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LHC Group Reports Increase of 13.0% in Third Quarter Earnings Per Diluted Share, 18.5% in Adjusted Earnings Per Diluted Share

Revenue Grows 18.2%

Increases 2017 Guidance

LAFAYETTE, La., Nov. 06, 2017 (GLOBE NEWSWIRE) -- LHC Group, Inc. (NASDAQ:LHCG) announced its financial results for the three months and nine months ended September 30, 2017.

Financial Results for the Third Quarter of 2017 Compared with Third Quarter of 2016

  • Net service revenue increased 18.2% to $272.9 million compared with $230.8 million.
  • Net income attributable to LHC Group’s common stockholders was $10.9 million, up 13.5% from $9.6 million, while earnings per diluted share attributable to LHC Group’s common stockholders increased 13.0% to $0.61 per diluted share from $0.54.
  • Adjusted net income attributable to LHC Group’s common stockholders, which excludes expenses related to the CHRISTUS joint venture transaction and one agency closure in Oklahoma, was $11.5 million, up 19.8% from $9.6 million, or $0.64 per diluted share.
  • Total organic growth in home health admissions was 6.2%.
  • Total organic revenue growth in home health was 10.3%.

Operational Highlights

  • LHC Group quality and patient satisfaction results continued to set the pace for the home health industry in the most recent CMS Star ratings for the sixth consecutive quarter, while exceeding the national average with 96% of its locations having four stars or greater. HomeCare Elite also recently named more than 70% of LHC Group home care locations among the nation’s best, up from over 60% last year.
  • Excluding the LifePoint joint venture, LHC Group acquired 35 home health, hospice or community-based locations and six long-term acute care hospital operations during the nine months ended September 30, 2017, which consisted of $108 million in annual revenue. This sets a new record for the Company in the amount of annual revenue acquired in a year.
  • Completed a new joint venture with CHRISTUS Health, the Company’s 75th hospital or health system joint venture.

Commenting on the announcement, Keith G. Myers, LHC Group’s chairman and CEO, said, “The strength of our business model and the company-wide commitment to delivering high quality and patient satisfaction were evident once again in the strong organic growth in home health admissions as well as the growth generated from our joint ventures with the country’s leading hospitals and health systems. We have work ahead of us to deliver on the performance we expect from new leadership we brought to our hospice business and to execute on an active pipeline of de novo, acquisition and joint venture opportunities, but we are confident in our 2017 growth expectations and continuing a strong pace for 2018.”

Mr. Myers concluded, “The convergence of value-based healthcare and hospital systems’ needs to improve outcomes and value in home health and hospice place a premium on quality and the ability to address the entire post-acute continuum. These dynamics continue to play to the strengths, experience and culture within our organization as demonstrated by the success of our recent partnerships with CHRISTUS, LifePoint Health and Baptist Memorial.”

CHRISTUS Health Joint Venture
On September 1, 2017, the Company and CHRISTUS Health finalized their previously announced joint venture partnership to enhance home health, hospice, community-based and long-term acute-care services in Louisiana, Texas, Arkansas and Georgia. LHC Group acquired 21 service locations, all of which will continue to operate under their existing names. The joint venture is expected to generate approximately $80 million in annualized revenue and is expected to begin contributing to earnings in 2018.

LifePoint Health Joint Venture
On September 1, 2017, LHC Group completed the third and final phase of its joint venture with LifePoint Health by converting nine remaining locations the Company had managed since January 1, 2017, to owned locations. The joint venture now owns 28 home health and 13 hospice locations and is actively pursuing de novo and acquisition opportunities in both new and existing markets served by LifePoint Health. The 28 home health and 13 hospice locations, which consist of $72 million in annual revenue, were acquired in three phases during 2017. The full effect of the acquired revenue will be realized in 2018.

CMS Final Fiscal Year 2018 Medicare Home Health Prospective Payment System (HH PPS) Rate Update
On November 1, 2017, CMS issued its final rule updating HH PPS, which results in a 0.4% decrease in payment to home health agencies in calendar year 2018, which is consistent with a proposed rule introduced in July 2017. For calendar 2019, CMS decided not to finalize its rule on the Home Health Groupings Model (HHGM) and will take additional time to further engage with stakeholders to move towards a system that shifts the focus from volume of services to a more value based patient-centered model.

