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LHC Group Announces Fourth Quarter EPS of $0.44 and 17.8% Growth in Adjusted EPS to $0.53

LAFAYETTE, La., March 02, 2016 (GLOBE NEWSWIRE) -- 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 year ended December 31, 2015.

Financial Results for the Fourth Quarter

  • Net service revenue increased 13.2% to $219.0 million for the fourth quarter of 2015 compared with $193.4 million for the fourth quarter of 2014.
  • Net income attributable to LHC Group for the fourth quarter of 2015 was $7.7 million, or $0.44 per diluted share, compared with $5.5 million, or $0.32 per diluted share, in the same period of 2014.
  • Adjusted net income attributable to LHC Group increased 21.0% to $9.3 million and 17.8% to $0.53 per diluted share for the fourth quarter of 2015 from $7.7 million and $0.45 per diluted share for the fourth quarter of 2014.(1)
  • Total comparable-quarter growth in admissions for all service lines was 7.7%.
  • Total comparable-quarter organic growth in home health admissions was 4.0%.

Financial Results for the Year

  • Net service revenue grew 11.3% to $816.4 million for 2015 compared with $733.6 million for 2014.
  • Net income attributable to LHC Group for 2015 was $32.3 million, or $1.84 per diluted share.
  • Adjusted net income attributable to LHC Group for 2015 increased 41.9% to $34.1 million and 39.6% to $1.94 per diluted share.(1)
  • Total growth in admissions for all service lines for 2015 was 8.3% compared with 2014.
  • Total organic growth in home health admissions for 2015 was 3.4% compared with 2014.
  • General and administrative expense improved 140 basis points to 30.5% of revenue for 2015.

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

"LHC Group produced substantial profitable growth for the fourth quarter of 2015 to complete a year of strong financial performance," said Keith G. Myers, LHC Group's chairman and CEO. "The double-digit increase in our revenues reflected continued meaningful organic revenue growth, which, at 5.9%, was our strongest quarterly performance for the year. Our acquisition strategy also again drove our results. For 2015, we completed seven acquisition transactions, for nine home health agencies, 17 hospice agencies and two community-based services agencies, which generate aggregate annualized revenue of $64.6 million. These transactions included the fourth quarter acquisitions of Halcyon Hospice with approximately $41 million of annualized revenue and two home health agencies in Kentucky with approximately $7.6 million in aggregate annualized revenue. In addition, our ongoing cost containment efforts, combined with increased revenue-driven operating leverage, produced a 60 basis-point improvement in G&A as a percentage of revenue for the fourth quarter.

"I congratulate our team for these results, even as we continued to achieve above-industry quality scores. We expect our growth momentum to continue in 2016, as we capitalize on opportunities for further organic growth and evaluate a very robust pipeline of potential acquisition opportunities. With cash flow from operations for 2015 of $60 million and availability under our credit agreement of $117.1 million at year end, we are confident of our ability to execute our growth plans for 2016.

"Over the longer term, we also believe LHC Group is well positioned for the shift in the reimbursement system to value-based payment models, which incentivize payors to leverage the capabilities of high quality home health providers. We are already seeing an increase in the volume and acuity of our admissions as payors shift patients from more intensive and more expensive clinical settings, and we are already making a difference in the lives of our patients and their families with our innovative physician-led clinical protocols. With this shift intensifying over the coming years, we expect to be a leading partner of choice for health systems and payors as they seek to improve their patients’ non-acute care. Based on LHC Group’s demonstrated quality of care, scale and market density, innovative, data-driven technology capabilities, financial strength and proven acquisition and integration expertise, we expect to leverage these favorable market dynamics to produce further long-term growth in earnings and shareholder value."

