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

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