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LHC Group Announces Fourth Quarter and Full-Year 2014 Results

LAFAYETTE, La., Feb. 25, 2015 (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 year ended December 31, 2014.

Financial Results for the Fourth Quarter

  • Net service revenue for the fourth quarter of 2014 was $193.4 million.
  • Net income attributable to LHC Group for the fourth quarter of 2014 was $5.5 million, or $0.32 per diluted share.
  • Adjusted net income attributable to LHC Group for the fourth quarter of 2014 was $7.7 million, or $0.45 per diluted share. (1)

Financial Results for the Year

  • Net service revenue for the year ended December 31, 2014, was $733.6 million.
  • Net income attributable to LHC Group for the year ended December 31, 2014, was $21.8 million, or $1.26 per diluted share.
  • Adjusted net income attributable to LHC Group for the year ended December 31, 2014, was $24.0 million, or $1.39 per diluted share. (1)

(1) See "Reconciliation of Non-GAAP Measures - Adjusted net income attributable to LHC Group" to GAAP results on page 9

Commenting on the results, Keith G. Myers, LHC Group's chairman and CEO, said, "We are pleased with our operating results and the overall performance of our company and our team in 2014. Our focus on reducing overhead costs, combined with the investments we've made in point-of-care technology over the past several years, is allowing us to operate more efficiently and improve clinical outcomes through more meaningful coordination and collaboration with physicians, hospitals, and other healthcare providers in the continuum or care."

Myers added, "As we celebrate our first 20 years and look forward to the next chapter in our company's story, our proven healthcare delivery model, combined with our unique hospital joint venture strategy, positions us well to take advantage of the unprecedented growth opportunities ahead and to be at the forefront of change as our country moves toward a more integrated healthcare delivery system.

FY 2015 Guidance

Fiscal year net service revenue is expected to be in the range of $755 million to $775 million, and fully diluted earnings per share are expected to be in the range of $1.50 to $1.70.