FY 2016 Guidance
Fiscal year 2016 net service revenue is expected to be in the range of $870 million to $890 million, and fully diluted earnings per share are expected to be in the range of $1.90 to $2.00. This guidance includes:

(1) the negative impact from the Medicare Home Health Prospective Payment System for 2016, which is expected to have an approximate 2% impact, or $9.5 million reduction to Medicare Home Health revenue and $0.32 reduction in fully diluted earnings per share for 2016; and
(2) the negative impact from the Medicare Long-Term Care Hospital (LTCH) Prospective Payment System (PPS), which establishes two different types of LTCH PPS payment rates depending on whether the patient meets certain clinical criteria: the LTCH PPS standard Federal payment rate and a new LTCH PPS site neutral payment rate comparable to the IPPS payment rates. The effect from the LTCH PPS is a 4.9% impact, or an expected $3.6 million reduction to Medicare LTCH revenue or $0.06 net reduction in fully diluted earnings per share for 2016 after implementation strategies.

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, March 3, 2016, at 11:00 a.m. Eastern time to discuss its fourth quarter and full year 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 Thursday, March 10, 2016, by dialing (855) 859‑2056 (international callers should call (404) 537-3406) and entering confirmation number 19231055. 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)
Dec. 31,
2015
Dec. 31,
2014
ASSETS
Current assets:
Cash$ 6,139 $ 531
Receivables:
Patient accounts receivable, less allowance for uncollectible accounts of $26,712 and $18,582, respectively 110,350 97,498
Other receivables 2,093 1,334
Amounts due from governmental entities 1,081 1,164
Total receivables, net 113,524 99,996
Deferred income taxes 11,381
Prepaid income taxes 1,949 3,093
Prepaid expenses 10,833 8,724
Other current assets 5,835 3,777
Receivable due from insurance carrier 550 7,850
Total current assets 138,830 135,352
Property, building and equipment, net of accumulated depreciation of $38,907 and $44,683, respectively 38,096 34,787
Goodwill 290,694 240,019
Intangible assets, net of accumulated amortization of $8,496 and $6,560, respectively 96,405 79,685
Other assets 2,029 1,896
Total assets$ 566,054 $ 491,739
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued liabilities$ 24,586 $ 19,278
Salaries, wages and benefits payable 28,098 22,466
Self-insurance reserve 9,636 6,559
Current portion of long-term debt 241 230
Amounts due to governmental entities 7,055 4,459
Legal settlement payable 550 7,850
Total current liabilities 70,166 60,842
Deferred income taxes 23,729 33,592
Income tax payable 3,415 3,415
Revolving credit facility 98,000 60,000
Long-term debt, less current portion 543 778
Total liabilities 195,853 158,627
Noncontrolling interest – redeemable 12,408 11,517
Stockholders’ equity:
Common stock – $0.01 par value: 40,000,000 shares authorized; 22,224,423 and 22,015,211 shares issued in 2015 and 2014, respectively 222 220
Treasury stock – 4,776,560 and 4,734,363 shares at cost, respectively (37,139) (35,660)
Additional paid-in capital 113,793 108,708
Retained earnings 277,706 245,371
Total LHC Group, Inc. stockholders’ equity 354,582 318,639
Noncontrolling interest – non-redeemable 3,211 2,956
Total stockholders’ equity 357,793 321,595
Total liabilities and stockholders’ equity$ 566,054 $ 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
December 31,
Year Ended
December 31,
2015 2014 2015 2014
Net service revenue$ 218,993 $ 193,371 $ 816,366 $ 733,632
Cost of service revenue 128,940 112,792 480,878 434,775
Gross margin 90,053 80,579 335,488 298,857
Provision for bad debts 4,369 4,081 19,243 15,780
General and administrative expenses 68,106 61,287 248,629 233,945
Impairment of intangibles and other 1,025 3,646 1,273 3,646
Operating income 16,553 11,565 66,343 45,486
Interest expense (769) (625) (2,302) (2,486)
Non-operating income 100 106 457 265
Income before income taxes and noncontrolling interest 15,884 11,046 64,498 43,265
Income tax expense 5,752 3,314 22,848 14,513
Net income 10,132 7,732 41,650 28,752
Less net income attributable to noncontrolling interest 2,398 2,198 9,315 6,915
Net income attributable to LHC Group, Inc.’s common stockholders$ 7,734 $ 5,534 $ 32,335 $ 21,837
Earnings per share – basic:
Net income attributable to LHC Group, Inc.’s common stockholders$ 0.44 $ 0.32 $ 1.86 $ 1.27
Earnings per share – diluted:
Net income attributable to LHC Group, Inc.’s common stockholders$ 0.44 $ 0.32 $ 1.84 $ 1.26
Weighted average shares outstanding:
Basic 17,447,691 17,274,677 17,405,379 17,229,026
Diluted 17,647,483 17,419,423 17,547,531 17,315,333


