations:
Operating leases		3,919		2,441	$	9,199	$	2,675

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

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

On ~~December 4, 2020,~~February 1, 2022, we completed the acquisition of the operations of JourneyCare Inc. (“JourneyCare”)~~Queen City Hospice, LLC and its affiliate Miracle City Hospice, LLC (together “Queen City Hospice”)~~. The purchase price was approximately $~~194.8~~$85.0 million, including the amount of acquired excess cash held by ~~Queen City Hospice~~JourneyCare at the closing of the acquisition (approximately $~~15.4~~$0.5 million). The ~~purchase of Queen City Hospice~~JourneyCare acquisition was funded with a combination of a $35.0 million draw on the Company’s revolving credit facility and available cash. With the ~~purchase of Queen City Hospice,~~JourneyCare acquisition, the Company expanded its hospice services in the state of ~~Ohio.~~Illinois. The related acquisition and integration costs were $~~0.8~~$0.3 million and ~~$1.7~~$1.8 million, respectively, for the three ~~and six~~ months ended ~~June 30, 2021, respectively.~~March 31, 2022. 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	$	169,356		$	70,153
Identifiable intangible assets		20,015			13,792
Cash		15,444			500
Property and equipment		759
Accounts receivable		5,835			7,080
Operating lease assets, net		3,028			3,728
Other assets		94			280
Accounts payable		(2,257	)
Property and equipment					1,194
Accrued expenses		(503	)		(6,714	)
Accrued payroll		(1,555	)		(1,486	)
Long-term operating lease liabilities		(2,765	)		(3,537	)
Government stimulus advances		(12,694	)
Total purchase price	$	194,757		$	84,990

Identifiable intangible assets acquired included ~~$11.0~~$9.0 million in a trade ~~names~~name and ~~$1.5 million of non-competition agreements with estimated useful lives of fifteen years and five years, respectively, and $7.5~~$4.8 million of indefinite lived state licenses. The preliminary estimated fair value of identifiable intangible assets was determined with the assistance of a valuation specialist, using Level 3 inputs as defined under ASC Topic 820. The fair value analysis and related valuations reflect the conclusions of management. All estimates, key assumptions, and forecasts were either provided by or reviewed by the Company. The goodwill and intangible assets acquired are deductible for tax purposes.

~~On November 1, 2020, we completed the~~The JourneyCare acquisition accounted for $9.5 million of ~~County Homemakers. The purchase price was approximately $15.8~~net service revenues and $2.0 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 County Homemakers was funded with the Company’s available cash. With the purchase of County Homemakers, the Company expanded its personal care services in the state of Pennsylvania. The related integration costs were $0.2 millionoperating income for the ~~six~~three months ended ~~June 30, 2021. These costs were included in general and administrative expenses on the Unaudited Condensed Consolidated Statements of Income and were expensed as incurred.~~March 31, 2022.

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

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

On July 1, 2020, we completed the acquisition of A Plus Health Care, Inc. (“A Plus”). The purchase price was approximately $14.5 million, including the amount of acquired excess cash held by A Plus at the closing of the acquisition (approximately $2.8 million). The purchase of A Plus was funded with the Company’s available cash. With the purchase of A Plus, the Company expanded its personal care services in the state of

Montana. The related integration costs were $0.1 million for the six months ended June 30, 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:~~

Identifiable intangible assets acquired included $1.4 million in trade names with an estimated useful life of 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. 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 of SunLife Home Care (“SunLife”) for approximately $1.7 million and recorded goodwill of $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 tax purposes.~~

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~~March 31, 2022 as if ~~each of~~ the ~~acquisitions of Queen City Hospice, County Homemakers and A Plus~~JourneyCare acquisition closed on January 1, ~~2020.~~2021.

					For the Three Months Ended March 31, (Amounts in Thousands)
	For the Three Months Ended June 30, 2020 (Amounts in Thousands)		For the Six Months Ended June 30, 2020 (Amounts in Thousands)		2022		2021
Net service revenues	$	203,465	$	412,434	$	231,847	$	219,920
Operating income		11,344		23,941		12,240		10,936
Net income		8,354		18,661		7,629		7,894
Net income per common share
Basic income per share	$	0.54	$	1.20	$	0.48	$	0.50
Diluted income per share	$	0.52	$	1.17	$	0.47	$	0.49

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, County Homemakers and A Plus~~the operations of JourneyCare had been acquired effective January 1, ~~2020.~~2021. 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, 2021~~and related adjustments is provided below:

	Goodwill								Hospice			Personal Care		Home Health			Total
	Hospice		Personal Care		Home Health		Total		(Amounts in Thousands)
	(Amounts in Thousands)
Goodwill as of December 31, 2020	$	314,833	$	152,448	$	1,791	$	469,072
Goodwill as of December 31, 2021									$	328,334		$	152,688	$	23,370		$	504,392
Additions for acquisitions		—		115		—		115		70,153			—		—			70,153
Adjustments to previously recorded goodwill		149		140		—		289		(113	)		—		(346	)		(459	)
Goodwill as of June 30, 2021	$	314,982	$	152,703	$	1,791	$	469,476
Goodwill as of March 31, 2022									$	398,374		$	152,688	$	23,024		$	574,086

In connection with the JourneyCare acquisition, the Company recognized goodwill in its hospice segment of $70.2 million, during the three months ended March 31, 2022. See Note 4 for additional information regarding the acquisition.

The Company’s identifiable intangible assets consist of customer and referral relationships, trade names and trademarks, non-competition agreements and state licenses. Amortization is computed using straight-line and accelerated methods based upon the estimated useful lives of the respective assets, which range from ~~one~~five 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.

The carrying amount and accumulated amortization of each identifiable intangible asset category consisted of the following as of ~~June 30, 2021:~~March 31, 2022:

	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	$	—		$	—		$	—		$	20,791		$	20,791		$	—		$	—		$	—		$	25,901		$	25,901
Intangible assets subject to amortization:
Gross carrying amount		44,672			42,926			6,225			12,507			106,330			44,672			51,941			6,785			12,508			115,906
Accumulated amortization		(35,391	)		(17,106	)		(3,336	)		(4,041	)		(59,874	)		(36,779	)		(19,126	)		(4,081	)		(5,521	)		(65,507	)
Intangible assets subject to amortization, net		9,281			25,820			2,889			8,466			46,456			7,893			32,815			2,704			6,987			50,399
Total intangible assets at June 30, 2021	$	9,281		$	25,820		$	2,889		$	29,257		$	67,247
Total intangible assets at March 31, 2022																$	7,893		$	32,815		$	2,704		$	32,888		$	76,300

In connection with the JourneyCare acquisition, the Company recognized a trade name of $9.0 million and indefinite lived state licenses of $4.8 million in its hospice segment during the three months ended March 31, 2022. See Note 4 for additional information regarding the acquisition.

Amortization expense related to the ~~identifiable~~ intangible assets ~~amounted to $2.1~~was $1.8 million and ~~$4.3~~$2.2 million for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~respectively, and $1.8 million and $3.5 million for the three and six months ended June 30, 2020,~~ respectively. The weighted average remaining useful lives of identifiable intangible assets as of ~~June 30, 2021 is 9.5~~March 31, 2022 was 10.2 years.

	June 30, 2021		December 31, 2020		March 31, 2022		December 31, 2021
	(Amounts in Thousands)				(Amounts in Thousands)
Prepaid workers’ compensation and liability insurance	$	2,782	$	2,838
Income tax receivable					$	4,333	$	7,556
Prepaid workers' compensation and liability insurance						2,070		3,206
Workers' compensation insurance receivable		1,860		1,860		1,073		1,559
Health insurance receivable		1,108		528
Other		6,990		4,743		7,182		6,170
Total prepaid expenses and other current assets	$	12,740	$	9,969	$	14,658	$	18,491

~~Government stimulus advances consisted of the following:~~7. COVID-19 Pandemic

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~~took dramatic actions to provide liquidity to businesses and the banking system in the United ~~States.~~ States, as described below.

One of the primary sources of relief for healthcare providers is the Provider Relief Fund, which has been funded through the Coronavirus Aid, Relief, and Economic Security Act (“CARES ~~Act, which was expanded by the PPPHCE Act,~~Act”) and ~~the CAA. The American Rescue Plan Act of 2021 (“ARPA”), another relief package with numerous provisions that affect~~related legislation. Provider Relief Fund payments are intended to compensate healthcare providers ~~was signed into law~~for lost revenues and health care related expenses incurred in ~~March 2021. See Note 9 for additional information regarding government actions~~response to ~~mitigate COVID-19’s impact.~~

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

In to reimburse expenses or losses that other sources are obligated to reimburse. Commercial organizations that receive and expend annual total ~~the CARES Act and other relief legislation include over $178 billion~~awards of $750,000 or more in federal funding, ~~to be distributed~~including payments received through the Provider Relief Fund, are subject to ~~eligible providers, including public entities and Medicare- and/or Medicaid-enrolled providers.~~ federal audit requirements.

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~~and fully utilized ~~$10.4 million and $11.3 million of~~ these funds ~~for~~as of December 31, 2021, including $0.9 million during the three ~~and six~~ months ended ~~June 30,~~March 31, 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~~were required to properly and fully document the use of such funds in reports to ~~HHS,~~the U.S. Department of Health & Human Services (“HHS”), which ~~must be submitted~~we were required to submit no later than March 31, 2022. ~~The Company’s ability to utilize and retain some or all of such funds will depend on~~We have submitted 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.required reports.

The CARES Act also ~~provides~~provided 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,~~As of March 31, 2022 and December 31, 2021, the ~~Company began paying its~~ deferred portion of employer Social Security payroll taxes was $4.1 million, which is included within Government stimulus advances on the Company’s Unaudited Condensed Consolidated Balance Sheets. The payroll tax deferral requires that the remaining deferred payroll taxes be paid by December 31, 2022.

The American Rescue Plan Act of 2021 (“ARPA”), which became law on March 11, 2021, provides for $350 billion in relief funding for eligible state, local, territorial, and ~~expects~~Tribal governments to ~~repay~~mitigate the ~~$7.1 million~~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 (“HCBS”) from April 1, 2021, through March 31, 2022, provided the ~~fourth quarter~~state satisfied certain conditions. States are permitted to use the state funds equivalent to the additional federal funds through March 31, 2024. States must use the monies attributable to this matching fund increase to supplement, not supplant, their level of state spending for the implementation of activities enhanced under the Medicaid HCBS in effect as of April 1, 2021.

