August 6, 2014

LHC Group announces second quarter 2014 results

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.

 

LHC GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)
(Unaudited)
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
LHC GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)
(Unaudited)
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
LHC GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
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)
Purchase of additional noncontrolling interest
(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
LHC GROUP, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Amounts in thousands)
(Unaudited)
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
LHC GROUP, INC. AND SUBSIDIARIES
SEGMENT INFORMATION (Continued)
(Amounts in thousands)
(Unaudited)
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

LHC GROUP, INC. AND SUBSIDIARIES
SELECT CONSOLIDATED KEY STATISTICAL AND FINANCIAL DATA
(Unaudited)
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
(1) The Centers for Medicare and Medicaid Services (CMS) updated the Medicare Home Health Prospective Payment System effective January 1, 2014, which reduced the average case-mix weight for 2014 from 1.3464 to 1.0000. To offset the effect of resetting the case mix average to 1.000, CMS upwardly adjusted the national, standardized 60-day episode payment rate by the same factor that it used to decrease the weights from $2,137.73 in 2013 to $2,869.27 in 2014.
(2) Organic growth is calculated as the sum of same store plus de novo for the period divided by total from the same period in the prior year.