November 2, 2016

LHC Group reports third quarter 2016 earnings of $0.54 per diluted share on revenue of $230.8 million

LHC Group reports third quarter 2016 earnings of $0.54
per diluted share on revenue of $230.8 million

——————————————
Produces double-digit organic home health admissions growth of 10.5%
——————————————
Company raises fiscal year 2016 guidance for fully diluted earnings
per share to a range of $2.05 to $2.08 and net service revenue
to a range of $910 million to $920 million

LAFAYETTE, La. (November 2, 2016) – LHC Group, Inc. (NASDAQ: LHCG) today announced its financial results for the three months and nine months ended September 30, 2016.

Financial Results for the Third Quarter of 2016 Compared with the Third Quarter of 2015

  • Net service revenue increased 13.1% to $230.8 million for the third quarter of 2016 compared with $204.1 million for the third quarter of 2015.
  • Net income attributable to LHC Group grew 8.7% to $9.6 million compared with $8.8 million, or 8.0% on a per diluted share basis to $0.54 from $0.50, which includes estimated Medicare reimbursement reductions for the third quarter of 2016 of $0.03 per diluted share.
  • Total comparable-quarter growth in admissions for all service lines for the third quarter was 15.3%.
  • Total comparable-quarter organic growth in home health admissions for the third quarter was 10.5%.

Commenting on the announcement, Keith G. Myers, LHC Group’s chairman and CEO, said, “LHC Group produced another solid quarter, highlighted by strong growth in total admissions and organic home health admissions. In addition to higher admission volume, our home health admissions continued to increase in acuity, driving a 4.8% increase in average Medicare reimbursement and contributing to 5.4% organic growth in home health net service revenue.

“We are also very pleased to have announced today, by separate news release, our new joint venture with LifePoint Health, one of the country’s leading providers of healthcare to non-urban communities. Combining the LifePoint Health transaction with all other transactions closed in the year-to-date, we have now eclipsed our $100 million acquisition annual revenue target, with approximately $106 million in acquired revenue.

“We expect the current upward trend in same store organic growth to continue as a result of increasing market awareness of our differentiating capabilities and quality scores, market consolidation, and the continued shift to value-based care. We also expect growth in hospital and health system joint ventures and freestanding acquisitions in certain markets to continue and look for 2017 to be another strong growth year overall for our company.

“In addition, with the October release of the CMS Star ratings, LHC Group continues to lead the home health industry in quality and patient satisfaction. With these quality ratings and LHC Group’s being the only national home health provider that is 100% accredited by the Joint Commission, we are clearly the leading partner of choice for hospitals and health systems that recognize the value in improving their patients’ non-acute care. LHC Group began partnering with hospitals in 1998, and with the inclusion of LifePoint, we are the trusted partner of 68 hospitals and health systems which includes 172 hospitals.

“LHC Group also remains well positioned to fund both new joint ventures and additional acquisitions from our robust pipeline of potential transactions. We had $16.5 million in cash at the end of the third quarter, $66.2 million of trailing 12 month’s cash flow from operations and $123.2 million of availability under our credit agreement.”

Mr. Myers concluded, “LHC Group’s record of success and significant prospects for continued profitable growth are a clear tribute to the compassionate and skilled healthcare professionals –and those who support them – who provide our patients quality care all day, every day. As has CMS through its Star ratings, we recognize and applaud their outstanding work and the commitment, skill and passion through which it is sustained.”

FY 2016 Guidance

LHC Group today raised its fiscal year 2016 guidance for fully diluted earnings per share to be in an expected range of $2.05 to $2.08, from the previous range of $1.90 to $2.00, and raised its fiscal year 2016 guidance for net service revenue to be in an expected range of $910 million to $920 million, from the previous range of range of $885 million to $900 million. This guidance includes:

(1) the negative impact from the Medicare Home Health Prospective Payment System for 2016, which is expected to reduce 2016 Medicare Home Health revenue by approximately 1.5% to 2.0%, or $7.1 million to $9.5 million, and fully diluted earnings per share by $0.24 to $0.32;