The CARES Act and related laws temporarily lifted 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 extended sequestration through 2030). Congress further delayed these sequestration cuts through March 31, 2022, and reduced the sequestration adjustment to 1% from April 1 through June 30, 2022. The full 2% reduction is currently scheduled to resume July 1, 2022. These sequestration cuts have been extended through 2030, with the reductions for 2030 set to increase to 2.25% for the first six months and to 3% for the second six months.

In the hospice segment, Medicare sequester relief resulted in an increase in net service revenues of $0.9 million and $0.7 million for the three months ended March 31, 2022 and 2021, respectively. In the home health segment, Medicare sequester relief resulted in an increase in net service revenues of $0.2 million and $0.1 million for the three months ended March 31, 2022 and 2021, respectively.

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, an additional Medicare payment reduction of up to 4% was required to take effect in January 2022. However, Congress delayed implementation of this payment reduction until 2023. 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 or when the mandated sequestration will occur.

For the three months ended March 31, 2022 and 2021, COVID-19-related expenses in our personal care segment were approximately $1.7 million and $0.9 million, respectively, and are included in cost of service revenues on the Consolidated Statements of Income. Additionally, the Company recognized revenue of $1.4 million and $1.8 million attributable to temporary rate increases from certain payors in our personal care segment for the three months ended March 31, 2022 and 2021, respectively.

Although the United States has recently experienced a moderation of infection and related hospitalization rates, there continues to be a significant number of COVID-19 cases and deaths in the United States and throughout the world. Given the longer-term uncertainties associated with the COVID-19 pandemic, it is impossible to predict the effect and ultimate impact of the COVID-19 pandemic on the Company as conditions related to the COVID-19 pandemic continue to evolve.

	June 30, 2021			December 31, 2020			March 31, 2022			December 31, 2021
	(Amounts in Thousands)						(Amounts in Thousands)
Revolving loan under the credit facility	$	178,458		$	178,458		$	259,853		$	224,853
Term loan under the credit facility		17,640			18,130
Less unamortized issuance costs		(1,411	)		(1,716	)		(3,726	)		(3,941	)
Total	$	194,687		$	194,872
Less current maturities		(973	)		(971	)
Long-term debt	$	193,714		$	193,901		$	256,127		$	220,912

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~~as amended by the First Amendment to Amended and Restated Credit Agreement, dated as of September 12, 2019, and as further amended by the Second Amendment to Amended and Restated Credit Agreement, dated as of July 30, 2021 (as ~~hereinafter defined),~~amended, the “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~~; as used throughout this Quarterly Report on Form 10-Q, “credit facility” shall mean the credit facility evidenced by the Credit ~~Agreement.~~Agreement). The credit facility consists of a $600.0 million revolving credit facility and a $125.0 million incremental loan facility, which incremental loan facility may be for term loans or an increase to the revolving loan commitments. The maturity of this credit facility is ~~May 8, 2023.~~July 30, 2026. 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.

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.

~~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 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. 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.

T~~As of June 30, 2021,~~he Company pays a fee ranging from 0.20% to 0.35% based on the ~~Company was in compliance with all financial covenants under~~applicable senior net leverage ratio times the ~~Credit Agreement.~~

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 tounused portion of the revolving loan ~~commitments.~~ portion of the credit facility. The ~~Amendment further provides~~credit facility contains hardwired fallback language that contemplates a transition from LIBOR, and specifically identifies SOFR as the ~~proceeds~~replacement reference rate and details the mechanism for transition at LIBOR cessation, which is anticipated to occur on June 30, 2023. The transition to SOFR is not expected to have a material impact on the Company’s results of ~~such $50.0 million incremental revolving loans may be used for, among other things, general corporate purposes.~~operations or liquidity.

~~On July 30, 2021,~~During the three months ended March 31, 2022, the Company ~~entered into a Second Amendment (the “Second Amendment”)~~drew $35.0 million under its credit facility to ~~its Credit Agreement, see Note 12 for additional information.~~

fund, in part, the JourneyCare acquisition. During the ~~six~~three months ended ~~June 30,~~March 31, 2021, ~~and 2020,~~ the Company had 0 draws under its credit facility.

~~As of June 30, 2021,~~At March 31, 2022, the Company had a total of ~~$178.5~~$259.9 million of revolving loans, with an interest rate of ~~2.08%, and $17.6 million of term loans, with an~~2.46% ~~interest rate of 2.09%~~, outstanding on its credit facility. After giving effect to the amount drawn on its credit facility, approximately ~~$8.7~~$8.1 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 ~~$112.8~~$377.6 million of capacity and $109.6 million available for borrowing under its credit facility.As of December 31, ~~2020,~~2021, the Company had a total of ~~$178.5~~$224.9 million of revolving loans, with an interest rate of ~~1.90%~~2.10%, ~~and $18.1 million of term loans, with an interest rate of 1.90%,~~ outstanding on its credit ~~facility~~facility..

8.As of March 31, 2022, the Company was in compliance with all financial covenants under the Credit Agreement.

The effective income tax rates were ~~26.7%~~27.9% and ~~23.6%~~19.0% for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively.

The difference between our federal statutory and effective income tax rates is principally due to the inclusion of state taxes, ~~and~~ non-deductible compensation and an excess tax expense, partially offset by the use of federal employment tax credits.

~~The effective income tax rates were 23.5%~~ ~~and 18.6% for~~For the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 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 the use of federal employment tax credits and excess tax benefit. For the six months ended June 30, 2020, 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. For the six months ended June 30, 2021 and 2020, the effective tax rates were inclusive of an excess tax expense of 2.7% and an excess tax benefit of ~~3.0% and 7.5%~~7.4%, respectively. The excess tax expense or benefit is a discrete item, related to the vesting of equity shares, which requires the Company to recognize the ~~benefit~~expense fully in the period. An excess tax expense or benefit results if the Company’s ~~income tax deduction exceeds the~~ cumulative costs of the award recognized exceed the income tax deduction on the Unaudited Condensed Consolidated Statements of Income, whereas an excess tax benefit results if the Company’s cumulative costs of the award recognized are less than the income tax deduction on the 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 impact the United States and other parts of the world.

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 CARES Act, a sweeping stimulus bill intended to bolster the U.S. economy, was enacted. The PPPHCE Act and the CAA both expansions of the CARES Act, were signed into law on April 24, 2020 and December 27, 2020, respectively. In total, the CARES Act, the PPPHCE Act and CAA authorize $178 billion in funding to be distributed to health care providers through the Provider Relief Fund. This funding is intended to support healthcare providers by reimbursing them for healthcare-related expenses or lost revenues attributable to COVID-19. On March 11, 2021, the ARPA was signed into law, another COVID-19 relief package with numerous provisions that affect healthcare providers, including additional funding targeted to specified healthcare providers and to improve coronavirus testing and vaccine-related activities.

In addition to the Provider Relief Fund, the CARES Act 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.

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 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 New Mexico. ~~The Centers for Medicare and Medicaid Services Office of Inspector General’s~~In 2018, the Office of Audit Services (“OAS”) ~~had in 2018~~, under the HHS Office of Inspector General, 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 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 OAS review through the terms of the Ambercare purchase agreement. The Company disputes the results of the OAS review and related asserted billing errors and is in the process of 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 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.

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,~~March 31, 2022 and 2021 ~~and 2020,~~ along with the items necessary to reconcile the segment information to the totals reported in the accompanying 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, 2021								For the Three Months Ended March 31, 2022
	(Amounts in Thousands)								(Amounts in Thousands)
	Personal Care		Hospice		Home Health		Total		Personal Care		Hospice		Home Health		Total
Net service revenues	$	176,267	$	36,909	$	4,717	$	217,893	$	169,632	$	47,727	$	9,275	$	226,634
Cost of services revenues		127,258		18,912		2,913		149,083		126,291		23,441		6,716		156,448
Gross profit		49,009		17,997		1,804		68,810		43,341		24,286		2,559		70,186
General and administrative expenses		16,358		8,673		968		25,999		15,004		11,712		2,359		29,075
Segment operating income	$	32,651	$	9,324	$	836	$	42,811	$	28,337	$	12,574	$	200	$	41,111

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ the Company’s revenue by payor type was as follows:

	Personal Care
	For the Three Months Ended June 30,										For the Six Months Ended June 30,
Personal Care Segment																					For the Three Months Ended March 31,
	2021					2020					2021					2020					2022					2021
	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	$	88,382		50.2	%	$	78,054		50.0	%	$	169,231		49.6	%	$	157,398		49.7	%	$	83,908		49.5	%	$	80,849		49.0	%
Managed care organizations		78,865		44.7			69,282		44.3			154,321		45.2			141,393		44.6			77,390		45.6			75,456		45.8
Private pay		5,046		2.9			4,986		3.2			9,949		2.9			10,257		3.2			4,626		2.7			4,903		3.0
Commercial insurance		2,676		1.5			2,394		1.5			5,022		1.5			4,970		1.6			2,024		1.2			2,346		1.4
Other		1,298		0.7			1,552		1.0			2,612		0.8			2,915		0.9			1,684		1.0			1,314		0.8
Total personal care segment net service revenues	$	176,267		100.0	%	$	156,268		100.0	%	$	341,135		100.0	%	$	316,933		100.0	%	$	169,632		100.0	%	$	164,868		100.0	%

	Hospice
	For the Three Months Ended June 30,										For the Six Months Ended June 30,
Hospice Segment																					For the Three Months Ended March 31,
	2021					2020					2021					2020					2022					2021
	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	$	34,452		93.3	%	$	22,753		92.8	%	$	68,437		93.8	%	$	45,971		92.4	%	$	43,485		91.1	%	$	33,985		94.2	%
Commercial insurance																						2,244		4.7			533		1.5
Managed care organizations		1,395		3.8			1,198		4.9			2,882		3.9			2,578		5.2			1,715		3.6			1,487		4.1
Other		1,062		2.9			574		2.3			1,684		2.3			1,188		2.4			283		0.6			89		0.2
Total hospice segment net service revenues	$	36,909		100.0	%	$	24,525		100.0	%	$	73,003		100.0	%	$	49,737		100.0	%	$	47,727		100.0	%	$	36,094		100.0	%

