November 4, 2015

LHC Group announces third quarter 2015 results and raises 2015 revenue and EPS guidance

LAFAYETTE, La. (November 4, 2015) – LHC Group, Inc. (NASDAQ: LHCG), a national provider of home health, hospice, community-based and comprehensive post-acute healthcare services, today announced its financial results for the three months and nine months ended September 30, 2015.

Financial Results for the Third Quarter

  • Net service revenue for the third quarter of 2015 was $204.1 million, an increase of 8.7% compared with net service revenue of $187.7 million in the same period of 2014.
  • Net income attributable to LHC Group for the third quarter of 2015 was $8.8 million, or $0.50 per diluted share, an increase of 43.3% compared with net income attributable to LHC Group of $6.2 million, or $0.36 per diluted share, in the same period of 2014.
  • Total growth in admissions for all service lines for the third quarter of 2015 was 4.9% compared with the third quarter of 2014.
  • Total organic growth in home health admissions for the third quarter of 2015 was 2.9% compared with the third quarter of 2014.

Commenting on the results, Keith G. Myers, LHC Group’s chairman and CEO, said, “Our dedicated employees have once again exceeded expectations. Our ability to consistently deliver high-quality care to the growing number of patients, families and communities we serve is a testament to the collective talent, work ethic and experience of the growing number of healthcare professionals who make up our LHC Group family. I am extremely proud of the strong and well-balanced operating results our team delivered during the third quarter of 2015 and through the first nine months of 2015. Through three quarters in 2015, LHC Group has delivered solid results with strong volume growth combined with efficiently and effectively delivering the superior care and service expected by those we serve.

“We remain intensely focused on our strategy to grow organically in existing markets and through acquisitions and hospital joint ventures in new markets and believe that we are well positioned to be a growth and consolidation leader in the years ahead of us. On the acquisition growth front, we completed the acquisition of Halcyon Hospice on October 1, which consists of 16 hospice locations across three states with annual revenue of approximately $41 million. This acquisition increases our hospice service line revenue by 56% and is consistent with our strategy of growing our three in-home service lines of home health, hospice and community-based services.”

Financial Results for the Nine Months

  • Net service revenue for the nine months ended September 30, 2015, was $597.4 million, an increase of 10.6% compared with net service revenue of $540.3 million in the same period of 2014.
  • Net income attributable to LHC Group for the nine months ended September 30, 2015, was $24.6 million, or $1.40 per diluted share, an increase of 50.9% compared with net income attributable to LHC Group of $16.3 million, or $0.94 per diluted share, in the same period of 2014.
  • Total growth in admissions for all service lines for the nine months ended September 30, 2015, was 8.6% compared to the same period in 2014.
  • Total organic growth in home health admissions for the nine months ended September 30, 2015, was 4.0% compared with the same period in 2014.

LHC Group also announces the pending acquisition of substantially all of the assets of Nurses Registry and Home Health Corp. for $5.7 million. Nurses Registry’s licensed home health service area covers 16 counties in the Certificate of Need State of Kentucky. The estimated population of the licensed service area is over 765,000, with more than 101,000 over 65 years of age. Estimated annualized revenue is approximately $6.5 million. This acquisition is expected to close on November 11, 2015, and LHC Group estimates the earnings per share impact to be a negative $0.02 in the fourth quarter, including integration and transaction costs.

FY 2015 Guidance

The Company is raising its full year 2015 guidance for net service revenue to a new range of $805 million to $815 million from the previous range of $780 million to $795 million. In addition, the Company is raising its fully diluted earnings per share guidance to a new range of $1.75 to $1.85 from the previous range of $1.70 to $1.80. This guidance includes the negative impact on the fourth quarter from the Medicare Home Health Prospective Payment System for 2016 of approximately $0.02 per diluted share. This guidance also includes the recent acquisition of Halcyon Hospice and the aforementioned pending acquisition of Nurses Registry, which are anticipated to be dilutive to LHC Group’s fourth quarter 2015 earnings per share by approximately $0.06 and $0.02, respectively, due to transaction and integration costs. This guidance does not take into account the impact of future reimbursement changes, if any, future acquisitions, if made, de novo locations, if opened, or future legal expenses, if necessary.

