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LHC Group Reports Fourth-Quarter 2016 EPS of $0.55 and Adjusted EPS of $0.58 on Revenue of $235.4 Million

PRODUCES FULL-YEAR 2016 EPS OF $2.07

Establishes Financial Guidance for 2017

LAFAYETTE, La., March 08, 2017 (GLOBE NEWSWIRE) -- LHC Group, Inc. (NASDAQ:LHCG) today announced its financial results for the three months and year ended December 31, 2016.

Financial Results for the Fourth Quarter of 2016 Compared with the Fourth Quarter of 2015

  • Net service revenue increased 7.5% to $235.4 million for the fourth quarter of 2016 compared with $219.0 million for the fourth quarter of 2015.
  • Net income attributable to LHC Group was $9.8 million, or $0.55 per diluted share, for the latest quarter, compared with $7.7 million, or $0.44 per diluted share, for the fourth quarter of 2015. Adjusted net income attributable to LHC Group for the fourth quarter of 2016 was $0.58 per diluted share(1) compared with $0.53 per diluted share for the fourth quarter of 2015(1).
  • For the fourth quarter of 2016, net income attributable to LHC Group and adjusted net income attributed to LHC Group reflect the impact of estimated net Medicare reimbursement reductions of $0.11 per diluted share compared with the fourth quarter of 2015.
  • Total comparable-quarter growth in admissions for all service lines for the fourth quarter was 13.2%.
  • Total comparable-quarter organic growth in home health admissions for the fourth quarter was 10.8%.

(1) See “Reconciliation of Non-GAAP Measures - Adjusted net income attributable to LHC Group” to GAAP results on page 10.

Financial Results for Full-Year 2016 Compared with Full-Year 2015

  • Net service revenue increased 12.1% to $914.8 million for 2016 compared with $816.4 million for 2015.
  • Net income attributable to LHC Group grew 13.1% to $36.6 million compared with $32.3 million and 12.5% to $2.07 per diluted share compared with $1.84 per diluted share. Results for 2016 include estimated net Medicare reimbursement reductions of $0.28 per diluted share compared with 2015.
  • Total comparable-annual growth in admissions for all service lines for 2016 was 12.9%.
  • Total comparable-annual organic growth in home health admissions for 2016 was 9.3%.

Commenting on the announcement, Keith G. Myers, LHC Group’s chairman and CEO, said, “We are pleased with our fourth-quarter financial results and with the operating momentum we built throughout 2016. A continuation of favorable admission trends drove double-digit growth in both total admissions and organic home health admissions for the second consecutive quarter. In addition, the acuity of our home health admissions further increased resulting in a 4.7% rise in average Medicare reimbursement. Reflecting the strength of these increases, our home health organic revenue increased 7.3% for the fourth quarter and 6.4% for the full year.

“We expect to continue our organic home health growth momentum in 2017. This growth, in part, reflects the expansion of our marketing efforts into our substantial secondary markets – those in which we are licensed but do not have an agency location – due to our enhanced capabilities resulting from the completion of our point of care system in 2014. We believe these markets represent a meaningful long-term growth opportunity.

“We also attribute much of our fourth quarter and full-year organic growth and increased patient acuity to our 72 hospital and health system joint venture partnerships. We believe our increasing volume from these partners - at a time when the healthcare industry’s shift to value-based care is intensifying - has resulted from our ability to provide high quality care for their post-acute and non-acute patients and, thereby, create significant costs savings for these partners. We are further favorably differentiated within our industry by the CMS Star ratings for quality and patient satisfaction, both of which LHC Group has now led for three consecutive quarters. The Company also continues to be the country’s only home health provider that is 100% accredited with the Joint Commission excluding recent acquisitions.

“These attributes provide very substantial support to our ongoing effort to be the leading partner of choice for hospitals and health systems that recognize the value in improving their patients’ non-acute care. We expect them to drive continued organic growth from our existing joint venture partnerships and, as the recent completion of our newest joint venture with LifePoint Health indicates, to drive further success in our strategy to develop new joint venture partnerships.