	Home Health
	For the Three Months Ended June 30,										For the Six Months Ended June 30,
Home Health Segment																					For the Three Months Ended March 31,
	2021					2020					2021					2020					2022					2021
	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	$	3,825		81.1	%	$	3,010		79.6	%	$	7,327		80.9	%	$	6,480		79.8	%	$	6,812		73.4	%	$	3,502		80.7	%
Managed care organizations		822		17.4			688		18.2			1,620		17.9			1,495		18.4			1,904		20.5			798		18.4
Other		70		1.5			85		2.2			110		1.2			147		1.8			559		6.1			40		0.9
Total home health segment net service revenues	$	4,717		100.0	%	$	3,783		100.0	%	$	9,057		100.0	%	$	8,122		100.0	%	$	9,275		100.0	%	$	4,340		100.0	%

The Company derives a significant amount of its revenue from its operations in Illinois, New ~~York~~Mexico and New ~~Mexico.~~York. The percentages of segment revenue for each of these significant states for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~ were as follows:

	Personal Care
	For the Three Months Ended June 30,										For the Six Months Ended June 30,
Personal Care Segment																					For the Three Months Ended March 31,
	2021					2020					2021					2020					2022					2021
	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	$	84,788		48.0	%	$	69,052		44.2	%	$	158,172		46.3	%	$	140,598		44.4	%	$	84,693		49.9	%	$	73,385		44.5	%
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			25,440		15.0			23,593		14.3
New York ⁽¹⁾																						21,385		12.6			27,575		16.7
All other states		40,460		23.0			38,141		24.4			80,776		23.7			74,728		23.6			38,114		22.5			40,315		24.5
Total personal care segment net service revenues	$	176,267		100.0	%	$	156,268		100.0	%	$	341,135		100.0	%	$	316,933		100.0	%	$	169,632		100.0	%	$	164,868		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

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

%

(1)

In 2019, New York initiated a new Request For Offer (“RFO”) process to competitively procure CDPAP fiscal intermediaries. The Company was not selected in the initial RFO process. We submitted a formal protest in response to the selection process, which was filed and accepted in March 2021, but we have not yet received a response to the formal protest. The Company continues to consider other arrangements and to pursue our protest of the award. The New York fiscal year 2023 state budget, passed in April 2022, amends the current Fiscal Intermediary RFO process to authorize all fiscal intermediaries that submitted an RFO application and served at least 200 clients in New York City or 50 clients in other counties between January 1, 2020 and March 31, 2020 to contract with the New York State Department of Health and continue to operate in all counties contained in their application. Under this provision, the Company would be allowed to continue to contract with all of its current payors for CDPAP services. The Company is currently assessing the future of its participation in this program. Given the status of the program, the Company has suspended materially all of its new patient admissions under the New York CDPAP program.

~~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 ~~38.9%~~42.4%, and ~~37.4%~~35.8% of our net service revenues for the three months ended ~~June 30,~~March 31, 2022, and 2021, ~~and 2020, respectively, and accounted for 37.4% and 37.5% of our net service revenues for the six months ended June 30, 2021 and 2020,~~ respectively. The Illinois Department on Aging, the largest payor program for the Company’s Illinois personal care operations, accounted for ~~22.6%~~20.7% and ~~23.2%~~20.4% of the Company’s net service revenues for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and accounted for 21.5% and 23.2% of the Company’s net service revenues for the six months ended June 30, 2021 and 2020,~~ respectively.

The related receivables due from the Illinois Department on Aging represented ~~16.7% and 15.9%~~16.1% of the Company’s net accounts receivable at ~~June 30, 2021~~both March 31, 2022 and December 31, ~~2020, respectively.~~2021.

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, 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 the revolving credit facility. With the purchase of Armada, the Company expanded our home health and hospice services in the state of 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 ~~future~~anticipated impact to our business with respect to developments related to the COVID-19 pandemic, including, without limitation, those related to the length and severity of the pandemic, as well as the timing, availability and acceptance of effective medical treatments, vaccines and booster shots; the spread of potentially more contagious and/or virulent forms of the virus; the pandemic’s impact on our operations, reimbursement and our consumer population; measures we are taking to respond to the pandemic; the impact of government regulation, stimulus and ~~stimulus~~relief 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 any other stimulus or relief 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; workforce disruptions, including shortages and increased labor expenses, associated with competitive labor market conditions and the impact of quarantines; the impact of vaccine mandates on the workforce; and supply shortages and disruptions; 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~~state and ~~state~~city 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 federal, 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~~information technology 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, LLC and its affiliate Miracle City Hospice, LLC (together “Queen City Hospice”); the~~ potential ~~impact of the discontinuation or modification of LIBOR;~~acquisitions; the effectiveness, quality and cost of our services; our ability to successfully execute our growth strategy; changes in tax rates; the impact of public health ~~emergencies;~~emergencies, including the COVID-19 pandemic; the impact of inclement weather or natural disasters; 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, ~~2020,~~2021, filed with the SEC on ~~March 1, 2021.~~February 25, 2022. 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.

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 ~~37.2%~~35.7% and ~~38.6%~~37.9% of our net service revenues during the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and 37.5% and 38.8% of our net service revenues during the six months ended June 30, 2021 and 2020,~~ respectively.

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

A summary of certain consolidated financial results for the three months ended March 31, 2022 and 2021 is provided in the table below.

As of ~~June 30, 2021,~~March 31, 2022, we provided our services in 22 states through 207 offices. ~~For~~We served approximately 53,000 and 50,000 discrete individuals during the ~~six~~three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, we served approximately 56,000 and 55,000 discrete individuals,~~ respectively. Our personal care segment also includes staffing services, with clients including assisted living facilities, nursing homes and hospice facilities.

~~COVID-19,~~Although the ~~disease caused by~~United States has recently experienced a ~~novel coronavirus,~~moderation of infection and related hospitalization rates, there continues to be widespread throughout the United States and other parts of the world. Governments and public health officials continue to recommend and mandate certain precautions to mitigate the spread of the virus. The number of cases of COVID-19 has decreased in the United States in recent months as vaccines have become more widely available, and a significant ~~number of 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 ~~the change of restrictions~~deaths in the United States and throughout the world. Moreover, while economic conditions in the United States have ~~significantly improved during 2021. However~~continued to improve in ~~July 2021, due in part~~the first quarter of 2022 compared to earlier pandemic levels, inflationary pressures, competitive labor market conditions and supply chain disruptions continue to impact the ~~emergence~~U.S. economy. The long-term trends of new ~~variants of the novel coronavirus, as well as low vaccination rates~~cases and ~~an increase in the number of COVID-19 cases in certain parts of the United States and other parts of the world, certain governments and public health officials~~deaths in the United States and ~~globally~~the future impact of the pandemic continues to be unknown.

CMS issued an interim rule in November 2021 requiring COVID-19 vaccinations for Medicare- and Medicaid-certified providers and suppliers, including hospices and home health agencies, which covers clinical staff, individuals providing services under arrangements, volunteers and staff who are not involved in direct patient care. Additionally, some states have ~~begun~~implemented, or may implement in the future, vaccine mandates with respect to ~~recommend~~healthcare personnel. It is currently difficult to predict the ~~reinstitution~~impact that any of ~~certain mitigation strategies, such~~these vaccine mandates may have on us or the extent to which these vaccine mandates will ultimately become effective. However, we expect that these rules, to the extent that they become effective, will impact our home health and hospice segments.

We are monitoring developments as ~~masking. As such,~~information becomes available, including with respect to national, state and local vaccine mandates, to access the possible impact on our workforce in personal care, home health, hospice and our corporate support centers. We have developed a multistep program in order to strongly encourage our employees to get the COVID-19 vaccine, which included offering a vaccine stipend and incentives as well as creating educational and motivational leadership communication. These educational and motivational leadership communications are ongoing. We are actively engaged in an effort to track primary vaccination rates, which include the first and second doses, among caregivers and to continue to improve those rates. However, it is difficult to predict the future impact of the pandemic, including the impact of the President’s National COVID-19 Preparedness Plan and the implementation of existing and potential additional federal, state and local vaccine mandates on economic conditions in the United States and our business at this time.

For the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 2021, COVID-19-related expenses in our personal care segment were approximately ~~$11.4~~$1.7 million and ~~13.3~~$0.9 million, respectively, ~~which were 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~~are 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~~$1.4 million and ~~$4.8~~$1.8 million attributable to temporary rate increases from certain payors in our personal care segment for the three ~~and six~~ months ended ~~June 30,~~March 31, 2022 and 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, 2021,~~March 31, 2022, the Company deferred the recognition of ~~$6.4~~$5.9 million of payments received from payors for COVID-19 reimbursement, included within accrued expenses, which will be recognized as we incur specific expenses related to the pandemic, such as expenses related to acquiring additional PPE and COVID-19 related paid time off, or will be returned to the extent COVID-19-related expenses are not incurred. We are not able to reasonably predict the total costs we will incur related to the COVID-19 pandemic, and such costs could be substantial.

~~Due to lower COVID-19 infection rates~~Federal and the widespread availability of vaccinations, various restriction that previously limited non-essential employment opportunities in most states that we operate in have been lifted. Consequently, the 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 ability to attract and retain sufficient caregivers.

~~Federal~~state agencies continue to issue regulations and guidance related to the COVID-19 pandemic, and the public health 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.~~impacted by the pandemic. We will continue to assess the impact and consequences of the COVID-19 pandemic 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 and relief legislation, the President’s National COVID-19 Preparedness Plan, and existing and potential additional federal, state and local vaccine mandates, 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 I, Item 1A—“Risk 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~~economic and/or public health conditions deteriorate in connection with the pandemic” of our Annual Report on Form 10-K for the ~~period~~year ended December 31, ~~2020,~~2021, filed with the SEC on ~~March 1, 2021.~~February 25, 2022.

See “Liquidity and Capital Resources” below for additional information regarding funds received related to COVID-19 pandemic relief.

As the labor market has tightened and unemployment has declined in comparison to earlier levels, the competition for new caregivers, including skilled healthcare staff, has increased significantly. To the extent that we continue to experience a shortage of caregivers, it may hinder our ability to fully meet the continuing demand for both our non-clinical and clinical services. The increased staffing challenges, including quarantine requirements related to the Omicron surge, have resulted in increased labor cost to satisfy our staffing requirements during the three months ended March 31, 2022 compared to 2021 in our non-clinical and clinical operations.

