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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): August 7, 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. [   ]

 

Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareLHCGNASDAQ Global Select Market

 

 
 

Item 2.02. Results of Operations and Financial Condition.

On August 7, 2019, the Company issued a press release announcing its financial results for the second quarter ended June 30, 2019.  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 August 7, 2019, announcing the Company’s financial results for the second quarter ended June 30, 2019.
   
99.2 Second Quarter 2019 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: August 8, 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 Second Quarter 2019 Financial Results

Strong Execution on Organic Growth and M&A Strategy 
Affirms 2019 Guidance

LAFAYETTE, La., Aug. 07, 2019 (GLOBE NEWSWIRE) -- LHC Group, Inc. (NASDAQ: LHCG) announced its financial results for the quarter ended June 30, 2019. Unless otherwise noted, all results for the second quarter ended June 30, 2019 are compared with the second quarter ended June 30, 2018.

Second Quarter of 2019 Financial Results - All Businesses on Track for First Half of 2019

A reconciliation of all non-GAAP financial results in this release appears on page 12.

Operational and Strategic Highlights

Commenting on the results, Keith G. Myers, LHC Group’s Chairman and Chief Executive Officer, said, “Since our founding 25 years ago, change in the healthcare industry is something to which we are accustomed and has transformed us into the leader we are today in in-home healthcare. Navigating change requires organizational alignment, leadership and clinical alignment. With a seat at the table with our more than 350 hospital system joint venture partners and with payors in value-based arrangements, we are uniquely positioned to benefit from the transition of patients to the most clinically appropriate, cost-effective setting possible – within the comfort and privacy of the home or place of residence.” 

“At LHC Group, we are always clinically focused and ensure that within any model of care that we are patient-first, outcomes-based, and deliver industry leading quality and patient satisfaction,” added Myers. “This commitment, backed by an exceptionally deep team and national scale, continues to generate strong organic growth. It also provides the foundation for the compelling value proposition so attractive to joint venture partners and for the pursuit of new growth opportunities that can extend our in-home healthcare footprint.”

M&A Strategy - Executing on Strong Pipeline of Joint Ventures and Acquisitions
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 $3.5 million.

LHC Group and Geisinger Home Health and Hospice, and AtlantiCare Home Health and Hospice finalized their joint venture partnership to enhance home health and hospice services at Geisinger locations in Pennsylvania on April 1, 2019 and at AtlantiCare - a Member of Geisinger in Atlantic County, New Jersey, on June 1, 2019. These agencies, which serve their local communities in the states of Pennsylvania and New Jersey, represent annualized revenue of approximately $35.0 million.

On July 30, 2019, LHC Group agreed to purchase a home health and home and community based services (HCBS) provider located in Baltimore from VNA of Maryland and Elite Home Care Services. The agreement includes 100 percent of the provider’s assets and is expected to close on September 1, 2019, subject to customary closing conditions. LHC Group expects annualized revenue from this acquisition of approximately $35.0 million.

On August 1, 2019, LHC Group and Capital Regional Medical Center (CRMC) finalized their joint venture to purchase from SSM Health the assets of three home health and hospice locations in Jefferson City and Mexico, Missouri. These agencies, which serve their local communities in the state of Missouri, represent annualized revenue 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 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.

Full Year 2019 Guidance Affirmed - 21.1% Year-over-Year Adjusted Earnings Growth at the Midpoint Continues to be Fueled by Strong Organic Growth and Acquisition Accretion

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; adjusted earnings per diluted share in a range of $4.25 to $4.35; 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, “We are in growth mode for the balance of 2019 and 2020 as we are confident we will thrive no matter the eventual outcome of PDGM or other regulatory initiatives. With the achievement of annualized run rate pre-tax synergies of $31.2 million from the Almost Family acquisition, we continue planning for the next phase of both earnings and top line growth that we expect in 2020 from completion of our final phases of the Almost Family integration, the pursuit of additional revenue synergies and our continual improvements in quality of care and patient satisfaction Star ratings across the former Almost Family locations. Our strong capital structure and available liquidity provide a solid advantage for us to maintain and even increase our M&A activity.”