“In addition to the positive industry and Company dynamics that have created a strong corporate development pipeline of potential hospital and health system joint ventures, rising consolidation pressures in the home health industry have also produced a robust pipeline of potential transactions for freestanding home health and hospice providers. Combined, these pipelines generated announced transactions in 2016 for over $106 million in annualized revenue. We remain well-positioned to fund future acquisitions, with significant anticipated cash flow from operations, which totaled $67.5 million for 2016, and $130 million of availability under our credit agreement.”

Mr. Myers concluded, “The strength of LHC Group’s differentiated quality of care, competitive positioning and market potential all reflect the character, experience, and work ethic, of our team, including both healthcare professionals and all those who support them throughout the Company. The commitment and compassion this team brings to their jobs every day make a vital difference in the lives of those we are privileged to care for and serve, every day. We thank them for their unceasing effort, while recognizing that this team of skilled and dedicated people provides the foundation of the Company’s prospects for long-term growth and increased shareholder value.”

FY 2017 Guidance
Fiscal year 2017 net service revenue is expected to be in the range of $1 billion to $1.03 billion, and fully diluted earnings per share are expected to be in the range of $2.07 to $2.23. This guidance includes:

(1) the negative impact from the Medicare Home Health Prospective Payment System for 2017, which is expected to have an approximate 2% impact, or $10 million reduction to Medicare Home Health revenue and $0.34 reduction in fully diluted earnings per share for 2017;
(2) the negative impact from the Medicare Long-Term Care Hospital (LTCH) Prospective Payment System (PPS), which is expected to reduce Medicare LTCH revenue by $6 million or $0.12 net reduction in fully diluted earnings per share for 2017 after mitigation strategies;
(3) 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 2017 by 2.1%, or $2.7 million, and fully diluted earnings per share by $0.09; and
(4) the Home Health and Hospice Joint Venture with LifePoint which was effective January 1, 2017 and is anticipated to achieve approximately $50 - $55 million in revenue and $0.02-$0.05 in EPS attributable to LHC Group in 2017.

