LHC Group Announces Third Quarter 2015 Results and Raises 2015 Revenue and EPS Guidance

LAFAYETTE, La., Nov. 4, 2015 (GLOBE NEWSWIRE) — LHC Group, Inc. (NASDAQ:LHCG), a national provider of home health, hospice, community-based and comprehensive post-acute healthcare services, today announced its financial results for the three months and nine months ended September 30, 2015.

Financial Results for the Third Quarter

  • Net service revenue for the third quarter of 2015 was $204.1 million, an increase of 8.7% compared with net service revenue of $187.7 million in the same period of 2014.
  • Net income attributable to LHC Group for the third quarter of 2015 was $8.8 million, or $0.50 per diluted share, an increase of 43.3% compared with net income attributable to LHC Group of $6.2 million, or $0.36 per diluted share, in the same period of 2014.
  • Total growth in admissions for all service lines for the third quarter of 2015 was 4.9% compared with the third quarter of 2014.
  • Total organic growth in home health admissions for the third quarter of 2015 was 2.9% compared with the third quarter of 2014.

Commenting on the results, Keith G. Myers, LHC Group’s chairman and CEO, said, “Our dedicated employees have once again exceeded expectations. Our ability to consistently deliver high-quality care to the growing number of patients, families and communities we serve is a testament to the collective talent, work ethic and experience of the growing number of healthcare professionals who make up our LHC Group family. I am extremely proud of the strong and well-balanced operating results our team delivered during the third quarter of 2015 and through the first nine months of 2015. Through three quarters in 2015, LHC Group has delivered solid results with strong volume growth combined with efficiently and effectively delivering the superior care and service expected by those we serve.

“We remain intensely focused on our strategy to grow organically in existing markets and through acquisitions and hospital joint ventures in new markets and believe that we are well positioned to be a growth and consolidation leader in the years ahead of us. On the acquisition growth front, we completed the acquisition of Halcyon Hospice on October 1, which consists of 16 hospice locations across three states with annual revenue of approximately $41 million. This acquisition increases our hospice service line revenue by 56% and is consistent with our strategy of growing our three in-home service lines of home health, hospice and community-based services.”

Financial Results for the Nine Months

  • Net service revenue for the nine months ended September 30, 2015, was $597.4 million, an increase of 10.6% compared with net service revenue of $540.3 million in the same period of 2014.
  • Net income attributable to LHC Group for the nine months ended September 30, 2015, was $24.6 million, or $1.40 per diluted share, an increase of 50.9% compared with net income attributable to LHC Group of $16.3 million, or $0.94 per diluted share, in the same period of 2014.
  • Total growth in admissions for all service lines for the nine months ended September 30, 2015, was 8.6% compared to the same period in 2014.
  • Total organic growth in home health admissions for the nine months ended September 30, 2015, was 4.0% compared with the same period in 2014.

LHC Group also announces the pending acquisition of substantially all of the assets of Nurses Registry and Home Health Corp. for $5.7 million. Nurses Registry’s licensed home health service area covers 16 counties in the Certificate of Need State of Kentucky. The estimated population of the licensed service area is over 765,000, with more than 101,000 over 65 years of age. Estimated annualized revenue is approximately $6.5 million. This acquisition is expected to close on November 11, 2015, and LHC Group estimates the earnings per share impact to be a negative $0.02 in the fourth quarter, including integration and transaction costs.

FY 2015 Guidance

The Company is raising its full year 2015 guidance for net service revenue to a new range of $805 million to $815 million from the previous range of $780 million to $795 million. In addition, the Company is raising its fully diluted earnings per share guidance to a new range of $1.75 to $1.85 from the previous range of $1.70 to $1.80. This guidance includes the negative impact on the fourth quarter from the Medicare Home Health Prospective Payment System for 2016 of approximately $0.02 per diluted share. This guidance also includes the recent acquisition of Halcyon Hospice and the aforementioned pending acquisition of Nurses Registry, which are anticipated to be dilutive to LHC Group’s fourth quarter 2015 earnings per share by approximately $0.06 and $0.02, respectively, due to transaction and integration costs. This guidance does 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 on Thursday, November 5, 2015, at 11:00 a.m. Eastern time to discuss its third quarter 2015 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 Wednesday, November 11, 2015, by dialing (855) 859‑2056 (international callers should call (404) 537-3406) and entering confirmation number 45313318. 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 post-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.

