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LHC Group Announces Third Quarter 2014 Results

LAFAYETTE, La., Nov. 5, 2014 (GLOBE NEWSWIRE) -- 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 nine months ended September 30, 2014.

Financial Results for the Third Quarter

  • Net service revenue for the third quarter of 2014 was $187.7 million, compared with $164.7 million for the same period in 2013.
  • Net income attributable to LHC Group for the third quarter of 2014 was $6.2 million, compared with $5.3 million for the same period in 2013.
  • Diluted earnings per share was $0.36 for the third quarter of 2014 as compared with $0.31 for the same period in 2013.

Financial Results for the Nine Months

  • Net service revenue for the nine months ended September 30, 2014, was $540.3 million, compared with $493.0 million for the same period in 2013.
  • Net income attributable to LHC Group for the nine months ended September 30, 2014, was $16.3 million, compared with $17.4 million for the same period in 2013.
  • Diluted earnings per share was $0.94 for the nine months ended September 30, 2014, compared with $1.02 for the same period in 2013.

Commenting on the results, Keith G. Myers, LHC Group's chairman and CEO, said, "I am extremely proud of the strong and well-balanced operating results our team delivered during the third quarter of 2014 and with our continued ability to execute our long-term growth strategy. In 2014, we have acquired 57 locations in 15 states, which consisted of $105 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, improving efficiencies and reducing costs."

LHC Group is in the final phase of its company-wide conversion to point of care technology, which is anticipated to be completed during the fourth quarter of 2014. In conjunction with this final phase of its point of care conversion, LHC Group is in the process of eliminating certain general and administrative expenses, consolidating a limited number of locations in service area overlap markets and closing three underperforming providers during the fourth quarter of 2014. These initiatives are estimated to yield annual cost savings of $7 million to $8 million when fully implemented, beginning in 2015. As part of these efforts, LHC Group expects non-recurring costs in the fourth quarter of 2014 of $3 million to $4 million.

Myers added, "In the third quarter of 2010, we began our strategic and systematic conversion of all of our home health and hospice agencies to point of care technology. We are confident point of care will enhance our efforts in the areas of disease management, clinical decision support, medication management, transitions in care, quality measurements, compliance and clinical care improvement. We also expect it to expand our capability to electronically exchange key clinical information with hospitals, physicians and other providers of care. In the fourth quarter of 2014, we enter the final phase of the conversion, which demonstrates our commitment to continuously improving quality while becoming more efficient and reducing costs. We expect the completion of this plan will have a positive, material impact on our results of operations for 2015 and beyond.

"In closing, I would like to congratulate and thank the LHC Group family for their unwavering commitment to excellence. Their 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 Company's healthcare professionals."