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 9, 2017, at 11:00 a.m. Eastern time to discuss its fourth quarter and year-end 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, March 16, 2017, by dialing (855) 859‑2056 (international callers should call (404) 537-3406) and entering confirmation number 52252764. 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 facility-based services. LHC Group operates 298 home health services locations, 72 hospice locations, 16 community-based service locations and six long-term acute care hospitals (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)
Dec. 31,
2016
Dec. 31,
2015
ASSETS
Current assets:
Cash$ 3,264 $ 6,139
Receivables:
Patient accounts receivable, less allowance for uncollectible accounts of $29,036 and $26,712, respectively 124,803 110,350
Other receivables 5,115 2,093
Amounts due from governmental entities 942 1,081
Total receivables, net 130,860 113,524
Prepaid income taxes 1,949
Prepaid expenses 9,821 10,833
Other current assets 5,796 5,835
Receivable due from insurance carrier 550
Total current assets 149,741 138,830
Property, building and equipment, net of accumulated depreciation of $35,226 and $38,907, respectively 43,251 38,096
Goodwill 307,317 290,694
Intangible assets, net of accumulated amortization of $10,968 and $8,496, respectively 102,006 96,405
Other assets 11,756 2,029
Total assets$ 614,071 $ 566,054
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued liabilities$ 26,805 $ 24,586
Salaries, wages, and benefits payable 34,265 28,098
Self-insurance reserves 10,691 9,636
Current portion of long-term debt 252 241
Amounts due to governmental entities 4,955 7,055
Income tax payable 3,499
Legal settlement payable 550
Total current liabilities 80,467 70,166
Deferred income taxes 31,941 23,729
Income tax payable 3,415
Revolving credit facility 87,000 98,000
Long-term debt, less current portion 544 543
Total liabilities 199,952 195,853
Noncontrolling interest – redeemable 12,567 12,408
Stockholders’ equity:
LHC Group, Inc. stockholders’ equity:
Common stock – $0.01 par value; 40,000,000 shares authorized; 22,429,041 and 22,224,423 shares issued in 2016 and 2015, respectively 224 222
Treasury stock – 4,828,679 and 4,776,560 shares at cost, respectively (39,135) (37,139)
Additional paid-in capital 119,748 113,793
Retained earnings 314,289 277,706
Total LHC Group, Inc. stockholders’ equity 395,126 354,582
Noncontrolling interest – non-redeemable 6,426 3,211
Total equity 401,552 357,793
Total liabilities and equity$ 614,071 $ 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
December 31,
Year Ended
December 31,
2016 2015 2016 2015
Net service revenue$ 235,443 $ 218,993 $ 914,823 $ 816,366
Cost of service revenue 144,089 128,940 557,650 480,878
Gross margin 91,354 90,053 357,173 335,488
Provision for bad debts 3,131 4,370 14,790 19,243
General and administrative expenses 69,050 68,076 270,622 247,919
Impairment of intangibles and other 1,025 1,273
(Gain) loss on disposal of assets (190) 30 1,199 710
Operating income 19,363 16,552 70,562 66,343
Interest expense (768) (769) (2,936) (2,302)
Non-operating income 213 100 492 457
Income before income taxes and noncontrolling interest 18,808 15,883 68,118 64,498
Income tax expense 6,676 5,751 22,176 22,848
Net income 12,132 10,132 45,942 41,650
Less net income attributable to noncontrolling interests 2,315 2,399 9,359 9,315
Net income attributable to LHC Group, Inc.’s common stockholders$ 9,817 $ 7,735 $ 36,583 $ 32,335
Earnings per share – basic:
Net income attributable to LHC Group, Inc.’s common stockholders$ 0.56 $ 0.44 $ 2.08 $ 1.86
Earnings per share – diluted:
Net income attributable to LHC Group, Inc.’s common stockholders$ 0.55 $ 0.44 $ 2.07 $ 1.84
Weighted average shares outstanding:
Basic 17,597,190 17,447,691 17,559,477 17,405,379
Diluted 17,764,066 17,647,483 17,682,820 17,547,531


LHC GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
Year Ended
December 31,
2016 2015
Operating activities:
Net income$ 45,942 $ 41,650
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 12,160 11,955
Provision for bad debts 14,790 19,243
Stock-based compensation expense 4,872 4,225
Deferred income taxes 7,402 1,518
Loss on disposal of assets 1,199 710
Impairment of intangibles and other 1,280
Changes in operating assets and liabilities, net of acquisitions:
Receivables (28,873) (27,951)
Prepaid expenses and other assets 1,034 (3,793)
Prepaid income taxes 1,641 441
Accounts payable and accrued expenses 9,182 10,526
Income tax payable 84
Net amounts due to/from governmental entities (1,961) 130
Net cash provided by operating activities 67,472 59,934
Investing activities:
Cash paid for acquisitions, primarily goodwill and intangible assets (23,156) (70,572)
Purchases of property, building and equipment (16,009) (13,283)
Advanced payments on acquisitions (11,488)
Other 273
Net cash (used in) investing activities (50,380) (83,855)
Financing activities:
Proceeds from line of credit 38,000 83,000
Payments on line of credit (49,000) (45,000)
Excess tax benefits from vesting of stock awards 1,303 914
Proceeds from employee stock purchase plan 912 782
Payments on debt (238) (233)
Noncontrolling interest distributions (9,413) (8,324)
Purchase of additional controlling interest (275)
Sale of noncontrolling interest 356
Withholding taxes paid on stock-based compensation (1,996) (1,479)
Proceeds from exercise of stock options 109 144
Net cash (used in) provided by financing activities (19,967) 29,529
Change in cash (2,875) 5,608
Cash at beginning of period 6,139 531
Cash at end of period$ 3,264 $ 6,139
Supplemental disclosures of cash flow information
Interest paid$ 3,123 $ 1,870
Income taxes paid$ 11,533 $ 20,361