Conference Call
LHC Group will host a conference call on Thursday, August 8, 2019, at 9:00 a.m. Eastern time to discuss its second 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 August 15, 2019, by dialing (855) 859‑2056 (international callers: (404) 537-3406) and entering confirmation number 2959016.

The Company has posted supplemental financial information on the second 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, affordable healthcare services to patients in the privacy and comfort 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)

 June 30,
 2019
 December
31, 2018
 (Unaudited)  
ASSETS   
Current assets:   
Cash$26,737  $49,363 
Receivables:   
Patient accounts receivable272,941  252,592 
Other receivables6,153  6,658 
Amounts due from governmental entities1,018  830 
Total receivables280,112  260,080 
Prepaid income taxes4,511  11,788 
Prepaid expenses25,134  24,775 
Other current assets21,310  20,899 
Total current assets357,804  366,905 
Property, building and equipment, net of accumulated depreciation of $62,354 and $55,253, respectively80,088  79,563 
Goodwill1,188,227  1,161,717 
Intangible assets, net of accumulated amortization of $15,854 and $15,176, respectively296,716  297,379 
Assets held for sale2,500  2,850 
Operating lease right of use asset84,638   
Other assets19,882  20,301 
Total assets$2,029,855  $1,928,715 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable and other accrued liabilities$79,038  $77,135 
Salaries, wages, and benefits payable81,645  84,254 
Self-insurance reserves32,570  32,776 
Current operating lease liabilities26,453   
Current portion of long-term debt  7,773 
Amounts due to governmental entities5,065  4,174 
Total current liabilities224,771  206,112 
Deferred income taxes46,919  43,306 
Income taxes payable4,671  4,297 
Revolving credit facility230,000  235,000 
Long term notes payable  930 
Operating lease payable59,980   
Total liabilities566,341  489,645 
Noncontrolling interest — redeemable15,467  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 in 2019 and 2018; 35,837,779 and 35,636,414 shares issued in 2019 and 2018, respectively358  356 
Treasury stock —  5,052,927 and 4,958,721shares at cost, respectively(57,893) (49,374)
Additional paid-in capital941,923  937,968 
Retained earnings471,831  427,975 
Total LHC Group, Inc. stockholders’ equity1,356,219  1,316,925 
Noncontrolling interest — non-redeemable91,828  107,549 
Total equity1,448,047  1,424,474 
Total liabilities and equity$2,029,855  $1,928,715 
        


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

 Three Months Ended June 30, Six Months Ended June 30,
 2019 2018 2019 2018
Net service revenue$517,842  $502,024  $1,020,427  $793,078 
Cost of service revenue325,860  321,004  646,852  509,622 
Gross margin191,982  181,020  373,575  283,456 
General and administrative expenses148,584  149,214  293,805  241,245 
Other intangible impairment charge1,018  778  7,337  778 
Operating income42,380  31,028  72,433  41,433 
Interest expense(2,885) (3,202) (5,937) (4,652)
Income before income taxes and noncontrolling interest39,495  27,826  66,496  36,781 
Income tax expense9,557  7,170  13,157  8,147 
Net income29,938  20,656  53,339  28,634 
Less net income attributable to noncontrolling interests4,938  3,859  9,483  6,842 
Net income attributable to LHC Group, Inc.’s common stockholders$25,000  $16,797  $43,856  $21,792 
        
Earnings per share:       
Basic$0.81  $0.55  $1.42  $0.90 
Diluted$0.80  $0.55  $1.41  $0.89 
Weighted average shares outstanding:       
Basic30,960  30,498  30,899  24,179 
Diluted31,201  30,742  31,188  24,403 


