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 | % | ||||||||
- 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.
- Almost Family locations remain counted as acquired locations due to continued system integrations, which are expected to be completed by the end of 2019.
- 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 | ||||||||
- Provision for bad debts are classified as implicit price concessions in determining the transaction price of the Company's net service revenue.
- 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).
- 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).
- Tax benefit due to the exercise of stock options related to the Almost Family acquisition.
- 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