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Section 1: 8-K (FORM 8-K)

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________

Form 8-K
_____________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event Reported): February 27, 2019  

LHC GROUP, INC.
(Exact Name of Registrant as Specified in Charter)

Delaware001-3398971-0918189
(State or Other Jurisdiction of Incorporation)(Commission File Number)(I.R.S. Employer Identification Number)

 

901 Hugh Wallis Road South, Lafayette, LA 70508
(Address of Principal Executive Offices) (Zip Code)

(337) 233-1307
(Registrant's telephone number, including area code)


(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 [   ]  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 [   ]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 [   ]  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 [   ]  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2). Emerging growth company [   ]

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [   ]

 
 

Item 2.02. Results of Operations and Financial Condition.

On February 27, 2019, the Company issued a press release announcing its financial results for the quarter and year ended December 31, 2018.  A copy of the press release is furnished with this Current Report on Form 8-K as Exhibit 99.1 and is incorporated herein by reference.

The information furnished pursuant to Item 2.02 and Exhibit 99.1 of this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date of this Current Report, regardless of any general incorporation language in the filing, except as shall be expressly set forth by specific reference in such filing.

Item 9.01. Financial Statements and Exhibits.

(d)       Exhibits

The following exhibit is furnished with this Current Report on Form 8-K:

EXHIBIT NO.         DESCRIPTION
   
99.1 Press Release, dated February 27, 2019, announcing the Company’s financial results for the quarter and year ended December 31, 2018.
99.2 Fourth Quarter 2018 Supplemental Financial Information

 


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 LHC GROUP, INC.
   
  
Date: February 27, 2019By: /s/ JOSHUA L. PROFFITT        
  Joshua L. Proffitt
  Chief Financial Officer
  

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Section 2: EX-99.1 (PRESS RELEASE)

EdgarFiling

EXHIBIT 99.1

LHC Group Announces Fourth Quarter 2018 Financial Results

2019 Guidance Highlights Strong Earnings Accretion from Almost Family Acquisition and Contributions from Joint Ventures

LAFAYETTE, La., Feb. 27, 2019 (GLOBE NEWSWIRE) -- LHC Group, Inc. (NASDAQ: LHCG) announced its financial results for the quarter and year ended December 31, 2018. Unless otherwise noted, all results for the fourth quarter and year ended December 31, 2018 are compared with the fourth quarter and year ended December 31, 2017.

Fourth Quarter of 2018 Financial Results – Strong Finish to the Year as Expected

Full Year 2018 Financial Results – Reaches Top End of Adjusted EPS Guidance with 14.5% Accretion from Almost Family Acquisition

(1) See “Reconciliation of Non-GAAP Measures – Adjusted net income attributable to LHC Group” to GAAP results on page 12.

Operational and Strategic Highlights

Commenting on the results, Keith G. Myers, LHC Group’s Chairman and Chief Executive Officer, said, “As it stands today, we are six months ahead of schedule of our integration of the Almost Family acquisition. We have been able to maintain an aggressive growth posture through the integration as evidenced by the incremental growth in our partnership with LifePoint, the joint venture transaction with Unity Health and the recently announced larger scale joint venture with Geisinger.”

“The growth potential that exists within all of our service lines led to strong growth in 2018,” added Mr. Myers. “When we combine this potential with a national in-home healthcare platform licensed to serve over 60 percent of the age 65+ population in the U.S. and a proven operational model, we expect that momentum to continue. The Home Care industry has made a dramatic transformation over the past decade. We are delivering measurable value through generating equal or superior outcomes and patient satisfaction to those we serve in the comfort and privacy of their homes where they want to be, at a fraction of the cost of care provided in more costly institutional settings.”

Joint Venture Strategy – Accelerating Momentum after Record Year in 2018
On December 10, 2018, LHC Group expanded its existing partnership with LifePoint Health with the finalization of two transactions to acquire ownership of home health service providers in Hickory, N.C. and Danville, Va. These acquisitions represented annualized revenue of approximately $6.3 million. Since forming the original partnership with LifePoint Health in January 2017, the joint venture has grown to include 33 home health locations, 14 hospice locations and one home and community based services location.

On January 31, 2019, LHC Group and Unity Health finalized an equity partnership agreement to purchase and share ownership of two home health providers in Arkansas: Unity Health – White County Medical Center Home Health in Searcy and Unity Health – Harris Medical Center Home Health in Newport. These agencies, which serve their local communities and the Northeast Arkansas region, represent annualized revenue of approximately $4.0 million.

On February 26, 2019, LHC Group and Geisinger Home Health and Hospice, and AtlantiCare Home Health and Hospice entered into a definitive agreement for a joint venture partnership to enhance home health and hospice services at Geisinger locations in Pennsylvania and at AtlantiCare – A Member of Geisinger in Atlantic County, New Jersey. The joint venture is expected to be completed by April 1 for the Pennsylvania locations, and by June 1 for New Jersey, subject to customary closing conditions, at which time LHC Group will purchase majority ownership of Geisinger’s home health and hospice services and assume management responsibility. LHC Group expects annualized revenue from this joint venture of approximately $35.0 million and that it will not materially affect its 2019 diluted earnings per share.

Full Year 2019 Guidance – 18.3% Adjusted Earnings Growth at the Midpoint is Expected to be Fueled by Strong Organic Growth and Recent Acquisition Accretion
Full year 2019 net service revenue is expected to be in a range of $2.08 billion to $2.13 billion, adjusted earnings per diluted share is expected to be in a range of $4.15 to $4.25, and Adjusted EBITDA, less non-controlling interest, is expected to be in a range of $212 million to $218 million. The guidance assumes the following:

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, “2018 was a solid year for LHC Group and one in which we had continued strong organic growth along with achieving 14.5% accretion from our acquisition of Almost Family. Our outlook for 2019 is predicated on continuing to generate strong organic growth in both the legacy LHC Group and acquired locations and higher contribution margins from $1.03 billion of acquisitions completed in the past three years. With a robust M&A pipeline, strong free cash flow and low leverage, we are well positioned for continued growth through acquisitions and joint ventures.”

Conference Call
LHC Group will host a conference call on Thursday, February 28, 2019, at 9:00 a.m. Eastern time to discuss its fourth quarter 2018 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 March 8, 2019, by dialing (855) 859‑2056 (international callers: (404) 537-3406) and entering confirmation number 5070228. The Company posted supplemental financial information on the fourth quarter and 2018 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 36 states – reaching 60 percent of the U.S. population aged 65 and older. LHC Group is the preferred in-home healthcare partner for 340 leading hospitals around the country.