Guidance

The Company is raising its full-year 2014 guidance for net service revenue, which was issued on August 6, 2014, in the range of $720 million to $730 million, to a range of $725 million to $735 million due to the Life Care Home Health acquisition that was completed on September 1, 2014. The Company is reaffirming its full-year 2014 guidance for fully diluted earnings per share in the range of $1.25 to $1.35. This guidance includes the negative impact from the Medicare Home Health Prospective Payment System for 2014 of approximately $0.17 per diluted share. This guidance does not take into account the estimated impact from the non-recurring costs in the fourth quarter of 2014 of $3 million to $4 million, 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, November 6, 2014, at 11 a.m. Eastern time to discuss its third 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, November 13, 2014, by dialing (855) 859‑2056 (international callers should call (404) 537-3406) and entering confirmation number 11054087. 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)
Sept. 30,
2014
Dec. 31,
2013
ASSETS
Current assets:
Cash $ 4,876 $ 14,014
Receivables:
Patient accounts receivable, less allowance for uncollectible accounts of $17,463 and $14,334, respectively 99,652 88,964
Other receivables 828 608
Amounts due from governmental entities 990 1,234
Total receivables, net 101,470 90,806
Deferred income taxes 11,152 9,251
Prepaid income taxes 4,069
Prepaid expenses 8,160 6,966
Other current assets 4,205 4,449
Receivable due from insurance carrier 7,850
Total current assets 137,713 129,555
Property, building and equipment, net of accumulated depreciation of $46,022 and $40,935, respectively 33,798 31,052
Goodwill 242,218 194,893
Intangible assets, net of accumulated amortization of $6,020 and $4,518, respectively 79,988 62,184
Other assets 1,914 4,542
Total assets $ 495,631 $ 422,226
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued liabilities $ 19,959 $ 17,217
Salaries, wages and benefits payable 30,946 31,927
Self-insurance reserve 6,858 5,862
Current portion of long-term debt 247 249
Amounts due to governmental entities 4,242 4,391
Legal settlement payable 7,850
Total current liabilities 70,102 59,646
Deferred income taxes 31,483 29,060
Income tax payable 3,415 3,415
Revolving credit facility 64,000 22,000
Long-term debt, less current portion 818 963
Total liabilities 169,818 115,084
Noncontrolling interest- redeemable 11,001 11,258
Stockholders' equity:
Common stock – $0.01 par value: 40,000,000 shares authorized; 22,002,988 and 21,801,634 shares issued in 2014 and 2013, respectively 220 218
Treasury stock – 4,733,432 and 4,693,647 shares at cost, respectively (35,638) (34,715)
Additional paid-in capital 107,497 103,972
Retained earnings 239,837 223,534
Total LHC Group, Inc. stockholders' equity 311,916 293,009
Noncontrolling interest- non-redeemable 2,896 2,875
Total equity 314,812 295,884
Total liabilities and stockholders' equity $ 495,631 $ 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
September 30,
Nine Months Ended
September 30,
2014 2013 2014 2013
Net service revenue $ 187,713 $ 164,748 $ 540,261 $ 493,003
Cost of service revenue 113,122 97,966 321,983 288,223
Gross margin 74,591 66,782 218,278 204,780
Provision for bad debts 3,974 2,708 11,699 9,833
General and administrative expenses 58,432 53,047 172,658 158,827
Operating income 12,185 11,027 33,921 36,120
Interest expense (643) (430) (1,861) (1,555)
Non-operating income 235 54 159 184
Income before income taxes and noncontrolling interest 11,777 10,651 32,219 34,749
Income tax expense 3,924 3,782 11,199 12,236
Net income 7,853 6,869 21,020 22,513
Less net income attributable to noncontrolling interests 1,679 1,572 4,717 5,140
Net income attributable to LHC Group, Inc.'s common stockholders $ 6,174 $ 5,297 $ 16,303 $ 17,373
Earnings per share – basic:
Net income attributable to LHC Group, Inc.'s common stockholders $ 0.36 $ 0.31 $ 0.95 $ 1.02
Earnings per share – diluted:
Net income attributable to LHC Group, Inc.'s common stockholders $ 0.36 $ 0.31 $ 0.94 $ 1.02
Weighted average shares outstanding:
Basic 17,260,078 17,083,201 17,213,648 17,035,541
Diluted 17,356,916 17,182,013 17,289,554 17,109,675
LHC GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Nine Months Ended
September 30,
2014 2013
Operating activities
Net income $ 21,020 $ 22,513
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 6,874 5,958
Provision for bad debts 11,699 9,833
Stock based compensation expense 3,086 2,879
Deferred income taxes 522 480
Loss on sale of assets 21 17
Changes in operating assets and liabilities, net of acquisitions:
Receivables (12,868) (18,462)
Prepaid expenses and other assets 280 (1,114)
Prepaid income taxes 4,005 4,262
Accounts payable and accrued expenses (1,283) 645
Net amounts due to/from governmental entities 95 (631)
Net cash provided by operating activities 33,451 26,380
Investing activities
Purchases of property, building and equipment (4,872) (5,997)
Cash paid for acquisitions, primarily goodwill and intangible assets (73,194) (26,920)
Net cash (used in) investing activities (78,066) (32,917)
Financing activities
Proceeds from line of credit 72,000 64,500
Payments on line of credit (30,000) (60,000)
Proceeds from employee stock purchase plan 575 570
Proceeds from debt issuance 1,138
Payments on debt (147)
Noncontrolling interest distributions (5,086) (6,286)
Payment of deferred financing fees (900)
Excess tax benefits from vesting of stock awards 124 11
Redemption of treasury shares (923) (794)
Purchase of additional noncontrolling interest (359) (1,879)
Sale of noncontrolling interest 193
Net cash provided by (used in) financing activities 35,477 (2,740)
Change in cash (9,138) (9,277)
Cash at beginning of period 14,014 9,720
Cash at end of period $ 4,876 $ 443
Supplemental disclosures of cash flow information
Interest paid $ 1,827 $ 1,523
Income taxes paid $ 6,946 $ 18,123