In addition to our organic growth, we have grown through acquisitions that have expanded our presence in current markets, with the goal of having all three levels of in-home care in our markets or ~~facilitated~~facilitating our entry into new markets where in-home care has been moving to managed care organizations.

On July 1, 2020, we completed the acquisition of A Plus for approximately $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 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.~~

~~On December 4, 2020, we 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”~~(collectively, “Armada”) for approximately ~~$29.1~~$29.8 million, including the amount of acquired excess cash held by Armada at the closing of the acquisition (approximately $0.7 million), with funding provided by our revolving credit facility. With the purchase of Armada, we ~~increased~~expanded our ~~clinical depth~~home health and ~~operational strength in New Mexico and enhanced our ability to provide all three levels of home care~~hospice services in the ~~state.~~state of New Mexico.

On October 1, 2021, we completed the acquisition of Summit Home Health, LLC (“Summit”) for approximately $8.1 million, with funding provided by available cash. With the purchase of Summit, we added clinical services in Illinois to our home health segment.

On February 1, 2022, we completed the acquisition of the operations of JourneyCare, Inc. (“JourneyCare”) for approximately $85.0 million, including the amount of acquired excess cash held by JourneyCare at the closing of the acquisition (approximately $0.5 million), with funding provided through a combination of a $35.0 million draw under the revolving credit facility and available cash on hand. With the JourneyCare acquisition, the Company adds hospice services in Illinois.

Our ~~payor clients~~payors 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 and budgetary changes 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,~~March 31, 2022 and 2021, ~~and 2020,~~ our revenue by payor and significant states by segment were as follows:

Personal Care Segment																					For the Three Months Ended March 31,
	Personal Care																				2022					2021
	For the Three Months Ended June 30,										For the Six Months Ended June 30,										Amount (in Thousands)		% of Segment Net Service Revenues			Amount (in Thousands)		% of Segment Net Service Revenues
	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
State, local and other government programs	$	88,382		50.2	%	$	78,054		50.0	%	$	169,231		49.6	%	$	157,398		49.7	%
State, local and other governmental programs																					$	83,908		49.5	%	$	80,849		49.0	%
Managed care organizations		78,865		44.7			69,282		44.3			154,321		45.2			141,393		44.6			77,390		45.6			75,456		45.8
Private pay		5,046		2.9			4,986		3.2			9,949		2.9			10,257		3.2			4,626		2.7			4,903		3.0
Commercial insurance		2,676		1.5			2,394		1.5			5,022		1.5			4,970		1.6			2,024		1.2			2,346		1.4
Other		1,298		0.7			1,552		1.0			2,612		0.8			2,915		0.9			1,684		1.0			1,314		0.8
Total personal care segment net service revenues	$	176,267		100.0	%	$	156,268		100.0	%	$	341,135		100.0	%	$	316,933		100.0	%	$	169,632		100.0	%	$	164,868		100.0	%
Illinois	$	84,788		48.0	%	$	69,052		44.2	%	$	158,172		46.3	%	$	140,598		44.4	%	$	84,693		49.9	%	$	73,385		44.5	%
New Mexico																						25,440		15.0			23,593		14.3
New York(1)		25,535		14.5			27,244		17.4			53,110		15.6			59,082		18.6			21,385		12.6			27,575		16.7
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			38,114		22.5			40,315		24.5
Total personal care segment net service revenues	$	176,267		100.0	%	$	156,268		100.0	%	$	341,135		100.0	%	$	316,933		100.0	%	$	169,632		100.0	%	$	164,868		100.0	%

	Hospice
	For the Three Months Ended June 30,										For the Six Months Ended June 30,
Hospice Segment																					For the Three Months Ended March 31,
	2021					2020					2021					2020					2022					2021
	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	$	34,452		93.3	%	$	22,753		92.8	%	$	68,437		93.8	%	$	45,971		92.4	%	$	43,485		91.1	%	$	33,985		94.2	%
Commercial insurance																						2,244		4.7			533		1.5
Managed care organizations		1,395		3.8			1,198		4.9			2,882		3.9			2,578		5.2			1,715		3.6			1,487		4.1
Other		1,062		2.9			574		2.3			1,684		2.3			1,188		2.4			283		0.6			89		0.2
Total hospice segment net service revenues	$	36,909		100.0	%	$	24,525		100.0	%	$	73,003		100.0	%	$	49,737		100.0	%	$	47,727		100.0	%	$	36,094		100.0	%
Ohio	$	14,694		39.8	%	$	—		—	%	$	28,808		39.4	%	$	—		—	%	$	16,328		34.2	%	$	14,114		39.1	%
Illinois ⁽²⁾																						9,541		20.0			—		—
New Mexico		8,717		23.6			11,443		46.7			17,948		24.6			22,452		45.1			8,233		17.3			9,230		25.6
All other states		13,498		36.6			13,082		53.3			26,247		36.0			27,285		54.9			13,625		28.5			12,750		35.3
Total hospice segment net service revenues	$	36,909		100.0	%	$	24,525		100.0	%	$	73,003		100.0	%	$	49,737		100.0	%	$	47,727		100.0	%	$	36,094		100.0	%

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

	Home Health
	For the Three Months Ended June 30,										For the Six Months Ended June 30,
Home Health Segment																					For the Three Months Ended March 31,
	2021					2020					2021					2020					2022					2021
	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	$	3,825		81.1	%	$	3,010		79.6	%	$	7,327		80.9	%	$	6,480		79.8	%	$	6,812		73.4	%	$	3,502		80.7	%
Managed care organizations		822		17.4			688		18.2			1,620		17.9			1,495		18.4			1,904		20.5			798		18.4
Other		70		1.5			85		2.2			110		1.2			147		1.8			559		6.1			40		0.9
Total home health segment net service revenues	$	4,717		100.0	%	$	3,783		100.0	%	$	9,057		100.0	%	$	8,122		100.0	%	$	9,275		100.0	%	$	4,340		100.0	%
New Mexico	$	4,717		100.0	%	$	3,783		100.0	%	$	9,057		100.0	%	$	8,122		100.0	%	$	7,509		81.0	%	$	4,340		100.0	%
Illinois ⁽³⁾																						1,766		19.0			—		—
Total home health segment net service revenues	$	4,717		100.0	%	$	3,783		100.0	%	$	9,057		100.0	%	$	8,122		100.0	%	$	9,275		100.0	%	$	4,340		100.0	%

We derive a significant amount of our net service revenues in Illinois, which represented ~~38.9%~~42.4% and ~~37.4%~~35.8% of our net service revenues for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and accounted for 37.4% and 37.5% of our net service revenues for the six months ended June 30, 2021 and 2020,~~ respectively.

A significant amount of our net service revenues are derived from one payor, ~~client,~~ the Illinois Department on Aging, the largest payor program for our Illinois personal care operations, which accounted for ~~22.6%~~20.7% and ~~23.2%~~20.4% of our net service revenues for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively,~~ ~~and accounted for 21.5% and 23.2% of the Company’s net service revenues for the six months ended June 30, 2021 and 2020,~~ respectively.

On November 26, 2019, the City 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. In subsequent years, minimum wage will be increased through a cost of living adjustment capped at 2.5%.

Effective January 1, 2021, the state of Illinois fiscal year 2021 budget increased hourly in-home care rates through the Community Care Program by 7.1%, to $23.40 from $21.84. 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~~The Company recognized $2.0 million related to the rate increase for ~~services delivered from January 1, 2021 to March~~the year ended December 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~~which is expected to be received ~~in September 2021. On June 17, 2021,~~during the ~~Governor~~second quarter of 2022.

Effective January 1, 2022, the Illinois ~~signed the~~ fiscal year 2022 budget ~~which funds an increase of~~increased hourly in-home care rates to $24.96. On July 12, 2021, in connection with the temporary increase in federal funding for Medicaid home and community-based services authorized by the ARPA, Illinois submitted its Initial Spending Plan and Narrative to CMS for approval. Included in that plan is the acceleration of the rate increase to $24.96 from January 1, 2022, to November 1, 2021. The Company recognized $3.6 million related to the rate increase for the year ended December 31, 2021 which is expected to be received during the second quarter of 2022. CMS granted partial approval of the Illinois plan but highlighted that the state will need to submit an amendment for certain Medicaid waiver programs with regard to any rate change methodology. CMS has approved the waiver amendment to increase rates effective November 1, 2021.

The Illinois fiscal year 2023 budget was signed into law by the Governor on April 19, 2022 and includes a $0.70 rate increase effective January 1, 2023. The Chicago minimum wage is projected to increase by 2.5% effective July 1, 2022.

Our business will benefit from the rate increases noted above as planned for ~~2022,~~2023, but there is no assurance that there will be additional offsetting rate increases ~~will be adopted~~ in Illinois for fiscal years beyond fiscal year ~~2022,~~2023, and our financial performance will be adversely impacted for any periods in which an additional offsetting reimbursement rate increase is not in effect.

Home health services provided to Medicare beneficiaries are paid under the Medicare Home Health Prospective Payment System (“HHPPS”), which uses national, standardized 30-day period payment rates for periods of care that meet a certain threshold of home health visits (periods of care that do not meet the visit threshold are paid a per-visit payment rate for providing care). Although payment is made for each 30-day period, the HHPPS permits continuous 60-day certification periods through which beneficiaries are verified as eligible for the home health benefit. The daily home health payment rate is adjusted for case-mix and area wage levels. CMS uses the Patient-Driven Groupings Model (“PDGM”) as the case-mix classification model to place periods of care into payment categories, classifying patients based on clinical characteristics and their resource needs. An outlier adjustment may be paid for periods of care where costs exceed a specific threshold amount.

CMS updates the HHPPS payment rates each calendar year. ~~Effective~~For calendar year ~~2021,~~2022, CMS increased HHPPS rates ~~increased~~ by ~~2.0%~~an estimated 3.2%, which reflects a ~~2.3%~~3.1% market basket update ~~reduced by~~and a ~~multifactor~~ productivity adjustment of ~~0.3~~negative 0.5 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 mandated by the Bipartisan Budget Act of 2018.points, among other changes. Home health providers that do not comply with quality data reporting requirements are subject to a ~~2 percentage~~2-percentage point reduction to their market basket update.