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)

 December 31, 
2018
 December 31,
2017
    
ASSETS   
Current assets:   
Cash$49,363  $2,849 
Receivables:   
Patient accounts receivable252,592  161,898 
Other receivables6,658  3,163 
Amounts due from governmental entities830  830 
Total receivables260,080  165,891 
Prepaid income taxes11,788  7,006 
Prepaid expenses24,775  13,042 
Other current assets20,899  12,177 
Total current assets366,905  200,965 
Property, building and equipment, net of accumulated depreciation of $55,253 and $43,565, respectively79,563  46,453 
Goodwill1,161,717  392,601 
Intangible assets, net of accumulated amortization of $15,176 and $13,041, respectively297,379  134,610 
Assets held for sale2,850   
Other assets20,301  19,073 
Total assets$1,928,715  $793,702 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable and other accrued liabilities$77,135  $39,750 
Salaries, wages, and benefits payable84,254  44,747 
Self-insurance reserve32,776  12,450 
Current portion of long-term debt7,773  286 
Amounts due to governmental entities4,174  5,019 
Total current liabilities206,112  102,252 
Deferred income taxes43,306  27,466 
Income taxes payable4,297   
Revolving credit facility235,000  144,000 
Long term notes payable930   
Total liabilities489,645  273,718 
Noncontrolling interest — redeemable14,596  13,393 
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 and 40,000,000 shares authorized in 2018 and 2017, respectively; 35,636,414 and 22,640,046 shares issued in 2018 and 2017, respectively356  226 
Treasury stock —  4,958,721 and 4,890,504 shares at cost, respectively(49,374) (42,249)
Additional paid-in capital937,968  126,490 
Retained earnings427,975  364,401 
Total LHC Group, Inc. stockholders’ equity1,316,925  448,868 
Noncontrolling interest — non-redeemable107,549  57,723 
Total equity1,424,474  506,591 
Total liabilities and equity$1,928,715  $793,702 
        


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

 (Unaudited)  
 Three Months Ended
 December 31,
 Twelve Months Ended
December 31,
 2018 2017 2018(1) 2017
Net service revenue$509,841  $291,140  $1,809,963  $1,062,602 
Cost of service revenue324,539  187,426  1,156,357  675,810 
Gross margin185,302  103,714  653,606  386,792 
General and administrative expenses145,609  89,108  537,916  310,539 
Impairment of intangibles and other3,562  1,513  4,689  1,571 
Operating income36,131  13,093  111,001  74,682 
Interest expense(3,255) (1,170) (9,679) (3,352)
Income before income taxes and noncontrolling interest32,876  11,923  101,322  71,330 
Income tax expense7,568  (9,466) 22,399  10,944 
Net income25,308  21,389  78,923  60,386 
Less net income attributable to noncontrolling interests4,756  2,954  15,349  10,274 
Net income attributable to LHC Group, Inc.’s common stockholders$20,552  $18,435  $63,574  $50,112 
Earnings per share attributable to LHC Group, Inc.'s common stockholders:       
Basic$0.67  $1.04  $2.31  $2.83 
Diluted$0.66  $1.02  $2.29  $2.79 
Weighted average shares outstanding:       
Basic30,777,556  17,749,872  27,498,351  17,715,992 
Diluted31,142,061  18,043,297  27,773,396  17,961,018 



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

 Twelve Months Ended
December 31,
 2018 2017
Operating activities:   
Net income$78,923  $60,386 
Adjustments to reconcile net income to net cash provided by operating activities:     
Depreciation and amortization expense16,362  13,422 
Stock-based compensation expense9,358  5,964 
Deferred income taxes19,453  (4,475)
Loss on disposal of assets319  60 
Impairment of intangibles and other4,370  1,511 
Changes in operating assets and liabilities, net of acquisitions:     
Receivables(362) (26,906)
Prepaid expenses and other assets(10,257) (26,973)
Prepaid income taxes(2,519) (7,006)
Accounts payable and accrued expenses(6,577) 19,666 
Income tax payable511  (3,499)
Net amounts due to/from governmental entities(996) 176 
Net cash provided by operating activities108,585  32,326 
Investing activities:     
Purchases of property, building and equipment(32,993) (10,176)
Cash acquired from business combination, net of cash paid7,702  (64,598)
Net cash used in investing activities(25,291) (74,774)
Financing activities:     
Proceeds from line of credit303,943  96,000 
Payments on line of credit(319,743) (39,000)
Proceeds from employee stock purchase plan1,342  1,026 
Payments on debt(4,975) (260)
Payments on deferred financing fees(1,884)  
Noncontrolling interest distributions(12,134) (11,382)
Withholding taxes paid on stock-based compensation(7,125) (3,114)
Purchase of additional controlling interest(412) (1,488)
Sale of noncontrolling interest4,208  251 
Net cash (used in) provided by financing activities(36,780) 42,033 
Change in cash46,514  (415)
Cash at beginning of period2,849  3,264 
Cash at end of period$49,363  $2,849 
Supplemental disclosures of cash flow information:       
Interest paid$9,067  $3,853 
Income taxes paid$5,703  $25,199 


Non-cash financing and investing activity:       
Accrued capital expenditures$3,449  $ 
Consideration transferred for a business combination$795,412  $ 
Income taxes paid$7,705  $ 


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

 Three Months Ended December 31, 2018
 Home
health
services
 Hospice
services
 Home and
CBS
 Facility-
based
services
 HCI Total
Net service revenue$367,107 $52,976 $  52,885 $27,439 $9,434 $509,841
Cost of service revenue225,999 35,435  40,329 17,797 4,979 324,539
Gross margin141,108 17,541  12,556 9,642 4,455 185,302
General and administrative expenses100,358 17,798  11,407 9,903 6,143 145,609
Impairment of intangibles and other1,073 162  (10) 200 2,137 3,562
Operating income (loss)39,677 (419)  1,159 (461) (3,825) 36,131
Interest expense(2,427) (415)  (82) (181) (150) (3,255)
Income (loss) before income taxes and noncontrolling interest37,250 (834)  1,077 (642) (3,975) 32,876
Income tax expense (benefit)8,688 (141)  370 (439) (910) 7,568
Net income (loss)28,562 (693)  707 (203) (3,065) 25,308
Less net income (loss) attributable to noncontrolling interests3,873 548  (119) 461 (7) 4,756
Net income (loss) attributable to LHC Group, Inc.’s common stockholders$24,689 $(1,241) $826 $(664) $(3,058) $20,552
Total assets$1,336,537 $209,680 $236,523 $70,261 $75,714 $1,928,715
                   
 Three Months Ended December 31, 2017
 Home
health
services
 Hospice
services
 Home and
CBS
 Facility-
based
services
 HCI Total
Net service revenue$208,199 $42,431 $12,756 $27,754 $ $291,140
Cost of service revenue129,283 28,782  10,339 19,022  187,426
Gross margin78,916 13,649  2,417 8,732  103,714
General and administrative expenses63,854 13,061  2,984 9,209  89,108
Impairment of intangibles and other1,493 1   19  1,513
Operating income (loss)13,569 587  (567) (496)  13,093
Interest expense(925) (169)  (62) (14)  (1,170)
Income (loss) before income taxes and noncontrolling interest12,644 418  (629) (510)  11,923
Income tax expense (benefit)(7,204) (1,382)  (446) (434)  (9,466)
Net income19,848 1,800  (183) (76)  21,389
Less net income (loss) attributable to noncontrolling interests3,049 210  (104) (201)  2,954
Net income (loss) attributable to LHC Group, Inc.’s common stockholders$16,799 $1,590 $(79) $125 $ $18,435
Total assets$534,385 $155,230 $48,216 $55,871 $ $793,702
                  


