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CST: 21/11/2019 08:27:59   

LHC Group Announces Third Quarter 2019 Financial Results

14 Days ago

Increases 2019 EPS Guidance
Growth Expected to Accelerate in 2020

LAFAYETTE, La., Nov. 06, 2019 (GLOBE NEWSWIRE) -- LHC Group, Inc. (NASDAQ: LHCG) announced its financial results for the quarter ended September 30, 2019. Unless otherwise noted, all results are compared with the third quarter ended September 30, 2018.

Third Quarter of 2019 Financial Results – LHC Group Legacy Home Health and Hospice and Fully Converted Almost Family Locations Generating Strong Growth

  • Net service revenue increased 4.2% to $528.5 million.
  • Net income attributable to LHC Group’s common stockholders increased 41.6% to $30.1 million. Earnings per diluted share attributable to LHC Group’s common stockholders increased 41.2% to $0.96, which includes the effect of costs and expenses described within the adjusted results below.
  • Adjusted net income attributable to LHC Group’s common stockholders increased 33.9% to $39.5 million. Adjusted earnings per diluted share attributable to LHC Group’s common stockholders increased 32.6% to $1.26.
  • Adjusted EBITDA increased 22.2% to $59.6 million.
  • Adjusted results for the third quarter of 2019 exclude transaction and other transition related costs and expenses as well as charges and expenses related to certain closures and relocations in the aggregate amount of $9.4 million after tax, or $0.30 per diluted share.
  • Organic growth in home health admissions was 11.1% for the quarter and 8.6% year-to-date excluding Almost Family locations.
  • Organic growth in home health revenue was 7.9% for the quarter and 7.2% year-to-date excluding Almost Family locations.
  • Organic growth in hospice admissions was 2.1% for the quarter and 5.9% year-to-date excluding Almost Family locations.
  • Organic growth in hospice revenue was 6.0% for the quarter and 7.2% year-to-date excluding Almost Family locations.
  • Organic growth in hospice average daily census was 9.2% for the quarter and 8.9% year-to-date excluding Almost Family locations

A reconciliation of all non-GAAP financial results in this release appears on page 13.

Operational and Strategic Highlights

  • LHC Group quality and patient satisfaction scores continue to exceed the national average and outpace industry peers with 97% of its same store locations having CMS Quality Star ratings of four stars or greater when excluding Almost Family locations and other recent acquisitions. We continue to experience quarter over quarter improvement in each of our quality and patient satisfaction scores through our Almost Family locations and other recently acquired locations.
  • The 130 Almost Family locations that were fully converted to LHC Group’s version of Homecare Homebase prior to the third quarter demonstrated sequential organic growth in home health admissions of 1.2% in the third quarter as compared to the second quarter. We expect to complete the conversion of the remaining Almost Family locations to Homecare Homebase by the end of 2019.
  • To date in 2019, LHC Group has acquired or agreed to acquire 17 home health, 8 hospice, and two home and community based services locations in 10 states and the District of Columbia, the majority of which are hospital joint ventures. These acquisitions represent approximately $86.7 million in annualized revenue.

Commenting on the results, Keith G. Myers, LHC Group’s Chairman and Chief Executive Officer, said, “We have been able to deliver excellent results in 2019 with strong organic growth, margin improvement and momentum in our M&A strategy. Our growth is highlighted by increasing market share from legacy LHC locations and improving the performance at post-conversion Almost Family locations. We are well positioned to extend our growth posture in 2020 and beyond.”

M&A Strategy - Strong Current Pipeline of Joint Ventures and Acquisitions and Market Consolidation Expected to Accelerate in 2020
On August 1, 2019, LHC Group and Capital Regional Medical Center finalized their joint venture to purchase from SSM Health the assets of three home health and hospice locations in Jefferson City and Mexico, Missouri. LHC Group expects annualized revenue from this joint venture of approximately $3.5 million.

On August 1, 2019, LHC Group and Atmore Community Hospital finalized a JV partnership agreement to purchase and share ownership of a home health provider in Atmore, Alabama. The provider will continue operating under the name Atmore Community Home Care, serving patients and families in the community and the region with in-home healthcare. LHC Group expects annualized revenue from this joint venture of approximately $2.0 million.

