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.
|
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
|
|
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
|
|
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)
|
|
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
|
|
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
|
|
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
|
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
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|
2016
|
2015
|
2016
|
2015
|
|
|
Key Data:
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|
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)
|
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|
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:
|
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|
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:
|
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|
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:
|
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|
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.