Press Release

LHC Group Reports First Quarter 2017 EPS of $0.53 on Revenue of $246.6 Million

Company Raises Fiscal Year 2017 Guidance for Fully Diluted Earnings Per Share to a Range of $2.23 to $2.33 and Net Service Revenue to a Range of $1.02 Billion to $1.04 Billion

Company Release - 5/3/2017 5:12 PM ET

LAFAYETTE, La., May 03, 2017 (GLOBE NEWSWIRE) -- LHC Group, Inc. (NASDAQ:LHCG) today announced its financial results for the three months ended March 31, 2017.

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

  • Net service revenue increased 10.8% to $246.6 million for the first quarter of 2017 compared with $222.6 million for the first quarter of 2016.
  • Net income attributable to LHC Group was $9.5 million, or $0.53 per diluted share, for the first quarter of 2017 compared with $7.7 million, or $0.44 per diluted share, for the first quarter of 2016. Results for the first quarter of 2017 included a lower tax expense for the quarter due to an excess tax benefit of $838,000, or $0.05 per diluted share, associated with the adoption of a new accounting standard for stock-based compensation.
  • Total comparable-quarter organic growth in home health admissions for the first quarter was 11.7%.
  • Total comparable-quarter organic growth in hospice admissions for the first quarter was 6.2%.

Commenting on the announcement, Keith G. Myers, LHC Group’s chairman and CEO, said, “LHC Group’s financial results for the first quarter have given us a strong start to 2017, as the momentum driving organic revenue growth and our productive acquisition strategy continued to lift our performance. Comparable-quarter growth in total admissions and organic home health admissions both increased at a double-digit pace for the third consecutive quarter, and this growth has accelerated for organic home health admissions for six consecutive quarters.

“Organic home health admissions growth remains relatively balanced between our joint venture locations and stand-alone locations. Due to the greater average acuity of our admissions combined with our strong organic admissions growth, our organic net home health revenues increased 8.0% for the quarter.

“We have also continued the momentum evident in 2016 in our acquisition strategy, especially through joint ventures with hospitals and health systems. On January 1, 2017, we finalized our previously announced joint venture with LifePoint Health, through which we will phase in the acquisitions of 41 LifePoint home health and hospice locations throughout 2017, beginning with 12 home health and eight hospice locations acquired effective January 1, 2017. We also began managing 10 additional LifePoint home health locations at the start of the year.  On April 1, 2017, we completed the acquisition of seven additional home health and five hospice locations under the joint venture, and we are scheduled to acquire the 10 remaining home health locations we now manage on September 1, 2017.

“Since the end of the first quarter, we have also announced two additional joint ventures with high-quality hospitals.  We have expanded our presence in West Virginia and Ohio through our joint venture with Pleasant Valley Hospital in Point Pleasant, West Virginia, which, among other services, offers co-located home health and hospices services through a location in Point Pleasant and one in Pomeroy, Ohio.  We have also announced a definitive agreement to create a joint venture with Baptist Memorial Health Care system, to enhance home health and hospice care in Tennessee and Mississippi.  Under this joint venture, which we expect to complete on June 1, 2017, subject to customary closing conditions, we will acquire three home health and five hospice locations in Tennessee and Mississippi.

“We believe the momentum we continue to experience in our organic growth and acquisition strategies reflects the healthcare industry’s rapidly growing recognition of our ability to provide high quality care for post-acute and sub-acute patients in highly cost-effective venues, such as the home and hospice. Our reputation for high quality has been further strengthened by the CMS Star ratings for quality and patient satisfaction for the home health industry, which after the April 2017 release, we have now led for the past year.  Further, we believe our work with hospitals and health systems to reduce re-hospitalization and lower healthcare costs through home healthcare is receiving wider attention in the healthcare industry. We also continue to execute a long-term strategy of creating joint ventures with hospitals and health systems with a goal of becoming the industry’s home health and hospice partner of choice. Today, we are engaged in 73 joint ventures with hospitals and health systems that operate a total of 190 hospitals, a leadership position that is clear evidence of our ability to provide the high quality care that leading hospitals demand.”

Mr. Myers concluded, “LHC Group’s reputation for high quality and its leadership in home health rests on the skill and commitment of our healthcare professionals, and those who support them, who care for our patients and their families. Because of their capabilities and compassion, our patients can safely live exactly where they want to be, in the comfort of their own homes. We thank all our team members for their hard work and their commitment to making such an important difference in our patients’ lives.”

FY 2017 Guidance
LHC Group today raised its fiscal year 2017 guidance for net service revenue to be in an expected range of $1.02 billion to $1.04 billion, from the previous range of $1 billion to $1.03 billion, and fully diluted earnings per share to be in an expected range of $2.23 to $2.33, from the previous range of $2.07 to $2.23. As of January 1, 2017, the Company adopted a new accounting standard, ASU 2016-09, under which adjustments to the income tax effects of share-based awards are now recognized in the income statement as a component of the provision for income taxes when the awards vest, instead of through equity on the balance sheet. The Company’s financial guidance includes the $838,000 income tax benefit, or $0.05 per diluted share, related to the adoption of this new accounting standard.