LHC GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Year Ended
December 31,
2015 2014
Operating activities
Net income$ 41,650 $ 28,752
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 11,955 9,571
Provision for bad debts 19,243 15,780
Stock based compensation expense 4,225 4,094
Deferred income taxes 1,518 2,402
Impairment of intangibles and other 1,990 3,650
Changes in operating assets and liabilities, net of acquisitions:
Receivables (27,951) (16,372)
Prepaid expenses and other assets (3,793) 191
Prepaid income taxes 441 911
Accounts payable and accrued expenses 10,526 (10,460)
Net amounts due to/from governmental entities 130 138
Net cash provided by operating activities 59,934 38,657
Investing activities
Purchases of property, building and equipment (13,283) (8,105)
Cash paid for acquisitions, primarily goodwill and intangible assets (70,572) (73,933)
Net cash used in investing activities (83,855) (82,038)
Financing activities
Proceeds from line of credit 83,000 75,000
Payments on line of credit (45,000) (37,000)
Proceeds from employee stock purchase plan 782 782
Payments on debt (233) (202)
Noncontrolling interest distributions (8,324) (6,843)
Payment of deferred financing fees (852)
Excess tax benefits from vesting of restricted stock 914 124
Redemption of treasury shares (1,479) (945)
Purchase of additional noncontrolling interest (275) (359)
Proceeds from exercise of stock options 144
Sale of noncontrolling interest 193
Net cash provided by financing activities 29,529 29,898
Change in cash 5,608 (13,483)
Cash at beginning of period 531 14,014
Cash at end of period$ 6,139 $ 531
Supplemental disclosures of cash flow information
Interest paid$ 1,870 $ 2,461
Income taxes paid$ 20,361 $ 11,781


LHC GROUP, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Amounts in thousands)
(Unaudited)
Three Months Ended December 31, 2015
Home
Health
Services
Hospice
Services
Community-
Based
Services
Facility-
Based
Services
Total
Net service revenue$ 158,279 $ 31,166 $ 10,488 $ 19,060 $ 218,993
Cost of service revenue 92,147 18,271 7,444 11,078 128,940
Provision for bad debts 3,627 306 384 52 4,369
General and administrative expenses 49,352 11,096 2,155 5,503 68,106
Impairment of intangibles and other 1,025 1,025
Operating income 12,128 1,493 505 2,427 16,553
Interest expense (607) (85) (8) (69) (769)
Non-operating income 89 13 1 (3) 100
Income before income taxes and noncontrolling interest 11,610 1,421 498 2,355 15,884
Income tax expense 4,173 485 230 864 5,752
Net income 7,437 936 268 1,491 10,132
Less net income attributable to noncontrolling interest 1,839 299 (43) 303 2,398
Net income attributable to LHC Group, Inc.'s common stockholders$ 5,598 $ 637 $ 311 $ 1,188 $ 7,734
Total assets$ 394,392 $ 101,641 $ 31,235 $ 38,786 $ 566,054