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

 Twelve Months Ended
 December 31, 2018
 Home
health
services
 Hospice
services
 Home and
CBS
 Facility-
based
services
 HCI Total
Net service revenue$1,291,457   $199,118   $172,501   $113,784   $33,103   $1,809,963  
Cost of service revenue802,006   130,991    130,660   76,899   15,801   1,156,357  
Gross margin489,451   68,127    41,841   36,885   17,302   653,606  
General and administrative expenses378,124   60,933    40,467   39,638   18,754   537,916  
Impairment of intangibles and other1,816   186    (6)  554   2,139   4,689  
Operating income (loss)109,511   7,008    1,380   (3,307)  (3,591)  111,001  
Interest expense(7,060)  (1,529)   (76)  (545)  (469)  (9,679) 
Income (loss) before income taxes and noncontrolling interest102,451   5,479    1,304   (3,852)  (4,060)  101,322  
Income tax expense (benefit)22,711   1,227    420   (1,136)  (823)  22,399  
Net income (loss)79,740   4,252    884   (2,716)  (3,237)  78,923  
Less net income (loss) attributable to noncontrolling interests 13,361    1,764      (275 )    589    (90)   15,349  
Net income (loss) attributable to LHC Group, Inc.’s common stockholders$66,379   $2,488   $1,159   $(3,305)  $(3,147)  $63,574  
                              


 Twelve Months Ended
 December 31, 2017

 Home
health
services

 Hospice
services

 Home and
CBS

 Facility-
based
services

 HCI Total
Net service revenue$777,583  $157,287  $  46,159  $81,573  $ $1,062,602 
Cost of service revenue 482,179   103,969   35,244   54,418     675,810 
Cost of service revenue 295,404   53,318   10,915   27,155     386,792 
General and administrative expenses 229,264   45,516   9,946   25,813     310,539 
Impairment of intangibles and other 1,612   22      (63)    1,571 
Operating income 64,528   7,780   969   1,405     74,682 
Interest expense (2,546)  (511)  (191)  (104)    (3.352)
Income before income taxes and noncontrolling interest 61,982   7,269   778   1,301     71,330 
Income tax expense 9,509   1,057   156   222     10,944 
Net income 52,473   6,212   622   1,079     60,386 
Less net income (loss) attributable to noncontrolling interests 9,102   1,248     (111)   35     10,274 
Net income attributable to LHC Group, Inc.’s common stockholders$43,371  $4,964  $733  $1,044  $ $50,112 
                       



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

  Three Months Ended   Twelve Months Ended 
  December 31,
   December 31,
 
  2018   2017   2018   2017 
Key Data:
               
Home-Health Services:               
Locations 543   315   543   315 
Acquired 4   1   260   43 
De novo    1      3 
Divested/Consolidated (18)  (9)  (38)  (12)
Total new admissions 92,168   49,668   331,839   192,116 
Medicare new admissions 56,919   30,745   206,077   120,177 
Average daily census 75,869   44,362   75,946   43,107 
Average Medicare daily census 49,858   29,925   50,491   29,514 
Medicare completed and billed episodes 93,950   54,493   338,247   213,255 
Average Medicare case mix for completed
  and billed Medicare episodes
 1.11   1.11   1.10   1.10 
Average reimbursement per completed
  and billed Medicare episodes
$2,991  $2,830  $2,934  $2,817 
Total visits 2,485,083   1,448,351   8,957,390   5,565,371 
Total Medicare visits 1,659,256   987,586   6,034,664   3,899,678 
Average visits per completed
  and billed Medicare episodes
 17.7   18.1   17.8   18.3 
Organic growth:(1)    
Net revenue 6.6%  7.8%  8.5%  10.0%
Net Medicare revenue 1.4%  1.8%  4.0%  4.7%
Total new admissions 7.8%  5.3%  8.2%  10.7%
Medicare new admissions 3.5%  1.6%  4.8%  5.4%
Average daily census 2.9%  1.0%  2.9%  4.2%
Average Medicare daily census -1.1%  -3.8%  -0.9%  -1.3%
Medicare completed and billed episodes 1.0%  -2.7%  1.1%  1.1%
     
Home and Community-Based Services:    
Locations 81   12   81   12 
Acquired 1   1   65   1 
De novo       4    
Divested/Consolidated           
Average daily census 14,642   2,161   14,392   1,849 
Billable hours 2,257,127   469,963   7,259,191   1,644,372 
Revenue per billable hour$23.87  $27.88  $24.17  $28.53 
     
Hospice-Based Services:    
Locations 104   91   104   91 
Acquired 2      18   27 
De novo       1   1 
Divested/Consolidated (3)     (6)  (2)
Admissions 4,558   3,655   17,697   13,369 
Average daily census 3,995   3,180   3,603   3,036 
Patient days 351,742   292,568   1,314,581   1,108,323 
Average revenue per patient day$153  $147  $154  $144 
     
Facility-Based Services:    
Long-term Acute Care     
Locations 12   14   12   14 
Acquired          6 
Divested/Consolidated (1)     (2)   
Patient days 18,409   21,719   83,889   63,168 
Average revenue per patient day$1,359  $1,170  $1,269  $1,152 
Occupancy rate 64.5%  73.1%  74.1%  74.7%

 (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.


LHC GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF REVENUE AFTER ADOPTION OF ASU 2014-09
(Amounts in thousands, Unaudited)
     
 Three Months Ended
December 31,
 Twelve Months Ended 
December 31,
  2018  2017  2018  2017
Net Service Revenue, pre-adoption$515,638 $292,386 $1,835,478 $1,072,086
Less: Implicit price concession (1) 5,797  1,246  25,515  9,484
Net Service Revenue, post-adoption$509,841 $291,140 $1,809,963 $1,062,602
            
            
            
RECONCILIATION OF ADJUSTED NET INCOME ATTRIBUTABLE TO LHC GROUP, INC.
(Amounts in thousands, Unaudited)
     
 Three Months Ended
 Twelve Months Ended
 December 31, 
 December 31,
  2018  2017  2018  2017
Net income attributable to LHC Group, Inc.’s common stockholders$20,552 $18,435 $63,574 $50,112
Add (net of tax):           
AFAM and other acquisition expenses (2) 4,235  3,816  23,524  4,299
Closures/relocations (3) 7,271  2,566  12,070  2,695
Excess tax benefit (4)     (1,200)  
Income tax effect of adjustments to income (5)     689  
New tax rate (6)   (13,602)    (13,602)
Adjusted net income attributable to$32,058 $11,215 $98,657 $43,504
LHC Group, Inc.’s common stockholders           
            
            
     
RECONCILIATION OF ADJUSTED NET INCOME
ATTRIBUTABLE TO LHC GROUP, INC. PER DILUTED SHARE
 (Unaudited)
     