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, 2014, 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, Dec. 31,
  2015 2014
     
ASSETS    
Current assets:    
Cash  $ 61,733  $ 531
Receivables:    
Patient accounts receivable, less allowance for uncollectible accounts of $25,931 and $18,582, respectively 107,139 97,498
Other receivables 1,245 1,334
Amounts due from governmental entities 961 1,164
Total receivables, net 109,345 99,996
Deferred income taxes 15,833 11,381
Prepaid income taxes 2,314 3,093
Prepaid expenses 10,038 8,724
Other current assets 6,119 3,777
Receivable due from insurance carrier 550 7,850
Total current assets 205,932 135,352
Property, building and equipment, net of accumulated depreciation of $43,642 and $44,683, respectively 38,255 34,787
Goodwill 242,062 240,019
Intangible assets, net of accumulated amortization of $7,964 and $6,560, respectively 80,731 79,685
Other assets 1,907 1,896
Total assets  $ 568,887  $ 491,739
LIABILITIES AND STOCKHOLDERS’ EQUITY    
Current liabilities:    
Accounts payable and other accrued liabilities  $ 22,269  $ 19,278
Salaries, wages and benefits payable 35,447 22,466
Self-insurance reserve 9,692 6,559
Current portion of long-term debt 238 230
Amounts due to governmental entities 4,051 4,459
Legal settlement payable 550 7,850
Total current liabilities 72,247 60,842
Deferred income taxes 39,169 33,592
Income tax payable 3,415 3,415
Revolving credit facility 92,000 60,000
Long-term debt, less current portion 608 778
Total liabilities 207,439 158,627
Noncontrolling interest – redeemable 11,890 11,517
Stockholders’ equity:    
Common stock – $0.01 par value: 40,000,000 shares authorized; 22,221,755 and 22,015,211 shares issued in 2015 and 2014, respectively 222 220
Treasury stock – 4,775,913 and 4,734,363 shares at cost, respectively (37,109) (35,660)
Additional paid-in capital 113,192 108,708
Retained earnings 269,971 245,371
Total LHC Group, Inc. stockholders’ equity 346,276 318,639
Noncontrolling interest – non-redeemable 3,282 2,956
Total stockholders’ equity 349,558 321,595
Total liabilities and stockholders’ equity  $ 568,887  $ 491,739
     
         
LHC GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except share and per share data)
(Unaudited)
         
  Three Months Ended Nine Months Ended
  September 30, September 30,
  2015 2014 2015 2014
Net service revenue  $ 204,122  $ 187,713  $ 597,373  $ 540,261
Cost of service revenue 120,873 113,122 351,938 321,983
Gross margin 83,249 74,591 245,435 218,278
Provision for bad debts 4,809 3,974 14,873 11,699
General and administrative expenses 60,748 58,197 180,416 172,499
Operating income 17,692 12,420 50,146 34,080
Interest expense (434) (643) (1,533) (1,861)
Income before income taxes and noncontrolling interest 17,258 11,777 48,613 32,219
Income tax expense 6,148 3,924 17,097 11,199
Net income 11,110 7,853 31,516 21,020
Less net income attributable to 2,265 1,679 6,916 4,717
noncontrolling interest        
Net income attributable to LHC Group, Inc.’s common stockholders  $ 8,845  $ 6,174  $ 24,600  $ 16,303
         
Earnings per share – basic:        
Net income attributable to LHC Group, Inc.’s common stockholders  $ 0.51  $ 0.36  $ 1.41  $ 0.95
         