~~Historically, CMS paid~~In addition, beginning January 1, 2022, Medicare requires 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 has phased out RAP payments. In calendar year 2021, CMS will not provide any up-front payments in response to a RAP but will continue to require home health providersagencies to submit ~~streamlined RAPs as notice~~a one-time Notice of Admission (“NOA”) for each patient that aestablishes that the beneficiary is under a Medicare home health period of care. InFailure to submit the NOA within five calendar days from the start of care will result in a reduction to the 30-day period payment amount for each day from the start of care date until the date the NOA is submitted.

Effective January 1, 2022, CMS began implementing a nationwide expansion of the Home Health Value-Based Purchasing (“HHVBP”) Model. Under the model, home health agencies will receive increases or decreases to their Medicare fee-for-service payments of up to 5%, based on performance against specific quality measures relative to the performance of other home health providers. Data collected in each performance year will impact Medicare payments two years later. Calendar year 2023 is the first performance year under the expanded HHVBP Model, which will affect payments in calendar year ~~2022, CMS will replace~~2025.

In certain states, payment of claims may be impacted by the ~~RAP~~Review Choice Demonstration for Home Health Services, a program intended to identify and prevent fraud, reduce the number of Medicare appeals and improve provider compliance with Medicare program requirements. The program applies to home health agencies in Illinois, Ohio, North Carolina, Florida and Texas and may expand, in the future, into additional states. Providers in states subject to the Review Choice Demonstration 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 ~~“Notice~~25% payment reduction. Home health agencies that maintain high compliance levels will be eligible for additional options that may be less burdensome. We are currently unable to predict what impact, if any, this program may have on our result of ~~Admission.”~~operations or financial position.

Hospice services provided to Medicare beneficiaries are paid under the Medicare Hospice Prospective Payment System, under which CMS sets a daily rate for each day a patient is enrolled in the hospice benefit. CMS updates these rates each federal fiscal year. Effective October 1, ~~2020,~~2021, CMS increased hospice payment rates by ~~2.4%~~2.0%. This ~~reflected~~reflects a ~~2.4%~~2.7% market basket increase ~~reduced~~and a negative 0.7 percentage point productivity adjustment. Hospices that do not satisfy quality reporting requirements are subject to a 2 percentage point reduction to the market basket update. Beginning in 2024, the reduction to the market basket update for failure to report quality data will increase to 4 percentage points.

Overall payments made by Medicare to each hospice provider number are subject to an inpatient cap and an aggregate cap, which is set each federal fiscal year. The inpatient cap limits the ~~multifactor productivity adjustment~~number of ~~0.0 percentage points. Additionally, the~~days of inpatient care to no more than 20% of total patient care days. The aggregate cap, which limits the total Medicare reimbursement that a hospice may receive based on an annual per-beneficiary cap amount and the number of Medicare patients served, was updated to ~~$30,683.93~~$31,297.61 for federal fiscal year ~~2021.~~2022. If a hospice’s Medicare payments exceed its inpatient or aggregate ~~cap,~~caps, it must repay Medicare the excess amount.

~~On February 11,~~ The New York Consumer Directed Personal Assistance Program (“CDPAP”) is a self-directed care alternative program that allows eligible individuals who need help with activities of daily living or skilled nursing services to choose their caregivers. We provide support services as a CDPAP fiscal intermediary. In 2021, the ~~state of New York announced its initial selection of parties~~Company was not selected to enter into contracts as a 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~~and submitted a provider. The Company was not one of the 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 does not expect a financial impact in 2021. Based on its current run rate, the Company estimates it will receive $52 million and $4 million in revenue and operating income, respectively, from the program for the year ended December 31, 2021. The Company continues to explore its options, including appeals, other arrangements under which the Company may continue to provide these services, and expense reductions to minimize any potential final impact of the RFO process.formal

protest in response to the 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 on or after November 1, 2021. In the meantime, we continue to consider other arrangements and to pursue our protest of the award,selection process, which was filed and accepted on March 19, 2021. The Company has not yet received a response to the formal protest.

~~Components~~The New York fiscal year 2023 state budget, passed in April 2022, amends the current Fiscal Intermediary Request For Offer (“RFO”) process to authorize all fiscal intermediaries that submitted an RFO application and served at least 200 clients in New York City or 50 clients in other counties between January 1, 2020 and March 31, 2020 to contract with the New York State Department of Health and continue to operate in all counties contained in their application.Under this provision, the Company would be allowed to continue to contract with all of its current payors for CDPAP services. The Company is currently assessing the future of its participation in this program. Given the status of the program, the Company suspended materially all of its new patient admissions under the New York CDPAP.

We generate net service revenues by providing our services directly to consumers and primarily on an hourly 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,~~private consumers andpayors, including federal, state and local governmental agencies, managed care organizations and commercial ~~insurers and private pay consumers.~~insurers.

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 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, using straight line or accelerated methods based upon their estimated useful lives.

Interest expense is reported when incurred and principally consists of interest and unused credit line fees on the credit 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, 2021 and 2020, the federal statutory rate was 21.0%.~~ The effective income tax rate was ~~26.7%~~27.9% and ~~23.6%~~19.0% for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively. The effective income tax rates are 23.5% and 18.6% for the six months ended June 30, 2021 and 2020, respectively.~~ respectively, compared to our federal statutory rate of 21%. The difference between our federal statutory and effective income tax rates is was principally due to the inclusion of state taxes, non-deductible compensation and excess tax ~~benefit, and~~expense, partially offset by the use of federal employment tax credits.

Three Months Ended ~~June 30, 2021~~March 31, 2022 Compared to Three Months Ended ~~June 30, 2020~~March 31, 2021

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

	For the Three Months Ended June 30,																				For the Three Months Ended March 31,
	2021						2020							Change							2022						2021						Change
				% Of						% Of														% Of						% Of
				Net Service						Net Service														Net Service						Net Service
	Amount			Revenues			Amount			Revenues				Amount		%					Amount			Revenues			Amount			Revenues			Amount			%
	(Amounts in Thousands, Except Percentages)																			(Amounts in Thousands, Except Percentages)
Net service revenues	$	217,893			100.0	%	$	184,576			100.0		%	$	33,317		18.1		%		$	226,634			100.0	%	$	205,302			100.0	%	$	21,332			10.4		%
Cost of service revenues		149,083			68.4			129,579			70.2				19,504		15.1					156,448			69.0			144,105			70.2			12,343			8.6
Gross profit		68,810			31.6			54,997			29.8				13,813		25.1					70,186			31.0			61,197			29.8			8,989			14.7
General and administrative expenses		48,175			22.1			42,450			23.0				5,725		13.5					53,152			23.5			45,426			22.1			7,726			17.0
Depreciation and amortization		3,587			1.6			2,940			1.6				647		22.0					3,521			1.5			3,601			1.8			(80	)		(2.2	)
Total operating expenses		51,762			23.8			45,390			24.6				6,372		14.0					56,673			25.0			49,027			23.9			7,646			15.6
Operating income		17,048			7.8			9,607			5.2				7,441		77.5					13,513			6.0			12,170			5.9			1,343			11.0
Interest income		(31	)		—			(155	)		(0.1	)			124		(80.0	)				(58	)		—			(22	)		—			(36	)		163.6
Interest expense		1,262			0.6			721			0.4				541		75.0					1,820			0.8			1,216			0.6			604			49.7
Total interest expense, net		1,231			0.6			566			0.3				665		117.5					1,762			0.8			1,194			0.6			568			47.6
Income before income taxes		15,817			7.3			9,041			4.9				6,776		74.9					11,751			5.2			10,976			5.3			775			7.1
Income tax expense		4,220			1.9			2,134			1.2				2,086		97.8					3,281			1.5			2,082			1.0			1,199			57.6
Net income	$	11,597			5.3	%	$	6,907			3.7		%	$	4,690		67.9		%		$	8,470			3.7	%	$	8,894			4.3	%	$	(424	)		(4.8	)	%

Net service revenues increased by ~~18.1%~~10.4% to ~~$217.9~~$226.6 million for the three months ended ~~June 30, 2021~~March 31, 2022 compared to ~~$184.6~~$205.3 million for the three months ended ~~June 30, 2020. The increase was~~March 31, 2021. Revenue increased by $11.6 million in our hospice segment and by $4.9 million in our home health segment during the three months ended March 31, 2022, compared to the same period in 2021, largely due to ~~a 3.7% increase~~acquisitions. In addition, revenue increased by $4.8 million in ~~billable hours and a 6.9%~~our personal care segment, during the three months ended March 31, 2022, compared to the same period in 2021 primarily due to an 8.7% increase in revenues per billable hour, ~~for~~partially offset by a decrease in the ~~three months ended June 30, 2021 in our personal care segment.~~ New York CDPAP program.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%~~31.0% for the three months ended ~~June 30, 2021,~~March 31, 2022, compared to 29.8% for the same period in ~~2020. The increase was mainly attributed~~2021 due to ~~the full-quarter effect~~growth in ~~2021 of the acquisition of a relatively~~our higher margin hospice ~~segment business in 2020.~~segment.

General and administrative expenses increased to ~~$48.2~~$53.2 million for the three months ended ~~June 30, 2021,~~March 31, 2022 as compared to ~~$42.5~~$45.4 million for the three months ended ~~June 30, 2020.~~March 31, 2021. 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~~$4.9 million, an increase in acquisition expense of $1.3 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~~increased to 23.5% for the three months ended March 31, 2022, from 22.1% for the three months ended ~~June 30, 2021, from 23.0% for the three months ended June 30, 2020.~~March 31, 2021.

Depreciation and amortization expense ~~increased~~decreased to ~~$3.6 million from $2.9~~$3.5 million for the three 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 $1.3~~March 31, 2022 from $3.6 million for the three months ended ~~June 30, 2021 from $0.7~~March 31, 2021.

Interest expense increased to $1.8 million for the three months ended ~~June 30, 2020.~~March 31, 2022 from $1.2 million for the three months ended March 31, 2021. The increase in interest expense was primarily due to higher outstanding borrowings under our credit facility for the three months ended ~~June 30, 2021~~March 31, 2022 compared to the three months ended ~~June 30, 2020.~~March 31, 2021 due to the JourneyCare acquisition.