On August 1, 2019, LHC Group purchased two home and community based services (HCBS) locations in West Union and Waverly, Ohio from Comfort Home Care. The agreement includes 100 percent of each location’s assets, which will be consolidated under LHC Group’s existing HCBS provider, HomeCare by Blackstone, in Columbus. LHC Group expects annualized revenue from this acquisition of approximately $2.0 million.

On August 1, 2019, LHC Group completed the previously announced acquisition of a home health and HCBS provider located in Baltimore from VNA of Maryland and Elite Home Care Services. LHC Group expects annualized revenue from this acquisition of approximately $35.0 million.

On September 1, 2019, LHC Group finalized a joint venture agreement with Norton Healthcare in Louisville, Kentucky to share ownership of Caregivers Health Network, a home health provider. Under terms of the agreement, Norton Healthcare purchased a minority interest in the agency, which has been renamed Norton Home Health.

On November 5, 2019, LHC Group and LifePoint Health agreed to further expand their existing joint venture partnership with the purchase of one home health provider with a location in Wilmington, Ohio and two hospice providers with a location in Sierra Vista, Arizona and Lewiston, Idaho. The agreement, which is subject to customary closing conditions, is expected to close by December 1, 2019. LHC Group expects annualized revenue from the expansion of this joint venture of approximately $3.6 million.

On November 5, 2019, LHC Group agreed to purchase a single freestanding home health provider – Life Wellness Home Health – in Las Vegas, Nevada. The agreement, which is subject to customary closing conditions, is expected to close by December 1, 2019. LHC Group expects annualized revenue from this joint venture of approximately $2.1 million.

Myers noted, “The common thread throughout all of the recent regulatory rulings and changes is that they shift care into the home and encourage payment models built on delivering value. The new models are now more dependent than ever on providers who can deliver the highest levels of clinical quality across the broadest range of services and within a value-based environment. LHC Group wins in all of these scenarios, and it will increase the value proposition we provide to leading hospital and health systems across the country. With over 30% of existing home health agencies projected to close as a result of PDGM and the elimination of the RAP according to many industry sources, we expect market consolidation through acquisitions and market share gains to help fuel our organic growth as well.”

Full Year 2019 EPS Guidance Raised and Full Year Revenue and EBITDA Guidance Affirmed - 24% Year-over-Year Adjusted Earnings Growth at the Midpoint Continues to be Fueled by Strong Organic Growth and Acquisition Accretion
The Company increased its guidance for full year adjusted earnings per diluted share to a range of $4.35 to $4.45 from a range of $4.25 to $4.35. The Company affirmed its full year 2019 guidance issued on May 8, 2019 for net service revenue in a range of $2.09 billion to $2.14 billion and Adjusted EBITDA, less non-controlling interest, in a range of $214 million to $220 million.

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, location closures, if any, or future legal expenses, if necessary. The adjusted earnings guidance for 2019 is presented on a non-GAAP basis, as it does not include the impact of transaction related costs, integration related expenses or other expenses related to the acquisition of Almost Family or other acquisitions. Given the difficulty in predicting the future amount and timing of these expenses, the Company cannot reasonably provide a full reconciliation of its fiscal year 2019 adjusted earnings per share guidance to GAAP earnings per share.

Joshua L. Proffitt, LHC Group’s Chief Financial Officer, added, “LHC Group’s distinct advantages in quality and patient satisfaction scores, national scale, organic growth, accelerating M&A pipeline, available liquidity and compelling value proposition for our partners provide near-term and long-term growth avenues that we have only begun to fully deploy. The strong organic growth we have achieved this year and the strengthening of the Almost Family business in the third quarter position us well for continued growth in 2020. In addition, the favorable rulings by CMS for PDGM and other expected regulatory changes that further enhance our leadership position and differentiated business model position us at the forefront of what we anticipate is a historic consolidation opportunity that can materially drive our growth in 2020 and beyond.”