Conference Call

LHC Group will host a conference call on Thursday, November 5, 2015, at 11:00 a.m. Eastern time to discuss its third quarter 2015 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 Wednesday, November 11, 2015, by dialing (855) 859‑2056 (international callers should call (404) 537-3406) and entering confirmation number 45313318. 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 following 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 primarily 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, community‑based services agencies and long-term acute care hospitals.

 

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, 2014, 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)
Sept. 30,
2015
Dec. 31,
2014
ASSETS
Current assets:
Cash
$    61,733
$         531
Receivables:
Patient accounts receivable, less allowance for uncollectible accounts             of $25,931 and $18,582, respectively
107,139
97,498
Other receivables
1,245
1,334
Amounts due from governmental entities
961
1,164
   Total receivables, net
109,345
99,996
Deferred income taxes
15,833
11,381
Prepaid income taxes
2,314
3,093
Prepaid expenses
10,038
8,724
Other current assets
6,119
3,777
Receivable due from insurance carrier
550
7,850
   Total current assets
205,932
135,352
Property, building and equipment, net of accumulated depreciation
   of $43,642 and $44,683, respectively
38,255
34,787
Goodwill
242,062
240,019
Intangible assets, net of accumulated amortization of $7,964
   and $6,560, respectively
80,731
79,685
Other assets
1,907
1,896
Total assets
$  568,887
$  491,739
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued liabilities
$    22,269
$    19,278
Salaries, wages and benefits payable
35,447
22,466
Self-insurance reserve
9,692
6,559
Current portion of long-term debt
238
230
Amounts due to governmental entities
4,051
4,459
Legal settlement payable
550
7,850
   Total current liabilities
72,247
60,842
Deferred income taxes
39,169
33,592
Income tax payable
3,415
3,415
Revolving credit facility
92,000
60,000
Long-term debt, less current portion
608
778
   Total liabilities
207,439
158,627
Noncontrolling interest – redeemable
11,890
11,517
Stockholders’ equity:
Common stock – $0.01 par value: 40,000,000 shares authorized;
   22,221,755 and 22,015,211 shares issued in 2015 and 2014, respectively
222
220
Treasury stock – 4,775,913 and 4,734,363 shares at cost, respectively
(37,109)
(35,660)
Additional paid-in capital
113,192
108,708
Retained earnings
269,971
245,371
Total LHC Group, Inc. stockholders’ equity
346,276
318,639
Noncontrolling interest – non-redeemable
3,282
2,956
Total stockholders’ equity
349,558
321,595
Total liabilities and stockholders’ equity
$  568,887
$  491,739
LHC GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2015
2014
2015
2014
Net service revenue
$  204,122
$  187,713
$  597,373
$  540,261
Cost of service revenue
120,873
113,122
351,938
321,983
Gross margin
83,249
74,591
245,435
218,278
Provision for bad debts
4,809
3,974
14,873
11,699
General and administrative expenses
60,748
58,197
180,416
172,499
Operating income
17,692
12,420
50,146
34,080
Interest expense
(434)
(643)
(1,533)
(1,861)
Income before income taxes and noncontrolling interest
17,258
11,777
48,613
32,219
Income tax expense
6,148
3,924
17,097
11,199
Net income
11,110
7,853
31,516
21,020
Less net income attributable to
   noncontrolling interest
2,265
1,679
6,916
4,717
Net income attributable to LHC Group, Inc.’s common stockholders
$      8,845
$      6,174
$    24,600
$    16,303
Earnings per share – basic:
Net income attributable to LHC Group, Inc.’s common stockholders
$        0.51
$        0.36
$        1.41
$        0.95
Earnings per share – diluted:
Net income attributable to LHC Group, Inc.’s common stockholders
$        0.50
$        0.36
$        1.40
$        0.94
Weighted average shares outstanding:
Basic
17,436,731
17,260,078
17,389,934
17,213,648
Diluted
17,610,953
17,356,916
17,526,687