Fiscal Year 2017 Guidance
LHC Group raised its issued fiscal year 2017 guidance for net service revenue to be in an expected range of $1.05 billion to $1.06 billion, from the previous range of $1.03 billion to $1.045 billion, and GAAP earnings per diluted share to be in an expected range of $2.35 to $2.40, from the previous range of $2.30 to $2.40.

The Company’s fiscal year 2017 financial guidance includes the expenses of approximately $0.03 per fully diluted share for the third quarter of 2017 related to the CHRISTUS joint venture transaction and one agency closure in Oklahoma. The guidance ranges do not take into account the impact of 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 later today at 11:00 a.m. Eastern time to discuss its third quarter 2017 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 November 13, 2017, by dialing (855) 859‑2056 (international callers should call (404) 537-3406) and entering confirmation number 96827521.

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 324 home health services locations, 92 hospice locations, 12 community-based service locations and 15 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, 2016, 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)

Sept. 30, 2017Dec. 31,
2016
(Unaudited)
ASSETS
Current assets:
Cash$ 16,922 $ 3,264
Receivables:
Patient accounts receivable, less allowance for uncollectible accounts of $26,089 and $29,036, respectively 145,508 124,803
Other receivables 4,705 5,115
Amounts due from governmental entities 830 942
Total receivables, net 151,043 130,860
Prepaid income taxes 4,879
Prepaid expenses 11,437 9,821
Other current assets 7,331 5,796
Total current assets 191,612 149,741
Property, building and equipment, net of accumulated depreciation of $41,876 and $35,226, respectively 47,562 43,251
Goodwill 392,689 307,317
Intangible assets, net of accumulated amortization of $12,607 and $10,968, respectively 130,779 102,006
Other assets 2,411 11,756
Total assets$ 765,053 $ 614,071
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued liabilities$ 40,355 $ 26,805
Salaries, wages, and benefits payable 53,289 34,265
Self-insurance reserve 9,524 10,691
Current portion of long-term debt 261 252
Amounts due to governmental entities 4,564 4,955
Income tax payable 3,499
Total current liabilities 107,993 80,467
Deferred income taxes 38,186 31,941
Revolving credit facility 119,000 87,000
Long-term debt, less current portion 93 544
Total liabilities 265,272 199,952
Noncontrolling interest – redeemable 13,206 12,567
Stockholders’ equity:
LHC Group, Inc. stockholders’ equity:
Common stock – $0.01 par value; 40,000,000 shares authorized; 22,635,322 and 22,429,041 shares issued in 2017 and 2016, respectively 226 224
Treasury stock – 4,890,181 and 4,828,679 shares at cost, respectively (42,226) (39,135)
Additional paid-in capital 125,208 119,748
Retained earnings 345,967 314,289
Total LHC Group, Inc. stockholders’ equity 429,175 395,126
Noncontrolling interest – non-redeemable 57,400 6,426
Total equity 486,575 401,552
Total liabilities and equity$ 765,053 $ 614,071

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,
2017 2016 2017 2016
Net service revenue$ 272,872 $ 230,797 $ 779,700 $ 679,380
Cost of service revenue 172,856 140,832 488,384 413,561
Gross margin 100,016 89,965 291,316 265,819
Provision for bad debts 3,194 3,275 8,238 11,658
General and administrative expenses 75,669 66,999 221,077 201,296
(Gain) Loss on disposal of assets (177) 142 (23) 1,389
Operating income 21,330 19,549 62,024 51,476
Interest expense (995) (816) (2,615) (2,167)
Income before income taxes and
noncontrolling interest
20,335 18,733 59,409 49,309
Income tax expense 7,445 6,562 20,410 15,500
Net income 12,890 12,171 38,999 33,809
Less net income attributable to
noncontrolling interests
1,984 2,555 7,321 7,043
Net income attributable to LHC Group, Inc.’s common stockholders$ 10,906 $ 9,616 $ 31,678 $ 26,766
Earnings per share attributable to LHC Group, Inc.’s common stockholders:
Basic$ 0.61 $ 0.55 $ 1.79 $ 1.53
Diluted$ 0.61 $ 0.54 $ 1.77 $ 1.52
Weighted average shares outstanding:
Basic 17,740,818 17,588,163 17,704,561 17,546,773
Diluted 18,010,522 17,719,473 17,931,700 17,664,284