Patient Driven Groupings Model (PDGM) Commentary
“Last week’s final PDGM ruling by CMS of a 4.36% behavioral adjustment was a significant improvement for the home health industry compared with the proposed rule issued in July 2019 with an 8.01% behavioral adjustment,” Myers added. “Despite this positive change, we remain concerned with the lack of transparency in CMS’s use of assumptions to establish payment policy and adjustments. We support payment reform that is evidence-based rather than on assumptions. We will continue to work closely with CMS to urge them to be more transparent in the calculation of payments to providers under the Medicare Home Health benefit”.

“I would like to thank the many sponsors in Congress for their overwhelming support with the regulatory and legislative changes under PDGM and their understanding of the need for the change in the adjustment to preserve access to home health services, particularly in rural areas. This change would not have happened without their help. I would also like to thank Seema Verma, the CMS Administrator, and her staff at CMS and HHS for their multiple meetings with us and their willingness to work collaboratively and listen to the industry’s concerns.”

“I’m extremely proud of how the LHC Group team approached the challenge of PDGM from a clinical perspective and created clinical pathways that ensure our high standards of clinical care and quality outcomes while increasing efficiency that minimizes the financial impact,” noted Myers. “Our clinical leadership team began working on PDGM preparedness in January and initiated pilots in mid-July that proved out the efficacy of our care models. Based on the success of these pilots, we are beginning the rollout of the care model. The benefits of this clinical approach will become more evident in 2020 as we execute our patient care models under the new rulings and demonstrate what it truly means to deliver value in the most appropriate and cost-efficient setting.”

Conference Call
LHC Group will host a conference call on Thursday, November 7, 2019, at 9:00 a.m. Eastern time to discuss its third quarter 2019 results. The toll-free number to call for this interactive teleconference is (866) 393‑1608 (international callers: (973) 890-8327). A telephonic replay of the conference call will be available through midnight on November 14, 2019, by dialing (855) 859‑2056 (international callers: (404) 537-3406) and entering confirmation number 4293488.

The Company has posted supplemental financial information on the third quarter results that it will reference during the conference call. The supplemental information can be found under Quarterly Results on the Company’s Investor Relations page. A live webcast 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 one hour following the conclusion of the live broadcast.

About LHC Group, Inc.
LHC Group, Inc. is a national provider of in-home healthcare services and innovations, providing quality, value-based healthcare to patients primarily within the comfort and privacy of their home or place of residence. LHC Group’s services cover a wide range of healthcare needs for patients and families dealing with illness, injury, or chronic conditions. The company’s 32,000 employees deliver home health, hospice, home and community based services, and facility-based care in 35 states and the District of Columbia – reaching 60 percent of the U.S. population aged 65 and older. LHC Group is the preferred in-home healthcare partner for 350 leading hospitals around the country. In 2019, the company was named to the inaugural Forbes list of “America’s Best-in-State Employers.”

