LHC Group Announces Earnings Per Diluted Share of $0.44 for First Quarter 2016, Up 12.8% From First Quarter 2015

Affirms Established Financial Guidance for Fiscal 2016

LAFAYETTE, La., May 04, 2016 (GLOBE NEWSWIRE) -- LHC Group, Inc. (NASDAQ:LHCG) today announced its financial results for the three months ended March 31, 2016.

Financial Results for the First Quarter

Net service revenue increased 15.3% to $222.6 million for the first quarter of 2016 compared with $193.1 million for the first quarter of 2015.
Net income attributable to LHC Group for the first quarter of 2016 grew 12.9% to $7.7 million compared with $6.8 million for the same period in 2015.
Net income attributable to LHC Group per diluted share increased 12.8% to $0.44 for the first quarter of 2016 from $0.39 for the first quarter last year.
Total comparable-quarter growth in admissions for all service lines was 10.7%.
Total comparable-quarter organic growth in home health admissions was 7.2%.

“We are pleased with our financial results for the first quarter of 2016, which included the impact of previously discussed Medicare reimbursement changes that we estimate reduced revenue by $1.5 million for the quarter and earnings per diluted share by $0.05,” remarked Keith G. Myers, LHC Group’s chairman and CEO. “We attribute the 15.3% increase in net service revenue primarily to a relatively balanced contribution from organic revenue growth and acquisitions.”

Organic revenue for home health services increased 8.1% for the quarter from the first quarter of 2015. This growth was primarily driven by a 7.2% increase in total new admissions for the quarter, as well as improved reimbursement reflecting increased acuity in the Company’s case mix. Net service revenue also benefited from a full quarter of operations for the seven acquisitions completed in 2015. For the first quarter of 2016, LHC Group acquired two home health locations and opened a de novo location. The Company also acquired six hospice locations, four of which were acquired in the purchase of Heartlite Hospice in March 2016.

With revenue growth generating additional operating leverage, combined with continuous cost control efforts, LHC Group achieved a 90 basis-point improvement in general and administrative expenses as a percent of revenue to 29.8% for the first quarter of 2016 compared with the first quarter last year. For the quarter, this improvement was more than offset by a 160 basis-point reduction in gross margin, primarily due to higher expenses related to acquisition integration and to the increased costs of providing care for a higher-acuity case mix.

Mr. Myers added, “Looking forward, we expect increased admission volume and patient acuity to have a further positive net impact on our organic growth rate, as payors and health systems shift patients in need of non-acute care from more intensive and expensive clinical settings. Consistent with this expectation, we were pleased to announce our 66^th joint venture with hospitals and health systems in early April. Our new joint venture is with Northern Arizona Healthcare (NAH), the largest healthcare organization in a region encompassing more than 700,000 people. NAH has more than 3,000 doctors and staff providing comprehensive healthcare services through a variety of venues anchored by two major medical centers in Flagstaff and Verde Valley. Through the joint venture, we are operating, and have become the majority owner of, NAH’s two home health agencies and one hospice agency. In addition to providing us our first partnership in Arizona and the Southwest, this latest joint venture further validates our ongoing work to be a leading partner of choice for health systems and payors as they seek to improve their patients’ non-acute care.

“We also expect to continue executing on our robust corporate development pipeline, which produced five transactions in the first quarter – two acquisitions and three joint ventures – that include service lines producing an aggregate of $15.4 million in trailing 12 months revenue. With LHC Group’s trailing 12 months cash flow from operations of over $50 million at March 31, 2016, and current availability under our credit agreement of $123.2 million, we remain confident of funding our growth plans for 2016.”

Mr. Myers concluded, “We recognize and thank our team for their hard and selfless work to provide high quality care to our patients. Their commitment and the results they produce fundamentally support our continued belief that LHG Group is well positioned to leverage attractive market dynamics through our proven organic growth and acquisition strategies. We are confident that strong execution of these strategies will drive further long-term profitable growth and increased shareholder value.”

FY 2016 Guidance
LHC Group today affirmed its fiscal year 2016 guidance for net service revenue to be in an expected range of $870 million to $890 million, and fully diluted earnings per share to be in an expected range of $1.90 to $2.00. This guidance includes:

⁽¹⁾the negative impact from the Medicare Home Health Prospective Payment System for 2016, which is expected to have an approximate 2% impact, or $9.5 million reduction to Medicare Home Health revenue and $0.32 reduction in fully diluted earnings per share for 2016; and
⁽²⁾the negative impact from the Medicare Long-Term Care Hospital (LTCH) Prospective Payment System (PPS), which establishes two different types of LTCH PPS payment rates depending on whether the patient meets certain clinical criteria: the LTCH PPS standard Federal payment rate and a new LTCH PPS site neutral payment rate comparable to the IPPS payment rates. The effect from the LTCH PPS is a 4.9% impact, or an expected $3.6 million reduction to Medicare LTCH revenue or $0.06 net reduction in fully diluted earnings per share for 2016 after implementation strategies.

