LHC Group Reports Third Quarter 2016 Earnings of $0.54 Per Diluted Share on Revenue of $230.8 Million

Produces Double-Digit Organic Home Health Admissions Growth of 10.5%

Company Raises Fiscal Year 2016 Guidance for Fully Diluted Earnings per Share
to a Range of $2.05 to $2.08 and Net Service Revenue to a Range of $910 million to $920 million

LAFAYETTE, La., Nov. 02, 2016 (GLOBE NEWSWIRE) -- LHC Group, Inc. (NASDAQ:LHCG) today announced its financial results for the three months and nine months ended September 30, 2016.

Financial Results for the Third Quarter of 2016 Compared with the Third Quarter of 2015

Net service revenue increased 13.1% to $230.8 million for the third quarter of 2016 compared with $204.1 million for the third quarter of 2015.
Net income attributable to LHC Group grew 8.7% to $9.6 million compared with $8.8 million, or 8.0% on a per diluted share basis to $0.54 from $0.50, which includes estimated Medicare reimbursement reductions for the third quarter of 2016 of $0.03 per diluted share.
Total comparable-quarter growth in admissions for all service lines for the third quarter was 15.3%.
Total comparable-quarter organic growth in home health admissions for the third quarter was 10.5%.

Commenting on the announcement, Keith G. Myers, LHC Group’s chairman and CEO, said, “LHC Group produced another solid quarter, highlighted by strong growth in total admissions and organic home health admissions. In addition to higher admission volume, our home health admissions continued to increase in acuity, driving a 4.8% increase in average Medicare reimbursement and contributing to 5.4% organic growth in home health net service revenue.

“We are also very pleased to have announced today, by separate news release, our new joint venture with LifePoint Health, one of the country’s leading providers of healthcare to non-urban communities. Combining the LifePoint Health transaction with all other transactions closed in the year-to-date, we have now eclipsed our $100 million acquisition annual revenue target, with approximately $106 million in acquired revenue.

“We expect the current upward trend in same store organic growth to continue as a result of increasing market awareness of our differentiating capabilities and quality scores, market consolidation, and the continued shift to value-based care. We also expect growth in hospital and health system joint ventures and freestanding acquisitions in certain markets to continue and look for 2017 to be another strong growth year overall for our company.

“In addition, with the October release of the CMS Star ratings, LHC Group continues to lead the home health industry in quality and patient satisfaction. With these quality ratings and LHC Group’s being the only national home health provider that is 100% accredited by the Joint Commission, we are clearly the leading partner of choice for hospitals and health systems that recognize the value in improving their patients’ non-acute care. LHC Group began partnering with hospitals in 1998, and with the inclusion of LifePoint, we are the trusted partner of 68 hospitals and health systems which includes 172 hospitals.

“LHC Group also remains well positioned to fund both new joint ventures and additional acquisitions from our robust pipeline of potential transactions. We had $16.5 million in cash at the end of the third quarter, $66.2 million of trailing 12 month’s cash flow from operations and $123.2 million of availability under our credit agreement.”

Mr. Myers concluded, “LHC Group’s record of success and significant prospects for continued profitable growth are a clear tribute to the compassionate and skilled healthcare professionals –and those who support them – who provide our patients quality care all day, every day. As has CMS through its Star ratings, we recognize and applaud their outstanding work and the commitment, skill and passion through which it is sustained.”

FY 2016 Guidance
LHC Group today raised its fiscal year 2016 guidance for fully diluted earnings per share to be in an expected range of $2.05 to $2.08, from the previous range of $1.90 to $2.00, and raised its fiscal year 2016 guidance for net service revenue to be in an expected range of $910 million to $920 million, from the previous range of range of $885 million to $900 million. This guidance includes:

⁽¹⁾the negative impact from the Medicare Home Health Prospective Payment System for 2016, which is expected to reduce 2016 Medicare Home Health revenue by approximately 1.5% to 2.0%, or $7.1 million to $9.5 million, and fully diluted earnings per share by $0.24 to $0.32;
⁽²⁾the negative impact from the Medicare Long-Term Care Hospital (LTCH) Prospective Payment System (PPS), which is expected to reduce 2016 Medicare LTCH revenue by 4.9%, or $3.6 million, and fully diluted earnings per share by a net $0.06 after implementation strategies;
⁽³⁾the negative impact from the reduction of 18 beds in one of the Company’s LTACs beginning June 1, 2016, which is expected to reduce 2016 LTCH revenue by $3.1 million and fully diluted earnings per share by a net $0.03 after implementation strategies;
⁽⁴⁾the negative impact on the fourth quarter of 2016 from the final Medicare Home Health Prospective Payment System for 2017, which is expected to reduce fourth quarter fully diluted earnings per share by approximately $0.03; and
⁽⁵⁾the positive impact from the 2017 Medicare Hospice Wage Index and Payment Rate final rule, effective October 1, 2016, which is expected to increase our Medicare Hospice revenue for the fourth quarter of 2016 by 2.1%, or $650,000, and fully diluted earnings per share by $0.02.

