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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., Nov. 02, 2016 (GLOBE NEWSWIRE) -- 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.


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

Source:LHC Group