The Company’s financial guidance does not take into account the impact of other future reimbursement changes, if any, future acquisitions, if made, de novo locations, if opened, or future legal expenses, if necessary.

Conference Call
LHC Group will host a conference call on Thursday, May 5, 2016, at 11:00 a.m. Eastern time to discuss its first quarter 2016 results. The toll-free number to call for this interactive teleconference is (866) 393‑1608 (international callers should call (973) 890-8327). A telephonic replay of the conference call will be available through midnight on Thursday, May 12, 2016, by dialing (855) 859‑2056 (international callers should call (404) 537-3406) and entering confirmation number 83060861. 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 long-term acute care hospitals (LTACHs). At March 31, 2016, LHC Group operated 284 home health services locations, 61 hospice locations, 11 community-based service locations and six 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, 2015, filed with the Securities and Exchange Commission. LHC Group undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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

	March 31, 2016			Dec. 31, 2015
ASSETS
Current assets:
Cash	$	5,593		$	6,139
Receivables:
Patient accounts receivable, less allowance for uncollectible accounts of $28,617 and $26,712, respectively		117,761			110,350
Other receivables		2,507			2,093
Amounts due from governmental entities		964			1,081
Total receivables, net		121,232			113,524
Prepaid income taxes		1,575			1,949
Prepaid expenses		10,519			10,833
Other current assets		6,265			5,835
Receivable due from insurance carrier		–			550
Total current assets		145,184			138,830
Property, building and equipment, net of accumulated depreciation of $41,017 and $38,907, respectively		38,191			38,096
Goodwill		296,240			290,694
Intangible assets, net of accumulated amortization of $9,097 and $8,496, respectively		100,863			96,405
Other assets		2,375			2,029
Total assets	$	582,853		$	566,054

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued liabilities	$	24,912		$	24,586
Salaries, wages and benefits payable		39,506			28,098
Self-insurance reserve		11,109			9,636
Current portion of long-term debt		243			241
Amounts due to governmental entities		4,729			7,055
Legal settlement payable		–			550
Total current liabilities		80,499			70,166
Deferred income taxes		23,605			23,729
Income tax payable		3,415			3,415
Revolving credit facility		96,000			98,000
Long-term debt, less current portion		485			543
Total liabilities		204,004			195,853
Noncontrolling interest – redeemable		12,463			12,408
Stockholders’ equity:
Common stock – $0.01 par value: 40,000,000 shares authorized; 22,370,384 and 22,224,423 shares issued in 2016 and 2015, respectively		224			222
Treasury stock – 4,814,522 and 4,776,560 shares at cost, respectively		(38,560	)		(37,139	)
Additional paid-in capital		115,654			113,793
Retained earnings		285,392			277,706
Total LHC Group, Inc. stockholders’ equity		362,710			354,582
Noncontrolling interest – non-redeemable		3,676			3,211
Total stockholders’ equity		366,386			357,793
Total liabilities and stockholders’ equity	$	582,853		$	566,054

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

	Three Months Ended March 31,
		2016			2015
Net service revenue	$	222,552		$	193,079
Cost of service revenue		135,601			114,426
Gross margin		86,951			78,653
Provision for bad debts		4,601			5,259
General and administrative expenses		66,240			59,298
Operating income		16,110			14,096
Interest expense		(885	)		(545	)
Income before income taxes and noncontrolling interest		15,225			13,551
Income tax expense		5,342			4,729
Net income		9,883			8,822
Less net income attributable to noncontrolling interests		2,197			2,017
Net income attributable to LHC Group, Inc.’s common stockholders	$	7,686		$	6,805

Earnings per share – basic and diluted:
Net income attributable to LHC Group, Inc.’s common stockholders	$	0.44		$	0.39

Weighted average shares outstanding:
Basic		17,485,766			17,322,791
Diluted		17,633,549			17,489,483