 Three Months Ended
 Twelve Months Ended
   December 31, December 31,
  2018  2017  2018  2017
Net income attributable to LHC Group, Inc.’s common stockholders$0.66 $1.02 $2.29 $2.79
Add (net of tax):           
AFAM and other acquisition expenses (2) 0.14  0.21  0.85  0.24
Closures/relocations (3) 0.23  0.14  0.43  0.15
Excess tax benefit (4)     (0.04)  
Income tax effect of adjustments to income (5)     0.02  
New tax rate (6)   (0.75)    (0.76)
Adjusted net income attributable to$1.03 $0.62 $3.55 $2.42
LHC Group, Inc.’s common stockholders           

(1) All amounts previously classified as provision for bad debts are now classified as implicit price concessions in determining the transaction price of the Company's net service revenue. 
(2) Transition and integration costs associated with the acquisition of Almost Family ($5.9 million pre-tax in the three months ended December 31, 2018 and $33.0 million in the twelve months ended December 31, 2018). 
(3) Expenses and impairments associated with the closure or consolidation of 28 locations in 2018. ($10.2 million pre-tax in the three months ended December 31, 2018 and $16.9 million in the twelve months ended December 31, 2018).
(4) Tax benefit due to the exercise of stock options related to the Almost Family acquisition. 
(5) The year-to-date effective tax rate was 26.1% as excess tax benefits exceeded the impact of certain deal and transaction costs that are not deductible related to the acquisitions. We continue to anticipate a normalized effective tax rate of 28% to 29% and have used that tax rate in the presentation of adjusted net income attributable to LHC Group and adjusted net income attributable to LHC Group per diluted share. 
(6) The passage of the Tax Cuts and Jobs Act of 2017 reduced the deferred tax liability by $13.6 million in 2017.

We have included certain financial measures in this press release, including adjusted net income attributable to LHC Group and adjusted net income attributable to LHC Group per diluted share, which are “non-GAAP financial measures” as defined under the rules and regulations promulgated by the SEC. We define adjusted net income attributable to LHC Group as net income attributable to LHC Group adjusted for the AFAM acquisition and other closure costs. We define adjusted net income attributable to LHC Group per diluted share as net income attributable to LHC Group adjusted for the AFAM acquisition and other closure costs divided by weighted average diluted shares outstanding.

Adjusted net income attributable to LHC Group and adjusted net income attributable to LHC Group per diluted share are supplemental measures of our performance and are not required by, or presented in accordance with, generally accepted accounting principles in the United States (“GAAP”). Adjusted net income attributable to LHC Group and adjusted net income attributable to LHC Group per diluted share are not measures of our financial performance under GAAP and should not be considered as alternatives to net income attributable to LHC Group, net income attributable to LHC Group per diluted share or any other performance measures derived in accordance with GAAP. Our measurements of adjusted net income attributable to LHC Group and adjusted net income attributable to LHC Group per diluted share may not be comparable to similarly titled measures of other companies. We have included information concerning adjusted net income attributable to LHC Group and adjusted net income attributable to LHC Group per diluted share in this press release because we believe that such information is used by certain investors as measures of a company’s historical performance. We believe these measures are frequently used by securities analysts, investors and other interested parties in the evaluation of issuers of equity securities, many of which present adjusted net income and adjusted net income per diluted share when reporting their results. Our presentation of adjusted net income attributable to LHC Group and adjusted net income attributable to LHC Group per diluted share should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.

Contact:
Eric Elliott

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

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Section 3: EX-99.2 (EXHIBIT 99.2)

EdgarFiling

EXHIBIT 99.2

 

Supplemental Financial Information Fourth Quarter Ended December 31, 2018 February 27, 2019

 

 

Forward - Looking Statements “This presentation 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 . Words such as “anticipate,” “expect,” “project,” “intend,” “believe,” “will,” “estimate,” “may,” “could,” “should,” “outlook,” and “guidance” and words and terms of similar substance used in connection with any discussion of future plans, actions, events or results identify forward - looking statements . 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 that could cause actual events or results to differ materially from the events or results described in the forward - looking statements, including, but not limited to, the risks and uncertainties described in our filings with the Securities and Exchange Commission, including our most recent Annual Report on Form 10 - K and subsequent Quarterly Reports on Form 10 - Q and Current Reports on Form 8 - K . Many of these risks, uncertainties and assumptions are beyond the Company’s ability to control or predict . Because of these risks, uncertainties and assumptions, investors 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 presentation . 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 Company and attributable to the Company or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above . ” Non - GAAP Financial Information This presentation includes certain financial measures that were not prepared in accordance with U . S . generally accepted accounting principles (“GAAP”), including EBITDA and Adjusted EBITDA . The company uses these non - GAAP financial measures in operating its business because management believes they are less susceptible to variances in actual operating performance that can result from the excluded items . The company presents these financial measures to investors because they believe they are useful to investors in evaluating the primary factors that drive the company's operating performance . The items excluded from these non - GAAP measures are important in understanding LHC Group’s financial performance, and any non - GAAP measures presented should not be considered in isolation of, or as an alternative to, GAAP financial measures . Since these non - GAAP financial measures are not measures determined in accordance with GAAP, have no standardized meaning prescribed by GAAP and are susceptible to varying calculations, these measures, as presented, may not be comparable to other similarly titled measures of other companies . EBITDA of LHC Group is defined as net income (loss) before income tax benefit (expense), interest expense, and depreciation and amortization expense . Adjusted EBITDA of LHC Group is defined as net income (loss) before income tax expense benefit (expense), depreciation and amortization expense, and transaction costs related to previous transactions . 2 Please visit the Investors section on our website at Investor.LHCgroup.com for additional information on LHC Group and the industry. Nasdaq: LHCG

 

 

Table of Contents 3 Company overview ………………………………………………………………………… .................... … 4 - 5 Corporate highlights and select statistical and financial data ……………………… .......... 6 - 7 Consolidated results ………………………………………………………………… ........................ …… 8 - 9 Adjustments to net income …………………………………………………………………………… ... …… 10 Segment results …………………………………………………………………………………………… ..... 11 - 16 2019 guidance ……………………………………………………………………………………………………… . 17 Almost Family update ………………………………………………………………………………………… ... 18 Recent joint ventures………………………………………………………………………..…………………..19 Quality data………………………………………………………………………………………………….….20 - 21 Debt and liquidity metrics…………………………………………………………………………………....22 Managed care initiative update………………………………………………………………………..…..23 Focus for 2019………………………………………………………………………………………………….…..24 Non - GAAP reconciliations…………………………………………………………………………….....25 - 27

 

 

Home Health Hospice HCBS Home Health & Hospice Home Health & HCBS Home Health, Hospice, & HCBS LHC Group Overview 71.4% 11.0% 9.5% 6.3% 1.8% % of Revenue HH Hospice HCBS Facility-based HCI 4

 

 

Proven Value Creator on Accelerated Growth Path Unique Assets and Unique Positioning Second largest ACO management company in the U.S ., with more than 12,000 unique providers serving more than 460,000 Medicare attributed lives Today’s Industry Vastly Different than 10 Years Ago Home health in front of industry tailwinds with transition to value - based reimbursement and stabilized reimbursement landscape Preferred setting for lower cost - of - care and higher quality = improved value proposition Accelerated Growth with Multiple Levers Organic growth fed by industry - leading quality scores and co - location strategy Continued momentum of growth from existing and potential JV partners and acquisitions fueled by strong balance sheet Comprehensive in - home healthcare solution on a national scale and the proven leading partner for hospitals and health systems ’ Almost Family Integration Ahead of schedule Executing on identified cost synergies of $ 25 - 30 million 5