17,289,554
LHC GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Nine Months Ended
September 30,
2015
2014
Operating activities
Net income
$    31,516
$    21,020
Adjustments to reconcile net income to net cash provided by
   operating activities:
Depreciation and amortization expense
8,685
6,874
Provision for bad debts
14,873
11,699
Stock based compensation expense
3,150
3,086
Deferred income taxes
1,125
522
Impairment of intangibles
248
Loss on disposal of assets
680
21
Changes in operating assets and liabilities, net of acquisitions:
Receivables
(24,643)
(12,868)
Prepaid expenses and other assets
(3,660)
280
Prepaid income taxes
779
4,005
Accounts payable and accrued expenses
19,071
(1,283)
Net amounts due to/from governmental entities
(205)
95
Net cash provided by operating activities
51,619
33,451
Investing activities
Purchases of property, building and equipment
(11,401)
(4,872)
Cash paid for acquisitions, primarily goodwill and intangible assets
(4,359)
(73,194)
Net cash used in investing activities
(15,760)
(78,066)
Financing activities
Proceeds from line of credit
64,000
72,000
Payments on line of credit
(32,000)
(30,000)
Proceeds from employee stock purchase plan
569
575
Payments on debt
(172)
(147)
Noncontrolling interest distributions
(6,372)
(5,086)
Payment of deferred financing fees
(900)
Excess tax benefits from vesting of restricted stock
897
124
Redemption of treasury shares
(1,449)
(923)
Purchase of additional noncontrolling interest
(275)
(359)
Proceeds from exercise of stock options
145
Sale of noncontrolling interest
193
Net cash provided by financing activities
25,343
35,477
Change in cash
61,202
(9,138)
Cash at beginning of period
531
14,014
Cash at end of period
$    61,733
$      4,876
Supplemental disclosures of cash flow information
Interest paid
$      1,227
$      1,827
Income taxes paid
$    14,242
$      6,946
LHC GROUP, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Amounts in thousands)
(Unaudited)
Three Months Ended September 30, 2015
Home
Health Services
Hospice Services
Community-Based Services
Facility-
Based
Services
Total
Net service revenue
$     155,047
$       19,205
$       10,628
$       19,242
$     204,122
Cost of service revenue
90,013
11,691
7,276
11,893
120,873
Provision for bad debts
3,988
51
560
210
4,809
General and administrative expenses
47,666
5,398
2,091
5,593
60,748
Operating income
13,380
2,065
701
1,546
17,692
Interest expense
(343)
(47)
(5)
(39)
(434)
Income before income taxes and noncontrolling interest
13,037
2,018
696
1,507
17,258
Income tax expense
4,602
713
297
536
6,148
Net income
8,435
1,305
399
971
11,110
Less net income attributable to
     noncontrolling interest
1,812
279
(29)
203
2,265
Net income attributable to LHC Group, Inc.’s
     common stockholders
$          6,623
$          1,026
$             428
$             768
$          8,845
Total assets
$     449,038
$       41,694
$       33,070
$       45,085
$     568,887
Three Months Ended September 30, 2014
Home
Health
Services
Hospice Services
Community-Based Services
Facility-
Based
Services
Total
Net service revenue
$     143,675
$    17,071
$          8,973
$    17,994
$  187,713
Cost of service revenue
85,305
10,431
6,201
11,185
113,122
Provision for bad debts
3,644
269
109
(48)
3,974
General and administrative expenses
46,501
4,721
1,900
5,075
58,197
Operating income
8,225
1,650
763
1,782
12,420
Interest expense
(510)
(64)
(5)
(64)
(643)
Income before income taxes and noncontrolling interest
7,715
1,586
758
1,718
11,777
Income tax expense
3,005
521
29
369
3,924
Net income
4,710
1,065
729
1,349
7,853
Less net income attributable to
     noncontrolling interest
1,193
292
(8)
202
1,679
Net income attributable to LHC Group, Inc.’s common stockholders
$          3,517
$         773
$             737
$      1,147
$      6,174
Total assets
$     390,536
$    34,622
$       34,244
$    36,229
$  495,631
LHC GROUP, INC. AND SUBSIDIARIES
SEGMENT INFORMATION (Continued)