LHC GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)

Nine Months Ended
September 30,
2017 2016
Operating activities:
Net income$ 38,999 $ 33,809
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 9,680 9,024
Provision for bad debts 8,238 11,658
Stock-based compensation expense 4,522 3,518
Deferred income taxes 6,245 6,062
Loss on disposal of assets (23) 1,389
Impairment of intangibles and other 81
Changes in operating assets and liabilities, net of acquisitions:
Receivables (19,569) (21,175)
Prepaid expenses and other assets (3,859) 450
Prepaid income taxes (4,879) (2,482)
Accounts payable and accrued expenses 26,038 17,633
Income taxes payable (3,499)
Net amounts due to/from governmental entities (279) (2,043)
Net cash provided by operating activities 61,695 57,843
Investing activities:
Purchases of property, building and equipment (7,944) (14,576)
Cash paid for acquisitions, primarily goodwill and intangible assets (61,247) (20,332)
Other 273
Net cash used in investing activities (69,191) (34,635)
Financing activities:
Proceeds from line of credit 63,000 38,000
Payments on line of credit (31,000) (44,000)
Proceeds from employee stock purchase plan 776 663
Payments on debt (192) (156)
Noncontrolling interest distributions (8,406) (6,859)
Excess tax benefits from vesting of stock awards 1,293
Withholding taxes paid on stock-based compensation (3,091) (1,931)
Purchase of additional controlling interest (184)
Sale of noncontrolling interest 251 52
Proceeds from exercise of stock options 109
Net cash provided by (used in) financing activities 21,154 (12,829)
Change in cash 13,658 10,379
Cash at beginning of period 3,264 6,139
Cash at end of period$ 16,922 $ 16,518
Supplemental disclosures of cash flow information:
Interest paid$ 2,694 $ 2,329
Income taxes paid$ 22,376 $ 11,390

LHC GROUP, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Amounts in thousands)
(Unaudited)

Three Months Ended September 30, 2017
Home
Health
Services
Hospice
Services
Community-
Based
Services
Facility-
Based
Services
Total
Net service revenue$ 198,978 $ 41,291 $ 12,146 $ 20,457 $ 272,872
Cost of service revenue 123,204 27,441 8,971 13,240 172,856
Provision for bad debts 2,661 234 30 269 3,194
General and administrative expenses 55,980 11,263 2,387 6,039 75,669
(Gain) loss on disposal of assets 20 13 (210) (177)
Operating income 17,113 2,340 758 1,119 21,330
Interest expense (746) (149) (50) (50) (995)
Income before income taxes and noncontrolling interest 16,367 2,191 708 1,069 20,335
Income tax expense 5,703 931 338 473 7,445
Net income 10,664 1,260 370 596 12,890
Less net income attributable to noncontrolling interests 1,759 273 (21) (27) 1,984
Net income attributable to
LHC Group, Inc.’s
common stockholders
$ 8,905 $ 987 $ 391 $ 623 $ 10,906
Total assets$ 515,562 $ 156,296 $ 44,621 $ 48,574 $ 765,053


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


LHC GROUP, INC. AND SUBSIDIARIES

SEGMENT INFORMATION (Continued)
(Amounts in thousands)
(Unaudited)

Nine Months Ended September 30, 2017
Home
Health
Services
Hospice
Services
Community-
Based
Services
Facility-
Based
Services
Total
Net service revenue$ 575,180 $ 116,249 $ 33,807 $ 54,464 $ 779,700
Cost of service revenue 352,896 75,187 24,905 35,396 488,384
Provision for bad debts 5,796 1,393 404 645 8,238
General and administrative expenses 165,153 32,404 6,957 16,563 221,077
(Gain) loss on disposal of assets 39 21 (83) (23)
Operating income 51,296 7,244 1,541 1,943 62,024
Interest expense (1,961) (393) (130) (131) (2,615)
Income before income taxes and noncontrolling interest 49,335 6,851 1,411 1,812 59,409
Income tax expense 16,712 2,439 602 657 20,410
Net income 32,623 4,412 809 1,155 38,999
Less net income (loss) attributable to noncontrolling interests 6,053 1,038 (7) 237 7,321
Net income attributable to
LHC Group, Inc.’s
common stockholders
$ 26,570 $ 3,374 $ 816 $ 918 $ 31,678


