Press Release

LHC Group Reports Fourth Quarter Financial Results

February 28, 2018

Issues Initial 2018 Guidance

LAFAYETTE, La.--(BUSINESS WIRE)--Feb. 28, 2018-- LHC Group, Inc. (NASDAQ: LHCG) announced its financial results for the three months and twelve months ended December 31, 2017.

Financial Results for the Fourth Quarter of 2017

  • Net service revenue increased 24.2% to $292.4 million compared with $235.4 million in the fourth quarter of 2016.
  • Net income attributable to LHC Group’s common stockholders was $18.4 million, up 87.8% from $9.8 million in the fourth quarter of 2016, while earnings per diluted share attributable to LHC Group’s common stockholders increased 85.5% to $1.02 per diluted share from $0.55 in the fourth quarter of 2016.
  • Results for the fourth quarter of 2017 include an increase of $0.75 per diluted share for the non-cash decrease in the provision for income taxes from the impact of the Tax Cuts and Jobs Act of 2017 on net deferred tax liabilities, which is partially offset by increases in Almost Family merger and other costs of approximately $0.35 per diluted share(1).
  • Adjusted net income attributable to LHC Group’s common stockholders was $11.2 million, or $0.62 per diluted share, compared with $10.3 million, or $0.58 per diluted share, in the fourth quarter of 2016, for an increase of 6.9%.
  • Total organic growth in home health admissions was 5.3%.
  • Total organic revenue growth in home health was 7.8%.

Financial Results for Fiscal 2017

  • Net service revenue increased 17.2% to $1.07 billion compared with $914.8 million in the prior-year period.
  • Net income attributable to LHC Group’s common stockholders was $50.1 million, up 37.0% from $36.6 million in the prior-year period, while earnings per diluted share attributable to LHC Group’s common stockholders increased 34.8% to $2.79 per diluted share from $2.07 in the prior-year period.
  • Adjusted net income attributable to LHC Group’s common stockholders was $43.5 million, or $2.42 per diluted share(1), compared with $37.0 million, or $2.10 per diluted share(1), in the prior-year period, for an increase of 17.6%.
  • Total organic growth in home health admissions was 10.7%.
  • Total organic revenue growth in home health was 10.0%.

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

Operational Highlights

  • LHC Group quality and patient satisfaction results continue to exceed the national average with 98% of its same store locations having CMS Quality Star ratings of four stars or greater.
  • LHC Group acquired 71 home health, hospice or community-based locations and six long-term acute care hospital operations during the twelve months ended December 31, 2017, which produced a record year of $114.4 million in annual revenue prior to acquisition.
  • LHC Group agreed to merge with Almost Family, Inc., which would create one of the largest providers of in-home healthcare in the country. The all-stock merger is expected to accelerate revenue growth by providing additional channels of organic growth and creating a significant pipeline of joint ventures, extensions of existing relationships and acquisitions. A total of $25 million in annualized pre-tax cost synergies have been identified.

Commenting on the results, Keith G. Myers, LHC Group’s chairman and CEO, said, “The growth we generated in the fourth quarter was consistent with our experience throughout 2017 and helped us exceed our full year revenue and earnings goals. As always, this performance is driven by an overriding focus on clinical excellence that delivers quality and patient satisfaction that, according to the CMS Star ratings, continues to lead the home health industry. This was a record-setting year for us with acquisitions and joint ventures, and our ability to improve outcomes remains a critical element in providing value to our partners as we work alongside them to create customized solutions.”

Mr. Myers concluded, “We have established a growth plan for 2018 based on strong organic growth and continuation of our partnerships with leading hospitals and health systems. Our expectations for continuing the positive impact within the communities we serve are as high as they have ever been. With much of the regulatory uncertainties in our industry now resolved through recent pronouncements and legislation, we are confident the environment is conducive to executing on new growth opportunities and delivering on the benefits of a record-setting year for acquired revenue.”

Almost Family Merger Transaction

On November 15, 2017, LHC Group and Almost Family entered into an agreement providing for a ‘merger of equals’ business combination. Following approval by both companies’ shareholders, the merger will be an all-stock transaction with an exchange ratio of 0.9150 of LHC Group shares to be exchanged for each outstanding share of Almost Family stock. The combined company will have an expanded geographic service territory of 36 states covering over 60% of the U.S. population aged 65 and over, 781 locations and 76 joint venture partnerships with health systems that include 336 hospitals. The combined company will operate under the LHC Group name with common shares traded on the NASDAQ under ticker symbol LHCG. On February 22, 2018, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 with respect to this transaction had expired, satisfying one of the important conditions to closing. The transaction is expected to close at the end of the first quarter following both companies’ March 29, 2018, special shareholder meetings to approve the proposed transaction.