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

 Six Months Ended
 June 30,
 2019 2018
Operating activities:   
Net income$53,339  $28,634 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization expense8,400  7,548 
Amortization of operating lease right of use asset15,528   
Stock-based compensation expense4,392  3,919 
Deferred income taxes4,821  1,714 
Loss (gain) on disposal of assets312  (126)
Impairment of intangibles and other7,337  778 
Changes in operating assets and liabilities, net of acquisitions:   
Receivables(22,704) (18,897)
Prepaid expenses and other assets(324) (6,521)
Prepaid income taxes5,063  4,624 
Accounts payable and accrued expenses(18,735) 8,729 
Income taxes payable374   
Net amounts due to/from governmental entities528  (704)
Net cash provided by operating activities58,331  29,698 
Investing activities:   
Purchases of property, building and equipment(7,599) (13,760)
Cash acquired from business combinations, net of cash paid(20,431) 13,086 
Net cash used in investing activities(28,030) (674)
Financing activities:   
Proceeds from line of credit25,000  270,084 
Payments on line of credit(30,000) (278,884)
Proceeds from employee stock purchase plan931  634 
Payments on debt(7,650) 135 
Payments on deferred financing fees  (1,881)
Noncontrolling interest distributions(13,857) (5,763)
Withholding taxes paid on stock-based compensation(8,519) (4,095)
Purchase of additional controlling interest(18,748) (55)
Exercise of options(84)  
Sale of noncontrolling interest  3,322 
Net cash (used in) financing activities(52,927) (16,503)
Change in cash(22,626) 12,521 
Cash at beginning of period49,363  2,849 
Cash at end of period$26,737  $15,370 
Supplemental disclosures of cash flow information:   
Interest paid$4,038  $3,112 
Income taxes paid$4,042  $2,139 
        

Non-cash operating activity: The Company recorded $98.1 million in operating lease right of use assets in exchange for lease obligations.

Non-cash financing activity:  The Company accrued $1.0 million for capital expenditures primarily related to the home office expansion project during the six months ended June 30, 2019.

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

 Three Months Ended June 30, 2019
 Home
health
services
 Hospice
services
 Home and
community-
based
services
 Facility-
based
services
 HCI Total
Net service revenue$375,253  $55,057  $52,414  $27,975  $7,143  $517,842 
Cost of service revenue230,545  34,858  39,505  17,572  3,380  325,860 
General and administrative expenses108,958  15,096  11,213  9,335  3,982  148,584 
Other intangible impairment charge748  270        1,018 
Operating income (loss)35,002  4,833  1,696  1,068  (219) 42,380 
Interest expense(2,023) (323) (284) (170) (85) (2,885)
Income (loss) before income taxes and noncontrolling interest32,979  4,510  1,412  898  (304) 39,495 
Income tax expense (benefit)8,070  1,581  (171) 148  (71) 9,557 
Net income (loss)24,909  2,929  1,583  750  (233) 29,938 
Less net income (loss) attributable to noncontrolling interests3,948  898  (267) 365  (6) 4,938 
Net income (loss) attributable to LHC Group, Inc.’s common stockholders$20,961  $2,031  $1,850  $385  $(227) $25,000 
Total assets$1,407,221  $234,789  $240,746  $77,686  $69,413  $2,029,855 
                        


 Three Months Ended June 30, 2018
 Home
health
services
 Hospice
services
 Home and
community-
based
services
 Facility-
based
services
 HCI Total
Net service revenue$360,276  $50,554  $52,753  $28,304  $10,137  $502,024 
Cost of service revenue223,490  32,998  39,682  19,307  5,527  321,004 
General and administrative expenses105,674  15,108  12,444  10,601  5,387  149,214 
Other intangible impairment charge291      487    778 
Operating income (loss)30,821  2,448  627  (2,091) (777) 31,028 
Interest expense(2,256) (473) (158) (159) (156) (3,202)
Income (loss) before income taxes and noncontrolling interest28,565  1,975  469  (2,250) (933) 27,826 
Income tax expense (benefit)7,091  483  139  (313) (230) 7,170 
Net income (loss)21,474  1,492  330  (1,937) (703) 20,656 
Less net income (loss) attributable to noncontrolling interests3,810  412  (90) (207) (66) 3,859 
Net income (loss) attributable to LHC Group, Inc.’s common stockholders$17,664  $1,080  $420  $(1,730) $(637) $16,797 
Total assets$1,306,773  $189,447  $255,456  $66,665  $63,329  $1,881,670 
                        