This guidance does not take into account the impact of 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, February 26, 2015, at 11:00 a.m. Eastern time to discuss its fourth quarter and full-year 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, March 5, 2015, by dialing (855) 859‑2056 (international callers should call (404) 537-3406) and entering confirmation number 62252687. 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)
Dec. 31,
2014
Dec. 31,
2013
ASSETS
Current assets:
Cash $ 531 $ 14,014
Receivables:
Patient accounts receivable, less allowance for uncollectible accounts of $18,582 and $14,334, respectively 97,498 88,964
Other receivables 1,334 608
Amounts due from governmental entities 1,164 1,234
Total receivables, net 99,996 90,806
Deferred income taxes 11,381 9,251
Prepaid income taxes 3,093 4,069
Prepaid expenses 8,724 6,966
Other current assets 3,777 4,449
Receivable due from insurance carrier 7,850
Total current assets 135,352 129,555
Property, building and equipment, net of accumulated depreciation of $44,683 and $40,935, respectively 34,787 31,052
Goodwill 240,019 194,893
Intangible assets, net of accumulated amortization of $6,560 and $4,518, respectively 79,685 62,184
Other assets 1,896 4,542
Total assets $ 491,739 $ 422,226
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other accrued liabilities $ 19,278 $ 17,217
Salaries, wages and benefits payable 22,466 31,927
Self-insurance reserve 6,559 5,862
Current portion of long-term debt 230 249
Amounts due to governmental entities 4,459 4,391
Legal settlement payable 7,850
Total current liabilities 60,842 59,646
Deferred income taxes 33,592 29,060
Income tax payable 3,415 3,415
Revolving credit facility 60,000 22,000
Long-term debt, less current portion 778 963
Total liabilities 158,627 115,084
Noncontrolling interest- redeemable 11,517 11,258
Stockholders' equity:
Common stock – $0.01 par value: 40,000,000 shares authorized; 22,015,211 and 21,801,634 shares issued in 2014 and 2013, respectively 220 218
Treasury stock – 4,734,363 and 4,693,647 shares at cost, respectively (35,660) (34,715)
Additional paid-in capital 108,708 103,972
Retained earnings 245,371 223,534
Total LHC Group, Inc. stockholders' equity 318,639 293,009
Noncontrolling interest- non-redeemable 2,956 2,875
Total stockholders' equity 321,595 295,884
Total liabilities and stockholders' equity $ 491,739 $ 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
December 31,
Year Ended
December 31,
2014 2013 2014 2013
Net service revenue $ 193,371 $ 165,280 $ 733,632 $ 658,283
Cost of service revenue 112,792 95,241 434,775 383,464
Gross margin 80,579 70,039 298,857 274,819
Provision for bad debts 4,081 4,096 15,780 13,929
General and administrative expenses 61,287 54,806 233,945 213,633
Impairment of intangibles and other 3,646 520 3,646 520
Operating income 11,565 10,617 45,486 46,737
Interest expense (625) (440) (2,486) (1,995)
Non-operating income 106 79 265 263
Income from continuing operations before income taxes and noncontrolling interest 11,046 10,256 43,265 45,005
Income tax expense 3,314 3,623 14,513 15,859
Income from continuing operations 7,732 6,633 28,752 29,146
Less net income attributable to noncontrolling interests 2,198 1,664 6,915 6,804
Net income attributable to LHC Group, Inc.'s common stockholders $ 5,534 $ 4,969 $ 21,837 $ 22,342
Earnings per share – basic:
Net income attributable to LHC Group, Inc.'s common stockholders $ 0.32 $ 0.29 $ 1.27 $ 1.31
Earnings per share – diluted:
Net income attributable to LHC Group, Inc.'s common stockholders $ 0.32 $ 0.29 $ 1.26 $ 1.30
Weighted average shares outstanding:
Basic 17,274,677 17,096,360 17,229,026 17,049,794
Diluted 17,419,423 17,228,499 17,315,333 17,132,751
LHC GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Year Ended
December 31,
2014 2013
Operating activities
Net income $ 28,752 $ 29,146
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 9,571 8,325
Provision for bad debts 15,780 13,929
Stock based compensation expense 4,094 3,886
Deferred income taxes 2,402 2,351
Impairment of intangibles and other 3,650 520
Changes in operating assets and liabilities, net of acquisitions:
Receivables (16,372) (18,961)
Prepaid expenses and other assets 191 (749)
Prepaid income taxes 911 3,299
Accounts payable and accrued expenses (10,460) 4,395
Net amounts due to/from governmental entities 138 (226)
Net cash provided by operating activities 38,657 45,915
Investing activities
Cash paid for acquisitions, primarily goodwill and intangible assets (73,933) (26,920)
Purchases of property, building and equipment (8,105) (8,343)
Net cash (used in) investing activities (82,038) (35,263)
Financing activities
Proceeds from line of credit 75,000 73,000
Payments on line of credit (37,000) (70,500)
Excess tax benefits from vesting of stock awards 124 18
Proceeds from employee stock purchase plan 782 786
Proceeds from debt issuance 1,212
Payments on debt (202)
Noncontrolling interest distributions (6,843) (8,126)
Payment of deferred financing fees (852)
Purchase of additional controlling interest (359) (1,879)
Sale of noncontrolling interest 193
Redemption of treasury shares (945) (869)
Net cash provided by (used in) financing activities 29,898 (6,358)
Change in cash (13,483) 4,294
Cash at beginning of period 14,014 9,720
Cash at end of period $ 531 $ 14,014
Supplemental disclosures of cash flow information
Interest paid $ 2,461 $ 1,961
Income taxes paid $ 11,781 $ 21,606
LHC GROUP, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Amounts in thousands)
(Unaudited)
Three Months Ended December 31, 2014
Home-Based Services Hospice Services Facility-Based Services Total
Net service revenue $ 157,076 $ 18,260 $ 18,035 $ 193,371
Cost of service revenue 91,294 10,325 11,173 112,792
Provision for bad debts 3,470 442 169 4,081
General and administrative expenses 51,085 4,888 5,314 61,287
Impairment of intangibles and other 3,269 202 175 3,646
Operating income 7,958 2,403 1,204 11,565
Interest expense (499) (63) (63) (625)
Non-operating income 100 3 3 106
Income from continuing operations before income taxes and noncontrolling interest 7,559 2,343 1,144 11,046
Income tax expense 2,341 558 415 3,314
Income from continuing operations 5,218 1,785 729 7,732
Less net income attributable to noncontrolling interests 1,756 294 148 2,198
Net income attributable to LHC Group, Inc.'s common stockholders $ 3,462 $ 1,491 $ 581 $ 5,534
Total assets $ 420,538 $ 34,847 $ 36,354 $ 491,739