(2) the negative impact from the Medicare Long-Term Care Hospital (LTCH) Prospective Payment System (PPS), which is expected to reduce 2016 Medicare LTCH revenue by 4.9%, or $3.6 million, and fully diluted earnings per share by a net $0.06 after implementation strategies;

(3) the negative impact from the reduction of 18 beds in one of the Company’s LTACs beginning June 1, 2016, which is expected to reduce 2016 LTCH revenue by $3.1 million and fully diluted earnings per share by a net $0.03 after implementation strategies;

(4) the negative impact on the fourth quarter of 2016 from the final Medicare Home Health Prospective Payment System for 2017, which is expected to reduce fourth quarter fully diluted earnings per share by approximately $0.03; and

(5) the positive impact from the 2017 Medicare Hospice Wage Index and Payment Rate final rule, effective October 1, 2016, which is expected to increase our Medicare Hospice revenue for the fourth quarter of 2016 by 2.1%, or $650,000, and fully diluted earnings per share by $0.02.

The Company’s financial guidance does not take into account the impact of other 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 3, 2016, at 11:00 a.m. Eastern time to discuss its third quarter 2016 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, November 10, 2016, by dialing (855) 859‑2056 (international callers should call (404) 537-3406) and entering confirmation number 87126847. 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 non-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 (LTACHs). At September 30, 2016, LHC Group operated 289 home health services locations, 64 hospice locations, 11 community-based service locations and six LTACHs with eight locations.

