LHC Group announces second quarter 2014 results
Raises lower end of full-year 2014 guidance for fully diluted earnings per share
to a new range of $1.25 to $1.35 from $1.15 to $1.35 previously
LAFAYETTE, La. (August 6, 2014) – LHC Group, Inc. (NASDAQ: LHCG), a national provider of home health, hospice and comprehensive post-acute healthcare services, today announced its financial results for the three months and six months ended June 30, 2014.
Financial Results for the Second Quarter
- Net service revenue for the second quarter of 2014 was $188.9 million, compared with $166.3 million for the same period in 2013.
- Net income attributable to LHC Group for the second quarter of 2014 was $6.1 million, compared with $5.8 million for the same period in 2013.
- Diluted earnings per share was $0.35 for the second quarter of 2014, compared with $0.34 for the same period in 2013.
Commenting on the results, Keith G. Myers, LHC Group’s chairman and CEO, said, “We are very pleased with our financial performance during the second quarter of 2014 and with our continued ability to execute our long-term growth strategy. Over the last 18 months, we have executed 10 transactions, including the recently announced definitive asset purchase agreement with Life Care Home Health, Inc. that is anticipated to close on September 1. These transactions, with a total purchase price of $101.5 million in cash, consisted of 81 locations in 21 states and represented $151.1 million in aggregate trailing twelve month revenues at the time of acquisition. As we look ahead to the remainder of 2014 and beyond, we are well positioned to continue increasing shareholder value by focusing on growing revenue and improving efficiencies in our existing locations, while capitalizing on opportunities to expand our geographical footprint in home health, hospice and community-based services. I would like to congratulate and thank our entire team for their unwavering commitment to excellence and for consistently delivering the highest quality of care to the growing number of patients, families and communities we serve.”
Financial Results for the Six Months
- Net service revenue for the six months ended June 30, 2014, was $352.5 million, compared with $328.3 million for the same period in 2013.
- Net income attributable to LHC Group for the six months ended June 30, 2014, was $10.1 million, compared with $12.1 million for the same period in 2013.
- Diluted earnings per share was $0.59 for the six months ended June 30, 2014, compared with $0.71 for the same period in 2013.
Guidance
The Company is raising its full-year 2014 guidance for net service revenue, which was issued on March 5, 2014, in the range of $700 million to $720 million, to a range of $720 million to $730 million. The Company is also raising the lower end of its range for fully diluted earnings per share from $1.15 to $1.35 to a range of $1.25 to $1.35. This guidance includes the negative impact from the Medicare Home Health Prospective Payment System for 2014 and the positive impact of the recently closed acquisition of the home health, hospice and community-based services operations of Deaconess HomeCare and Elk Valley Health Services. This guidance does not take into account the impact from LHC Group’s recently announced pending acquisition of the assets of Life Care Home Health, Inc., other future reimbursement changes, if any, future acquisitions or share repurchases, if made, de novo locations, if opened, or future legal expenses, if necessary.
Conference Call
LHC Group will host a conference call Thursday, August 7, 2014, at 11 a.m. Eastern time to discuss its second quarter 2014 results. The toll-free number to call for this interactive teleconference is (866) 393-1608 (international callers should call (973) 890-8327). A telephonic replay of the conference call will be available through midnight on Thursday, August 14, 2014, by dialing (855) 859‑2056 (international callers should call (404) 537-3406) and entering confirmation number 66312151. A live broadcast of LHC Group’s conference call will be available under the Investor Relations section of the Company’s website, www.LHCgroup.com. A one-year online replay will be available approximately an hour after the conclusion of the live broadcast.
About LHC Group, Inc.
LHC Group, Inc. is a national provider of post-acute healthcare services, providing quality, cost-effective healthcare to patients within the comfort and privacy of their home or place of residence. LHC Group provides a comprehensive array of healthcare services through home health, hospice and community‑based services agencies in its home-based and hospice-based divisions and long-term acute care hospitals in its facility-based division.
Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements about the Company’s future financial performance and the strength of the Company’s operations. Such forward-looking statements may be identified by words such as “continue,” “expect,” and similar expressions. Forward-looking statements involve a number of risks and uncertainties that may cause actual results to differ materially from those expressed or implied by such forward-looking statements, including changes in reimbursement, changes in government regulations, changes in LHC Group’s relationships with referral sources, increased competition for LHC Group’s services, increased competition for joint venture and acquisition candidates, changes in the interpretation of government regulations and other risks set forth in Item 1A. Risk Factors in LHC Group’s Annual Report on Form 10-K for the year ended December 31, 2013, filed with the Securities and Exchange Commission. LHC Group undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
|
June 30,
2014
|
Dec. 31,
2013
|
|
|
ASSETS
|
||
|
Current assets:
|
||
|
Cash
|
$ 12,027
|
$ 14,014
|
|
Receivables:
|
||
|
Patient accounts receivable, less allowance for uncollectible accounts of $16,176 and $14,334, respectively
|
98,932
|
88,964
|
|
Other receivables
|
2,361
|
608
|
|
Amounts due from governmental entities
|
990
|
1,234
|
|
Total receivables, net
|
102,283
|
90,806
|
|
Deferred income taxes
|
9,817
|
9,251
|
|
Prepaid income taxes
|
3,497
|
4,069
|
|
Prepaid expenses
|
8,657
|
6,966
|
|
Other current assets
|
4,137
|
4,449
|
|
Receivable due from insurance carrier
|
7,850
|
–
|
|
Total current assets
|
148,268
|
129,555
|
|
Property, building and equipment, net of accumulated depreciation
of $44,258 and $40,935, respectively
|
32,929
|
31,052
|
|
Goodwill
|
229,462
|
194,893
|
|
Intangible assets, net of accumulated amortization of $5,461
and $4,518, respectively
|
83,973
|
62,184
|
|
Other assets
|
2,993
|
4,542
|
|
Total assets
|
$ 497,625
|
$ 422,226
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||
|
Current liabilities:
|
||
|
Accounts payable and other accrued liabilities
|
$ 18,718
|
$ 17,217
|
|
Salaries, wages and benefits payable
|
37,648
|
31,927
|
|
Self-insurance reserve
|
6,610
|
5,862
|
|
Current portion of long-term debt
|
225
|
249
|
|
Amounts due to governmental entities
|
3,746
|
4,391
|
|
Legal settlement payable
|
7,850
|
–
|
|
Total current liabilities
|
74,797
|
59,646
|
|
Deferred income taxes
|
30,470
|
29,060
|
|
Income tax payable
|
3,415
|
3,415
|
|
Revolving credit facility
|
69,000
|
22,000
|
|
Long-term debt, less current portion
|
896
|
963
|
|
Total liabilities
|
178,578
|
115,084
|
|
Noncontrolling interest- redeemable
|
11,263
|
11,258
|
|
Stockholders’ equity:
|
||
|
Common stock – $0.01 par value: 40,000,000 shares authorized; 21,983,432 and 21,801,634 shares issued in 2014 and 2013, respectively
|
219
|
218
|
|
Treasury stock – 4,730,511 and 4,693,647 shares at cost, respectively
|
(35,565)
|
(34,715)
|
|
Additional paid-in capital
|
106,549
|
103,972
|
|
Retained earnings
|
233,663
|
223,534
|
|
Total LHC Group, Inc. stockholders’ equity
|
304,866
|
293,009
|
|
Noncontrolling interest- non-redeemable
|
2,918
|
2,875
|