Forward-looking Statements
This press release contains “forward-looking statements” (as defined in the Securities Litigation Reform Act of 1995) regarding, among other things, future events or the future financial performance of the Company, or anticipated benefits of the transaction. Words such as “anticipate,” “expect,” “project,” “intend,” “believe,” “will,” “estimates,” “may,” “could,” “should” and words and terms of similar substance used in connection with any discussion of future plans, actions or events identify forward-looking statements. Forward-looking statements contained in this press release include, but are not limited to: our 2019 revenue and earnings guidance, statements about the benefits of the acquisition, including anticipated earnings accretion, synergies and cost savings and the timing thereof; the Company’s plans, objectives, expectations, projections and intentions; and other statements relating to the transaction that are not historical facts. Forward-looking statements are based on information currently available to the Company and involve estimates, expectations and projections. Investors are cautioned that all such forward-looking statements are subject to risks and uncertainties, and important factors could cause actual events or results to differ materially from those indicated by such forward-looking statements. With respect to the acquisition, these risks, uncertainties and factors include, but are not limited to: the risk that the businesses will not be integrated successfully; the risk that the cost savings, synergies and growth from the transaction may not be fully realized or may take longer to realize than expected; the diversion of management time on integration-related issues; and the risk that costs associated with the integration of the businesses are higher than anticipated. With respect to the Company’s  businesses, these risks, uncertainties and factors include, but are not limited to: changes in, or failure to comply with, existing government regulations that impact the Company’s businesses; legislative proposals for healthcare reform; the impact of changes in future interpretations of fraud, anti-kickback, or other laws; changes in Medicare and Medicaid reimbursement levels; changes in laws and regulations with respect to Accountable Care Organizations; changes in the marketplace and regulatory environment for Health Risk Assessments; decrease in demand for the Company’s services; the potential impact of the transaction on relationships with customers, joint venture and other partners, competitors, management and other employees, including the loss of significant contracts or reduction in revenues associated with major payor sources; ability of customers to pay for services; risks related to any current or future litigation proceedings; potential audits and investigations by government and regulatory agencies, including the impact of any negative publicity or litigation; the ability to attract new customers and retain existing customers in the manner anticipated; the ability to hire and retain key personnel; increased competition from other entities offering similar services as offered by the  Company; reliance on and integration of information technology systems; ability to protect intellectual property rights; impact of security breaches, cyber-attacks or fraudulent activity on the Company’s reputation; the risks associated with assumptions the parties make in connection with the parties’ critical accounting estimates and legal proceedings; the risks associated with the Company’s expansion strategy, the successful integration of recent acquisitions, and if necessary, the ability to relocate or restructure current facilities; and the potential impact of an economic downturn or effects of tax assessments or tax positions taken, risks related to goodwill and other intangible asset impairment, tax adjustments, anticipated tax rates, benefit or retirement plan costs, or other regulatory compliance costs.

Many of these risks, uncertainties and assumptions are beyond the Company’s ability to control or predict. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Furthermore, forward-looking statements speak only as of the information currently available to the Company on the date they are made, and the Company does not undertake any obligation to update publicly or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this press release. The Company does not give any assurance (1) that the Company will achieve its guidance or expectations, or (2) concerning any result or the timing thereof. All subsequent written and oral forward-looking statements concerning the transaction or other matters and attributable to the Company or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above.


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

  September 30,
 2019
  December 31, 2018
ASSETS      
Current assets:      
Cash $ 29,302     $ 49,363  
Receivables:      
Patient accounts receivable 288,114     252,592  
Other receivables 11,205     6,658  
Amounts due from governmental entities 963     830  
Total receivables 300,282     260,080  
Prepaid income taxes 1,316     11,788  
Prepaid expenses 19,994     24,775  
Other current assets 22,140     20,899  
Total current assets 373,034     366,905  
Property, building and equipment, net of accumulated depreciation of $66,219 and $55,253, respectively 84,288     79,563  
Goodwill 1,216,227     1,161,717  
Intangible assets, net of accumulated amortization of $16,127 and $15,176, respectively 304,517     297,379  
Assets held for sale 2,500     2,850  
Operating lease right of use asset 95,427      
Other assets 21,871     20,301  
Total assets $ 2,097,864     $ 1,928,715  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable and other accrued liabilities $ 76,458     $ 77,135  
Salaries, wages, and benefits payable 105,582     84,254  
Self-insurance reserves 31,798     32,776  
Current operating lease liabilities 29,362      
Current portion of long-term debt     7,773  
Amounts due to governmental entities 1,249     4,174  
Total current liabilities 244,449     206,112  
Deferred income taxes 50,200     43,306  
Income taxes payable 3,582     4,297  
Revolving credit facility 232,000     235,000  
Long term notes payable     930  
Operating lease payable 70,109      
  Total liabilities 600,340     489,645  
Noncontrolling interest — redeemable 15,594     14,596  
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; 60,000,000 shares authorized; 35,857,938 and 35,636,414 shares issued in 2019 and 2018, respectively 359     356  
Treasury stock —  5,060,266 and 4,958,721 shares at cost, respectively (58,796 )   (49,374 )
Additional paid-in capital 945,575     937,968  
Retained earnings 501,898     427,975  
Total LHC Group, Inc. stockholders’ equity 1,389,036     1,316,925  
Noncontrolling interest — non-redeemable 92,894     107,549  
Total equity 1,481,930     1,424,474  
Total liabilities and equity $ 2,097,864     $ 1,928,715  