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, November 3, 2016, at 11:00 a.m. Eastern time to discuss its third 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, November 10, 2016, by dialing (855) 859‑2056 (international callers should call (404) 537-3406) and entering confirmation number 87126847. 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 September 30, 2016, LHC Group operated 289 home health services locations, 64 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)
		Sept. 30, 2016			Dec. 31, 2015
ASSETS
Current assets:
Cash	$	16,518		$	6,139
Receivables:
Patient accounts receivable, less allowance for uncollectible accounts of $29,258 and $26,712, respectively		119,491			110,350
Other receivables		2,261			2,093
Amounts due from governmental entities		964			1,081
Total receivables, net		122,716			113,524
Prepaid income taxes		4,124			1,949
Prepaid expenses		9,767			10,833
Other current assets		6,421			5,835
Receivable due from insurance carrier		—			550
Total current assets		159,546			138,830
Property, building and equipment, net of accumulated depreciation of $40,972 and $38,907, respectively		44,130			38,096
Goodwill		305,739			290,694
Intangible assets, net of accumulated amortization of $10,342 and $8,496, respectively		101,680			96,405
Other assets		2,358			2,029
Total assets	$	613,453		$	566,054

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and other accrued liabilities	$	28,511		$	24,586
Salaries, wages, and benefits payable		41,904			28,098
Self-insurance reserve		11,473			9,636
Current portion of long-term debt		249			241
Amounts due to governmental entities		4,895			7,055
Legal settlement payable		—			550
Total current liabilities		87,032			70,166
Deferred income taxes		30,601			23,729
Income tax payable		1,678			3,415
Revolving credit facility		92,000			98,000
Long-term debt, less current portion		379			543
Total liabilities		211,690			195,853
Noncontrolling interest — redeemable		12,668			12,408
Stockholders’ equity:
LHC Group, Inc. stockholders’ equity:
Common stock — $0.01 par value; 40,000,000 shares authorized; 22,419,523 and 22,224,423 shares issued in 2016 and 2015, respectively		224			222
Treasury stock — 4,826,872 and 4,776,560 shares at cost, respectively		(39,070	)		(37,139	)
Additional paid-in capital		118,689			113,793
Retained earnings		304,472			277,706
Total LHC Group, Inc. stockholders’ equity		384,315			354,582
Noncontrolling interest — non-redeemable		4,780			3,211
Total equity		389,095			357,793
Total liabilities and equity	$	613,453		$	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 September 30,					Nine Months Ended September 30,
		2016			2015			2016			2015

Net service revenue	$	230,797		$	204,122		$	679,380		$	597,373
Cost of service revenue		140,832			120,873			413,561			351,938
Gross margin		89,965			83,249			265,819			245,435
Provision for bad debts		3,275			4,809			11,658			14,873
General and administrative expenses		66,999			60,472			201,296			179,736
Loss on disposal of assets		142			276			1,389			680
Operating income		19,549			17,692			51,476			50,146
Interest expense		(816	)		(434	)		(2,167	)		(1,533	)
Income before income taxes and noncontrolling interest		18,733			17,258			49,309			48,613
Income tax expense		6,562			6,148			15,500			17,097
Net income		12,171			11,110			33,809			31,516
Less net income attributable to noncontrolling interests		2,555			2,265			7,043			6,916
Net income attributable to LHC Group, Inc.’s common stockholders	$	9,616		$	8,845		$	26,766		$	24,600

Earnings per share — basic:
Net income attributable to LHC Group, Inc.’s common stockholders	$	0.55		$	0.51		$	1.53		$	1.41

Earnings per share — diluted:
Net income attributable to LHC Group, Inc.’s common stockholders	$	0.54		$	0.50		$	1.52		$	1.40

Weighted average shares outstanding:
Basic		17,588,163			17,436,731			17,546,773			17,389,934
Diluted		17,719,473			17,610,953			17,664,284			17,526,687


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

	Nine Months Ended September 30,
		2016			2015

Operating activities:
Net income	$	33,809		$	31,516
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense		9,024			8,685
Provision for bad debts		11,658			14,873
Stock-based compensation expense		3,518			3,150
Deferred income taxes		6,062			1,125
Impairment of intangibles and other		—			248
Loss on disposal of assets		1,389			680
Changes in operating assets and liabilities, net of acquisitions:
Receivables		(21,175	)		(24,643	)
Prepaid expenses and other assets		450			(3,660	)
Prepaid income taxes		(2,482	)		779
Accounts payable and accrued expenses		17,633			19,071
Net amounts due to/from governmental entities		(2,043	)		(205	)
Net cash provided by operating activities		57,843			51,619

