Press Release

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

November 6, 2017

Revenue Grows 18.2%

Increases 2017 Guidance

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

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

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

Operational Highlights

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

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

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

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

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

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

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

The Company’s fiscal year 2017 financial guidance includes the expenses of approximately $0.03 per fully diluted share for the third quarter of 2017 related to the CHRISTUS joint venture transaction and one agency closure in Oklahoma. The guidance ranges do not take into account the impact of future reimbursement changes, if any, future acquisitions, if made, de novo locations, if opened, or future legal expenses, if necessary.

Conference Call
LHC Group will host a conference call later today at 11:00 a.m. Eastern time to discuss its third quarter 2017 results. The toll-free number to call for this interactive teleconference is (866) 393‑1608 (international callers should call (973) 890-8327). A telephonic replay of the conference call will be available through midnight on November 13, 2017, by dialing (855) 859‑2056 (international callers should call (404) 537-3406) and entering confirmation number 96827521.

A live broadcast of LHC Group’s conference call will be available under the Investor Relations section of the Company’s website, www.LHCgroup.com. A one-year online replay will be available approximately an hour following the conclusion of the live broadcast.

About LHC Group, Inc.
LHC Group, Inc. is a national provider of non-acute healthcare services, providing quality, cost-effective healthcare to patients primarily within the comfort and privacy of their home or place of residence. LHC Group provides a comprehensive array of healthcare services through home health, hospice, community‑based services agencies and facility-based services. LHC Group operates 324 home health services locations, 92 hospice locations, 12 community-based service locations and 15 long-term acute care hospitals (LTACHs) with eight locations.

Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements about the Company’s future financial performance and the strength of the Company’s operations. Such forward-looking statements may be identified by words such as “continue,” “expect,” and similar expressions. Forward-looking statements involve a number of risks and uncertainties that may cause actual results to differ materially from those expressed or implied by such forward-looking statements, including changes in reimbursement, changes in government regulations, changes in LHC Group’s relationships with referral sources, increased competition for LHC Group’s services, increased competition for joint venture and acquisition candidates, changes in the interpretation of government regulations and other risks set forth in Item 1A. Risk Factors in LHC Group’s Annual Report on Form 10-K for the year ended December 31, 2016, filed with the Securities and Exchange Commission. LHC Group undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

LHC GROUP, INC. AND SUBSIDIARIES,
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share data)

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

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

  Three Months Ended
September 30,
Nine Months Ended
September 30,
    2017     2016     2017     2016  
Net service revenue $   272,872   $   230,797   $   779,700   $   679,380  
Cost of service revenue   172,856     140,832     488,384     413,561  
Gross margin   100,016     89,965     291,316     265,819  
Provision for bad debts   3,194     3,275     8,238     11,658  
General and administrative expenses   75,669     66,999     221,077     201,296  
(Gain) Loss on disposal of assets   (177 )   142     (23 )   1,389  
Operating income   21,330     19,549     62,024     51,476  
Interest expense   (995 )   (816 )   (2,615 )   (2,167 )
Income before income taxes and
  noncontrolling interest
  20,335     18,733     59,409     49,309  
Income tax expense   7,445     6,562     20,410     15,500  
Net income   12,890     12,171     38,999     33,809  
Less net income attributable to
  noncontrolling interests
  1,984     2,555     7,321     7,043  
Net income attributable to LHC Group, Inc.’s common stockholders $   10,906   $   9,616   $   31,678   $   26,766  
         
Earnings per share attributable to LHC Group, Inc.’s common stockholders:        
Basic $   0.61   $   0.55   $   1.79   $   1.53  
Diluted $   0.61   $   0.54   $   1.77   $   1.52  
         
Weighted average shares outstanding:        
Basic   17,740,818     17,588,163     17,704,561     17,546,773  
Diluted   18,010,522     17,719,473     17,931,700     17,664,284  

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

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

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

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


  Three Months Ended September 30, 2016
  Home
Health
Services
Hospice
Services
Community-
Based
Services
Facility-
Based
Services
Total
Net service revenue $   167,529   $   35,322   $   11,793   $   16,153   $   230,797  
Cost of service revenue   100,057     21,243     9,100     10,432     140,832  
Provision for bad debts   2,049     797     190     239     3,275  
General and administrative expenses   50,293     9,491     2,263     4,952     66,999  
Loss on disposal of assets   20     5         117     142  
Operating income   15,110     3,786     240     413     19,549  
Interest expense   (612 )   (90 )   (41 )   (73 )   (816 )
Income before income taxes and noncontrolling interest   14,498     3,696     199     340     18,733  
Income tax expense   5,133     1,275     83     71     6,562  
Net income   9,365     2,421     116     269     12,171  
Less net income attributable to noncontrolling interests   1,853     553         149     2,555  
Net income attributable to
  LHC Group, Inc.’s
  common stockholders
$   7,512   $   1,868   $   116   $   120   $   9,616  
Total assets $   425,923   $   119,906   $   33,549   $   34,075   $   613,453  


LHC GROUP, INC. AND SUBSIDIARIES

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

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


  Nine Months Ended September 30, 2016
  Home
Health
Services
Hospice
Services
Community-
Based
Services
Facility-
Based
Services
Total
Net service revenue $   492,090   $   100,051   $   32,823   $   54,416   $   679,380  
Cost of service revenue   294,359     61,836     24,656     32,710     413,561  
Provision for bad debts   8,122     2,364     488     684     11,658  
General and administrative expenses   150,948     27,787     6,557     16,004     201,296  
Loss on disposal of assets   811     329     46     203     1,389  
Operating income   37,850     7,735     1,076     4,815     51,476  
Interest expense   (1,640 )   (232 )   (106 )   (189 )   (2,167 )
Income before income taxes and noncontrolling interest   36,210     7,503     970     4,626     49,309  
Income tax expense   11,026     2,484     413     1,577     15,500  
Net income   25,184     5,019     557     3,049     33,809  
Less net income (loss) attributable to noncontrolling interests   5,002     1,368     (57 )   730     7,043  
Net income attributable to
  LHC Group, Inc.’s
  common stockholders
$   20,182   $   3,651   $   614   $   2,319   $   26,766  

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

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

(1) Organic growth is calculated as the sum of same store plus de novo for the period divided by total from the same period in the prior year.

LHC GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF ADJUSTED NET INCOME ATTRIBUTABLE TO LHC GROUP, INC.
(Amounts in thousands)
(Unaudited)

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

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

 (Unaudited)

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

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

Source: LHC Group