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

  Three Months Ended
September 30,
  Nine Months Ended
 September 30,
  2019   2018   2019   2018
Net service revenue $ 528,499     $ 507,043     $ 1,548,926     $ 1,300,121  
Cost of service revenue 334,768     322,196     981,620     831,818  
Gross margin 193,731     184,847     567,306     468,303  
General and administrative expenses 146,829     149,572     440,634     390,817  
Other intangible impairment charge 197     345     7,534     1,123  
Operating income 46,705     34,930     119,138     76,363  
Interest expense (2,596 )   (3,264 )   (8,533 )   (7,916 )
Income before income taxes and noncontrolling interest 44,109     31,666     110,605     68,447  
Income tax expense 9,508     6,685     22,665     14,832  
Net income 34,601     24,981     87,940     53,615  
Less net income attributable to noncontrolling interests 4,534     3,751     14,017     10,593  
Net income attributable to LHC Group, Inc.’s common stockholders $ 30,067     $ 21,230     $ 73,923     $ 43,022  
               
Earnings per share:              
Basic $ 0.97     $ 0.69     $ 2.39     $ 1.63  
Diluted $ 0.96     $ 0.68     $ 2.37     $ 1.61  
Weighted average shares outstanding:              
Basic 30,971     30,750     30,919     26,393  
Diluted 31,247     31,084     31,203     26,641  


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

  Nine Months Ended
 September 30,
  2019   2018
Operating activities:      
Net income $ 87,940     $ 53,615  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization expense 12,812     11,986  
Amortization of operating lease right of use asset 22,952      
Stock-based compensation expense 6,382     7,336  
Deferred income taxes 8,102     2,915  
Loss (gain) on disposal of assets 337     4  
  Impairment of intangibles and other 7,534     1,123  
Changes in operating assets and liabilities, net of acquisitions:      
Receivables (42,928 )   (5,693 )
Prepaid expenses and other assets 2,018     (7,489 )
Prepaid income taxes 8,258     9,710  
Accounts payable and accrued expenses (4,668 )   13,862  
Income taxes payable (715 )   (313 )
Net amounts due to/from governmental entities (3,234 )   (722 )
Net cash provided by operating activities 104,790     86,334  
Investing activities:      
Purchases of property, building and equipment (15,401 )   (18,889 )
Cash paid for acquisitions, net of cash acquired (54,120 )   9,070  
Net cash used in investing activities (69,521 )   (9,819 )
Financing activities:      
Proceeds from line of credit 84,000     292,084  
Payments on line of credit (87,000 )   (300,884 )
Proceeds from employee stock purchase plan 1,540     1,015  
Payments on debt (7,650 )   (196 )
  Payments on deferred financing fees     (1,881 )
Noncontrolling interest distributions (18,944 )   (8,720 )
Withholding taxes paid on stock-based compensation (9,422 )   (6,719 )
Purchase of additional controlling interest (18,763 )   (412 )
Exercise of options 153      
Sale of noncontrolling interest 756     3,322  
Net cash (used in) financing activities (55,330 )   (22,391 )
Change in cash (20,061 )   54,124  
Cash at beginning of period 49,363     2,849  
Cash at end of period $ 29,302     $ 56,973  
Supplemental disclosures of cash flow information:      
Interest paid $ 8,549     $ 6,127  
Income taxes paid $ 8,015     $ 2,929  

Non-cash operating activity: The Company recorded $115.2 million in operating lease right of use assets in exchange for lease obligations.

Non-cash financing activity:  The Company accrued $1.5 million for capital expenditures primarily related to the home office expansion project during the nine months ended September 30, 2019.