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

 Six Months Ended June 30, 2019
 Home
health
services
 Hospice
services
 Home and
community-
based
services
 Facility-
based
services
 HCI Total
Net service revenue$738,288  $106,793  $104,199  $55,676  $15,471  $1,020,427 
Cost of service revenue456,668  68,034  79,360  35,304  7,486  646,852 
General and administrative expenses213,797  29,949  22,195  18,512  9,352  293,805 
Other intangible impairment charges7,066  271        7,337 
Operating income (loss)60,757  8,539  2,644  1,860  (1,367) 72,433 
Interest expense(4,161) (666) (585) (350) (175) (5,937)
Income (loss) before income taxes and noncontrolling interest56,596  7,873  2,059  1,510  (1,542) 66,496 
Income tax expense (benefit)11,278  2,027  (20) 153  (281) 13,157 
Net income (loss)45,318  5,846  2,079  1,357  (1,261) 53,339 
Less net income (loss) attributable to noncontrolling interests7,728  1,499  (577) 846  (13) 9,483 
Net income (loss) attributable to LHC Group, Inc.’s common stockholders$37,590  $4,347  $2,656  $511  $(1,248) $43,856 
                        


 Six Months Ended June 30, 2018
 Home
health
services
 Hospice
services
 Home and
community-
based
services
 Facility-
based
services
 HCI Total
Net service revenue$564,463  $93,180  $66,844  $58,454  $10,137  $793,078 
Cost of service revenue353,651  61,016  50,472  38,956  5,527  509,622 
General and administrative expenses171,963  28,406  15,742  19,747  5,387  241,245 
Other intangible impairment charges291      487    778 
Operating income38,558  3,758  630  (736) (777) 41,433 
Interest expense(3,344) (690) (229) (232) (157) (4,652)
Income (loss) before income taxes and noncontrolling interest35,214  3,068  401  (968) (934) 36,781 
Income tax expense (benefit)7,814  594  124  (155) (230) 8,147 
Net income (loss)27,400  2,474  277  (813) (704) 28,634 
Less net income (loss) attributable to noncontrolling interests6,047  829  (69) 101  (66) 6,842 
Net income (loss) attributable to LHC Group, Inc.’s common stockholders$21,353  $1,645  $346  $(914) $(638) $21,792 
                        


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

  Three Months Ended
June 30,
 Six Months Ended
June 30,
Key Data: 2019 2018 2019 2018
         
Home Health Services:        
Locations 539   568  539   568 
Acquired 7   253  15   254 
De novo          
Divested/consolidated (8)  (4) (16)  (5)
Total new admissions 95,198   93,905  191,388   147,028 
Medicare new admissions 57,391   59,012  116,284   92,040 
Average daily census 77,137   76,708  76,925   76,708 
Average Medicare daily census 49,827   51,279  49,918   51,279 
Medicare completed and billed episodes 93,824   96,370  184,795   150,908 
Average Medicare case mix for completed and billed Medicare episodes 1.10   1.10  1.10   1.09 
Average reimbursement per completed and billed Medicare episodes $3,084   $2,933  $3,067   $2,871 
Total visits 2,562,147   2,505,210  5,083,156   4,000,328 
Total Medicare visits 1,686,243   1,703,373  3,353,150   2,712,798 
Average visits per completed and billed Medicare episodes 18.0   17.6  18.1   18.0 
Organic growth excluding Almost Family (1)(2)        
Net revenue 6.6 % 9.0% 6.8 % 9.0%
Net Medicare revenue 4.7 % 5.1% 3.2 % 4.9%
Total new admissions 9.1 % 7.9% 7.4 % 7.2%
Medicare new admissions 1.9 % 5.4% 1.0 % 4.8%
Average daily census 4.6 % 2.3% 4.3 % 2.9%
Average Medicare daily census (0.6)% (1.0)% (1.2)% (0.8)%
Medicare completed and billed episodes 0.2 % 2.4% (0.2)% 1.0%
         