Three Months Ended December 31, 2013
Home-Based Services Hospice Services Facility-Based Services Total
Net service revenue $ 132,266 $ 15,184 $ 17,830 $ 165,280
Cost of service revenue 75,521 8,754 10,966 95,241
Provision for bad debts 3,619 428 49 4,096
General and administrative expenses 45,026 4,350 5,430 54,806
Impairment of intangibles and other 344 175 1 520
Operating income 7,756 1,477 1,384 10,617
Interest expense (332) (64) (44) (440)
Non-operating income 48 5 26 79
Income from continuing operations before income taxes and noncontrolling interest 7,472 1,418 1,366 10,256
Income tax expense 2,552 728 343 3,623
Income from continuing operations 4,920 690 1,023 6,633
Less net income attributable to noncontrolling interests 1,179 279 206 1,664
Net income attributable to LHC Group, Inc.'s common stockholders $ 3,741 $ 411 $ 817 $ 4,969
Total assets $ 356,842 $ 29,073 $ 36,311 $ 422,226
LHC GROUP, INC. AND SUBSIDIARIES
SEGMENT INFORMATION (Continued)
(Amounts in thousands)
(Unaudited)
Year Ended December 31, 2014
Home-Based Services Hospice Services Facility-Based Services Total
Net service revenue $ 592,664 $ 67,621 $ 73,347 $ 733,632
Cost of service revenue 349,467 39,804 45,504 434,775
Provision for bad debts 13,945 909 926 15,780
General and administrative expenses 193,832 18,882 21,231 233,945
Impairment of intangibles and other 3,269 202 175 3,646
Operating income 32,151 7,824 5,511 45,486
Interest expense (1,988) (249) (249) (2,486)
Non-operating income 203 43 19 265
Income from continuing operations before income taxes and noncontrolling interest 30,366 7,618 5,281 43,265
Income tax expense 11,104 1,955 1,454 14,513
Income from continuing operations 19,262 5,663 3,827 28,752
Less net income attributable to noncontrolling interests 5,085 1,122 708 6,915
Net income attributable to LHC Group, Inc.'s common stockholders $ 14,177 $ 4,541 $ 3,119 $ 21,837
Total assets $ 420,538 $ 34,847 $ 36,354 $ 491,739