Commenting on the expected merger, Mr. Myers added, “I am pleased with the pace and success of our integration planning work over the last few months as we have prepared for the combination of our two companies. We are confident in our track record of integrating acquisitions and joint ventures successfully, and we began focusing on the important aspects of this integration many months ago. Our integration planning activities began during our comprehensive due diligence efforts conducted prior to signing the merger agreement in November with the assistance of our third party advisor partners at Alston & Bird, FTI Consulting and Ernst & Young. In addition, in November we also engaged the Berkeley Research Group (“BRG”) to lead the integration process. BRG will remain engaged for at least a year after the closing to assist in the execution of the actual integration. Since November, BRG has established an integration management office at each of our home office locations in Lafayette and in Louisville. Through those rigorous and dedicated efforts, we’ve been working diligently through 23 separate integration planning workstreams, each with teams comprised of members from LHC Group, Almost Family and BRG, to plan for the integration of systems, processes and personnel.

“With a shared vision for delivering patient-centered care in the home and complementary strengths and cultures, we will be well positioned to lead the evolution of the in-home healthcare industry to value-based reimbursement and highly coordinated care. We look forward to outlining our combined growth expectations later this year.”

Fiscal Year 2018 Guidance

Fiscal year 2018 net service revenue is expected to be in a range of $1.22 billion to $1.25 billion, and adjusted earnings per diluted share is expected to be in a range of $3.00 to $3.20. This guidance excludes the impact from a completed merger with Almost Family and assumes the following:

(1) an effective tax rate of 29% to 30%, which reflects the positive impact from passage of the Tax Cuts and Jobs Act of 2017; and
(2) the negative impact from the Medicare Home Health Prospective Payment System (PPS) for 2018, which is expected to have an approximate -1% impact, or $6 million reduction to Medicare Home Health revenue and $0.20 reduction in fully diluted earnings per share for 2018.

The Company’s 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. Due to the difficulty in estimating the costs of the expected merger with Almost Family and its impact on GAAP earnings, the Company is only providing guidance to adjusted earnings for 2018. The Company’s guidance range on net service revenue does not take into account the Company’s adoption of ASU 2014-09 in 2018 regarding revenue recognition, which will result in a reduction to net service revenue by bad debt expense, but will not affect earnings per share.

Conference Call

LHC Group will host a conference call on Thursday, March 1, 2018, at 11:00 a.m. Eastern time to discuss its fourth 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 March 8, 2018, by dialing (855) 859-2056 (international callers should call (404) 537-3406) and entering confirmation number 2883586.

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 320 home health services locations, 92 hospice locations, 12 community-based service locations and 15 long-term acute care hospitals (LTACHs).

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)

 
      Dec. 31,

2017

      Dec. 31,

2016

 
 
ASSETS
Current assets:
Cash $ 2,849 $ 3,264
Receivables:
Patient accounts receivable, less allowance for uncollectible accounts of $23,556 and $29,036, respectively 161,898 124,803
Other receivables 3,163 5,115
Amounts due from governmental entities   830     942  
Total receivables, net 165,891 130,860
Prepaid income taxes 7,006
Prepaid expenses 13,042 9,821
Other current assets   12,177     5,796  
Total current assets 200,965 149,741
Property, building and equipment, net of accumulated depreciation of $43,565 and $35,226, respectively 46,453 43,251
Goodwill 392,601 307,317
Intangible assets, net of accumulated amortization of $13,041 and $10,968, respectively 134,610 102,006
Other assets   19,073     11,756  
Total assets $ 793,702   $ 614,071  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued liabilities $ 39,750 $ 26,805
Salaries, wages, and benefits payable 44,747 34,265
Self-insurance reserve 12,450 10,691
Current portion of long-term debt 286 252
Amounts due to governmental entities 5,019 4,955
Income tax payable

    3,499  
Total current liabilities 102,252 80,467
Deferred income taxes 27,466 31,941
Revolving credit facility 144,000 87,000
Long-term debt, less current portion

    544  
Total liabilities 273,718 199,952
Noncontrolling interest – redeemable 13,393 12,567
Stockholders’ equity:
LHC Group, Inc. stockholders’ equity:
Preferred stock – $0.01 par value: 5,000,000 shares authorized; none issued or outstanding