The Company’s financial guidance does not take into account the recently announced definitive agreement with Baptist Memorial Health Care, 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 on Thursday, May 4, 2017, at 11:00 a.m. Eastern time to discuss its first 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 Thursday, May 11, 2017, by dialing (855) 859‑2056 (international callers should call (404) 537-3406) and entering confirmation number 6053355. 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 305 home health services locations, 73 hospice locations, 11 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, 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)
(Unaudited)
   
 March 31,
2017
 Dec. 31,
2016
        
ASSETS
Current assets:  
Cash$16,781  $3,264 
Receivables:  
Patient accounts receivable, less allowance for uncollectible accounts of $27,641 and $29,036, respectively 125,455   124,803 
Other receivables 7,008   5,115 
Amounts due from governmental entities 830   942 
Total receivables, net 133,293   130,860 
Prepaid expenses 10,769   9,821 
Other current assets 6,289   5,796 
Total current assets 167,132   149,741 
Property, building and equipment, net of accumulated depreciation of $36,614 and $35,226, respectively 43,088   43,251 
Goodwill 319,045   307,317 
Intangible assets, net of accumulated amortization of $11,601 and $10,968, respectively 106,626   102,006 
Other assets 6,834   11,756 
Total assets$642,725  $614,071 
        
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:  
Accounts payable and other accrued liabilities$34,569  $26,805 
Salaries, wages, and benefits payable 45,056   34,265 
Self-insurance reserve 11,776   10,691 
Current portion of long-term debt 255   252 
Amounts due to governmental entities 3,858   4,955 
Income tax payable 3,663   3,499 
Total current liabilities 99,177   80,467 
Deferred income taxes 32,416   31,941 
Revolving credit facility 78,000   87,000 
Long-term debt, less current portion 476   544 
Total liabilities 210,069   199,952 
Noncontrolling interest – redeemable 12,893   12,567 
Stockholders’ equity:  
LHC Group, Inc. stockholders’ equity:  
Common stock – $0.01 par value; 40,000,000 shares authorized; 22,604,974 and 22,429,041 shares issued in 2017 and 2016, respectively 226   224 
Treasury stock –  4,881,623 and 4,828,679 shares at cost, respectively (41,704)  (39,135)
Additional paid-in capital 121,137   119,748 
Retained earnings 323,756   314,289 
Total LHC Group, Inc. stockholders’ equity 403,415   395,126 
Noncontrolling interest – non-redeemable 16,348   6,426 
Total equity 419,763   401,552 
Total liabilities and equity$642,725  $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
March 31,
  2017  % of
Revenue
  2016  % of
Revenue
Net service revenue$  246,618  100.0% $  222,552  100.0%
Cost of service revenue 154,370  62.6   135,601  60.9 
Gross margin 92,248  37.4   86,951  39.1 
Provision for bad debts 2,369  1.0   4,601  2.1 
General and administrative expenses 72,011  29.2   66,240  29.8 
Operating income 17,868  7.2   16,110  7.2 
Interest expense (780) (0.3)  (885) (0.4)
Income before income taxes and noncontrolling interest 17,088  6.9   15,225  6.8 
Income tax expense 5,173  41.1(1)  5,342  41.0(1)
Net income 11,915  4.8   9,883  4.4 
Less net income attributable to noncontrolling interests 2,448  1.0   2,197  1.0 
Net income attributable to LHC Group, Inc.’s common stockholders$  9,467  3.8% $  7,686  3.5%
              
Earnings per share attributable to LHC Group, Inc.’s common stockholders:             
Basic$  0.54   $  0.44  
Diluted$  0.53   $  0.44  
              
Weighted average shares outstanding:             
Basic 17,643,463    17,485,766  
Diluted 17,817,880    17,633,549  

 (1) Effective tax rate as a percentage of income from continuing operations attributable to LHC Group, Inc.’s common stockholders, excluding the impact of adopting ASU 2016-09 "Improvements to Employee Share-Based Payment Accounting” of approximately $0.8 million for the three months ended March 31, 2017.

 
LHC GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
  
 Three Months Ended
March 31,
 2017 2016
Operating activities:  
Net income$11,915  $9,883 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization expense 3,190   2,948 
Provision for bad debts 2,369   4,601 
Stock-based compensation expense 1,581   982 
Deferred income taxes 475   (124)
Loss on disposal of assets 152   204 
Changes in operating assets and liabilities, net of acquisitions:  
Receivables (341)  (12,446)
Prepaid expenses and other assets (2,413)  (162)
Prepaid income taxes    374 
Accounts payable and accrued expenses 18,524   13,110 
Income taxes payable 164    
Net amounts due to/from governmental entities (985)  (2,209)
Net cash provided by operating activities 34,631   17,161 
   
Investing activities:  
Purchases of property, building and equipment (2,523)  (2,622)
Cash paid for acquisitions, primarily goodwill and intangible assets (449)  (10,577)
Advanced payments on acquisitions (4,487)   
Other    273 
Net cash used in investing activities (7,459)  (12,926)
   