|
Total equity
|
307,784
|
295,884
|
|
Total liabilities and stockholders’ equity
|
$ 497,625
|
$ 422,226
|
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||
|
2014
|
2013
|
2014
|
2013
|
|
|
Net service revenue
|
$ 188,867
|
$ 166,302
|
$ 352,548
|
$ 328,255
|
|
Cost of service revenue
|
111,527
|
97,009
|
208,861
|
190,257
|
|
Gross margin
|
77,340
|
69,293
|
143,687
|
137,998
|
|
Provision for bad debts
|
4,363
|
3,208
|
7,725
|
7,125
|
|
General and administrative expenses
|
59,614
|
54,157
|
114,226
|
105,780
|
|
Operating income
|
13,363
|
11,928
|
21,736
|
25,093
|
|
Interest expense
|
(830)
|
(700)
|
(1,218)
|
(1,125)
|
|
Non-operating income (loss)
|
(109)
|
65
|
(76)
|
130
|
|
Income before income taxes and noncontrolling interest
|
12,424
|
11,293
|
20,442
|
24,098
|
|
Income tax expense
|
4,352
|
3,918
|
7,275
|
8,454
|
|
Net income
|
8,072
|
7,375
|
13,167
|
15,644
|
|
Less net income attributable to
noncontrolling interests
|
2,011
|
1,585
|
3,038
|
3,568
|
|
Net income attributable to LHC Group, Inc.’s common stockholders
|
$ 6,061
|
$ 5,790
|
$ 10,129
|
$ 12,076
|
|
Earnings per share – basic and diluted:
|
||||
|
Net income attributable to LHC Group, Inc.’s common stockholders
|
$ 0.35
|
$ 0.34
|
$ 0.59
|
$ 0.71
|
|
Weighted average shares outstanding:
|
||||
|
Basic
|
17,233,264
|
17,055,619
|
17,190,070
|
17,011,306
|
|
Diluted
|
17,277,224
|
17,127,017
|
17,268,556
|
17,088,463
|
|
Six Months Ended
June 30,
|
||
|
2014
|
2013
|
|
|
Operating activities
|
||
|
Net income
|
$ 13,167
|
$ 15,644
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
||
|
Depreciation and amortization expense
|
4,413
|
3,830
|
|
Provision for bad debts
|
7,725
|
7,125
|
|
Stock based compensation expense
|
2,069
|
1,895
|
|
Deferred income taxes
|
844
|
1,270
|
|
Gain on sale of assets
|
144
|
15
|
|
Changes in operating assets and liabilities, net of acquisitions:
|
||
|
Receivables
|
(8,625)
|
(10,837)
|
|
Prepaid expenses and other assets
|
(301)
|
(1,519)
|
|
Prepaid income taxes
|
512
|
3,479
|
|
Accounts payable and accrued expenses
|
4,249
|
7,600
|
|
Net amounts due to/from governmental entities
|
(401)
|
(432)
|
|
Net cash provided by operating activities
|
23,796
|
28,070
|
|
Investing activities
|
||
|
Purchases of property, building and equipment
|
(3,419)
|
(3,569)
|
|
Cash paid for acquisitions, primarily goodwill and intangible assets
|
(65,103)
|
(26,920)
|
|
Net cash used in investing activities
|
(68,522)
|
(30,489)
|
|
Financing activities
|
||
|
Proceeds from line of credit
|
68,000
|
55,000
|
|
Payments on line of credit
|
(21,000)
|
(49,500)
|
|
Proceeds from employee stock purchase plan
|
391
|
392
|
|
Proceeds from debt issuance
|
–
|
567
|
|
Payments on debt
|
(91)
|
–
|
|
Noncontrolling interest distributions
|
(3,122)
|
(4,352)
|
|
Payment of deferred financing fees
|
(799)
|
–
|
|
Excess tax benefits from vesting of restricted stock
|
112
|
11
|
|
Redemption of treasury shares
|
(850)
|
(755)
|
|
(95)
|
(1,618)
|
|
|
Sale of noncontrolling interest
|
193
|
–
|
|
Net cash provided by (used in) financing activities
|
42,739
|
(255)
|
|
Change in cash
|
(1,987)
|
(2,674)
|
|
Cash at beginning of period
|
14,014
|
9,720
|
|
Cash at end of period
|