Year Ended December 31, 2013
Home-Based Services Hospice Services Facility-Based Services Total
Net service revenue $ 526,719 $ 56,172 $ 75,392 $ 658,283
Cost of service revenue 304,987 34,212 44,265 383,464
Provision for bad debts 11,628 1,215 1,086 13,929
General and administrative expenses 176,074 16,210 21,349 213,633
Impairment of intangibles and other 344 175 1 520
Operating income 33,686 4,360 8,691 46,737
Interest expense (1,600) (200) (195) (1,995)
Non-operating income 142 26 95 263
Income from continuing operations before income taxes and noncontrolling interest 32,228 4,186 8,591 45,005
Income tax expense 12,545 1,797 1,517 15,859
Income from continuing operations 19,683 2,389 7,074 29,146
Less net income attributable to noncontrolling interests 4,596 956 1,252 6,804
Net income attributable to LHC Group, Inc.'s common stockholders $ 15,087 $ 1,433 $ 5,822 $ 22,342
Total assets $ 356,842 $ 29,073 $ 36,311 $ 422,226
LHC GROUP, INC. AND SUBSIDIARIES
SELECT CONSOLIDATED KEY STATISTICAL AND FINANCIAL DATA
(Unaudited)
Three Months Ended
December 31,
Year Ended
December 31,
2014 2013 2014 2013
Key Data:
Home-Based Services:
Home Health
Locations 276 255 276 255
Acquired 2 1 40 23
De novo 3
Divested/Consolidated (11) (22)
Total new admissions 34,329 29,565 133,054 121,750
Medicare new admissions 23,404 20,384 90,490 83,507
Average daily census 36,153 32,940 35,299 34,074
Average Medicare daily census 26,781 25,183 26,336 25,845
Medicare completed and billed episodes 46,726 43,232 182,896 170,898
Average Medicare case mix for completed and billed Medicare episodes(1) 1.01 1.30 0.99 1.27
Average reimbursement per completed and billed Medicare episodes $ 2,445 $ 2,413 $ 2,397 $ 2,423
Total visits 1,012,677 896,385 3,911,293 3,579,291
Total Medicare visits 750,924 682,641 2,912,440 2,707,119
Average visits per completed and billed Medicare episodes 16.1 15.8 15.9 15.8
Organic growth:(2)
Net revenue 2.0% -5.6% 1.4% -2.9%
Net Medicare revenue -0.8% -3.0% -0.4% -0.7%
Total new admissions 4.5% -0.8% 1.6% 3.6%
Medicare new admissions 3.0% -0.6% 1.2% 3.7%
Average daily census -0.7% -5.0% -3.5% -1.1%
Average Medicare daily census -3.1% -3.5% -4.1% -0.5%
Medicare completed and billed episodes -1.2% -0.2% 0.9% 1.2%
Community-Based Services:
Locations 13 8 13 8
Acquired 5
De novo 1 1 1
Divested/Consolidated (1) (1)
Average daily census 1,240 439 984 420
Billable hours 304,618 39,561 911,217 153,559
Revenue per billable hour $ 30.99 $ 21.03 $ 30.40 $ 20.88
Hospice-Based Services:
Locations 38 34 38 34
Acquired 6 2
De novo 1 1
Divested/Consolidated 1 (3)
Admissions 1,412 1,180 5,546 4,916
Average daily census 1,387 1,208 1,343 1,143
Patient days 127,633 111,107 490,252 417,069
Average revenue per patient day $ 143 $ 137 $ 138 $ 135
Facility-Based Services:
Long-term Acute Care
Locations 8 9 8 9
Patient days 15,589 15,116 62,352 61,838
Average revenue per patient day $ 1,115 $ 1,132 $ 1,130 $ 1,162
(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.

LHC GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED NET INCOME ATTRIBUTABLE TO LHC GROUP, INC.
(Amounts in thousands)
(Unaudited)
Three Months Ended
Dec. 31, 2014
Year Ended
Dec. 31, 2014
Net income attributable to LHC Group, Inc.'s common stockholders $ 5,534 $ 21,837
Add (net of tax):
Disposal costs on closures of underperforming locations (1) 954 954
Intangible impairment (2) 1,230 1,230
Restructure Severance (3) 369 369
Lease terminations (4) 289 289
Less:
Tax benefit (5) (657) (657)
Adjusted net income attributable to LHC Group, Inc.'s common stockholders $ 7,719 $ 24,022

RECONCILIATION OF ADJUSTED NET INCOME ATTRIBUTABLE TO LHC GROUP, INC. PER DILUTED SHARE
(Unaudited)
Three Months Ended
Dec. 31, 2014
Year Ended
Dec. 31, 2014
Net income attributable to LHC Group, Inc.'s common stockholders
per diluted share
$ 0.32 $ 1.26
Add:
Disposal costs on closures of underperforming locations (1) 0.06 0.06
Intangible impairment (2) 0.07 0.07
Restructure Severance (3) 0.02 0.02
Lease terminations (4) 0.02 0.02
Less:
Tax benefit (5) (0.04) (0.04)
Adjusted net income attributable to LHC Group, Inc.'s common stockholders per diluted share $ 0.45 $ 1.39
(1) Disposal costs related to the closures of underperforming locations
(2) Impairment to intangibles for write-down of carrying value of an acquired trade name.
(3) Severances associated with reduction of staff related to point of care rollout.
(4) Charges associated with lease terminations for closed/consolidated locations.
(5) A reduction to tax expense from the identification of additional deductions in 2014 as well as the retroactive reinstatement of the WOTC program.

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

Source:LHC Group