 

 

• Net service revenue up 75.1% for Q4 and up 70.3% for 2018 • Adjusted Earnings Per Share increases 66.1% for Q4 and 46.7% for 2018, reaching top end of 2018 annual guidance range • Delivered 14.5% accretion from mid - point of pre Almost Family EPS range to adjusted EPS for the year • LHCG standalone quality and patient satisfaction scores continue to lead the industry • Acquisitions completed during 2018 total $822.6 million in revenue • Organic growth in home health admissions and revenue + growth in hospice admissions and revenue continue to drive earnings growth • ACO’s under management for 2018 increased to 30 ACO’s covering 460,000 Medicare lives Strong Finish to 2018 6

 

 

Select Key Segment Statistical and Financial Data Organic growth : (1) Net revenue 6.6% 7.8% 8.5% 10.0% Net Medicare revenue 1.4% 1.8% 4.0% 4.7% Total new admissions 7.8% 5.3% 8.2% 10.7% Medicare new admissions 3.5% 1.6% 4.8% 5.4% Average daily census 2.9% 1.0% 2.9% 4.2% Average Medicare daily census - 1.1% - 3.8% - 0.9% - 1.3% Medicare completed and billed episodes 1.0% - 2.7% 1.1% 1.1% Three Months Ended December 31, Twelve Months Ended December 31, 2018 2017 2018 2017 Home Health Average daily census 14,642 2,161 14,392 1,849 Billable hours 2,257,127 469,963 7,259,191 1,644,372 Revenue per billable hour $23.87 $27.88 $24.17 $28.53 Home and Community - Based Admissions 4,558 3,655 17,697 13,369 Average daily census 3,995 3,180 3,603 3,036 Patient days 351,742 292,568 1,314,581 1,108,323 Average revenue per patient day $153 $147 $154 $144 Hospice Patient days 18,409 21,719 83,889 63,168 Average revenue per patient day $1,359 $1,170 $1,269 $1,152 Occupancy rate 64.5% 73.1% 74.1% 74.7% Facility - Based ( 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. 4Q 2018 Consolidated Growth 7 • Revenue: +75.1% • Adjusted EPS: +66.1% • Adjusted EBITDA: +118.0% Full Year 2018 Consolidated Growth • Revenue: +70.3% • Adjusted EPS: +46.7% • Adjusted EBITDA: +84.5%

 

 

2018 Adjusted Consolidated Results Three months ended Dec 31 Twelve months ended Dec 31 Consolidated Total Adjustments Adjusted Consolidated Consolidated Total Adjustments Adjusted Consolidated Net service revenue $509,841 $301 $510,142 $1,809,963 $851 $1,810,814 Cost of service revenue 324,539 (2,406) 322,133 1,156,357 (6,304) 1,150,053 Gross margin 185,302 188,009 653,606 660,761 General and administrative expenses 145,609 (9,823) 135,786 537,916 (38,128) 499,788 Impairment of intangibles and other 3,562 (3,562) 0 4,689 (4,689) 0 Operating income $36,131 $16,092 $52,223 $111,001 $49,972 $160,973 Add back depreciation 4,376 0 4,376 16,362 0 16,362 Less n oncontrolling interests (4,756) 0 (4,756) (15,349) 0 (15,349) Earnings before interest, tax, and depreciation (EBITDA less NCI) $35,751 $16,092 $51,843 $112,014 $ 49,971 $ 161,985 EBITDA less NCI as a percentage of revenue 7.0% 10.2% 6.2% 8.9% 8

 

 

Adjusted Consolidated Results – 2018 vs 2017 Three months ended Dec 31 Twelve months ended Dec 31 2018 Adjusted Consolidated % of rev 2017 Adjusted Consolidated % of rev 2018 Adjusted Consolidated % of rev 2017 Adjusted Consolidated % of rev Net service revenue $510,142 $291,934 $1,810,814 $1,063,396 Cost of service revenue 322,133 63.1% 185,087 63.4% 1,150,053 63.5% 673,471 63.3% Gross margin 188,009 36.9% 106,847 36.6% 660,761 36.5% 389,925 36.7% General and administrative expenses 135,786 26.6% 83,852 28.7% 499,788 27.6% 305,283 28.7% Operating income $52,223 10.2% $22,995 7.9% $160,973 8.9% $84,642 8.0% Depreciation 4,376 3,741 16,362 13,421 Noncontrolling interests (4,756) (2,954) (15,349) (10,274) Earnings before interest, tax, and depreciation (EBITDA less NCI) $51,843 $23,782 $ 161,985 $87,789 EBITDA less NCI as a percentage of revenue 10.2% 8.1% 8.9% 8.3% • Consolidated Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) increased 210 basis points as a percentage of revenue. This was due to an improvement of 30 basis points in gross margin and 210 basis point improvement in general and administrative expense in the fourth quarter of 2018 as compared to the same period in 2017. 9

 

 

2018 Adjustments to Net Income 2018 PRE - TAX ADJUSTMENTS Q1 Q2 Q3 Q4 YTD Almost Family merger cost $8,839 $8,361 $9,914 $ 5,922 $ 33,036 Closures relocations $0 $3,514 $3,251 $ 10,170 (1) $16,935 Income tax effect of adjustments to income $0 $689 $0 $0 $689 Excess tax benefit $0 $0 ($1,200) $0 ($1,200) Total $8,839 $12,564 $11,965 $16,092 $ 49,460 2018 ADJUSTMENTS NET OF TAX Q1 Q2 Q3 Q4 YTD Almost Family merger cost $6,311 $5,860 $7,118 $4,235 $23,524 Closures relocations $0 $2,464 $2,335 $7,271 $12,070 Income tax effect of adjustments to income $0 $689 $0 $0 $689 Excess tax benefit $0 $0 ($1,200) $0 ($1,200) Total $6,311 $9,013 $8,253 $11,506 $35,083 2018 ADJUSTMENTS NET OF TAX Q1 Q2 Q3 Q4 YTD Almost Family merger cost $0.35 $0.19 $0.23 $0.14 $0.85 Closures relocations $0.00 $0.08 $0.08 $0.23 $0.43 Income tax effect of adjustments to income $0.00 $0.02 $0.00 $0.00 $0.02 Excess tax benefit $0.00 $0.00 ($0.04) $0.00 ($0.04) Total $0.35 $0.29 $0.27 $0.37 $1.26 ( 1) Fourth Quarter Closure and Relocation Costs: • Closed 22 locations in the fourth quarter as we optimized our portfolio • Annual revenue for the closed locations was $29.6 million with an annual contribution loss of $1.8 million • $3.7 million in lease termination penalties related to closures in the fourth quarter • $3.6 million in impairment of intangibles related to closures in the fourth quarter • $2.9 million in severance and other related costs in the fourth quarter (2) Amount different from adjustment on page 8 twelve month EBITDA adjustment due to tax adjustments. 10 (2)