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%~~27.9% and ~~23.6%~~19.0% for the three months ended ~~June 30,~~March 31, 2022 and 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 and excess tax expense, 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~~ For the three months ended ~~June 30,~~March 31, 2022 and 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 the use of federal employment tax credits and excess tax benefit. For the six months ended June 30, 2020, 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. For the six months ended June 30, 2021 and 2020, the effective tax rates were inclusive of an excess tax expense of 2.7% and an excess tax benefit of ~~3.0% and 7.5%~~7.4%, respectively. The excess tax expense or benefit is a discrete item ~~related to the vesting of equity shares,~~ which requires the Company to recognize the expense or benefit fully in the ~~period.~~quarter.

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

	For the Three Months Ended June 30,																	For the Six Months Ended June 30,																	For the Three Months Ended March 31,
	2021					2020					Change							2021					2020					Change							2022						2021						Change
Personal Care Segment	Amount		% of Segment Net Service Revenues			Amount		% of Segment Net Service Revenues			Amount			%				Amount		% of Segment Net Service Revenues			Amount		% of Segment Net Service Revenues			Amount			%
																																			Amount			% of Segment Net Service Revenues			Amount			% of Segment Net Service Revenues			Amount			%
	(Amounts in Thousands, Except Percentages)																	(Amounts in Thousands, Except Percentages)																	(Amounts in Thousands, Except Percentages)
Operating Results
Net service revenues	$	176,267		100.0	%	$	156,268		100.0	%	$	19,999			12.8		%	$	341,135		100.0	%	$	316,933		100.0	%	$	24,202			7.6		%	$	169,632			100.0	%	$	164,868			100.0	%	$	4,764			2.9		%
Cost of services revenues		127,258		72.2			115,822		74.1			11,436			9.9				250,097		73.3			234,850		74.1			15,247			6.5				126,291			74.4			122,839			74.5			3,452			2.8
Gross profit		49,009		27.8			40,446		25.9			8,563			21.2				91,038		26.7			82,083		25.9			8,955			10.9				43,341			25.6			42,029			25.5			1,312			3.1
General and administrative expenses		16,358		9.3			14,603		9.3			1,755			12.0				31,641		9.3			30,205		9.5			1,436			4.8				15,004			8.9			15,283			9.3			(279	)		(1.8	)
Segment operating income	$	32,651		18.5	%	$	25,843		16.5	%	$	6,808			26.3		%	$	59,397		17.4	%	$	51,878		16.4	%	$	7,519			14.5		%	$	28,337			16.7	%	$	26,746			16.2	%	$	1,591			5.9		%
Business Metrics (Actual Numbers, Except Billable Hours in Thousands)
Location at period end																			164					150
Locations at period end																																				162						164
Average billable census * ⁽¹⁾		38,493					36,197					2,296			6.3		%		38,410					37,560					850			2.3		%		36,582						38,327						(1,745	)		(4.6	)	%
Billable hours * ⁽²⁾		7,650					7,374					276			3.7				15,187					15,048					139			0.9				7,101						7,567						(466	)		(6.2	)
Average billable hours per census per month * ⁽²⁾		65.9					67.5					(1.6	)		(2.4	)			65.6					66.3					(0.7	)		(1.1	)			64.4						65.2						(0.8	)		(1.2	)
Billable hours per business day * ⁽²⁾		117,688					113,447					4,241			3.7				117,729					115,750					1,979			1.7				110,951						118,237						(7,286	)		(6.2	)
Revenues per billable hour * ⁽²⁾	$	22.60				$	21.14				$	1.46			6.9		%	$	22.42				$	21.01				$	1.41			6.7		%	$	23.64					$	21.75					$	1.89			8.7		%
Same store revenue growth % * ⁽³⁾		7.4					9.7												5.9				11.8
Same store growth revenue % * ⁽³⁾																																				0.9	%					2.4	%

~~We derive~~The personal care segment derives a significant amount of ~~our~~its net service revenues from operations in Illinois, which represented ~~38.9%~~42.4% and ~~37.4%~~35.8% of ~~our~~ net service revenues for the three months ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~, ~~respectively, and accounted for 37.4% and 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%~~20.7% and ~~23.2%~~20.4% of net service revenues for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively,~~ ~~and accounted for 21.5% and 23.2% of net service revenues for the six months ended June 30, 2021 and 2020, respectively~~.

respectively. Net service revenues from state, local and other governmental ~~payors~~programs accounted for ~~50.2%~~49.5% and ~~50.0%~~49.0% of net service revenues for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. Managed care organizations accounted for ~~44.7%~~45.6% and ~~44.3%~~45.8% of net service revenues for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively, with commercial insurance, private pay and other payors accounting for the remainder of net service revenues. Net service revenues from state, local and other governmental payors accounted for 49.6% and 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~~ ~~44.6% of net service revenues for the six months ended June 30, 2021 and 2020,~~ ~~respectively~~ ~~with commercial insurance, private pay and other payors accounting for the remainder of net service revenues.~~

Net service revenues increased by ~~12.8% and~~ ~~7.6%~~ 2.9% for the three ~~and six~~ months ended ~~June 30, 2021, respectively,~~March 31, 2022 compared to the three ~~and six~~ months ended ~~June 30, 2020.~~March 31, 2021. Net service revenues ~~included~~increased primarily as a ~~6.9% and 6.7%~~result of an 8.7% increase in revenues per billable hour ~~for the three and six months ended June 30, 2021, respectively,~~, mainly attributed to rate increases discussed ~~above, as compared to the three and six months ended June 30, 2020. Due to~~above. The Company experienced a decrease in ~~restrictions related to COVID-19, billable hours~~ ~~increased by 3.7% and 0.9%~~ New York net service revenues of $6.2 million for the three ~~and six~~ months ended ~~June 30, 2021, respectively,~~March 31, 2022, primarily driven by a decrease in participation in the New York CDPAP program as discussed above, compared to ~~the three and six months ended June 30, 2020.~~2021.

Gross profit, expressed as a percentage of net service revenues, increased to ~~27.8%~~25.6% for the three months ended ~~June 30, 2021~~March 31, 2022 from ~~25.9%~~25.5% for the three months ended ~~June 30, 2020~~ ~~and from 26.7% for the six months ended June 30, 2021 to 25.9% for the six months ended June 30, 2020~~.March 31, 2021. This increase was primarily due to a decrease in direct payroll as a percentage of net service revenues of ~~1.9%~~0.1% for the three months ended ~~June 30, 2021~~March 31, 2022 as compared to the three months ended ~~June 30, 2020.~~March 31, 2021.

General and administrative expenses remained relatively consistent for the three months ended ~~June 30, 2021 and 2020, general and administrative expenses, expressed~~March 31, 2022, as ~~a percentage of net service revenues, was 9.3% and for~~compared to the ~~six~~three months ended ~~June 30, 2021 and 2020 was 9.3% and 9.5%, respectively.~~March 31, 2021.

	For the Three Months Ended June 30,																		For the Six Months Ended June 30,																		For the Three Months Ended March 31,
	2021						2020					Change							2021						2020					Change							2022						2021							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			%
	(Amounts in Thousands, Except Percentages)																		(Amounts in Thousands, Except Percentages)																		(Amounts in Thousands, Except Percentages)
Operating Results
Net service revenues	$	36,909			100.0	%	$	24,525		100.0	%	$	12,384			50.5		%	$	73,003			100.0	%	$	49,737		100.0	%	$	23,266			46.8		%	$	47,727			100.0	%	$	36,094				100.0	%	$	11,633			32.2		%
Cost of services revenues		18,912			51.2			10,924		44.5			7,988			73.1				37,508			51.4			23,242		46.7			14,266			61.4				23,441			49.1			18,596				51.5			4,845			26.1
Gross profit		17,997			48.8			13,601		55.5			4,396			32.3				35,495			48.6			26,495		53.3			9,000			34.0				24,286			50.9			17,498				48.5			6,788			38.8
General and administrative expenses		8,673			23.5			6,297		25.7			2,376			37.7				17,136			23.5			12,754		25.6			4,382			34.4				11,712			24.6			8,463				23.5			3,249			38.4
Segment operating income	$	9,324			25.3	%	$	7,304		29.8	%	$	2,020			27.7		%	$	18,359			25.1	%	$	13,741		27.7	%	$	4,618			33.6		%	$	12,574			26.3	%	$	9,035				25.0	%	$	3,539			39.2		%
Business Metrics (Actual Numbers)
Locations at period end																				33						30												33						34
Admissions * ⁽¹⁾		2,252						1,339					913			68.2		%		4,646						2,994					1,652			55.2		%		3,315						2,394							921			38.5		%
Average daily census * ⁽²⁾		2,460						1,743					717			41.1				2,430						1,803					627			34.8				3,320						2,400							920			38.3
Average discharge length of stay * ⁽³⁾		89						103					(14	)		(13.4	)			96						101					(5	)		(5.4	)			84						101							(17	)		(16.8	)
Patient days * ⁽⁴⁾		223,901						158,644					65,257			41.1				439,908						328,156					111,752			34.1				275,488						216,007							59,481			27.5
Revenue per patient day * ⁽⁵⁾	$	164.85					$	154.59				$	10.26			6.6		%	$	165.95					$	151.57				$	14.38			9.5		%	$	173.24					$	167.09						$	6.15			3.7		%
Same store revenue growth % * ⁽⁶⁾		(8.4	)					2.7												(8.4	)					2.7
Organic growth
- Revenue * ⁽⁶⁾																																						4.4	%					(8.4	)	%
- Average daily census * ⁽⁶⁾																																						7.0	%					(20.2	)	%

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

Net service revenues from Medicare accounted for ~~93.3%~~91.1% and ~~92.8%~~94.2% and managed care organizations accounted for ~~3.8%~~3.6% and ~~4.9%~~4.1% of total hospice segment net service revenues for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. ~~Net service revenues from Medicare accounted for 93.8% and 92.4% and managed care organizations accounted for 3.9% and 5.2% for the six months ended June 30, 2021 and 2020, respectively.~~

Net service revenues increased by ~~$12.4~~$11.6 million ~~and $23.3~~ for the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022 compared to the three ~~and six~~ months ended ~~June 30, 2020. For the three and six months ended June 30,~~March 31, 2021 ~~net service revenues increased~~ primarily ~~due to increases in average daily census and revenue per patient day mainly~~ attributed to organic growth and the ~~acquisition~~acquisitions of ~~Queen City Hospice~~the operations of JourneyCare on ~~December 4, 2020.~~February 1, 2022 and Armada on August 1, 2021.