Common stock – $0.01 par value; 40,000,000 shares authorized; 22,640,046 and 22,429,041 shares issued in 2017 and 2016, respectively 226 224
Treasury stock – 4,890,504 and 4,828,679 shares at cost, respectively (42,249 ) (39,135 )
Additional paid-in capital 126,490 119,748
Retained earnings   364,401     314,289  
Total LHC Group, Inc. stockholders’ equity 448,868 395,126
Noncontrolling interest – non-redeemable   57,723     6,426  
Total equity   506,591     401,552  
Total liabilities and equity $ 793,702   $ 614,071  

 
 
 

LHC GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)

 
      Three Months Ended

December 31,

    Year Ended

December 31,

  2017         2016     2017         2016  
Net service revenue $ 292,386 $ 235,443 $ 1,072,086 $ 914,823
Cost of service revenue   187,426     144,089     675,810     557,650  
Gross margin 104,960 91,354 396,276 357,173
Provision for bad debts 1,246 3,131 9,484 14,790
General and administrative expenses 89,108 69,050 310,539 270,622
Impairment of intangibles and other 1,430 1,511
(Gain) Loss on disposal of assets   83     (190 )   60     1,199  
Operating income 13,093 19,363 74,682 70,562
Interest expense (1,260 ) (768 ) (3,876 ) (2,936 )
Non-operating income   90     213     524     492  
Income before income taxes and

noncontrolling interest

11,923 18,808 71,330 68,118
Income tax expense   (9,466 )   6,676     10,944     22,176  
Net income 21,389 12,132 60,386 45,942
Less net income attributable to

noncontrolling interests

  2,954     2,315     10,274     9,359  
Net income attributable to LHC Group, Inc.’s common stockholders $ 18,435   $ 9,817   $ 50,112   $ 36,583  
 
Earnings per share attributable to LHC Group, Inc.’s common stockholders:
Basic $ 1.04   $ 0.56   $ 2.83   $ 2.08  
Diluted $ 1.02   $ 0.55   $ 2.79   $ 2.07  
 
Weighted average shares outstanding:
Basic 17,749,872 17,597,190 17,715,992 17,559,477
Diluted 18,043,297 17,764,066 17,961,018 17,682,820

 
 
 

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

 
      Year Ended

December 31,

  2017         2016  
Operating activities:
Net income $ 60,386 $ 45,942
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense 13,422 12,160
Provision for bad debts 9,484 14,790
Stock-based compensation expense 5,964 4,872
Deferred income taxes (4,475 ) 7,402
Loss on disposal of assets 60 1,199
Impairment of intangibles and other 1,511
Changes in operating assets and liabilities, net of acquisitions:
Receivables (36,390 ) (28,873 )
Prepaid expenses and other assets (26,973 ) 1,034
Prepaid income taxes (7,006 ) 1,641
Accounts payable and accrued expenses 19,666 9,182
Income taxes payable (3,499 ) 84
Net amounts due to/from governmental entities   176     (1,961 )
Net cash provided by operating activities 32,326 67,472
 
Investing activities:
Purchases of property, building and equipment (10,176 ) (16,009 )
Cash paid for acquisitions, primarily goodwill and intangible assets (64,598 ) (23,156 )
Advanced payments on acquisitions (11,488 )
Other     273  
Net cash used in investing activities (74,774 ) (50,380 )
 
Financing activities:
Proceeds from line of credit 96,000 38,000
Payments on line of credit (39,000 ) (49,000 )
Proceeds from employee stock purchase plan 1,026 912
Payments on debt (260 ) (238 )
Noncontrolling interest distributions (11,382 ) (9,413 )
Excess tax benefits from vesting of stock awards 1,303
Withholding taxes paid on stock-based compensation (3,114 ) (1.996 )
Purchase of additional controlling interest (1,488 )
Sale of noncontrolling interest 251 356
Proceeds from exercise of stock options     109  
Net cash provided by (used in) financing activities   42,033     (19,967 )
Change in cash (415 ) (2,875 )
Cash at beginning of period   3,264     6,139  
Cash at end of period $ 2,849   $ 3,264  
 
Supplemental disclosures of cash flow information:
Interest paid $ 3,853   $ 3,123  
Income taxes paid $ 25,199   $ 11,533  

 
 
 

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

 
      Three Months Ended December 31, 2017

Home

Health

Services

   

Hospice

Services

   

Community-

Based

Services

   