LHC GROUP, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Amounts in thousands)
(Unaudited)
Three Months Ended September 30, 2014
Home-
Based
Services
Hospice
Services
Facility-
Based
Services
Total
Net service revenue $ 152,648 $ 17,071 $ 17,994 $ 187,713
Cost of service revenue 91,506 10,431 11,185 113,122
Provision for bad debts 3,753 269 (48) 3,974
General and administrative expenses 48,591 4,756 5,085 58,432
Operating income 8,798 1,615 1,772 12,185
Interest expense (515) (64) (64) (643)
Non-operating income 190 35 10 235
Income before income taxes and noncontrolling interest 8,473 1,586 1,718 11,777
Income tax expense 3,034 521 369 3,924
Net income 5,439 1,065 1,349 7,853
Less net income attributable to noncontrolling interests 1,185 292 202 1,679
Net income attributable to LHC Group, Inc.'s common stockholders $ 4,254 $ 773 $ 1,147 $ 6,174
Total assets $ 424,780 $ 34,622 $ 36,229 $ 495,631
Three Months Ended September 30, 2013
Home-
Based
Services
Hospice
Services
Facility-
Based

Services
Total
Net service revenue $ 132,739 $ 14,171 $ 17,838 $ 164,748
Cost of service revenue 78,307 8,775 10,884 97,966
Provision for bad debts 2,333 318 57 2,708
General and administrative expenses 44,002 3,967 5,078 53,047
Operating income 8,097 1,111 1,819 11,027
Interest expense (348) (39) (43) (430)
Non-operating income 33 3 18 54
Income before income taxes and noncontrolling interest 7,782 1,075 1,794 10,651
Income tax expense 3,028 394 360 3,782
Net income 4,754 681 1,434 6,869
Less net income attributable to noncontrolling interests 1,077 202 293 1,572
Net income attributable to LHC Group, Inc.'s common stockholders $ 3,677 $ 479 $ 1,141 $ 5,297
Total assets $ 351,804 $ 27,536 $ 34,693 $ 414,033
LHC GROUP, INC. AND SUBSIDIARIES
SEGMENT INFORMATION (Continued)
(Amounts in thousands)
(Unaudited)
Nine Months Ended September 30, 2014
Home-
Based
Services
Hospice
Services
Facility-
Based
Services
Total
Net service revenue $ 435,588 $ 49,361 $ 55,312 $ 540,261
Cost of service revenue 258,173 29,479 34,331 321,983
Provision for bad debts 10,475 467 757 11,699
General and administrative expenses 142,747 13,994 15,917 172,658
Operating income 24,193 5,421 4,307 33,921
Interest expense (1,489) (186) (186) (1,861)
Non-operating income 103 40 16 159
Income before income taxes and noncontrolling interest 22,807 5,275 4,137 32,219
Income tax expense 8,763 1,397 1,039 11,199
Net income 14,044 3,878 3,098 21,020
Less net income attributable to noncontrolling interests 3,329 828 560 4,717
Net income attributable to LHC Group, Inc.'s common stockholders $ 10,715 $ 3,050 $ 2,538 $ 16,303
Total assets $ 424,780 $ 34,622 $ 36,229 $ 495,631
Nine Months Ended September 30, 2013
Home-
Based
Services
Hospice
Services
Facility-
Based
Services
Total