$ 12,027
|
$ 7,046
|
|
Supplemental disclosures of cash flow information
|
||
|
Interest paid
|
$ 1,177
|
$ 1,125
|
|
Income taxes paid
|
$ 6,064
|
$ 14,376
|
|
Three Months Ended June 30, 2014
|
||||
|
Home-
Based
Services
|
Hospice-
Services
|
Facility-
Based
Services
|
Total
|
|
|
Net service revenue
|
$ 154,260
|
$ 17,068
|
$ 17,539
|
$ 188,867
|
|
Cost of service revenue
|
90,223
|
10,151
|
11,153
|
111,527
|
|
Provision for bad debts
|
4,068
|
93
|
202
|
4,363
|
|
General and administrative expenses
|
49,612
|
4,791
|
5,211
|
59,614
|
|
Operating income
|
10,357
|
2,033
|
973
|
13,363
|
|
Interest expense
|
(664)
|
(83)
|
(83)
|
(830)
|
|
Non-operating income (loss)
|
(114)
|
2
|
3
|
(109)
|
|
Income before income taxes and noncontrolling interest
|
9,579
|
1,952
|
893
|
12,424
|
|
Income tax expense
|
3,436
|
530
|
386
|
4,352
|
|
Net income
|
6,143
|
1,422
|
507
|
8,072
|
|
Less net income attributable to
noncontrolling interests
|
1,537
|
335
|
139
|
2,011
|
|
Net income attributable to LHC Group, Inc.’s common stockholders
|
$ 4,606
|
$ 1,087
|
$ 368
|
$ 6,061
|
|
Total assets
|
$ 425,254
|
$ 35,530
|
$ 36,841
|
$ 497,625
|
|
Three Months Ended June 30, 2013
|
||||
|
Home-
Based
Services
|
Hospice-
Services
|
Facility-Based
Services
|
Total
|
|
|
Net service revenue
|
$ 132,638
|
$ 13,906
|
$ 19,758
|
$ 166,302
|
|
Cost of service revenue
|
77,624
|
8,628
|
10,757
|
97,009
|
|
Provision for bad debts
|
2,657
|
211
|
340
|
3,208
|
|
General and administrative expenses
|
44,624
|
4,143
|
5,390
|
54,157
|
|
Operating income
|
7,733
|
924
|
3,271
|
11,928
|
|
Interest expense
|
(567)
|
(63)
|
(70)
|
(700)
|
|
Non-operating income
|
35
|
3
|
27
|
65
|
|
Income before income taxes and noncontrolling interest
|
7,201
|
864
|
3,228
|
11,293
|
|
Income tax expense
|
3,140
|
413
|
365
|
3,918
|
|
Net income
|
4,061
|
451
|
2,863
|
7,375
|
|
Less net income attributable to
noncontrolling interests
|
973
|
243
|
369
|
1,585
|
|
Net income attributable to LHC Group, Inc.’s common stockholders
|
$ 3,088
|
$ 208
|
$ 2,494
|
$ 5,790
|
|
Total assets
|
$ 351,657
|
$ 27,030
|
$ 36,701
|
$ 415,388
|
|
Six Months Ended June 30, 2014
|
||||
|---|---|---|---|---|
|
Home-
Based
Services
|
Hospice-
Services
|
Facility-
Based
Services
|
Total
|
|
|
Net service revenue
|
$ 282,940
|
$ 32,290
|
$ 37,318
|
$ 352,548
|
|
Cost of service revenue
|
166,667
|
19,048
|
23,146
|
208,861
|
|
Provision for bad debts
|
6,722
|
198
|
805
|
7,725
|
|
General and administrative expenses
|
94,156
|
9,238
|
10,832
|
114,226
|
|
Operating income
|
15,395
|
3,806
|
2,535
|
21,736
|
|
Interest expense
|
(974)
|
(122)
|
(122)
|
(1,218)
|
|
Non-operating income (loss)
|
(87)
|
5
|
6
|
(76)
|
|
Income before income taxes and noncontrolling interest
|
14,334
|
3,689
|
2,419
|
20,442
|
|
Income tax expense
|
5,729
|
876
|
670
|
7,275
|
|
Net income
|
8,605
|
2,813
|
1,749
|
13,167
|
|
Less net income attributable to
noncontrolling interests
|
2,144
|
536
|
358
|
3,038
|
|
Net income attributable to LHC Group, Inc.’s common stockholders
|
$ 6,461
|
$ 2,277
|
$ 1,391
|
$ 10,129
|
|
Total assets
|
$ 425,254
|
$ 35,530
|
$ 36,841
|
$ 497,625
|
|
Six Months Ended June 30, 2013
|
||||
|---|---|---|---|---|
|
Home-
Based
Services