LHC GROUP, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Amounts in thousands)
(Unaudited)
Three Months Ended December 31, 2016
Home
Health
Services
Hospice
Services
Community-
Based
Services
Facility-
Based
Services
Total
Net service revenue$ 173,806 $ 34,898 $ 11,067 $ 15,672 $ 235,443
Cost of service revenue 104,091 21,523 7,947 10,528 144,089
Provision for bad debts 1,486 1,037 309 299 3,131
General and administrative expenses 52,255 9,393 2,217 5,185 69,050
Gain (loss) on disposal of assets 47 9 2 (248) (190)
Operating income 15,927 2,936 592 (92) 19,363
Interest expense (576) (85) (38) (69) (768)
Non-operating income (loss) 208 (1) 1 5 213
Income from continuing operations before income taxes and noncontrolling interest 15,559 2,850 555 (156) 18,808
Income tax expense 5,480 1,001 237 (42) 6,676
Net income 10,079 1,849 318 (114) 12,132
Less net income attributable to noncontrolling interests 1,875 499 (2) (57) 2,315
Net income attributable to LHC Group, Inc.’s common stockholders$ 8,204 $ 1,350 $ 320 $ (57)$ 9,817
Total assets$ 427,782 $ 116,090 $ 33,520 $ 36,679 $ 614,071


Three Months Ended December 31, 2015
Home-
Health
Services
Hospice
Services
Community-
Based
Services
Facility-
Based
Services
Total
Net service revenue$ 158,277 $ 31,166 $ 10,489 $ 19,061 $ 218,993
Cost of service revenue 92,146 18,272 7,444 11,078 128,940
Provision for bad debts 3,627 305 385 53 4,370
General and administrative expenses 49,327 11,091 2,155 5,501 68,228
Impairment of intangibles and other 1,025 1,025
Loss on sale of asset 25 4 29
Operating income 12,127 1,494 505 2,429 16,555
Interest expense (608) (85) (6) (70) (769)
Non-operating income (loss) 88 13 1 (3) 99
Income before income taxes and noncontrolling interest 11,607 1,422 500 2,356 15,885
Income tax expense 4,174 485 230 862 5,751
Net income 7,433 937 270 1,494 10,134
Less net income attributable to noncontrolling interests 1,840 299 (43) 303 2,399
Net income attributable to LHC Group, Inc.’s common stockholders $ 5,593 $ 638 $ 313 $ 1,191 $ 7,735
Total assets$ 394,392 $ 101,641 $ 31,235 $ 38,786 $ 566,054



LHC GROUP, INC. AND SUBSIDIARIES
SEGMENT INFORMATION (Continued)
(Amounts in thousands)
(Unaudited)
Year Ended December 31, 2016
Home
Health
Services
Hospice
Services
Community-
Based
Services
Facility-
Based
Services
Total
Net service revenue$ 665,896 $ 134,948 $ 43,891 $ 70,088 $ 914,823
Cost of service revenue 398,450 83,359 32,603 43,238 557,650
Provision for bad debts 9,609 3,401 797 983 14,790
General and administrative expenses 203,418 37,207 8,785 21,212 270,622
Loss (gain) on disposal of assets 857 338 49 (45) 1,199
Operating income 53,562 10,643 1,657 4,700 70,562
Interest expense (2,216) (317) (144) (259) (2,936)
Non-operating income 422 25 14 31 492
Income from continuing operations before income taxes and noncontrolling interest 51,768 10,351 1,527 4,472 68,118
Income tax expense 16,505 3,485 651 1,535 22,176
Net income 35,263 6,866 876 2,937 45,942
Less net income attributable to noncontrolling interests 6,876 1,867 (58) 674 9,359
Net income attributable to LHC Group, Inc.’s common stockholders$ 28,387 $ 4,999 $ 934 $ 2,263 $ 36,583


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 190,591 26,437 8,465 22,426 247,919
Impairment of intangibles and other 1,245 28 1,273
Loss on sale of asset 544 80 41 45 710
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 interests 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