Hospice Services:        
Locations 104   106  104   106 
Acquired 5   15  6   15 
De novo          
Divested/Consolidated (4)    (5)   
Admissions 4,637   4,528  9,225   8,582 
Average daily census 4,070   3,659  3,911   3,399 
Patient days 370,407   332,978  707,875   615,198 
Average revenue per patient day $152.44   $153.28  $154.42   $153.27 
Organic growth excluding Almost Family: (1)(2)        
Total new admissions 9.6 % 2.5% 7.9 % 3.8%
         
Home and Community-Based Services:        
Locations 80   80  80   80 
Acquired 3   64  3   64 
De novo         4 
Divested/Consolidated (3)    (3)   
Average daily census 14,002   14,557  14,033   14,528 
Billable hours 2,292,719   2,227,831  4,564,613   2,706,614 
Revenue per billable hour $23.46   $24.13  $23.44   $25.15 
         
Facility-Based Services:        
Long-term Acute Care        
Locations 12   12  12   12 
Acquired          
Divested/Consolidated    (2)    (2)
Patient days 19,970   21,303  39,606   43,863 
Average revenue per patient day $1,270   $1,300  $1,278   $1,274 
Occupancy rate 70.8 % 69.9% 70.6 % 72.4%

(1) Organic growth is calculated as the sum of same store plus de novo for the period divided by total from the same period in the prior year.
(2) Almost Family locations remain counted as acquired locations due to continued system integrations, which will be completed by the end of 2019.


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

  Three Months Ended
 June 30,
Six Months Ended
 June 30,
  2019 2018 2019 2018
Revenue $525,120  $509,742  $1,036,057  $805,722 
Less:  Implicit price concession (1) 7,278  7,718  15,630  12,644 
Net service revenue $517,842  $502,024  $1,020,427  $793,078 
                 

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

  Three Months Ended
 June 30,
Six Months Ended
 June 30,
  2019 2018 2019 2018
Net income attributable to LHC Group, Inc.’s common stockholders $25,000  $16,797  $43,856  $21,792 
Add (net of tax):        
AFAM and other acquisition expenses (2) 6,713  5,860  11,981  12,171 
Closures/relocations/consolidations (3) 1,537  2,464  3,781  2,464 
Income tax effect of adjustments to income   689    689 
Provider moratorium impairment (4)     4,332   
Adjusted net income attributable to LHC Group, Inc.’s common stockholders $33,250  $25,810  $63,950  $37,116 
                 

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

  Three Months Ended
 June 30,
Six Months Ended
 June 30,
  2019 2018 2019 2018
Net income attributable to LHC Group, Inc.’s common stockholders $0.80  $0.55  $1.41  $0.89 
Add (net of tax):        
  AFAM and other acquisition expenses (2) 0.22  0.19  0.39  0.53 
  Closures/relocations/consolidations (3) 0.05  0.08  0.12  0.08 
  Income tax effect of adjustments to income   0.02    0.02 
  Provider moratorium impairment (4)     0.14   
Adjusted net income attributable to LHC Group, Inc.’s common stockholders $1.07  $0.84  $2.06  $1.52 
  1. Provision for bad debts are classified as implicit price concessions in determining the transaction price of the Company's net service revenue.
  2. Transition, integration and Homecare Homebase conversion expenses and other costs associated with the acquisition of Almost Family and other recently announced or completed acquisitions. ($9.3 million pre-tax in the three months ended June 30, 2019 and $16.6 million in the six months ended June 30, 2019, which includes a $2.2 million lease termination charge that occurred in the second quarter of 2019).
  3. Expenses and impairments associated with the closure or consolidation of 13 locations in the second quarter of 2019 along with residual costs and expenses in connection with the closures in the first quarter of 2019. ($2.1 million pre-tax in the three months ended June 30, 2019 and $5.2 million in the six months ended June 30, 2019).
  4. During the six months ended June 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.