Gross profit, expressed as a percentage of net service revenues was ~~48.8%~~50.9% and ~~55.5%~~48.5% for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively,~~ respectively. ~~and 48.6% and 53.3%, for the six months ended June 30, 2021 and 2020, respectively~~. For the three ~~and six~~ months ended ~~June 30, 2021,~~March 31, 2022, the ~~decrease~~increase as a percentage of net service revenues was mainly attributed to ~~an increase~~a decrease of direct employee wages, taxes and benefit costs of ~~5.5% and 4.9%, respectively.~~1.5%.

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 ~~23.5%~~24.6% and ~~25.7%~~23.5% for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively,~~ ~~and 23.5% and 25.6% for the six months ended June 30, 2021 and 2020, respectively. These decreases for the three and six months ended June 30, 2021 compared to corresponding periods in 2020 are primarily due to acquisitions synergies.~~respectively. The increase in general and administrative expenses ~~for the three and six months ended June 30, 2021,~~ was primarily due to acquisitions that resulted in a ~~$1.7 million and $3.2~~$2.6 million increase in administrative employee wages, taxes and benefit ~~costs.~~costs and a $0.6 million increase in rent expenses for the three months ended March 31, 2022.

	For the Three Months Ended June 30,																For the Six Months Ended June 30,																	For the Three Months Ended March 31,
	2021					2020						Change					2021					2020					Change							2022							2021						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			%
	(Amounts in Thousands, Except Percentages)																(Amounts in Thousands, Except Percentages)																	(Amounts in Thousands, Except Percentages)
Operating Results
Net service revenues	$	4,717		100.0	%	$	3,783			100.0	%	$	934		24.7	%	$	9,057		100.0	%	$	8,122		100.0	%	$	935			11.5		%	$	9,275				100.0	%	$	4,340			100.0	%	$	4,935			113.7		%
Cost of services revenues		2,913		61.8			2,833			74.9			80		2.8			5,583		61.6			5,868		72.2			(285	)		(4.9	)			6,716				72.4			2,670			61.5			4,046			151.5
Gross profit		1,804		38.2			950			25.1			854		89.9			3,474		38.4			2,254		27.8			1,220			54.1				2,559				27.6			1,670			38.5			889			53.2
General and administrative expenses		968		20.5			883			23.3			85		9.6			1,933		21.3			1,905		23.5			28			1.5				2,359				25.4			965			22.3			1,394			144.5
Segment operating income	$	836		17.7	%	$	67			1.8	%	$	769		1,147.8	%	$	1,541		17.0	%	$	349		4.3	%	$	1,192			341.5		%	$	200				2.2	%	$	705			16.2	%	$	(505	)		(71.6	)	%
Business Metrics (Actual Numbers)
Locations at period end																		10					10												12							10
New admissions * ⁽¹⁾		1,186					1,068						118		11.0	%		2,354					2,090					264			12.6		%		3,336							1,168						2,168			185.6		%
Recertifications * ⁽²⁾		738					689						49		7.1			1,395					1,399					(4	)		(0.3	)			1,316							657						659			100.3
Total volume * ⁽³⁾		1,924					1,757						167		9.5			3,749					3,489					260			7.5				4,652							1,825						2,827			154.9
Visits * ⁽⁴⁾		31,582					29,797						1,785		6.0	%		59,247					63,507					(4,260	)		(6.7	)	%		65,213							27,665						37,548			135.7		%
Same store revenue growth % * ⁽⁵⁾		24.7					(4.3	)										11.5					4.1
Organic growth
- Revenue * ⁽⁵⁾																																			(0.5	)	%					—	%
- Admissions * ⁽⁵⁾																																			2.4		%					14.3	%

The home health segment 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 81.1%~~ and ~~79.6%,~~ managed care organizations accounted for ~~17.4%~~73.4% and ~~18.2%~~80.7% and ~~other accounted for 1.5%~~20.5% and ~~2.2%~~18.4%, of total home health segment net service revenues for the three months ended ~~June 30,~~March 31, 2022 and 2021, ~~and 2020, respectively.~~ Net service revenues from Medicare accounted for 80.9% and 79.8%, managed care organizations accounted for 17.9% and 18.4% and other accounted for 1.2% and 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,~~Home health services provided to Medicare beneficiaries are paid under the Medicare Home Health Prospective Payment System, which uses national, standardized 30-day period payment rates for periods of care. CMS ~~began using a 30-day episode~~uses the PDGM as the case-mix classification model to place periods 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~~into payment categories, classifying patients based on clinical ~~characteristics and other patient information into payment categories and eliminates the use~~characteristics. An outlier adjustment may be paid for periods of ~~therapy service thresholds for determination of payments. Also effective January 1, 2020, CMS finalized~~care in which costs exceed 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.~~specific threshold amount.

Net service revenues increased by ~~$0.9~~$4.9 million for ~~each of~~ the three ~~and six~~ months ended ~~June 30, 2021~~March 31, 2022 compared to the three ~~and six~~ months ended ~~June 30, 2020.~~March 31, 2021. Total visits increased for the three months ended ~~June 30,~~March 31, 2022, mainly attributed to the acquisition of Armada on August 1, 2021 and Summit on October 1, 2021, partially offset by a decrease in revenue related to the Omicron surge.

Gross profit, expressed as ~~COVID-19 restrictions ease.~~a percentage of net service revenues was 27.6% and 38.5% for the three months ended March 31, 2022 and 2021, respectively. For the three months ended March 31, 2022, the decrease was due to an increase of direct employee wages, taxes and benefit costs of

~~Gross profit, expressed~~8.7% as a percentage of net service revenues ~~was 38.2% and 25.1%~~compared to the three months ended March 31, 2021. Cost of service for the three months ended ~~June 30, 2021 and 2020, respectively,~~ ~~and 38.4% and 27.8%, for the six months ended June 30, 2021 and 2020, respectively~~. For the three and six months ended June 30, 2021, the increase was due to a decrease of direct employee wages, taxes and benefit costs of 11.1% and 9.0%, respectively, as a percentage of net service revenues. Cost of service for the six months ended June 30, 2021 decreasedMarch 31, 2022 increased compared to the corresponding period in ~~2020,~~2021, due to ~~a decrease~~an increase in ~~visits in connection with PDGM case mix.~~clinical caregiver training.

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 ~~20.5%~~25.4% and ~~23.3%~~22.3%, respectively, for the three months ended ~~June 30,~~March 31, 2022 and 2021, respectively. The increase in general and ~~2020, respectively,~~ administrative expenses was primarily due to acquisitions that resulted in a $1.2 million increase in administrative employee wages, taxes and ~~21.3% and 23.5%~~benefit costs for the ~~six~~three months ended ~~June 30, 2021 and 2020, respectively~~March 31, 2022..

Our primary sources of liquidity are cash on hand and cash from ~~operations.~~operations and borrowings under our credit facility. At ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, we had cash balances of ~~$139.4~~$124.8 million and ~~$145.1~~$168.9 million, respectively.

~~Cash flows from operating activities represent the inflow of cash from our payor clients~~At March 31, 2022, we had a $600.0 million revolving credit facility and ~~the outflow of cash~~a $125.0 million incremental loan facility, which may be for payroll and payroll taxes, operating expenses, interest and taxes. The open receivable balance from the Illinois Department on Aging, the largest payor program for the Company’s Illinois personal care operation, increased by $1.7 million from $21.2 million as of December 31, 2020 to $22.9 million as of June 30, 2021. The state of Illinois fiscal year 2021 budget includedterm loans or 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~~revolving loan commitments. The maturity of ~~care. The bonus payment of $3.0 million was recognized as net service revenues during the three and six months ended June~~this credit facility is July 30, ~~2021, and is expected to be received in September 2021.~~2026.

During the three ~~and six~~ months ended ~~June 30, 2021, we did not draw on~~March 31, 2022, drew $35.0 million under our revolving credit facility to fund, in part, the ~~term loan.~~JourneyCare acquisition. ~~As of June 30, 2021,~~At March 31, 2022, we had a total of ~~$178.5~~$259.9 million in revolving loans, with an interest rate of ~~2.08%~~2.46% outstanding on its credit facility and ~~$17.6 million of term loans, with an interest rate of 2.09%. After~~after giving effect to the amount drawn on our credit facility, approximately ~~$8.7~~$8.1 million of outstanding letters of credit and borrowing limits based on an advance multiple of adjusted EBITDA (as defined in the Credit Agreement), we had ~~$112.8~~$377.6 million of capacity and $109.6 million available for borrowing under our ~~revolving~~ credit ~~loan~~ facility. At December 31, ~~2020,~~2021, we had a total of ~~$178.5~~$224.9 million revolving credit loans, with an interest rate of ~~1.90%~~2.10%, ~~and $18.1 million term loans, with an interest rate of 1.90%.~~outstanding on our credit facility.

Our credit facility requires us to maintain a total net leverage ratio not exceeding 3.75:1.00. At ~~June 30, 2021,~~March 31, 2022, 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.

~~COVID-19~~See Note 8 to the Notes to Condensed Consolidated Financial Statements, Long-Term Debt, for additional details of our long-term debt.

~~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.Pandemic

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,~~July 15, 2022, 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.

In November 2020, the Company received grants in an aggregate principal amount of $13.7 million from the Provider Relief Fund, and fully utilized these funds as of December 31, 2021, including $0.9 million during the three months ended March 31, 2021, for healthcare related expenses, including retention payments, attributable to COVID-19 that were unreimbursed by other sources. We were required to properly and fully document the use of such funds in reports to HHS, which we were required to submit no later than March 31, 2022. We have submitted the required reports.

The ~~American Rescue Plan~~CARES Act allowed for the deferral of the employer portion of Social Security payroll taxes through December 31, 2020. As of March 31, 2022 and December 31, 2021, the deferred portion of employer Social Security payroll taxes was $4.1 million, which is included within Government stimulus advances on the Company’s Unaudited Condensed Consolidated Balance Sheets. The payroll tax deferral requires that the remaining deferred payroll taxes be paid by December 31, 2022.