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

  Three Months Ended September 30, 2019
  Home health services   Hospice services   Home and community-based services   Facility-based services   HCI   Total
Net service revenue $ 375,599     $ 62,028     $ 53,411     $ 28,715     $ 8,746     $ 528,499  
Cost of service revenue 237,414     35,819     39,694     18,508     3,333     334,768  
General and administrative expenses 108,318     15,218     10,809     9,498     2,986     146,829  
Other intangible impairment charge 197                     197  
Operating income 29,670     10,991     2,908     709     2,427     46,705  
Interest expense (1,758 )   (310 )   (272 )   (174 )   (82 )   (2,596 )
Income before income taxes and noncontrolling interest 27,912     10,681     2,636     535     2,345     44,109  
Income tax expense 5,900     1,689     1,299     144     476     9,508  
Net income 22,012     8,992     1,337     391     1,869     34,601  
Less net income (loss) attributable to
noncontrolling interests
3,577     1,213     (180 )   (67 )   (9 )   4,534  
Net income attributable to LHC Group, Inc.'s common stockholder $ 18,435     $ 7,779     $ 1,517     $ 458     $ 1,878     $ 30,067  
Total assets $ 1,458,991     $ 235,865     $ 243,779     $ 88,905     $ 70,324     $ 2,097,864  


  Three Months Ended September 30, 2018
  Home health services   Hospice services   Home and community-based services   Facility-based services   HCI   Total
Net service revenue $ 360,000     $ 52,962     $ 52,773     $ 27,891     $ 13,417     $ 507,043  
Cost of service revenue 222,765     34,540     39,860     20,146     4,885     322,196  
General and administrative expenses 105,112     14,685     12,922     9,823     7,030     149,572  
Other intangible impairment charge 345                     345  
Operating income (loss) 31,778     3,737     (9 )   (2,078 )   1,502     34,930  
Interest expense (2,284 )   (491 )   (163 )   (163 )   (163 )   (3,264 )
Income (loss) before income taxes and noncontrolling interest 29,494     3,246     (172 )   (2,241 )   1,339     31,666  
Income tax expense (benefit) 6,209     774     (74 )   (541 )   317     6,685  
Net income (loss) 23,285     2,472     (98 )   (1,700 )   1,022     24,981  
Less net income (loss) attributable to noncontrolling interests 3,425     386     (87 )   27         3,751  
Net income (loss) attributable to LHC Group, Inc.'s common stockholders $ 19,860     $ 2,086     $ (11 )   $ (1,727 )   $ 1,022     $ 21,230  
Total assets $ 1,316,792     $ 203,921     $ 246,963     $ 61,089     $ 81,999     $ 1,910,764  

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

  Nine Months Ended September 30, 2019
  Home health services   Hospice services   Home and community-based services   Facility-based services   HCI   Total
Net service revenue $ 1,113,887     $ 168,821     $ 157,610     $ 84,391     $ 24,217     $ 1,548,926  
Cost of service revenue 694,082     103,853     119,054     53,812     10,819     981,620  
General and administrative expenses 322,115     45,167     33,004     28,010     12,338     440,634  
Other intangible impairment charge 7,263     271                 7,534  
Operating income 90,427     19,530     5,552     2,569     1,060     119,138  
Interest expense (5,919 )   (976 )   (857 )   (524 )   (257 )   (8,533 )
Income before income taxes and noncontrolling interest 84,508     18,554     4,695     2,045     803     110,605  
Income tax expense 17,178     3,716     1,279     297     195     22,665  
Net income 67,330     14,838     3,416     1,748     608     87,940  
Less net income (loss) attributable to
noncontrolling interests
11,305     2,712     (757 )   779     (22 )   14,017  
Net income attributable to LHC Group, Inc.'s common stockholder $ 56,025     $ 12,126     $ 4,173     $ 969     $ 630     $ 73,923  