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 Second Quarter Ended June 30, 2019 August 7, 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 - 6 Select key segment statistical and financial data ……………… .. ……………………… ............. 7 Consolidated results ……………………………………………………………… ........................ ……… 8 - 9 Adjustments to net income …………………………………………………………………………… ... …… 10 Segment results …………………………………………………………………………………………… ..... 11 - 16 2019 guidance ... ……………………………………………………………… ………… .. …………… ... ……… . 17 Almost Family update ………………………………………………………………………………………… ... 18 Accelerated acquisition and joint venture momentum…………………………………………. 19 Quality data………………………………………………………………………………………………….……….20 Debt and liquidity metrics………………………………………………………………………………….....21 Focus for 2019………………………………………………………………………………………………….……22 Non - GAAP reconciliations…………………………………………………………………………….....23 - 25

 

 

Home Health Hospice HCBS Home Health & Hospice Home Health & HCBS Home Health, Hospice, & HCBS LHC Group Overview 72.4% 10.4% 10.2% 5.5% 1.5% % of Revenue HH Hospice HCBS Facility-based HCI 4 539 home health locations 60% Of U.S. population aged 65+ included in service area 104 hospice locations 80 home & community based services locations 25 facility based locations 12 other service locations 760 total locations 350 leading hospital JV partners 35 states and District of Columbia

 

 

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 visibility on the 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; demonstrating incremental margin improvement Realized cost synergies to an annual run rate of $31.2 million 5

 

 

• Net service revenue up 3.2% for Q2 as compared to Q2 2018 • Adjusted Earnings Per Share increases 27.4% for Q2 as compared to Q2 2018 • Realized $7.8 million in cost synergies in Q2 2019 from Almost Family acquisition which now brings the realized cost synergies to an annual run rate of $31.2 million • LHCG quality and patient satisfaction scores continue to lead the industry • Maintained strong pace of acquisitions – acquired or announced acquisitions of $81 million in annualized revenue year to date in 2019 • Organic growth in home health admissions and revenue + growth in hospice admissions and revenue continue to drive earnings growth Commentary on Q2 2019 6

 

 

Select Key Segment Statistical and Financial Data Organic growth excluding Almost Family: (1)(2) Net revenue 6.6% 9.0% 6.8% 9.0% Net Medicare revenue 4.7% 5.1% 3.2% 4.9% Total new admissions 9.1% 7.9% 7.4% 7.2% Medicare new admissions 1.9% 5.4% 1.0% 4.8% Average daily census 4.6% 2.3% 4.3% 2.9% Average Medicare daily census (0.6)% (1.0)% (1.2)% (0.8)% Medicare completed and billed episodes 0.2% 2.4% (0.2)% 1.0% Three Months Ended June 30 , Six Months Ended June 30, 2019 2018 2019 2018 Home Health Average daily census 14,002 14,557 14,033 14,528 Billable hours 2,292,719 2,227,831 4,564,614 2,706,614 Revenue per billable hour $23.46 $24.13 $23.44 $25.15 Home and Community - Based Admissions 4,637 4,528 9,225 8,582 Average daily census 4,070 3,659 3,911 3,399 Patient days 370,407 332,978 707,875 615,198 Average revenue per patient day $152.44 $153.28 $154.42 $153.27 Organic growth excluding Almost Family: (1)(2) Total new admissions 9.6% 2.5% 7.9% 3.8% Hospice Patient days 19,970 21,303 39,606 43,863 Average revenue per patient day $1,270 $1,300 $1,278 $1,274 Occupancy rate 70.8% 69.9% 70.6% 72.4% 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. (2) Almost Family locations remain counted as acquired locations due to continued system integrations, which will be completed by the end of 2019. 2Q 2019 Consolidated Growth 7 • Revenue: +3.2% • Adjusted EPS: +27.4% • Adjusted EBITDA: +22.5% • Revenue: +70.3% • Adjusted EPS: +46.7% • Adjusted EBITDA: +84.5% 1H 2019 Consolidated Growth • Revenue: +28.7% • Adjusted EPS: +34.9% • Adjusted EBITDA: +56.0%

 

 