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, 2015, 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,
2016
Dec. 31,
2015
ASSETS
Current assets:
Cash
$       16,518
$          6,139
Receivables:
Patient accounts receivable, less allowance for uncollectible accounts of $29,258 and $26,712, respectively
119,491
110,350
Other receivables
2,261
2,093
Amounts due from governmental entities
964
1,081
    Total receivables, net
122,716
113,524
Prepaid income taxes
4,124
1,949
Prepaid expenses
9,767
10,833
Other current assets
6,421
5,835
Receivable due from insurance carrier
550
Total current assets
159,546
138,830
Property, building and equipment, net of accumulated depreciation of $40,972 and $38,907, respectively
44,130
38,096
Goodwill
305,739
290,694
Intangible assets, net of accumulated amortization of $10,342 and $8,496, respectively
101,680
96,405
Other assets
2,358
2,029
Total assets
$     613,453
$     566,054
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued liabilities
$       28,511
$       24,586
Salaries, wages, and benefits payable
41,904
28,098
Self-insurance reserve
11,473
9,636
Current portion of long-term debt
249
241
Amounts due to governmental entities
4,895
7,055
Legal settlement payable
550
    Total current liabilities
87,032
70,166
Deferred income taxes
30,601
23,729
Income tax payable
1,678
3,415
Revolving credit facility
92,000
98,000
Long-term debt, less current portion
379
543
    Total liabilities
211,690
195,853
Noncontrolling interest — redeemable
12,668
12,408
Stockholders’ equity:
LHC Group, Inc. stockholders’ equity:
Common stock — $0.01 par value; 40,000,000 shares authorized; 22,419,523 and 22,224,423 shares issued in 2016 and 2015, respectively
224
222
Treasury stock —  4,826,872 and 4,776,560 shares at cost, respectively
(39,070)
(37,139)
Additional paid-in capital
118,689
113,793
Retained earnings
304,472
277,706
    Total LHC Group, Inc. stockholders’ equity
384,315
354,582
Noncontrolling interest — non-redeemable
4,780
3,211
    Total equity
389,095
357,793
            Total liabilities and equity
$     613,453
$     566,054
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,
2016
2015
2016
2015
Net service revenue
$     230,797
$     204,122
$     679,380
$     597,373
Cost of service revenue
140,832
120,873
413,561
351,938
Gross margin
89,965
83,249
265,819
245,435
Provision for bad debts
3,275
4,809
11,658
14,873
General and administrative expenses
66,999
60,472
201,296
179,736
Loss on disposal of assets
142
276
1,389
680
Operating income
19,549
17,692
51,476
50,146
Interest expense
(816)
(434)
(2,167)
(1,533)
Income before income taxes and
    noncontrolling interest
18,733
17,258
49,309
48,613
Income tax expense
6,562
6,148
15,500
17,097
Net income
12,171
11,110
33,809
31,516
Less net income attributable to
    noncontrolling interests
2,555
2,265
7,043
6,916
Net income attributable to LHC Group, Inc.’s common stockholders
$          9,616
$          8,845
$       26,766
$       24,600
Earnings per share — basic:
Net income attributable to LHC Group, Inc.’s common stockholders
$           0.55
$           0.51
$           1.53
$           1.41
Earnings per share — diluted:
Net income attributable to LHC Group, Inc.’s common stockholders
$           0.54
$           0.50
$           1.52
$           1.40
Weighted average shares outstanding:
Basic
17,588,163
17,436,731
17,546,773
17,389,934
Diluted
17,719,473
17,610,953
17,664,284
17,526,687
LHC GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Nine Months Ended
September 30,
2016
2015
Operating activities:
Net income
$       33,809
$       31,516
Adjustments to reconcile net income to net cash provided by
   operating activities:
Depreciation and amortization expense
9,024
8,685
Provision for bad debts
11,658
14,873
Stock-based compensation expense
3,518
3,150
Deferred income taxes
6,062
1,125
Impairment of intangibles and other
248
Loss on disposal of assets
1,389
680
Changes in operating assets and liabilities, net of acquisitions:
Receivables
(21,175)
(24,643)
Prepaid expenses and other assets
450
(3,660)
Prepaid income taxes
(2,482)
779
Accounts payable and accrued expenses
17,633
19,071
Net amounts due to/from governmental entities
(2,043)
(205)
Net cash provided by operating activities
57,843
51,619
Investing activities:
Purchases of property, building and equipment
(14,576)
(11,401)
Cash paid for acquisitions, primarily goodwill and intangible assets
(20,332)
(4,359)
Other
273
Net cash used in investing activities
(34,635)
(15,760)
Financing activities:
Proceeds from line of credit
38,000
64,000
Payments on line of credit
(44,000)
(32,000)
Proceeds from employee stock purchase plan
663
569
Payments on debt
(156)
(172)
Noncontrolling interest distributions
(6,859)
(6,372)
Excess tax benefits from vesting of stock awards
1,293
897
Withholding taxes paid on stock-based compensation
(1,931)
(1,449)
Purchase of additional controlling interest
(275)
Sale of noncontrolling interest
52
Proceeds from exercise of stock options
109
145
Net cash provided by (used in) financing activities
(12,829)
25,343
Change in cash