The ARPA, which became law on March 11, 2021, ~~provides~~provided 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~~provided for a 10 percentage point increase in federal matching funds for Medicaid ~~home and community based services~~HCBS from April 1, 2021, through March ~~30,~~31, 2022, provided the state ~~satisfies~~satisfied certain

conditions. ~~These and other federal stimulus measures may help~~States are permitted to ~~ease state-level budget constraints due to COVID-19.~~

~~One of~~use 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 responsestate funds equivalent to the ~~COVID-19 pandemic and are~~additional federal funds through March 31, 2024. States must use the monies attributable to this matching fund increase to supplement, 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~~supplant, their level 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~~state spending 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 useimplementation 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 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 2020activities enhanced under the ~~CARES Act, for the period~~Medicaid HCBS in effect as of 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.

The CARES Act and related legislation ~~also include other provisions offering financial relief, for example~~ temporarily ~~lifting~~lifted the Medicare sequester ~~which~~that 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~~2021. Congress further delayed these sequestration cuts through ~~2030).~~ ~~This~~March 31, 2022, and reduced the sequestration adjustment to 1% from April 1 through June 30, 2022. The full 2% reduction is currently scheduled to resume July 1, 2022. These sequestration cuts have been extended through 2030, with the reductions for 2030 set to increase to 2.25% for the first six months and to 3% for the second six months.

In our hospice segment, Medicare sequester relief resulted in an increase ~~of $0.1 million and $0.2 million to home health~~in net service revenues of $0.9 million 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~~ March 31, 2022 and 2021, respectively. In our home health segment, Medicare sequester relief resulted in an increase in net service revenues of ~~$0.3~~$0.2 million and $0.1 million, ~~respectively, to hospice~~for the three months ended March 31, 2022 and ~~home health net service revenues.However, the~~2021, respectively.

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,~~an additional Medicare ~~spending will be reduced by~~payment reduction of up to 4% was required to take effect in ~~fiscal year 2022, in addition to the existing sequestration requirements~~January 2022. However, Congress has delayed implementation of ~~the Budget Control Act of 2011.~~this payment reduction until 2023. 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 or when the mandated sequestration will occur.

We 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”). 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 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 credit facility is May 8, 2023. Interest on 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 equalSee Note 7 to the ~~greatest of (a) the rate of interest last quoted by The Wall Street Journal as the “prime rate,” (b) the sum~~Notes to Condensed Consolidated Financial Statements, COVID-19 Pandemic, for additional details 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), 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.

Addus HealthCare, Inc. (“Addus HealthCare”) is the borrower, and its parent, Holdings, and substantially all of Holdings’ subsidiaries are guarantors under this credit facility, and it is 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 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 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.

On September 12, 2019, we entered into a First Amendment (the “Amendment”) to our Credit Agreement. The Amendment increased our 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 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, 2021, we were in compliance with our financial covenants under the Credit Agreement~~.COVID-19 pandemic.

The following table summarizes changes in our cash flows for the ~~six~~three months ended ~~June 30, 2021~~March 31, 2022 and ~~2020:~~2021:

~~Six~~Three Months Ended ~~June 30, 2021~~March 31, 2022 Compared to ~~Six~~Three Months Ended ~~June 30, 2020~~March 31, 2021

~~Net cash used in~~Cash flows from operating activities ~~was $3.3 million~~represent the inflow of cash from our payors and the outflow of cash for ~~the six months ended June 30, 2021, compared to net~~payroll and payroll taxes, operating expenses, interest and taxes. Net cash provided by operating activities was $6.0 million for the three months ended March 31, 2022, compared to net cash used by operating activities of ~~$50.9~~$18.4 million for the same period in ~~2020.~~2021. The ~~decrease~~increase in cash provided by operations was primarily due to the timing of receipts on accounts receivable ~~of $29.5 million,~~ and the ~~repayment and the use of $24.0 million~~timing of government stimulus ~~funds for~~funds. The changes in accounts receivable were primarily related to the ~~six~~growth in revenue and a decrease in days sales outstanding (“DSO”) during the three months ended ~~June 30, 2021.~~March 31, 2022 compared to 2021, as described below. The related receivables due from the Illinois Department on Aging represented 16.1% of the Company’s net accounts receivable at both March 31, 2022 and December 31, 2021, as discussed below.

Net cash used in investing activities ~~was $1.9 million~~ for the ~~six~~three months ended ~~June 30, 2021 compared to~~March 31, 2022 primarily consisted of $84.5 million of net cash used ~~in investing activities of $5.0 million~~ for the ~~six~~JourneyCare acquisition. For the three months ended ~~June 30, 2020, which mainly consisted of~~March 31, 2022 and 2021, property and equipment purchases, primarily related to our ongoing investments in our technology ~~infrastructure.~~infrastructure, were $1.1 million and $1.0 million, respectively.

~~Net~~Our financing activities for the three months ended March 31, 2022 included borrowings of $35.0 million on the revolver portion of our credit facility to fund, in part, the JourneyCare acquisition. For the three months ended March 31, 2022 and 2021, net cash ~~used~~provided by financing activities ~~related to~~ included cash ~~payments on term loan of $0.5 and $0.3 million for the six months ended June 30, 2021 and 2020. For the six months ended June 30, 2020, the Company~~ received ~~cash~~ from the exercise of stock options of ~~$1.2 million.~~$0.5 million and $0.1 million, respectively.

Gross accounts receivable as of ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021 were approximately ~~$139.6~~$138.2 million and ~~$133.4~~$138.4 million, respectively. Outstanding accounts receivable, net of allowance, ~~increased~~decreased by ~~$5.6~~$0.1 million as of ~~June 30, 2021~~March 31, 2022 as compared to December 31, ~~2020.~~2021. Accounts receivable for the Illinois Department on Aging de~~increased~~creased approximately ~~$1.7~~$0.2 million during the quarter ended ~~June 30, 2021.~~March 31, 2022. 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 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 ~~57 days~~52 and 6154 days at ~~June 30, 2021~~March 31, 2022 and December 31, ~~2020, respectively.~~2021. The ~~DSOs~~DSO for our largest payor, the Illinois Department on Aging, was 43 days at ~~June 30, 2021~~both March 31, 2022 and December 31, 2020 were 43 days and 46 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 2021 and 2022.

The economic slowdown caused by the COVID-19 pandemic 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 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.

The ARPA provided $350 billion dollars in emergency funding for state, local, territorial, and Tribal governments to remedy the mismatch between increasing costs and decreasing revenues. We cannot determine if Congress will provide additional relief with additional stimulus and relief legislation, including extension of unemployment benefits and relief for states. Additionally, we cannot determine the impact that the economic slowdown caused by the COVID-19 pandemic 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 of ~~June 30, 2021,~~March 31, 2022, 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, ~~2020,~~2021, filed on ~~March 1, 2021.~~February 25, 2022.

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, 2021,~~March 31, 2022, we had outstanding borrowings of approximately ~~$196.1~~$109.6 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 month periods~~months period ended ~~June 30, 2021,~~March 31, 2022, our net income would have decreased by $0.4 million, or ~~$0.02~~$0.03 per diluted ~~share, and $0.7 million, or $0.05 per diluted share, respectively.~~share. We do not currently have any derivative or hedging arrangements, or other known exposures, to changes in interest rates.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of ~~June 30, 2021.~~March 31, 2022. 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 effective as of ~~June 30, 2021.~~March 31, 2022.

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, 2021~~March 31, 2022 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, ~~2020,~~2021, filed on ~~March 1, 2021.~~February 25, 2022. 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, 2021~~March 31, 2022 and December 31, ~~2020~~2021	3

Condensed Consolidated Statements of Income For the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~	4

Condensed Consolidated Statement of Stockholders’ Equity For the Three ~~and Six~~ Months Ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~	5

Condensed Consolidated Statements of Cash Flows For the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2022 and 2021 ~~and 2020~~	6

Notes to Condensed Consolidated Financial Statements	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2018

Item 3. Quantitative and Qualitative Disclosures About Market Risk	3531

Item 4. Controls and Procedures	3531

PART II. OTHER INFORMATION	3632

Item 1. Legal Proceedings	3632

Item 1A. Risk Factors	3632

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3632

Item 3. Defaults Upon Senior Securities	3632

Item 4. Mine Safety Disclosures	3632

Item 5. Other Information	3632

Item 6. Exhibits	3733

	June 30, 2021		December 31, 2020
	(Amounts in Thousands)
Current portion of operating lease liabilities	$	9,621	$	9,283
Payor advances (1)		6,375		4,206
Accrued health insurance		5,010		5,607
Accrued professional fees		3,729		4,220
Accrued payroll taxes		1,812		4,543
Other		9,170		9,705
Total accrued expenses	$	35,717	$	37,564

	March 31, 2022		December 31, 2021
	(Amounts in Thousands)
Current portion of operating lease liabilities	$	10,766	$	9,774
Accrued health insurance		6,637		5,200
Payor advances⁽¹⁾		5,866		6,485
Accrued professional fees		3,357		2,978
Other		12,194		12,640
Total accrued expenses	$	38,820	$	37,077


☒	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

	Total (Amounts in Thousands)
Goodwill	$	13,457
Identifiable intangible assets		474
Cash		1,104
Property and equipment		52
Accounts receivable		1,396
Operating lease assets, net		485
Other assets		40
Accounts payable		(122	)
Accrued expenses		(37	)
Accrued payroll		(543	)
Long-term operating lease liabilities		(485	)
Total purchase price	$	15,821

	Total (Amounts in Thousands)
Goodwill	$	9,732
Identifiable intangible assets		1,523
Cash		2,819
Accounts receivable		1,009
Operating lease assets, net		180
Other assets		26
Accounts payable		(34	)
Accrued expenses		(353	)
Accrued payroll		(275	)
Long-term operating lease liabilities		(100	)
Total purchase price	$	14,527


	ADDUS HOMECARE CORPORATION

Date: ~~August 4, 2021~~May 3, 2022	By:	/s/ R. DIRK ALLISON

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

Date: ~~August 4, 2021~~May 3, 2022	By:	/s/ BRIAN POFF

		Brian Poff Chief Financial Officer (As Principal Financial Officer)

Large Accelerated Filer

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Non-Accelerated Filer

Smaller Reporting Company

Emerging Growth Company