Investing activities:
Purchases of property, building and equipment		(14,576	)		(11,401	)
Cash paid for acquisitions, primarily goodwill and intangible assets		(20,332	)		(4,359	)
Other		273			—
Net cash used in investing activities		(34,635	)		(15,760	)

Financing activities:
Proceeds from line of credit		38,000			64,000
Payments on line of credit		(44,000	)		(32,000	)
Proceeds from employee stock purchase plan		663			569
Payments on debt		(156	)		(172	)
Noncontrolling interest distributions		(6,859	)		(6,372	)
Excess tax benefits from vesting of stock awards		1,293			897
Withholding taxes paid on stock-based compensation		(1,931	)		(1,449	)
Purchase of additional controlling interest		—			(275	)
Sale of noncontrolling interest		52			—
Proceeds from exercise of stock options		109			145
Net cash provided by (used in) financing activities		(12,829	)		25,343
Change in cash		10,379			61,202
Cash at beginning of period		6,139			531
Cash at end of period	$	16,518		$	61,733

Supplemental disclosures of cash flow information
Interest paid	$	2,329		$	1,227
Income taxes paid	$	11,390		$	14,242


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

	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

	Three Months Ended September 30, 2015
		Home- Health Services			Hospice Services			Community- Based Services			Facility- 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		47,451			5,364			2,084			5,573			60,472
Loss on disposal of assets		215			34			7			20			276
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 interests		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


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

	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 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

	Nine Months Ended September 30, 2015
		Home- Health Services			Hospice Services			Community- Based Services			Facility- 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		141,178			15,325			6,331			16,902			179,736
Loss on disposal of assets		518			72			45			45			680
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 interests		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


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

		Three Months Ended September 30,						Nine Months Ended September 30,
		2016			2015			2016			2015
Key Data:
*Home-Health Services:*
Home Health
Locations		289			275			289			275
Acquired		6			2			11			3
De novo		1			0			3			2
Divested/Consolidated		2			0			7			4
Total new admissions		40,657			35,772			118,730			106,948
Medicare new admissions		26,810			24,114			78,763			72,851
Average daily census		38,511			36,858			38,320			36,669
Average Medicare daily census		27,983			27,278			28,069			27,255
Medicare completed and billed episodes		49,230			48,063			148,195			142,572
Average Medicare case mix for completed and billed Medicare episodes		1.07			1.03			1.05			1.02
Average reimbursement per completed and billed Medicare episodes	$	2,724		$	2,600		$	2,670		$	2,562
Total visits		1,160,924			1,062,446			3,437,653			3,094,358
Total Medicare visits		856,177			787,220			2,526,405			2,302,492
Average visits per completed and billed Medicare episodes		17.4			16.4			17.0			16.1
Organic growth:⁽¹⁾
Net revenue		5.4	%		5.6	%		6.1	%		4.0	%
Net Medicare revenue		4.0	%		4.8	%		4.5	%		2.8	%
Total new admissions		10.5	%		2.9	%		8.8	%		4.0	%
Medicare new admissions		8.1	%		2.1	%		6.0	%		3.6	%
Average daily census		1.7	%		0.1	%		2.3	%		0.1	%
Average Medicare daily census		-0.1	%		-0.2	%		0.8	%		-0.4	%
Medicare completed and billed episodes		0.3	%		1.1	%		2.1	%		0.8	%

*Community-Based Services:*
Locations		11			13			11			13
Acquired		1			1			1			1
De novo		0			0			0			1
Divested/Consolidated		1			0			3			1
Average daily census		1,672			1,339			1,631			1,323
Billable hours		354,998			308,477			990,129			906,089
Revenue per billable hour	$	33.22		$	34.45		$	33.15		$	33.90

*Hospice-Based Services:*
Locations		64			39			64			39
Acquired		2			1			9			1
De novo		0			2			0			2
Divested/Consolidated		1			0			2			1
Admissions		2,554			1,584			7,540			4,562
Average daily census		2,736			1,528			2,593			1,444
Patient days		251,753			140,592			710,415			394,336
Average revenue per patient day	$	140		$	137		$	141		$	139

*Facility-Based Services:*
Long-term Acute Care
Locations		8			8			8			8
Patient days		13,499			15,422			42,965			46,977
Average revenue per patient day	$	1,113		$	1,175		$	1,189		$	1,163

⁽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 Reports Third Quarter 2016 Earnings of $0.54 Per Diluted Share on Revenue of $230.8 Million

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