Three Months Ended December 31, 2014
Home
Health
Services
Hospice
Services
Community-
Based
Services
Facility-
Based
Services
Total
Net service revenue$ 147,637 $ 18,260 $ 9,439 $ 18,035 $ 193,371
Cost of service revenue 84,473 10,325 6,821 11,173 112,792
Provision for bad debts 3,104 442 366 169 4,081
General and administrative expenses 48,821 4,888 2,264 5,314 61,287
Impairment of intangibles and other 3,269 202 175 3,646
Operating income 7,970 2,403 (12) 1,204 11,565
Interest expense (495) (63) (4) (63) (625)
Non-operating income 99 3 1 3 106
Income before income taxes and noncontrolling interest 7,574 2,343 (15) 1,144 11,046
Income tax expense 2,319 558 22 415 3,314
Net income 5,255 1,785 (37) 729 7,732
Less net income attributable to noncontrolling interest 1,780 294 (24) 148 2,198
Net income attributable to LHC Group, Inc.’s common stockholders$ 3,475 $ 1,491 $ (13)$ 581 $ 5,534
Total assets$ 386,511 $ 34,847 $ 34,027 $ 36,354 $ 491,739


LHC GROUP, INC. AND SUBSIDIARIES
SEGMENT INFORMATION (Continued)
(Amounts in thousands)
(Unaudited)
Year Ended December 31, 2015
Home
Health
Services
Hospice
Services
Community-
Based
Services
Facility-
Based
Services
Total
Net service revenue$ 613,188 $ 85,854 $ 41,202 $ 76,122 $ 816,366
Cost of service revenue 354,750 50,906 29,076 46,146 480,878
Provision for bad debts 15,736 1,002 1,816 689 19,243
General and administrative expenses 191,135 26,517 8,506 22,471 248,629
Impairment of intangibles and other 1,245 28 1,273
Operating income 50,322 7,429 1,776 6,816 66,343
Interest expense (1,819) (253) (23) (207) (2,302)
Non-operating income 397 38 3 19 457
Income before income taxes and noncontrolling interest 48,900 7,214 1,756 6,628 64,498
Income tax expense 17,173 2,541 787 2,347 22,848
Net income 31,727 4,673 969 4,281 41,650
Less net income attributable to noncontrolling interest 7,424 1,077 (144) 958 9,315
Net income attributable to LHC Group, Inc.'s common stockholders$ 24,303 $ 3,596 $ 1,113 $ 3,323 $ 32,335
Total assets$ 394,392 $ 101,641 $ 31,235 $ 38,786 $ 566,054


Year Ended December 31, 2014
Home
Health
Services
Hospice
Services
Community-
Based
Services
Facility-
Based
Services
Total
Net service revenue$ 564,966 $ 67,621 $ 27,698 $ 73,347 $ 733,632
Cost of service revenue 329,856 39,804 19,611 45,504 434,775
Provision for bad debts 13,072 909 873 926 15,780
General and administrative expenses 187,281 18,882 6,551 21,231 233,945
Impairment of intangibles and other 3,269 202 175 3,646
Operating income 31,488 7,824 663 5,511 45,486
Interest expense (1,969) (249) (19) (249) (2,486)
Non-operating income 201 43 2 19 265
Income before income taxes and noncontrolling interest 29,720 7,618 646 5,281 43,265
Income tax expense 10,999 1,955 105 1,454 14,513
Net income 18,721 5,663 541 3,827 28,752
Less net income attributable to noncontrolling interest 5,121 1,122 (36) 708 6,915
Net income attributable to LHC Group, Inc.'s common stockholders$ 13,600 $ 4,541 $ 577 $ 3,119 $ 21,837
Total assets$ 386,511 $ 34,847 $ 34,027 $ 36,354 $ 491,739