Earnings per share – diluted:        
Net income attributable to LHC Group, Inc.’s common stockholders  $ 0.50  $ 0.36  $ 1.40  $ 0.94
         
Weighted average shares outstanding:        
Basic 17,436,731 17,260,078 17,389,934 17,213,648
Diluted 17,610,953 17,356,916 17,526,687 17,289,554
         
     
LHC GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
     
  Nine Months Ended
  September 30,
  2015 2014
Operating activities    
Net income  $ 31,516  $ 21,020
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation and amortization expense 8,685 6,874
Provision for bad debts 14,873 11,699
Stock based compensation expense 3,150 3,086
Deferred income taxes 1,125 522
Impairment of intangibles 248
Loss on disposal of assets 680 21
Changes in operating assets and liabilities, net of acquisitions:  
Receivables (24,643) (12,868)
Prepaid expenses and other assets (3,660) 280
Prepaid income taxes 779 4,005
Accounts payable and accrued expenses 19,071 (1,283)
Net amounts due to/from governmental entities (205) 95
Net cash provided by operating activities 51,619 33,451
     
Investing activities    
Purchases of property, building and equipment (11,401) (4,872)
Cash paid for acquisitions, primarily goodwill and intangible assets (4,359) (73,194)
Net cash used in investing activities (15,760) (78,066)
     
Financing activities    
Proceeds from line of credit 64,000 72,000
Payments on line of credit (32,000) (30,000)
Proceeds from employee stock purchase plan 569 575
Payments on debt (172) (147)
Noncontrolling interest distributions (6,372) (5,086)
Payment of deferred financing fees (900)
Excess tax benefits from vesting of restricted stock 897 124
Redemption of treasury shares (1,449) (923)
Purchase of additional noncontrolling interest (275) (359)
Proceeds from exercise of stock options 145
Sale of noncontrolling interest 193
Net cash provided by financing activities 25,343 35,477
Change in cash 61,202 (9,138)
Cash at beginning of period 531 14,014
Cash at end of period  $ 61,733  $ 4,876
     
Supplemental disclosures of cash flow information    
Interest paid  $ 1,227  $ 1,827
Income taxes paid  $ 14,242  $ 6,946
     
           
LHC GROUP, INC. AND SUBSIDIARIES
SEGMENT INFORMATION
(Amounts in thousands)
(Unaudited)
           
  Three Months Ended September 30, 2015
  Home    Community- Facility-  
  Health
Services
Hospice
Services
Based
Services
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 47,666 5,398 2,091 5,593 60,748
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 interest 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
           
  Three Months Ended September 30, 2014
  Home    Community- Facility-  
  Health
Services
Hospice
Services
Based
Services
Based
Services

Total
Net service revenue  $ 143,675  $ 17,071  $ 8,973  $ 17,994  $ 187,713
Cost of service revenue 85,305 10,431 6,201 11,185 113,122
Provision for bad debts 3,644 269 109 (48) 3,974
General and administrative expenses 46,501 4,721 1,900 5,075 58,197
Operating income 8,225 1,650 763 1,782 12,420
Interest expense (510) (64) (5) (64) (643)
Income before income taxes and noncontrolling interest 7,715 1,586 758 1,718 11,777
Income tax expense 3,005 521 29 369 3,924
Net income 4,710 1,065 729 1,349 7,853
Less net income attributable to noncontrolling interest 1,193 292 (8) 202 1,679
Net income attributable to LHC Group, Inc.’s common stockholders  $ 3,517  $ 773  $ 737  $ 1,147  $ 6,174
Total assets  $ 390,536  $ 34,622  $ 34,244  $ 36,229  $ 495,631
           
           
LHC GROUP, INC. AND SUBSIDIARIES
SEGMENT INFORMATION (Continued)
(Amounts in thousands)
(Unaudited)
           
  Nine Months Ended September 30, 2015
  Home    Community- Facility-  
  Health
Services
Hospice
Services
Based
Services
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 141,696 15,397 6,376 16,947 180,416
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 interest 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
           