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 (loss) 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

LHC GROUP, INC. AND SUBSIDIARIES
SELECT CONSOLIDATED KEY STATISTICAL AND FINANCIAL DATA
(Unaudited)

Three Months Ended
September 30,
Nine Months Ended
September 30,
2017 2016 2017 2016
Key Data:
Home-Health Services:
Home Health
Locations 320 289 320 289
Acquired 8 6 40 11
De novo 0 1 0 3
Divested/Consolidated 2 2 5 7
Total new admissions 47,841 40,657 142,841 118,730
Medicare new admissions 29,964 26,810 89,789 78,763
Average daily census 43,450 38,511 42,862 38,320
Average Medicare daily census 29,691 27,983 29,527 28,069
Medicare completed and billed episodes 54,003 49,230 159,145 148,195
Average Medicare case mix for completed and billed Medicare episodes 1.10 1.07 1.09 1.05
Average reimbursement per completed and billed Medicare episodes$ 2,832 $ 2,724 $ 2,790 $ 2,670
Total visits 1,480,593 1,160,924 4,207,499 3,437,653
Total Medicare visits 1,012,098 856,177 2,912,689 2,526,405
Average visits per completed and billed Medicare episodes 18.7 17.4 18.3 17.0
Organic growth:(1)
Net revenue 10.3% 5.4% 10.3% 6.1%
Net Medicare revenue 4.9% 4.0% 5.6% 4.8%
Total new admissions 6.2% 10.5% 9.7% 8.8%
Medicare new admissions 1.7% 8.1% 5.5% 6.0%
Average daily census 3.7% 1.7% 4.0% 2.3%
Average Medicare daily census -1.2% -0.1% -0.7% 0.8%
Medicare completed and billed episodes 2.0% 0.3% 1.2% 2.1%
Community-Based Services:
Locations 12 11 12 11
Acquired 1 1 1 1
De novo 0 0 0 0
Divested/Consolidated 0 1 0 3
Average daily census 1,933 1,672 1,745 1,631
Billable hours 369,700 354,998 1,056,222 990,129
Revenue per billable hour$ 32.85 $ 33.22 $ 32.01 $ 33.15
Hospice-Based Services:
Locations 92 64 92 64
Acquired 6 2 27 9
De novo 0 0 0 0
Divested/Consolidated 1 1 1 2
Admissions 3,438 2,554 9,717 7,540
Average daily census 3,108 2,736 2,988 2,593
Patient days 285,971 251,753 815,755 710,415
Average revenue per patient day$ 144 $ 140 $ 143 $ 141
Facility-Based Services:
Long-term Acute Care
Locations 15 8 15 8
Acquired 6 0 6 0
Patient days 14,599 13,499 41,406 42,965
Average revenue per patient day$ 1,252 $ 1,113 $ 1,132 $ 1,189

(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
September 30,
2017 2016
Net income attributable to LHC Group, Inc.’s common stockholders$ 10,906$ 9,616
Add (net of tax):
Disposal costs on closure of underperforming location 129
Costs associated with CHRISTUS Health Joint Venture 483
Adjusted net income attributable to LHC Group, Inc.’s common stockholders$ 11,518$ 9,616

RECONCILIATION OF ADJUSTED NET INCOME ATTRIBUTABLE TO LHC GROUP, INC.
PER DILUTED SHARE

(Unaudited)

Three Months Ended
September 30,
2017 2016
Net income attributable to LHC Group, Inc.’s common stockholders
per diluted share
$ 0.61$ 0.54
Add:
Disposal costs on closure of underperforming location 0.01
Costs associated with CHRISTUS Health Joint Venture 0.02
Adjusted net income attributable to LHC Group, Inc.’s common stockholders per diluted share$ 0.64$ 0.54

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

Source:LHC Group