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

	Three Months Ended March 31,
		2016			2015
Operating activities
Net income	$	9,883		$	8,822
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		2,948			2,716
Provision for bad debts		4,601			5,259
Stock-based compensation expense		982			991
Deferred income taxes		(124	)		(183	)
Impairment of intangibles and other		–			79
Loss on disposal of assets		204			284
Changes in operating assets and liabilities, net of acquisitions:
Receivables		(12,446	)		(7,026	)
Prepaid expenses and other assets		(162	)		(2,549	)
Prepaid income taxes		374			2,478
Accounts payable and accrued expenses		13,110			10,624
Net amounts due to/from governmental entities		(2,209	)		1,109
Net cash provided by operating activities		17,161			22,604

Investing activities
Purchases of property, building and equipment		(2,622	)		(2,958	)
Cash paid for acquisitions, primarily goodwill and intangible assets		(10,577	)		(567	)
Other		273			–
Net cash used in investing activities		(12,926	)		(3,525	)

Financing activities
Proceeds from line of credit		4,000			-
Payments on line of credit		(6,000	)		(13,000	)
Proceeds from employee stock purchase plan		230			210
Payments on debt		(56	)		(57	)
Noncontrolling interest distributions		(2,185	)		(2,242	)
Excess tax benefits from vesting of stock awards		651			642
Withholding taxes paid on stock-based compensation		(1,421	)		(1,122	)
Net cash used in financing activities		(4,781	)		(15,569	)
Change in cash		(546	)		3,510
Cash at beginning of period		6,139			531
Cash at end of period	$	5,593		$	4,041

Supplemental disclosures of cash flow information
Interest paid	$	749		$	447
Income taxes paid	$	4,466		$	1,787

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

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

	Three Months Ended March 31, 2015
	Home Health Services			Hospice Services			Community- Based Services			Facility- Based Services			Total
Net service revenue	$	146,592		$	16,851		$	9,773		$	19,863		$	193,079
Cost of service revenue		85,546			10,099			6,900			11,881			114,426
Provision for bad debts		4,476			347			180			256			5,259
General and administrative expenses		46,454			4,888			2,217			5,739			59,298
Operating income		10,116			1,517			476			1,987			14,096
Interest expense		(430	)		(60	)		(6	)		(49	)		(545	)
Income before income taxes and noncontrolling interest		9,686			1,457			470			1,938			13,551
Income tax expense		3,657			620			45			407			4,729
Net income		6,029			837			425			1,531			8,822
Less net income attributable to noncontrolling interests		1,521			246			(20	)		270			2,017
Net income attributable to LHC Group, Inc.’s common stockholders	$	4,508		$	591		$	445		$	1,261		$	6,805
Total assets	$	385,653		$	34,019		$	32,971		$	38,321		$	490,964

LHC GROUP, INC. AND SUBSIDIARIES
SELECT CONSOLIDATED KEY STATISTICAL AND FINANCIAL DATA
(Unaudited)
	Three Months Ended March 31,
		2016			2015
Key Data:
*Home-Health Services:*
Home Health
Locations		284			272
Acquired		2			1
De novo		1			2
Divested/Consolidated		2			3
Total new admissions		39,124			35,965
Medicare new admissions		26,136			24,875
Average daily census		38,218			36,450
Average Medicare daily census		28,246			27,235
Medicare completed and billed episodes		48,486			46,684
Average Medicare case mix for completed and billed Medicare episodes		1.03			0.97
Average reimbursement per completed and billed Medicare episodes	$	2,551		$	2,463
Total visits		1,126,834			990,135
Total Medicare visits		829,267			741,850
Average visits per completed and billed Medicare episodes		17.1			15.9
Organic growth:⁽¹⁾
Net revenue		8.1	%		4.5	%
Net Medicare revenue		5.3	%		2.9	%
Total new admissions		7.2	%		6.2	%
Medicare new admissions		3.3	%		6.5	%
Average daily census		2.8	%		0.8	%
Average Medicare daily census		1.4	%		(0.5	)%
Medicare completed and billed episodes		1.9	%		0.3	%

*Community-Based Services:*
Locations		11			14
Acquired		0			1
De novo		0			0
Divested/Consolidated		2			0
Average daily census		1,372			1,262
Billable hours		304,487			294,016
Revenue per billable hour	$	34.30		$	33.24

*Hospice-Based Services:*
Locations		61			38
Acquired		6			0
De novo		0			0
Divested/Consolidated		1			0
Admissions		2,463			1,481
Average daily census		2,425			1,357
Patient days		220,694			122,179
Average revenue per patient day	$	140		$	138

*Facility-Based Services:*
Long-term Acute Care
Locations		8			8
Patient days		15,537			16,162
Average revenue per patient day	$	1,211		$	1,187

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

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LHC Group Announces Earnings Per Diluted Share of $0.44 for First Quarter 2016, Up 12.8% From First Quarter 2015

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