 

 

Three Months E nded December 31, 2018 Adjusted Segment Results Home health services Adjustments Adjusted Home health services Hospice services Adjustments Adjusted Hospice services Home and CBS Adjustments Adjusted HCBS services Net service revenue $367,107 $301 $367,408 $52,976 $52,976 $52,885 $52,885 Cost of service revenue 225,999 (1,522) 224,477 35,435 (663) 34,772 40,329 (20) 40,309 Gross margin 141,108 142,931 17,541 18,204 12,556 12,576 General and administrative expenses 100,358 (4,901) 95,457 17,798 (4,168) 13,630 11,407 (581) 10,826 Impairment of intangibles and other 1,073 (1,073) 0 162 (162) 0 (10) 10 0 Operating income $39,677 $7,797 $47,474 ($419) $4,993 $4,574 $1,159 $591 $1,750 Add back depreciation 2,430 2,430 513 513 162 162 Less n oncontrolling interests (3,873) (3,873) (548) (548) 119 119 Earnings before interest, tax, and depreciation (EBITDA less NCI) $38,234 $7,797 $46,031 ($454) $4,993 $4,539 $1,440 $591 $2,031 EBITDA less NCI as a percentage of revenue 10.4% 12.5% - 0.9% 8.6% 2.7% 3.8% Facility - based services Adjustments Adjusted Facility - based services HCI Adjustments Adjusted HCI services Net service revenue $27,439 $27,439 $9,434 $9,434 Cost of service revenue 17,797 (18) 17,779 4,979 (183) 4,796 Gross margin 9,642 9,660 4,455 4,638 General and administrative expenses 9,903 (10) 9,893 6,143 (163) 5,980 Impairment of intangibles and other 200 (200) 0 2,137 (2,137) 0 Operating income ($461) $228 ($233) ($3,825) $2,483 ($1,342) Add back depreciation 875 875 396 396 Less n oncontrolling interests (461) (461) 7 7 Earnings before interest, tax, and depreciation (EBITDA less NCI) ($47) $228 $181 ($3,422) $2,483 ($939) EBITDA less NCI as a percentage of revenue - 0.2% 0.7% - 36.3% - 10.0% 11

 

 

Twelve Months E nded December 31, 2018 Adjusted Segment Results Home health services Adjustments Adjusted Home health services Hospice services Adjustments Adjusted Hospice services Home and CBS Adjustments Adjusted HCBS services Net service revenue $1,291,457 $851 $1,292,308 $199,118 $199,118 $172,501 $172,501 Cost of service revenue 802,006 (2,500) 799,506 130,991 (1,083) 129,908 130,660 (190) 130,470 Gross margin 489,451 492,802 68,127 69,210 41,841 42,031 General and administrative expenses 378,125 (25,441) 352,684 60,932 (7,285) 53,647 40,467 (2,889) 37,578 Impairment of intangibles and other 1,816 (1,816) 0 186 (186) 0 (6) 6 0 Operating income $109,510 $30,608 $140,118 $7,009 $8,554 $15,563 $1,380 $3,073 $4,453 Depreciation 9,364 9,364 2,278 2,278 620 620 Noncontrolling interests (13,361) (13,361) (1,764) (1,764) 275 275 Earnings before interest, tax, and depreciation (EBITDA less NCI) $105,513 $ 30,607 $ 136,120 $7,523 $8,554 $16,077 $2,275 $3,073 $5,348 EBITDA less NCI as a percentage of revenue 8.2% 10.5% 3.8% 8.1% 1.3% 3.1% Facility - based services Adjustments Adjusted Facility - based services HCI Adjustments Adjusted HCI services Net service revenue $113,784 $113,784 $33,103 $33,103 Cost of service revenue 76,899 (2,016) 74,883 15,801 (515) 15,286 Gross margin 36,885 38,901 17,302 17,817 General and administrative expenses 39,638 (2,125) 37,513 18,754 (388) 18,366 Impairment of intangibles and other 554 (554) 0 2,139 (2,139) 0 Operating income ($3,307) $4,695 $1,388 ($3,591) $3,042 ($549) Depreciation 2,906 2,906 1,194 1,194 Noncontrolling interests (589) (589) 90 90 Earnings before interest, tax, and depreciation (EBITDA less NCI) ($990) $4,695 $3,705 ($2,307) $3,042 $735 EBITDA less NCI as a percentage of revenue - 0.9% 3.3% - 7.0% 2.2% 12

 

 

Three months ended December 31, Twelve months ended December 31, 2018 Adjusted Home health services % of rev 2017 Adjusted Home health services % of rev 2018 Adjusted Home health services % of rev 2017 Adjusted Home health services % of rev Net service revenue $367,408 $208,993 $1,292,308 $778,377 Cost of service revenue 224,477 61.1% 127,948 61.2% 799,506 61.9% 480,844 61.8% Gross margin 142,931 38.9% 81,045 38.8% 492,802 38.1% 297,533 38.2% General and administrative expenses 95,457 26.0% 59,712 28.6% 352,684 27.3% 225,122 28.9% Operating income $47,474 12.9% $21,333 10.2% $140,118 10.8% $72,411 9.3% Depreciation 2,430 2,315 9,364 8,754 Noncontrolling interests (3,873) (3,049) (13,361) (9,102) Earnings before interest, tax, and depreciation (EBITDA less NCI) $46,031 $20,599 $ 136,120 $72,063 EBITDA less NCI as a percentage of revenue 12.5% 9.9% 10.5% 9.3% • Home Health Adjusted EBITDA margin improved 260 basis points in the fourth quarter of 2018 compared to the same period in 2017. D ue to strong cost management in general and administrative expenses, which is down 260 basis points as a percentage of revenue. 13 Home Health Segment Adjusted Segment Results – 2018 vs 2017

 

 

Three months ended December 31, Twelve months ended December 31, 2018 Adjusted Hospice services % of rev 2017 Adjusted Hospice services % of rev 2018 Adjusted Hospice services % of rev 2017 Adjusted Hospice services % of rev Net service revenue $52,976 $42,431 $199,118 $157,287 Cost of service revenue 34,772 65.6% 28,624 67.5% 129,908 65.2% 103,811 66.0% Gross margin 18,204 34.4% 13,807 32.5% 69,210 34.8% 53,476 34.0% General and administrative expenses 13,630 25.7% 12,207 28.8% 53,647 26.9% 44,662 28.4% Operating income $4,574 8.6% $1,600 3.8% $15,563 7.8% $8,814 5.6% Depreciation 513 685 2,278 2,415 Noncontrolling interests (548) (210) (1,764) (1,248) Earnings before interest, tax, and depreciation (EBITDA less NCI) $4,539 $2,075 $16,077 $9,981 EBITDA less NCI as a percentage of revenue 8.6% 4.9% 8.1% 6.3% • Hospice Adjusted EBITDA margin improved 370 basis points in the fourth quarter of 2018 compared to the same period in 2018. D ue to a 190 basis point improvement in the gross margin and 310 basis point improvement in general and administrative expenses as a percentage of revenue. 14 Hospice Segment Adjusted Segment Results – 2018 vs 2017