  Nine Months Ended September 30, 2018
  Home health services   Hospice services   Home and community-based services   Facility-based services   HCI   Total
Net service revenue $ 924,463     $ 146,142     $ 119,617     $ 86,345     $ 23,554     $ 1,300,121  
Cost of service revenue 576,416     95,557     90,331     59,102     10,412     831,818  
General and administrative expenses 277,075     43,090     28,664     29,571     12,417     390,817  
Other intangible impairment charge 636             487         1,123  
Operating income 70,336     7,495     622     (2,815 )   725     76,363  
Interest expense (5,627 )   (1,181 )   (393 )   (395 )   (320 )   (7,916 )
Income (loss) before income taxes and noncontrolling interest 64,709     6,314     229     (3,210 )   405     68,447  
Income tax expense (benefit) 14,022     1,368     50     (695 )   87     14,832  
Net income (loss) 50,687     4,946     179     (2,515 )   318     53,615  
Less net income (loss) attributable to noncontrolling interests 9,472     1,215     (157 )   129     (66 )   10,593  
Net income (loss) attributable to LHC Group, Inc.'s common stockholders $ 41,215     $ 3,731     $ 336     $ (2,644 )   $ 384     $ 43,022  


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

    Three Months Ended
September 30,
  Nine Months Ended
September 30,
Key Data:   2019   2018   2019   2018
                 
Home Health Services:                
Locations   555     565     555     565  
Acquired   19     2     32     256  
De novo                
Divested/consolidated   (3 )   (5 )   (16 )   (10 )
Total new admissions   97,647     92,643     286,519     239,671  
Medicare new admissions   57,496     57,118     172,343     149,158  
Average daily census   76,905     75,479     76,573     76,080  
Average Medicare daily census   49,016     49,948     49,418     50,768  
Medicare completed and billed episodes   91,956     93,389     276,751     244,297  
Average Medicare case mix for completed and billed Medicare episodes   1.09     1.10     1.10     1.09  
Average reimbursement per completed and billed Medicare episodes   $ 3,070     $ 2,929     $ 3,060     $ 2,890  
Total visits   2,619,073     2,471,979     7,702,229     6,472,307  
Total Medicare visits   1,695,148     1,662,610     5,048,298     4,375,408  
Average visits per completed and billed Medicare episodes   18.4     17.8     18.2     17.9  
Organic growth excluding Almost Family (1)(2)                
Net revenue   7.9 %   9.3 %   7.2 %   9.1 %
Net Medicare revenue   4.1 %   4.6 %   3.5 %   4.8 %
Total new admissions   11.1 %   9.7 %   8.6 %   8.1 %
Medicare new admissions   5.4 %   4.6 %   2.5 %   4.8 %
Average daily census   7.2 %   2.9 %   5.1 %   2.9 %
Average Medicare daily census   2.6 %   (0.9 )%   0.0  %   (0.8 )%
Medicare completed and billed episodes   3.6 %   0.7 %   1.0 %   1.0 %
                 
Hospice Services:                
Locations   109     104     109     104  
Acquired   5     1     10     16  
De novo                
Divested/Consolidated       (3 )   (5 )   (3 )
Admissions   4,522     4,557     13,746     13,139  
Average daily census   4,187     3,763     4,002     3,525  
Patient days   385,164     346,153     1,093,039     962,839  
Average revenue per patient day   $ 152.47     $ 155.40     $ 153.74     $ 154.03  
Organic growth excluding Almost Family: (1)(2)                
Total new admissions   2.1 %   5.1 %   5.9 %   4.2 %
                 
Home and Community-Based Services:                
Locations (3)   105           105        
Average daily census   13,676     14,455     13,914     14,491  
Billable hours   2,276,984     2,295,450     6,841,598     5,002,064  
Revenue per billable hour   $ 23.97     $ 23.30     $ 23.62     $ 24.30  
                 
                 
                 
Facility-Based Services:                
Long-term Acute Care                
Locations   13     12     13     12  
Acquired   1         1      
Divested/Consolidated               (2 )
Patient days   18,918     21,617     58,524     65,480  
Average revenue per patient day   $ 1,377     $ 1,183     $ 1,310     $ 1,244  
Occupancy rate   66.3 %   75.8 %   69.2 %   73.5 %
  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.
  2. Almost Family locations remain counted as acquired locations due to continued system integrations, which are expected to be completed by the end of 2019.
     
  3. The number of locations for HCBS has been updated to not only include the physical standalone locations but also the locations that are part of a home health provider.