           
  Nine Months Ended September 30, 2014
  Home    Community- Facility-  
  Health
Services
Hospice
Services
Based
Services
Based
Services

Total
Net service revenue  $ 417,329  $ 49,361  $ 18,259  $ 55,312  $ 540,261
Cost of service revenue 245,383 29,479 12,790 34,331 321,983
Provision for bad debts 9,968 467 507 757 11,699
General and administrative expenses 138,356 13,954 4,288 15,901 172,499
Operating income 23,622 5,461 674 4,323 34,080
Interest expense (1,474) (186) (15) (186) (1,861)
Income before income taxes and noncontrolling interest 22,148 5,275 659 4,137 32,219
Income tax expense 8,680 1,397 83 1,039 11,199
Net income 13,468 3,878 576 3,098 21,020
Less net income attributable to noncontrolling interest 3,341 828 (12) 560 4,717
Net income attributable to LHC Group, Inc.’s common stockholders  $ 10,127  $ 3,050  $ 588  $ 2,538  $ 16,303
           
         
LHC GROUP, INC. AND SUBSIDIARIES
SELECT CONSOLIDATED KEY STATISTICAL AND FINANCIAL DATA
(Unaudited)
         
  Three Months Ended Nine Months Ended
  September 30, September 30,
  2015 2014 2015 2014
Key Data:        
Home-Health Services:        
Locations 275 283 275 283
Acquired 2 13 3 38
De novo 0 0 2 0
Divested/Consolidated 0 4 4 14
Total new admissions 35,772 33,962 106,948 98,725
Medicare new admissions 24,114 22,970 72,851 67,086
Average daily census 36,858 35,974 36,669 35,148
Average Medicare daily census 27,278 26,615 27,255 26,217
Medicare completed and billed episodes 48,063 46,631 142,572 136,170
Average Medicare case mix for completed and billed Medicare episodes 1.00 0.99 0.98 0.98
Average reimbursement per completed and billed Medicare episodes  $ 2,492  $ 2,390  $ 2,463  $ 2,375
Total visits 1,062,446 998,533 3,094,358 2,898,616
Total Medicare visits 787,220 739,184 2,302,492 2,161,516
Average visits per completed and billed Medicare episodes 16.4 15.9 16.1 15.8
Organic growth:(1)        
Net revenue 5.6% 1.1% 4.0% 1.1%
Net Medicare revenue 4.8% -1.2% 2.8% -0.2%
Total new admissions 2.9% 2.2% 4.0% 0.6%
Medicare new admissions 2.1% 0.8% 3.6% 0.6%
Average daily census 0.1% -1.7% 0.1% -4.0%
Average Medicare daily census -0.2% -3.1% -0.4% -4.4%
Medicare completed and billed episodes 1.1% 2.2% 0.8% 1.6%
         
Community-Based Services:        
Locations 13 13 13 13
Acquired 1 0 1 6
De novo 0 0 1 1
Divested/Consolidated 0 0 1 0
Average daily census 1,307 972 1,176 571
Billable hours 318,995 291,303 927,796 606,601
Revenue per billable hour  $ 33.32  $ 30.80  $ 33.10  $ 30.10
         
Hospice-Based Services:        
Locations 39 38 39 38
Acquired 1 0 1 6
De novo 2 1 2 1
Divested/Consolidated 0 0 1 1
Admissions 1,584 1,476 4,562 4,134
Average daily census 1,528 1,389 1,444 1,328
Patient days 140,592 127,832 394,336 362,619
Average revenue per patient day  $ 137  $ 134  $ 139  $ 136
         
Facility-Based Services:        
Long-term Acute Care        
Locations 8 8 8 8
Patient days 15,422 15,362 46,977 46,763
Average revenue per patient day  $ 1,175  $ 1,124  $ 1,163  $ 1,135
         
(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
         Investor Relations
         (337) 233-1307
         eric.elliott@lhcgroup.com