|
Hospice-
Services
|
Facility-
Based
Services
|
Total
|
|
|
Net service revenue
|
$ 261,714
|
$ 26,817
|
$ 39,724
|
$ 328,255
|
|
Cost of service revenue
|
151,159
|
16,683
|
22,415
|
190,257
|
|
Provision for bad debts
|
5,676
|
469
|
980
|
7,125
|
|
General and administrative expenses
|
87,046
|
7,893
|
10,841
|
105,780
|
|
Operating income
|
17,833
|
1,772
|
5,488
|
25,093
|
|
Interest expense
|
(920)
|
(97)
|
(108)
|
(1,125)
|
|
Non-operating income
|
61
|
18
|
51
|
130
|
|
Income before income taxes and noncontrolling interest
|
16,974
|
1,693
|
5,431
|
24,098
|
|
Income tax expense
|
6,965
|
675
|
814
|
8,454
|
|
Net income
|
10,009
|
1,018
|
4,617
|
15,644
|
|
Less net income attributable to
noncontrolling interests
|
2,340
|
475
|
753
|
3,568
|
|
Net income attributable to LHC Group, Inc.’s common stockholders
|
$ 7,669
|
$ 543
|
$ 3,864
|
$ 12,076
|
|
Total assets
|
$ 351,657
|
$ 27,030
|
$ 36,701
|
$ 415,388
|
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||
|
2014
|
2013
|
2014
|
2013
|
|
|
Key Data:
|
||||
|
Home-Based Services:
|
||||
|
Home Health
|
||||
|
Locations
|
277
|
251
|
277
|
251
|
|
Acquired
|
24
|
0
|
26
|
19
|
|
De novo
|
0
|
0
|
0
|
0
|
|
Total new admissions
|
33,869
|
30,868
|
64,754
|
61,229
|
|
Medicare new admissions
|
22,986
|
20,769
|
44,121
|
41,350
|
|
Average daily census
|
36,528
|
34,695
|
34,783
|
34,935
|
|
Average Medicare daily census
|
27,129
|
26,232
|
26,056
|
26,418
|
|
Medicare completed and billed episodes
|
47,142
|
45,191
|
89,577
|
87,999
|
|
Average Medicare case mix for completed and billed Medicare episodes(1)
|
0.99
|
1.27
|
0.98
|
1.26
|
|
Average reimbursement per completed and billed Medicare episodes
|
$ 2,392
|
$ 2,309
|
$ 2,374
|
$ 2,327
|
|
Total visits
|
992,637
|
914,690
|
1,900,083
|
1,774,188
|
|
Total Medicare visits
|
740,809
|
684,387
|
1,422,332
|
1,338,183
|
|
Average visits per completed and billed Medicare episodes
|
15.7
|
15.1
|
15.9
|
15.2
|
|
Organic growth:(2)
|
||||
|
Net revenue
|
2.1%
|
-3.5%
|
-1.4%
|
-3.2%
|
|
Net Medicare revenue
|
0.3%
|
-1.0%
|
-2.5%
|
-1.6%
|
|
Total new admissions
|
-0.1%
|
4.4%
|
-2.3%
|
4.0%
|
|
Medicare new admissions
|
2.1%
|
4.7%
|
-1.0%
|
3.9%
|
|
Average daily census
|
-3.8%
|
-0.3%
|
-10.0%
|
1.0%
|
|
Average Medicare daily census
|
-3.8%
|
0.0%
|
-10.3%
|
0.9%
|
|
Medicare completed and billed episodes
|
-3.2%
|
0.4%
|
-4.1%
|
0.5%
|
|
Community-Based Services:
|
||||
|
Locations
|
13
|
4
|
13
|
4
|
|
Acquired
|
5
|
0
|
6
|
0
|
|
De novo
|
0
|
0
|
1
|
0
|
|
Average daily census
|
851
|
433
|
697
|
417
|
|
Billable hours
|
277,215
|
38,131
|
317,932
|
76,526
|
|
Revenue per billable hour
|
$ 30
|
$ 21
|
$ 29
|
$ 20
|
|
Hospice-Based Services:
|
||||
|
Locations
|
37
|
34
|
37
|
34
|
|
Acquired
|
4
|
1
|
5
|
2
|
|
Admissions
|
1,426
|
1,209
|
2,658
|
2,484
|
|
Average daily census
|
1,371
|
1,146
|
1,298
|
1,109
|
|
Patient days
|
124,744
|
104,303
|
234,787
|
200,688
|
|
Average revenue per patient day
|
$ 137
|
$ 133
|
$ 138
|
$ 134
|
|
Facility-Based Services:
|
||||
|
Long-term Acute Care
|
||||
|
Locations
|
8
|
9
|
8
|
9
|
|
Patient days
|
14,939
|
15,283
|
31,401
|
31,401
|
|
Average revenue per patient day
|
$ 1,124
|
$ 1,203
|
$ 1,140
|
$ 1,198
|