 

 

Three months ended December 31, Twelve months ended December 31, 2018 Adjusted HCBS services % of rev 2017 Adjusted HCBS services % of rev 2018 Adjusted HCBS services % of rev 2017 Adjusted HCBS services % of rev Net service revenue $52,885 $12,756 $172,501 $46,159 Cost of service revenue 40,309 76.2% 10,288 80.7% 130,470 75.6% 35,193 76.2% Gross margin 12,576 23.8% 2,468 19.3% 42,031 24.4% 10,966 23.8% General and administrative expenses 10,826 20.5% 2,724 21.4% 37,578 21.8% 9,686 21.0% Operating income $1,750 3.3% ($256) - 2.0% $4,453 2.6% $1,280 2.8% Depreciation 162 119 620 455 Noncontrolling interests 119 104 275 111 Earnings before interest, tax, and depreciation (EBITDA less NCI) $2,031 ($33) $5,348 $1,846 EBITDA less NCI as a percentage of revenue 3.8% - 0.3% 3.1% 4.0% • Home and Community - Based Services Adjusted EBITDA margin improved 410 basis points in the fourth quarter of 2018 compared to the same period in 2017. This was due to 450 basis point improvement in the gross margin and 90 basis point improvement in general and administrative expenses. 15 Home and Community Based Services Segment Adjusted Segment Results – 2018 vs 2017

 

 

Facility - Based Services Segment Adjusted Segment Results – 2018 vs 2017 Three months ended December 31, Twelve months ended December 31, 2018 Adjusted Facility - based services % of rev 2017 Adjusted Facility - based services % of rev 2018 Adjusted Facility - based services % of rev 2017 Adjusted Facility - based services % of rev Net service revenue $27,439 $27,754 $113,784 $81,573 Cost of service revenue 17,779 64.8% 18,227 65.7% 74,883 65.8% 53,623 65.7% Gross margin 9,660 35.2% 9,527 34.3% 38,901 34.2% 27,950 34.3% General and administrative expenses 9,893 36.1% 9,209 33.2% 37,513 33.0% 25,813 31.6% Operating income ($233) - 0.8% $318 1.1% $1,388 1.2% $2,137 2.6% Depreciation 875 622 2,906 1,797 Noncontrolling interests (461) 201 (589) (35) Earnings before interest, tax and depreciation (EBITDA less NCI) $181 $1,141 $3,705 $3,899 EBITDA less NCI as a percentage of revenue 0.7% 4.1% 3.3% 4.8% • Facility - Based Services Adjusted EBITDA decreased 340 basis points due to a slower growth in census at two of our larger LTACHs. These LTACHs moved to a more centralized location during the third quarter. Census in these LTACHs have returned to normal in the first quarter of 2019 . In the fourth quarter of 2018, the occupancy percentage in the LTACHs was 64.5% with a revenue per patient day of $1,359 as compared to a 73.1% occupancy percentage and revenue per patient day of $1,269 in the same period of 2017. The current occupancy rate for the first quarter of 2019 is 72%. 16

 

 

Assumptions • Total of $12 million to $ 17 million in pre - tax cost synergies in connection with the Almost Family acquisition, bringing the total synergies expected for 2018 - 2019 to $25 million to $30 million • Estimated effective tax rate of 28% to 29% • Weighted average diluted shares of approximately 31.3 million for the full year of 2019 • 5 % to 7% organic growth in home health admissions • 6% to 8% organic growth in hospice admissions • Implicit price concession of 1.5% to 1.7% as a percentage of revenue 2019 Guidance FY 2018 Adjusted Results ( in millions except for EPS data ) FY 2019 Guidance Midpoint ( in millions except for EPS data ) Growth in 2019 over 2018 Revenue $1,810 $2,105 +16.3% EPS $3.55 $4.20 +18.3% EBITDA $162 $215 +32.7% • Net service revenue of $2.08 billion to $2.13 billion • Adjusted earnings per share of $4.15 to $4.25 • Adjusted EBITDA of $212 million to $218 million 17

 

 

Almost Family and other Integration Updates On pace to exceed our $ 25 - 30 million target for run rate cost synergies by the second half of 2019 Almost Family home health contribution margin up 190 bps from Q3 to Q4 2018 and improved 140 basis points from Q2 to Q3 2018 74% of Almost Family agencies rated 4 stars or greater for 3 months ended December 31 versus 68% for 3 months ended April 30 Almost Family admissions up 3.8% from April 1, 2018, through December 31, 2018, versus the same period in 2017. Operating within transformation phase 6 months ahead of schedule Renegotiated 6 new Almost Family agreements with payors covering 49 providers in 15 states, resulting in 17% rate increase for 2019, or approximately $2 million in incremental YOY revenue 18

 

 

Accelerated Joint Venture Momentum Following Successful Almost Family Acquisition Joint Venture Partner State Date Closed Locations Annual Revenue 1st Choice Home Health THR/Methodist Texas 2/1/2018 1 $2,800,000 St. Mary's Regional Medical Center Home Health St. Mary's Regional Medical Center Nevada 5/1/2018 1 $3,000,000 St. Mary's Regional Medical Center Hospice St. Mary's Regional Medical Center Nevada 8/1/2018 1 $5,000,000 Capital Region Medical Center Home Health Capital Region Medical Center Missouri 8/1/2018 1 $1,600,000 Home Health of Wilson LifePoint North Carolina 9/1/2018 1 $3,800,000 Guardian Home Health LifePoint North Carolina 12/1/2018 1 $3,000,000 Commonwealth LifePoint Virginia 12/1/2018 2 $3,300,000 Unity Health Homecare Unity Health Arkansas 1/31/2019 2 $4,000,000 Total acquired revenue since Almost Family acquisition $26,500,000 Announced j oint venture with Geisinger on 2/26/2019 13 $ 35,000,000 Total acquired and announced revenue 23 $61,500,000 19

 

 

LHC Group Quality Drives Organic Growth and JV Proposition *LHC Group, excluding ‘17 acquisitions and Almost Family • 100% of LHC Group agencies are Joint Commission accredited or are seeking accreditation • Fewer than 15% of all home care agencies nationwide earn Joint Commission accreditation 3.00 3.20 3.40 3.60 3.80 4.00 4.20 4.40 4.60 4.80 5.00 JAN - 16 APR - 16 JUL - 16 OCT - 16 JAN - 17 APR - 17 JUL - 17 OCT - 17 JAN - 18 APR - 18 JUL - 18 OCT - 18 JAN - 19 STAR RATING - QUALITY LHCG National State 4.75* 3.28 3.28 20

 

 

Industry - Leading Quality and Patient Satisfaction Scores Quality Jan 2019 Oct 2018 National Avg LHCG same store 4.75 4.74 3.28 LHCG including recent acquisitions 4.59 4.53 3.28 Almost Family 3.63 3.61 3.28 Combined 4.16 4.11 3.28 Patient Satisfaction Jan 2019 Oct 2018 National Avg LHCG same store 4.11 4.20 3.55 LHCG including recent acquisitions 4.09 4.16 3.55 Almost Family 3.66 3.57 3.55 Combined 3.92 3.93 3.55 • 99% of LHC same - store locations have CMS 4 stars or greater for quality • 85% of LHC same - store locations have CMS 4 stars or greater for patient satisfaction 21