10,379
61,202
Cash at beginning of period
6,139
531
Cash at end of period
$       16,518
$       61,733
Supplemental disclosures of cash flow information
Interest paid
$          2,329
$          1,227
Income taxes paid
$       11,390
$       14,242
LHC GROUP, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Amounts in thousands)
(Unaudited)
Three Months Ended September 30, 2016
Home
Health Services
Hospice Services
Community-Based Services
Facility-
Based
Services
Total
Net service revenue
$     167,529
$       35,322
$       11,793
$       16,153
$     230,797
Cost of service revenue
100,057
21,243
9,100
10,432
140,832
Provision for bad debts
2,049
797
190
239
3,275
General and administrative expenses
50,293
9,491
2,263
4,952
66,999
Loss on disposal of assets
20
5
117
142
Operating income
15,110
3,786
240
413
19,549
Interest expense
(612)
(90)
(41)
(73)
(816)
Income before income taxes and noncontrolling interest
14,498
3,696
199
340
18,733
Income tax expense
5,133
1,275
83
71
6,562
Net income
9,365
2,421
116
269
12,171
Less net income attributable to noncontrolling interests
1,853
553
149
2,555
Net income attributable to
     LHC Group, Inc.’s
     common stockholders
$          7,512
$          1,868
$             116
$             120
$          9,616
Total assets
$     425,923
$     119,906
$       33,549
$       34,075
$     613,453
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
47,451
5,364
2,084
5,573
60,472
Loss on disposal of assets
215
34
7
20
276
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 interests
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
LHC GROUP, INC. AND SUBSIDIARIES
SEGMENT INFORMATION (Continued)
(Amounts in thousands)
(Unaudited)
Nine Months Ended September 30, 2016
Home
Health Services
Hospice Services
Community-Based Services
Facility-
Based
Services
Total
Net service revenue
$     492,090
$     100,051
$       32,823
$       54,416
$     679,380
Cost of service revenue
294,359
61,836
24,656
32,710
413,561
Provision for bad debts
8,122
2,364
488
684
11,658
General and administrative expenses
150,948
27,787
6,557
16,004
201,296
Loss on disposal of assets
811
329
46
203
1,389
Operating income
37,850
7,735
1,076
4,815
51,476
Interest expense
(1,640)
(232)
(106)
(189)
(2,167)
Income before income taxes and noncontrolling interest
36,210
7,503
970
4,626
49,309
Income tax expense
11,026
2,484
413
1,577
15,500
Net income
25,184
5,019
557
3,049
33,809
Less net income attributable to noncontrolling interests
5,002
1,368
(57)
730
7,043
Net income attributable to
     LHC Group, Inc.’s
     common stockholders
$       20,182
$          3,651
$             614
$          2,319
$       26,766
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
141,178
15,325
6,331
16,902
179,736
Loss on disposal of assets
518
72
45
45
680
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 interests
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
LHC GROUP, INC. AND SUBSIDIARIES
SELECT CONSOLIDATED KEY STATISTICAL AND FINANCIAL DATA
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2016
2015
2016
2015
Key Data:
Home-Health Services:
Home Health
Locations
289
275
289
275
Acquired
6
2
11
3
De novo
1
0
3
2
Divested/Consolidated
2
0
7
4
Total new admissions
40,657
35,772
118,730
106,948
Medicare new admissions
26,810
24,114
78,763
72,851
Average daily census
38,511
36,858
38,320
36,669
Average Medicare daily census
27,983
27,278
28,069
27,255
Medicare completed and billed episodes
49,230
48,063
148,195
142,572
Average Medicare case mix for completed and billed Medicare episodes
1.07
1.03
1.05
1.02
Average reimbursement per completed and billed Medicare episodes
$          2,724
$      2,600
$          2,670
$      2,562
Total visits
1,160,924
1,062,446
3,437,653
3,094,358
Total Medicare visits
856,177
787,220
2,526,405
2,302,492
Average visits per completed and billed Medicare episodes
17.4
16.4
17.0
16.1
Organic growth:(1)
Net revenue
5.4%
5.6%
6.1%
4.0%
Net Medicare revenue
4.0%
4.8%
4.5%
2.8%
Total new admissions
10.5%
2.9%
8.8%
4.0%
Medicare new admissions
8.1%
2.1%
6.0%
3.6%
Average daily census
1.7%
0.1%
2.3%
0.1%
Average Medicare daily census
-0.1%
-0.2%
0.8%
-0.4%
Medicare completed and billed episodes
0.3%
1.1%
2.1%
0.8%
Community-Based Services:
Locations
11
13
11
13
Acquired
1
1
1
1
De novo
0
0
0
1
Divested/Consolidated
1
0
3
1
Average daily census
1,672
1,339
1,631
1,323
Billable hours
354,998
308,477
990,129
906,089
Revenue per billable hour
$              33.22
$         34.45
$             33.15
$         33.90
Hospice-Based Services:
Locations
64
39
64
39
Acquired
2
1
9
1
De novo
0
2
0
2
Divested/Consolidated
1
0
2
1
Admissions
2,554
1,584
7,540
4,562
Average daily census
2,736
1,528
2,593
1,444
Patient days
251,753
140,592
710,415
394,336
Average revenue per patient day
$             140
$         137
$             141
$         139
Facility-Based Services:
Long-term Acute Care
Locations
8
8
8
8
Patient days
13,499
15,422
42,965
46,977
Average revenue per patient day
$          1,113
$      1,175
$          1,189
$      1,163

(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.