Net service revenue $ 394,453 $ 40,988 $ 57,562 $ 493,003
Cost of service revenue 229,466 25,458 33,299 288,223
Provision for bad debts 8,009 787 1,037 9,833
General and administrative expenses 131,048 11,860 15,919 158,827
Operating income 25,930 2,883 7,307 36,120
Interest expense (1,268) (136) (151) (1,555)
Non-operating income 94 21 69 184
Income before income taxes and noncontrolling interest 24,756 2,768 7,225 34,749
Income tax expense 9,993 1,069 1,174 12,236
Net income 14,763 1,699 6,051 22,513
Less net income attributable to noncontrolling interests 3,417 677 1,046 5,140
Net income attributable to LHC Group, Inc.'s common stockholders $ 11,346 $ 1,022 $ 5,005 $ 17,373
Total assets $ 351,804 $ 27,536 $ 34,693 $ 414,033
LHC GROUP, INC. AND SUBSIDIARIES
SELECT CONSOLIDATED KEY STATISTICAL AND FINANCIAL DATA
(Unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2014 2013 2014 2013
Key Data:
Home-Based Services:
Home Health
Locations 283 255 283 255
Acquired 13 4 38 23
De novo 0 0 0 0
Total new admissions 33,962 30,142 98,725 92,185
Medicare new admissions 22,970 20,944 67,086 63,123
Average daily census 35,973 33,429 35,148 34,456
Average Medicare daily census 26,616 25,408 26,217 26,069
Medicare completed and billed episodes 46,633 42,191 136,529 127,761
Average Medicare case mix for completed and billed Medicare episodes(1) 0.99 1.28 0.98 1.27
Average reimbursement per completed and billed Medicare episodes $ 2,392 $ 2,489 $ 2,375 $ 2,425
Total visits 998,533 908,718 2,898,616 2,682,906
Total Medicare visits 739,184 686,295 2,161,516 2,024,478
Average visits per completed and billed Medicare episodes 15.9 16.3 15.8 15.8
Organic growth:(2)
Net revenue 1.1% -2.4% 1.1% -2.9%
Net Medicare revenue -1.2% 1.5% -0.2% -0.6%
Total new admissions 2.2% 1.8% 0.6% 3.5%
Medicare new admissions 0.8% 4.2% 0.6% 4.1%
Average daily census -1.7% -2.2% -4.0% -1.0%
Average Medicare daily census -3.1% -0.6% -4.4% -0.1%
Medicare completed and billed episodes 2.2% 0.8% 1.6% 0.8%
Community-Based Services:
Locations 13 5 13 5
Acquired 0 0 6 0
De novo 0 0 1 0
Average daily census 972 414 793 416
Billable hours 291,302 37,472 606,600 113,998
Revenue per billable hour $ 30.80 $ 21.96 $ 30.10 $ 20.83
Hospice-Based Services:
Locations 38 34 38 34
Acquired 0 0 6 2
Admissions 1,476 1,252 4,134 3,736
Average daily census 1,404 1,144 1,333 1,125
Patient days 127,832 105,274 362,619 305,962
Average revenue per patient day $ 134 $ 135 $ 136 $ 134
Facility-Based Services:
Long-term Acute Care
Locations 8 9 8 9
Patient days 15,362 15,321 46,763 46,722
Average revenue per patient day $ 1,124 $ 1,118 $ 1,135 $ 1,172
(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.

CONTACT: Eric Elliott Investor Relations (337) 233-1307 eric.elliott@lhcgroup.com

Source:LHC Group