Financing activities:  
Proceeds from line of credit 5,000   4,000 
Payments on line of credit (14,000)  (6,000)
Proceeds from employee stock purchase plan 256   230 
Payments on debt (65)  (56)
Noncontrolling interest distributions (2,391)  (2,185)
Sale of noncontrolling interest 114    
Excess tax benefits from vesting of stock awards    651 
Withholding taxes paid on stock-based compensation (2,569)  (1,421)
Net cash used in financing activities (13,655)  (4,781)
Change in cash 13,517   (546)
Cash at beginning of period 3,264   6,139 
Cash at end of period$16,781  $5,593 
        
Supplemental disclosures of cash flow information  
Interest paid$721  $749 
Income taxes paid$4,580  $4,466 
        


LHC GROUP, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Amounts in thousands)
(Unaudited)
  
 Three Months Ended March 31, 2017
 Home
Health
Services
 Hospice
Services
 Community-
Based
Services
 Facility-
Based
Services
 Total
Net service revenue$182,141  $36,445  $10,816  $17,216  $246,618 
Cost of service revenue 112,086   23,273   7,948   11,063   154,370 
Provision for bad debts 1,483   497   275   114   2,369 
General and administrative expenses 53,922   10,406   2,311   5,372   72,011 
Operating income 14,650   2,269   282   667   17,868 
Interest expense (585)  (117)  (39)  (39)  (780)
Income before income taxes and noncontrolling interest 14,065   2,152   243   628   17,088 
Income tax expense 4,253   659   83   178   5,173 
Net income 9,812   1,493   160   450   11,915 
Less net income attributable to noncontrolling interests 2,028   286   8   126   2,448 
Net income attributable to LHC Group, Inc.’s common stockholders$7,784  $1,207  $152  $324  $9,467 
Total assets$447,807  $126,068  $32,961  $35,889  $642,725 
                    


 Three Months Ended March 31, 2016
 Home
Health
Services
 Hospice
Services
 Community-
Based
Services
 Facility-
Based
Services
 Total
Net service revenue$161,387  $30,824  $10,443  $19,898  $222,552 
Cost of service revenue 96,712   19,627   7,727   11,535   135,601 
Provision for bad debts 3,455   775   82   289   4,601 
General and administrative expenses 49,558   8,990   2,079   5,613   66,240 
Operating income 11,662   1,432   555   2,461   16,110 
Interest expense (678)  (91)  (41)  (75)  (885)
Income before income taxes and noncontrolling interest 10,984   1,341   514   2,386   15,225 
Income tax expense 3,850   420   228   844   5,342 
Net income 7,134   921   286   1,542   9,883 
Less net income attributable to noncontrolling interests 1,594   317   (43)  329   2,197 
Net income attributable to LHC Group, Inc.’s common stockholders$5,540  $604  $329  $1,213  $7,686 
Total assets$400,924  $111,308  $33,133  $37,488  $582,853 
                    


LHC GROUP, INC. AND SUBSIDIARIES
SELECT CONSOLIDATED KEY STATISTICAL AND FINANCIAL DATA
(Unaudited)
  
 Three Months Ended
March 31,
 2017 2016
Key Data:       
Home-Health Services:  
Home Health  
Locations 305   284 
Acquired 22   2 
De novo 0   1 
Divested/Consolidated 1   2 
Total new admissions 47,375   39,124 
Medicare new admissions 29,957   26,136 
Average daily census 41,874   38,218 
Average Medicare daily census 29,244   28,246 
Medicare completed and billed episodes 51,838   48,486 
Average Medicare case mix for completed and billed Medicare episodes 1.07   1.03 
Average reimbursement per completed and billed Medicare episodes$2,749  $2,594 
Total visits 1,327,711   1,126,834 
Total Medicare visits 930,918   829,267 
Average visits per completed and billed Medicare episodes 18.0   17.1 
Organic growth:(1)  
Net revenue 8.0%  8.1%
Net Medicare revenue 4.7%  5.3%
Total new admissions 11.7%  7.2%
Medicare new admissions 7.5%  3.3%
Average daily census 4.0%  2.8%
Average Medicare daily census -1.1%  1.4%
Medicare completed and billed episodes 1.5%  1.9%
   
Community-Based Services:  
Locations 11   11 
Acquired 0   0 
De novo 0   0 
Divested/Consolidated 0   2 
Average daily census 1,678   1,608 
Billable hours 344,186   304,487 
Revenue per billable hour$31.42  $34.30 
   
Hospice-Based Services:  
Locations 73   61 
Acquired 8   6 
De novo 0   0 
Divested/Consolidated 0   1 
Admissions 3,112   2,463 
Average daily census 2,861   2,425 
Patient days 257,474   220,694 
Average revenue per patient day$142  $140 
   
Facility-Based Services:  
Long-term Acute Care   
Locations 8   8 
Patient days 13,732   15,537 
Average revenue per patient day$1,087  $1,211 
        

(2) 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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Source: LHC Group