(Amounts in thousands)
(Unaudited)
Nine Months Ended September 30, 2015
Home
Health Services
Hospice Services
Community-Based Services
Facility-
Based
Services
Total
Net service revenue
$     454,911
$       54,688
$       30,713
$       57,061
$     597,373
Cost of service revenue
262,604
32,634
21,632
35,068
351,938
Provision for bad debts
12,109
697
1,431
636
14,873
General and administrative expenses
141,696
15,397
6,376
16,947
180,416
Operating income
38,502
5,960
1,274
4,410
50,146
Interest expense
(1,211)
(168)
(17)
(137)
(1,533)
Income before income taxes and noncontrolling interest
37,291
5,792
1,257
4,273
48,613
Income tax expense
12,999
2,056
557
1,485
17,097
Net income
24,292
3,736
700
2,788
31,516
Less net income attributable to
    noncontrolling interest
5,584
778
(101)
655
6,916
Net income attributable to
    LHC Group, Inc.’s
    common stockholders
$       18,708
$          2,958
$             801
$          2,133
$       24,600
Nine Months Ended September 30, 2014
Home
Health Services
Hospice Services
Community-Based Services
Facility-
Based
Services
Total
Net service revenue
$     417,329
$    49,361
$       18,259
$  55,312
$ 540,261
Cost of service revenue
245,383
29,479
12,790
34,331
321,983
Provision for bad debts
9,968
467
507
757
11,699
General and administrative expenses
138,356
13,954
4,288
15,901
172,499
Operating income
23,622
5,461
674
4,323
34,080
Interest expense
(1,474)
(186)
(15)
(186)
(1,861)
Income before income taxes and noncontrolling interest
22,148
5,275
659
4,137
32,219
Income tax expense
8,680
1,397
83
1,039
11,199
Net income
13,468
3,878
576
3,098
21,020
Less net income attributable to
    noncontrolling interest
3,341
828
(12)
560
4,717
Net income attributable to LHC Group, Inc.’s common stockholders
$       10,127
$      3,050
$             588
$    2,538
$  16,303
LHC GROUP, INC. AND SUBSIDIARIES
SELECT CONSOLIDATED KEY STATISTICAL AND FINANCIAL DATA
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2015
2014
2015
2014
Key Data:
Home-Health Services:
Locations
275
283
275
283
Acquired
2
13
3
38
De novo
0
0
2
0
Divested/Consolidated
0
4
4
14
Total new admissions
35,772
33,962
106,948
98,725
Medicare new admissions
24,114
22,970
72,851
67,086
Average daily census
36,858
35,974
36,669
35,148
Average Medicare daily census
27,278
26,615
27,255
26,217
Medicare completed and billed episodes
48,063
46,631
142,572
136,170
Average Medicare case mix for completed and billed Medicare episodes
1.00
0.99
0.98
0.98
Average reimbursement per completed and billed Medicare episodes
$      2,492
$       2,390
$      2,463
$       2,375
Total visits
1,062,446
998,533
3,094,358
2,898,616
Total Medicare visits
787,220
739,184
2,302,492
2,161,516
Average visits per completed and billed Medicare episodes
16.4
15.9
16.1
15.8
Organic growth:(1)
Net revenue
5.6%
1.1%
4.0%
1.1%
Net Medicare revenue
4.8%
-1.2%
2.8%
-0.2%
Total new admissions
2.9%
2.2%
4.0%
0.6%
Medicare new admissions
2.1%
0.8%
3.6%
0.6%
Average daily census
0.1%
-1.7%
0.1%
-4.0%
Average Medicare daily census
-0.2%
-3.1%
-0.4%
-4.4%
Medicare completed and billed episodes
1.1%
2.2%
0.8%
1.6%
Community-Based Services:
Locations
13
13
13
13
Acquired
1
0
1
6
De novo
0
0
1
1
Divested/Consolidated
0
0
1
0
Average daily census
1,307
972
1,176
571
Billable hours
318,995
291,303
927,796
606,601
Revenue per billable hour
$         33.32
$       30.80
$         33.10
$       30.10
Hospice-Based Services:
Locations
39
38
39
38
Acquired
1
0
1
6
De novo
2
1
2
1
Divested/Consolidated
0
0
1
1
Admissions
1,584
1,476
4,562
4,134
Average daily census
1,528
1,389
1,444
1,328
Patient days
140,592
127,832
394,336
362,619
Average revenue per patient day
$         137
$          134
$         139
$          136
Facility-Based Services:
Long-term Acute Care
Locations
8
8
8
8
Patient days
15,422
15,362
46,977
46,763
Average revenue per patient day
$      1,175
$       1,124
$      1,163
$       1,135
(1) 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.