LHC GROUP, INC. AND SUBSIDIARIES
SELECT CONSOLIDATED KEY STATISTICAL AND FINANCIAL DATA
(Unaudited)
Three Months Ended
December 31,
Year Ended
December 31,
2016 2015 2016 2015
Key Data:
Home-Health Services:
Home Health
Locations 281 280 281 280
Acquired 3 4 12 9
De novo 1 5
Divested/Consolidated (9) (3) (16) (6)
Total new admissions 41,184 36,249 159,914 143,197
Medicare new admissions 26,812 24,060 105,575 96,911
Average daily census 39,407 37,060 38,587 36,752
Average Medicare daily census 28,381 27,432 28,146 27,297
Medicare completed and billed episodes 51,040 48,636 199,235 191,208
Average Medicare case mix for completed and billed Medicare episodes 1.09 1.05 1.06 1.03
Average reimbursement per completed and billed Medicare episodes$ 2,774 $ 2,650 $ 2,688 $ 2,579
Total visits 1,192,042 1,088,846 4,629,695 4,183,204
Total Medicare visits 869,759 804,537 3,396,164 3,107,029
Average visits per completed and billed Medicare episodes 17.0 16.5 17.0 16.2
Organic growth:(1)
Net revenue 7.3% 5.9% 6.4% 4.5%
Net Medicare revenue 5.3% 5.5% 4.7% 3.5%
Total new admissions 10.8% 4.0% 9.3% 3.4%
Medicare new admissions 8.5% 1.5% 6.6% 2.4%
Average daily census 3.5% 0.9% 2.3% 0.1%
Average Medicare daily census 0.8% 0.9% 0.4% -0.5%
Medicare completed and billed episodes 2.5% 3.2% 2.2% 1.4%
Community-Based Services:
Locations 11 13 11 13
Acquired 1 2
De novo
Divested/Consolidated (3) (1)
Average daily census 1,633 1,513 1,629 1,371
Billable hours 349,053 307,781 1,339,182 1,213,870
Revenue per billable hour$ 31.71 $ 34.08 $ 32.77 $ 33.94
Hospice-Based Services:
Locations 65 56 65 56
Acquired 16 10 17
De novo 1 1 2
Divested/Consolidated (2) (2) (1)
Admissions 2,607 2,225 10,147 6,787
Average daily census 2,713 2,360 2,623 1,675
Patient days 249,608 217,157 960,023 611,493
Average revenue per patient day$ 140 $ 144 $ 141 $ 140
Facility-Based Services:
Long-term Acute Care
Locations 8 8 8 8
Patient days 13,257 14,450 56,224 61,427
Average revenue per patient day$ 1,060 $ 1,249 $ 1,159 $ 1,183

(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, 2016
Three Months
Ended
Dec. 31, 2015
Net income attributable to LHC Group, Inc.’s common stockholders$ 9,817$ 7,734
Add (net of tax):
Disposal costs on closures of underperforming locations (1) 657
Goodwill and intangible disposal costs (2) 605
Acquisition costs (3) 451 341
Adjusted net income attributable to LHC Group, Inc.’s common stockholders $ 10,268$ 9,337


RECONCILIATION OF ADJUSTED NET INCOME ATTRIBUTABLE TO LHC GROUP, INC. PER DILUTED SHARE
(Unaudited)
Three Months
Ended
Dec. 31, 2016
Three Months
Ended
Dec. 31, 2015
Net income attributable to LHC Group, Inc.’s common stockholders per diluted share$ 0.55$ 0.44
Add:
Disposal costs on closures of underperforming locations (1) 0.04
Goodwill and intangible disposal costs (2) 0.03
Acquisition costs (3) 0.03 0.02
Adjusted net income attributable to LHC Group, Inc.’s common stockholders per diluted share$ 0.58$ 0.53

(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) 2016 Cost associated with PHR and LifePoint and 2015 cost associated with Halcyon and Nurses Registry acquisitions.

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

Source:LHC Group