Facility-

Based

Services

    Total
Net service revenue $ 208,327 $ 42,948 $ 13,102 $ 28,009 $ 292,386
Cost of service revenue 129,283 28,782 10,339 19,022 187,426
Provision for bad debts 128 517 346 255 1,246
General and administrative expenses 63,854 13,061 2,984 9,209 89,108
Impairment of intangibles and other 1,430 1,430
(Gain) loss on disposal of assets   63     1       19     83  
Operating income 13,569 587 (567 ) (496 ) 13,093
Interest expense (945 ) (189 ) (63 ) (63 ) (1,260 )
Non-operating income (loss)   20     20     1     49     90  
Income before income taxes and noncontrolling interest 12,644 418 (629 ) (510 ) 11,923
Income tax expense   (7,204 )   (1,382 )   (446 )   (434 )   (9,466 )
Net income 19,848 1,800 (183 ) (76 ) 21,389
Less net income attributable to noncontrolling interests   3,049     210     (104 )   (201 )   2,954  
Net income attributable to

LHC Group, Inc.’s

common stockholders

$ 16,799   $ 1,590   $ (79 ) $ 125   $ 18,435  
Total assets $ 534,385   $ 155,230   $ 48,216   $ 55,871   $ 793,702  
 
 
 
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  

 
 
 

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

 
      Year Ended December 31, 2017

Home

Health

Services

   

Hospice

Services

   

Community-

Based

Services

   

Facility-

Based

Services

    Total
Net service revenue $ 783,507 $ 159,197 $ 46,909 $ 82,473 $ 1,072,086
Cost of service revenue 482,179 103,969 35,244 54,418 675,810
Provision for bad debts 5,924 1,910 750 900 9,484
General and administrative expenses 229,265 45,516 9,946 25,812 310,539
Impairment of intangibles and other 1,511 1,511
(Gain) loss on disposal of assets   101     22       (63 )   60  
Operating income 64,527 7,780 969 1,406 74,682
Interest expense (2,906 ) (582 ) (194 ) (194 ) (3,876 )
Non-operating income   360     71     3     90     524  
Income before income taxes and noncontrolling interest 61,981 7,269 778 1,301 71,330
Income tax expense   9,509     1,057     156     222     10,944  
Net income 52,472 6,212 622 1,079 60,386
Less net income (loss) attributable to noncontrolling interests   9,102     1,248     (111 )   35     10,274  
Net income attributable to

LHC Group, Inc.’s

common stockholders

$ 43,370   $ 4,964   $ 733   $ 1,045   $ 50,112  
Total assets $ 534,385   $ 155,230   $ 48,216   $ 55,871   $ 793,702  
 
 
 
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 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 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 (loss) 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  
Total assets $ 427,782   $ 116,090   $ 33,520   $ 36,679   $ 614,071  

 
 
 

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

 
      Three Months Ended

December 31,

    Year Ended

December 31,

  2017         2016     2017         2016  
Key Data:
Home-Health Services:

Home Health

Locations 315 281 315 281
Acquired 1 3 43 12
De novo 1 1 3 5
Divested/Consolidated (9 ) (9 ) (12 ) (16 )
Total new admissions 49,668 41,184 192,116 159,914
Medicare new admissions 30,745 26,812 120,177 105,575
Average daily census 44,362 39,407 43,107 38,587
Average Medicare daily census 29,925 28,381 29,514 28,146
Medicare completed and billed episodes 54,493 51,040 213,255 199,235
Average Medicare case mix for completed and billed Medicare episodes 1.11 1.09 1.10 1.06
Average reimbursement per completed and billed Medicare episodes $ 2,867 $ 2,751 $ 2,817 $ 2,690
Total visits 1,448,351 1,192,042 5,656,371 4,629,695
Total Medicare visits 987,586 869,759 3,899,678 3,396,164
Average visits per completed and billed Medicare episodes 18.1 17.0 18.3 17.0
Organic growth:(1)
Net revenue 7.8 % 7.3 % 10.0 % 6.4 %
Net Medicare revenue 1.8 % 5.3 % 4.7 % 4.7 %
Total new admissions 5.3 % 10.8 % 10.7 % 9.3 %
Medicare new admissions 1.6 % 8.5 % 5.4 % 6.6 %
Average daily census 1.0 % 3.5 % 4.2 % 2.3 %
Average Medicare daily census -3.8 % 0.8 % -1.3 % 0.4 %
Medicare completed and billed episodes -2.7 % 2.5 % 1.1 % 2.2 %
 
Community-Based Services:
Locations 12 11 12 11
Acquired 1 1 1
De novo
Divested/Consolidated (3 )
Average daily census 2,161 1,633 1,849 1,629
Billable hours 469,963 376,934 1,644,372 1,484,012
Revenue per billable hour $ 27.88 $ 29.36 $ 28.53 $ 29.58
 
