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 GuidanceLHC 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 CallLHC 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 ElliottSenior Vice President of Finance(337) 233-1307eric.elliott@lhcgroup.com

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