LHC GROUP, INC. AND SUBSIDIARIES
SELECT CONSOLIDATED KEY STATISTICAL AND FINANCIAL DATA
(Unaudited)
Three Months Ended
December 31,
Year Ended
December 31,
2015 2014 2015 2014
Key Data:
Home-Health Services:
Locations 283 277 283 277
Acquired 4 2 9 40
De novo 3
Divested/Consolidated (3) (11) (6) (22)
Total new admissions 36,249 34,329 143,197 133,054
Medicare new admissions 24,060 23,404 96,911 90,490
Average daily census 37,060 36,153 36,752 35,299
Average Medicare daily census 27,432 26,781 27,297 26,336
Medicare completed and billed episodes 48,636 46,726 191,208 182,896
Average Medicare case mix for completed and billed Medicare episodes 1.02 1.01 0.99 0.99
Average reimbursement per completed and billed Medicare episodes$ 2,508 $ 2,445 $ 2,475 $ 2,397
Total visits 1,088,846 1,012,677 4,183,204 3,911,293
Total Medicare visits 804,537 750,924 3,107,029 2,912,440
Average visits per completed and billed Medicare episodes 16.5 16.1 16.1 15.9
Organic growth:(1)
Net revenue 5.9% 2.0% 4.5% 1.4%
Net Medicare revenue 5.5% -0.8% 3.5% -0.4%
Total new admissions 4.0% 4.5% 3.4% 1.6%
Medicare new admissions 1.5% 3.0% 2.4% 1.2%
Average daily census 0.9% -0.7% 0.1% -3.5%
Average Medicare daily census 0.9% -3.1% -0.5% -4.1%
Medicare completed and billed episodes 3.2% -1.2% 1.4% 0.9%
Community-Based Services:
Locations 13 12 13 12
Acquired 2 6
De novo
Divested/Consolidated (1) (1) (1)
Average daily census 1,423 1,240 1,124 984
Billable hours 307,781 304,618 1,213,870 911,217
Revenue per billable hour$ 34.08 $ 30.99 $ 33.94 $ 30.40
Hospice-Based Services:
Locations 56 38 56 38
Acquired 16 17 6
De novo 1 2 1
Divested/Consolidated (2) 1 (1) (3)
Admissions 2,225 1,412 6,787 5,546
Average daily census 2,360 1,387 1,675 1,343
Patient days 217,157 127,633 611,493 490,252
Average revenue per patient day$ 144 $ 143 $ 141 $ 138
Facility-Based Services:
Long-term Acute Care
Locations 8 8 8 8
Patient days 14,450 15,589 61,427 62,352
Average revenue per patient day$ 1,249 $ 1,115 $ 1,183 $ 1,130

(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.


LHC GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED NET INCOME ATTRIBUTABLE TO LHC GROUP, INC.
(Amounts in thousands)
(Unaudited)
Three
Months

Ended
Dec. 31,
2015
Year
Ended
Dec. 31,
2015
Net income attributable to LHC Group, Inc.’s common stockholders$ 7,734 $ 32,335
Add (net of tax):
Disposal costs on closures of underperforming locations (1) 657 657
Goodwill and intangible disposal costs (2) 605 749
Acquisition costs (3) 341 341
Adjusted net income attributable to LHC Group, Inc.’s common stockholders$ 9,337 $ 34,082


RECONCILIATION OF ADJUSTED NET INCOME ATTRIBUTABLE TO LHC GROUP, INC. PER DILUTED SHARE
(Unaudited)
Three
Months

Ended
Dec. 31,
2015
Year
Ended
Dec. 31,
2015
Net income attributable to LHC Group, Inc.’s common stockholders per diluted share$ 0.44 $ 1.84
Add:
Disposal costs on closures of underperforming locations (1) 0.04 0.04
Goodwill and intangible disposal costs (2) 0.03 0.04
Acquisition costs (3) 0.02 0.02
Adjusted net income attributable to LHC Group, Inc.’s common stockholders per diluted share$ 0.53 $ 1.94

(1) Disposal costs related to the closures of underperforming locations
(2) Goodwill and intangible disposal costs related to closures of underperforming locations and indefinite-lived intangible impairment related to write down of the assets.
(3) Cost associated with Halcyon and Nurses Registry acquisitions.


Contact: Eric Elliott Senior Vice President of Finance (337) 233-1307 eric.elliott@lhcgroup.com

Source:LHC Group