Hospice-Based Services:
Locations 91 65 91 65
Acquired 27 10
De novo 1 1 1
Divested/Consolidated (2 ) (2 )
Admissions 3,655 2,448 13,369 9,988
Average daily census 3,180 2,699 3,036 2,620
Patient days 292,568 248,270 1,108,118 958,847
Average revenue per patient day $ 147 $ 141 $ 144 $ 141
 
Facility-Based Services:

Long-term Acute Care

Locations 14 8 14 8
Acquired 6
Patient days 21,719 13,257 63,168 56,224
Average revenue per patient day $ 1,170 $ 1,060 $ 1,152 $ 1,159
 

(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

December 31,

 

Twelve Months Ended

December 31,

2017   2016 2017   2016
Net income attributable to LHC Group, Inc.’s common stockholders $ 18,435 $ 9,817 $ 50,112 $ 36,583
Add (net of tax):
New tax rate(1) (13,602 ) (13,602 )
AFAM merger/acquisition expenses(2) 3,816 451 4,299 451
Closures/relocations(3) 2,085 2,214
Home Health rule(4)   481     481  

Adjusted net income attributable to LHC Group, Inc.’s common stockholders

$ 11,215   $ 10,268 $ 43,504   $ 37,034
 
 

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

 

Three Months Ended

December 31,

Twelve Months Ended

December 31,

2017 2016 2017 2016
Net income attributable to LHC Group, Inc.’s common stockholders $ 1.02 $ 0.55 $ 2.79 $ 2.07
Add (net of tax):
New tax rate(1) (0.75 ) (0.76 )
AFAM merger/acquisition expenses(2) 0.21 0.03 0.24 0.03
Closures/relocations(3) 0.11 0.12
Home Health rule(4)   0.03     0.03  

Adjusted net income attributable to LHC Group, Inc.’s common stockholders

$ 0.62   $ 0.58 $ 2.42   $ 2.10
 

(1) The passage of the Tax Cuts and Jobs Act of 2017 reduced the deferred tax liability by $13.6 million.

(2) Expenses associated with the pending merger between LHC Group and Almost Family and other prior acquisitions and joint ventures.

(3) Expenses associated with the closure, relocation or consolidation of nine home health agencies. This cost includes the $1.4 million impairment of intangibles charge.

(4) Impact on 2017 episodes, which ended on or after January 1, 2018, from the Medicare Home Health Prospective Payment System (PPS) for 2018, which was finalized on November 5, 2017.

 
 

We have included certain financial measures in this press release, including adjusted net income attributable to LHC Group and adjusted net income attributable to LHC Group per diluted share, which are “non-GAAP financial measures” as defined under the rules and regulations promulgated by the SEC. We define adjusted net income attributable to LHC Group as net income attributable to LHC Group adjusted for the after-tax impact of the tax benefit related to tax reform, AFAM merger/acquisition costs, various adjustments, closures/relocations and the Home Health rule. We define adjusted net income attributable to LHC Group per diluted share as net income attributable to LHC Group adjusted for the after-tax impact of the tax benefit related to tax reform, AFAM merger/acquisition costs, various adjustments, closures/relocations and the Home Health rule divided by weighted average diluted shares outstanding.

Adjusted net income attributable to LHC Group and adjusted net income attributable to LHC Group per diluted share are supplemental measures of our performance and are not required by, or presented in accordance with, generally accepted accounting principles in the United States (“GAAP”). Adjusted net income attributable to LHC Group and adjusted net income attributable to LHC Group per diluted share are not measures of our financial performance under GAAP and should not be considered as alternatives to net income attributable to LHC Group, net income attributable to LHC Group per diluted share or any other performance measures derived in accordance with GAAP. Our measurements of adjusted net income attributable to LHC Group and adjusted net income attributable to LHC Group per diluted share may not be comparable to similarly titled measures of other companies. We have included information concerning adjusted net income attributable to LHC Group and adjusted net income attributable to LHC Group per diluted share in this press release because we believe that such information is used by certain investors as measures of a company’s historical performance. We believe these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of issuers of equity securities, many of which present adjusted net income and adjusted net income per diluted share when reporting their results. Our presentation of adjusted net income attributable to LHC Group and adjusted net income attributable to LHC Group per diluted share should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.

Source: LHC Group, Inc.

LHC Group, Inc.
Eric Elliott, 337-233-1307
Senior Vice President of Finance
eric.elliott@lhcgroup.com