 

 

Debt and Liquidity Metrics Outstanding Debt ( amounts in thousands ) As of Dec. 31, 2018 Total Debt – Balance Sheet $243,703 Less: Cash $49,363 Net Debt $194,340 Adjusted Leverage Ratio 1.20x Credit Facility ( amounts in thousands ) As of Dec. 31, 2018 Revolver Size $500,000 Less: Outstanding Revolver $235,000 Less: Letters of Credit $30,400 Available Revolver $234,600 Plus: Cash $49,400 Plus: Accordion $200,000 Total Liquidity $484,000 Cash Flow ( amounts in thousands ) As of Dec. 31, 2018 Free Cash Flow (12 Months Ended) $60,243 + Adjustments to 2018 EBITDA 49,972 = Adjusted Free Cash Flow (12 Months Ended) $110,215 DSO’s 45 days 22

 

 

Managed Care Initiative Update Rate Improvement • From 2016 - 2018, negotiated aggregate increase of 3% in managed care rates in LHCG legacy business • In 2018, negotiated new agreements with 5 payors covering 28 providers across 5 states – for a 7% increase heading into 2019 in LHCG legacy business Margin Improvement • From 2016 - 2018, improved contribution margin in LHCG legacy business by 480 bps New Model Arrangements • New executed LHCG model • 2 risk - based with upside opportunity and downside risk with reimbursement tied to quality metrics • Negotiated models specific to joint venture partnerships • 2 risk - based with upside opportunity and downside risk with reimbursement tied to quality metrics • 4 performance - based covering 5 hospitals with upside opportunity • Pending and under active negotiations • Bundle arrangements for Commercial, Medicare Advantage, BPCI, and Next Gen ACO payor markets • 1 PMPM arrangement • 4 risk - based with upside opportunity and downside risk with reimbursement tied to quality metrics 23

 

 

Focus for 2019 Maintain disciplined capital allocation with new joint ventures and other M&A activity Realize cost synergies from Almost Family acquisition to reach a run rate of $25 - $30 million by second half of 2019 Continue to lead industry with regulatory lobbying and readiness Maximize value of Healthcare Innovations business Capture incremental growth from raising Almost Family quality scores to LHCG standards Accelerate plans for unlocking untapped potential of co - location strategy Capture market share gains and incremental contributions from recent joint ventures and other acquisitions 24 Continue to lead the industry in quality and patient satisfaction scores Continue to lead the industry in voluntary turnover of less than 16%

 

 

Non - GAAP Reconciliations (Amounts in thousands, unaudited) RECONCILIATION OF REVENUE AFTER ADOPTION OF ASU 2014 - 09 RECONCILIATION OF ADJUSTED NET INCOME ATTRIBUTABLE TO LHC GROUP Three Months Ended December 31, Twelve Months Ended December 31, 2018 2017 2018 2017 Net Service Revenue, pre - adoption $515,638 $292,386 $ 1,835,478 $ 1,072,086 Less: Implicit price concession (1) 5,797 1,246 25,515 9,484 Net Service Revenue, post - adoption $509,841 $291,140 $ 1,809,963 $ 1,062,602 Three Months Ended December 31, Twelve Months Ended December 31, 2018 2017 2018 2017 Net income attributable to LHC Group, Inc.’s common stockholders $20,552 $18,435 $63,574 $50,112 Add (net of tax): Almost Family and other acquisition expenses (2) 4,235 3,816 23,524 4,299 Closures/relocations (3) 7,271 2,566 12,070 2,695 Excess tax benefit (4) ─ ─ (1,200) ─ Income tax effect of adjustments to income (5) ─ ─ 689 ─ New tax rate (6) ─ (13,602) ─ (13,602) Adjusted net income attributable to LHC Group, Inc.’s common stockholders $32,058 $11,215 $98,657 $43,504 25 Footnotes are on page 26

 

 

Non - GAAP Reconciliations (Amounts in thousands, unaudited ) RECONCILIATION OF ADJUSTED NET INCOME ATTRIBUTABLE TO LHC GROUP PER DILUTED SHARE Three Months Ended December 31, Twelve Months Ended December 31, 2018 2017 2018 2017 Net income attributable to LHC Group, Inc.’s common stockholders $0.66 $1.02 $2.29 $2.79 Add (net of tax): Almost Family and other acquisition expenses (2) 0.14 0.21 0.85 0.24 Closures/relocations (3) 0.23 0.14 0.43 0.15 Excess tax benefit (4) ─ ─ (0.04) ─ Income tax effect of adjustments to income (5) ─ ─ 0.02 ─ New tax rate (6) ─ (0.75) ─ (0.76) Adjusted net income attributable to LHC Group, Inc.’s common stockholders $1.03 $0.62 $3.55 $2.42 Footnotes : 1. All amounts previously classified as provision for bad debts are now classified as implicit price concessions in determining the transaction price of the Company's net service revenue . 2. Transition and integration costs associated with the acquisition of Almost Family ( $ 5 . 9 million pre - tax in the three months ended December 31 , 2018 and $ 33 . 0 million in the twelve months ended December 31 , 2018 ) . 3. Expenses and impairments associated with the closure or consolidation of 28 locations in 2018 . ( $ 10 . 2 million pre - tax in the three months ended December 31 , 2018 and $ 16 . 9 million in the twelve months ended December 31 , 2018 ) 4. Tax benefit due to the exercise of stock options related to the Almost Family acquisition . 5. The year - to - date effective tax rate was 26 . 1 % as excess tax benefits exceeded the impact of certain deal and transaction costs that are not deductible related to the acquisitions . We continue to anticipate a normalized effective tax rate of 28 % to 29 % and have used that tax rate in the presentation of adjusted net income attributable to LHC Group and adjusted net income attributable to LHC Group per diluted share . 6. The passage of the Tax Cuts and Jobs Act of 2017 reduced the deferred tax liability by $ 13 . 6 million in 2017 . 26

 

 

• Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) For the three month period ended December 31, For the Twelve month period ended December 31, 2018 2017 2018 2017 Net income $20,552 $18,435 $63,574 $50,112 Add: Income tax expense 7,568 (9,466) 22,399 10,944 Interest expense, net 3,255 1,170 9,679 3,352 Depreciation and amortization 4,376 3,741 16,362 13,422 Adjustment items (1) 16,092 9,902 49,972 9,959 Adjusted EBITDA $ 51,843 $23,782 $161,986 $ 87,789 (1) Adjustment items (pre - tax): Almost Family merger and other acquisition expenses $ 5,922 $5,921 $33,037 $5,979 Closures/relocations $10,170 $3,981 $16,935 $3,981 Total adjustments $16,092 $9,902 $49,972 $9,960 Non - GAAP Reconciliations (Amounts in thousands, unaudited) 27

 

 

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