LHC GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF REVENUE AFTER ADOPTION OF ASU 2014-09
(Amounts in thousands)
(Unaudited)

    Three Months Ended
 September 30,
Nine Months Ended
 September 30,
    2019   2018   2019   2018
Revenue   $ 532,026     $ 514,118     $ 1,568,084     $ 1,319,840  
Less:  Implicit price concession (1)   3,527     7,075     19,158     19,719  
Net service revenue   $ 528,499     $ 507,043     $ 1,548,926     $ 1,300,121  

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

    Three Months Ended
 September 30,
Nine Months Ended
 September 30,
    2019   2018   2019   2018
Net income attributable to LHC Group, Inc.’s common stockholders   $ 30,067     $ 21,230     $ 73,923     $ 43,022  
Add (net of tax):                
  AFAM and other acquisition expenses (2)   8,482     7,118     20,463     19,289  
  Closures/relocations/consolidations (3)   941     2,335     4,722     4,799  
  Excess tax benefit  (4)       (1,200 )       (1,200 )
  Income tax effect of adjustments to income               689  
  Provider moratorium impairment (5)           4,332      
Adjusted net income attributable to LHC Group, Inc.’s common stockholders   $ 39,490     $ 29,483     $ 103,440     $ 66,599  

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

    Three Months Ended
 September 30,
Nine Months Ended
 September 30,
    2019   2018   2019   2018
Net income attributable to LHC Group, Inc.’s common stockholders   $ 0.96     $ 0.68     $ 2.37     $ 1.61  
Add (net of tax):                
  AFAM and other acquisition expenses (2)   0.27     0.23     0.66     0.72  
  Closures/relocations/consolidations (3)   0.03     0.08     0.15     0.18  
  Excess tax benefit  (4)       (0.04 )       (0.05 )
  Income tax effect of adjustments to income               0.03  
  Provider moratorium impairment (5)           0.14      
Adjusted net income attributable to LHC Group, Inc.’s common stockholders   $ 1.26     $ 0.95     $ 3.32     $ 2.49  
  1. Provision for bad debts are classified as implicit price concessions in determining the transaction price of the Company's net service revenue.
  2. Transition, integration and Homecare Homebase conversion expenses and other costs associated with the acquisition of Almost Family and other recently announced or completed acquisitions ($11.7 million pre-tax in the three months ended Sept 30, 2019 and $28.3 million in the nine months ended Sept 30, 2019).
  3. Expenses and impairments associated with the closure or consolidation of 3 locations in the third quarter of 2019 along with residual costs and expenses in connection with closures in prior periods ($1.3 million pre-tax in the three months ended Sept 30, 2019 and $6.5 million in the nine months ended Sept 30, 2019).
  4. Tax benefit due to the exercise of stock options related to the Almost Family acquisition.
  5. During the nine months ended September 30, 2019, the Company recorded $6.0 million of moratoria impairment as a result of the Centers for Medicare and Medicaid Services (“CMS”) action to remove all federal moratoria with regard to Medicare provider enrollment.

RECONCILIATION OF ADJUSTED EBITDA
(Amounts in thousands)

(Unaudited)

    Three Months Ended
 September 30,
Nine Months Ended
 September 30,
    2019   2018   2019   2018
Net income attributable to LHC Group, Inc.’s common stockholders   $ 30,067     $ 21,230     $ 73,923     $ 43,022  
Add:                
  Income tax expense   9,508     6,685     22,665     14,832  
  Interest expense, net   2,596     3,264     8,533     7,916  
  Depreciation and amortization   4,412     4,438     12,812     11,986  
  Adjustment items (6)   13,033     13,165     40,841     33,879  
Adjusted EBITDA   $ 59,616     $ 48,782     $ 158,774     $ 111,635  


(6) Adjustment items (pre-tax):                
  Almost Family merger and other acquisition expenses   11,731     9,914     28,305     27,114  
  Closures/relocation/consolidations   1,302     3,251     6,536     6,765  
  Provider moratorium impairment           6,000      
Total adjustments   $ 13,033     $ 13,165     $ 40,841     $ 33,879  

Contact: 
Eric Elliott

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



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