2019 Adjusted Consolidated Results Three months ended June 30 Six months ended June 30 Consolidated Total Adjustments Adjusted Consolidated Consolidated Total Adjustments Adjusted Consolidated Net service revenue $517,842 $0 $517,842 $1,020,427 $0 $1,020,427 Cost of service revenue 325,860 (2,943) 322,917 646,852 (7,610) 639,242 Gross margin 191,982 194,925 373,575 381,185 General and administrative expenses 148,584 (7,443) 141,141 293,805 (12,861) 280,944 Impairment of intangibles and other 1,018 (1,018) 0 7,337 (7,337) 0 Operating income $42,380 $11,404 $53,784 $72,433 $27,808 $100,241 Add back depreciation 4,198 0 4,198 8,400 0 8,400 Less noncontrolling interests (4,938) 0 (4,938) (9,483) 0 (9,483) Earnings before interest, tax, and depreciation (EBITDA less NCI) $41,640 $11,404 $53,044 $71,350 $27,808 $99,158 EBITDA less NCI as a percentage of revenue 8.0% 10.2% 7.0% 9.7% 8

 

 

Adjusted Consolidated Results – 2019 vs 2018 Three months ended June 30 Six months ended June 30 2019 Adjusted Consolidated % of rev 2018 Adjusted Consolidated % of rev 2019 Adjusted Consolidated % of rev 2018 Adjusted Consolidated % of rev Net service revenue $517,842 $502,574 $1,020,427 $793,628 Cost of service revenue 322,917 62.4% 319,978 63.7% 639,242 62.6% 508,596 64.1% Gross margin 194,925 37.6% 182,596 36.3% 381,185 37.4% 285,032 35.9% General and administrative expenses 141,141 27.3% 139,693 27.8% 280,944 27.5% 222,885 28.1% Operating income $53,784 10.4% $42,903 8.5% $100,241 9.8% $62,147 7.8% Depreciation 4,198 4,255 8,400 7,548 Noncontrolling interests (4,938) (3,859) (9,483) (6,842) Earnings before interest, tax, and depreciation (EBITDA less NCI) $53,044 $43,299 $99,158 $62,853 EBITDA less NCI as a percentage of revenue 10.2% 8.6% 9.7% 7.9% • Consolidated Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) increased 160 basis points as a percentage of revenue. This was due to an improvement of 130 basis points in gross margin and 50 basis point improvement in general and administrative expense in the second quarter of 2019 as compared to the same period in 2018. • For the six months ended June 30, 2019, adjusted EBITDA increased 180 basis points due to 150 basis point improvement in gross margin and 60 basis point improvement in general and administrative expense. 9

 

 

Adjustments to Net Income PRE - TAX ADJUSTMENTS Q2 2019 Q2 2018 1H 2019 1H 2018 Almost Family and other acquisition expenses (1) $9,279 $8,361 $16,574 $17,200 Closures/relocations/consolidations (2) $2,125 $3,514 $5,234 $3,514 Income tax effect of adjustments to income $0 $689 $0 $689 Provider moratorium impairment (3) $0 $0 $6,000 $0 Total $11,404 $12,564 $27,808 $21,403 ADJUSTMENTS NET OF TAX Q2 2019 Q2 2018 1H 2019 1H 2018 Almost Family and other acquisition expenses (1) $6,713 $5,860 $11,981 $12,171 Closures/relocations/consolidations (2) $1,537 $2,464 $3,781 $2,464 Income tax effect of adjustments to income $0 $689 $0 $689 Provider moratorium impairment (3) $0 $0 $4,332 $0 Total $8,250 $9,013 $20,094 $15,324 ADJUSTMENTS NET OF TAX Q2 2019 Q2 2018 1H 2019 2H 2018 Almost Family and other acquisition expenses (1) $0.22 $0.19 $0.39 $0.53 Closures/relocations/consolidations (2) $0.05 $0.08 $0.12 $0.08 Income tax effect of adjustments to income $0.00 $0.02 $0.00 $0.02 Provider moratorium impairment (3) $0.00 $0.00 $0.14 $0.00 Total $0.27 $0.29 $0.65 $0.63 10 Footnotes: (1) Transition, integration and Homecare Homebase conversion expenses and other costs associated with the acquisition of Almost Family and other recently announced or completed acquisitions . ($9.3 million pre - tax in the three months ended June 30, 2019 and $16.6 million in the six months ended June 30, 2019, which includes a $2.2 million lease termination charge that occurred in the second quarter of 2019). (2) Expenses and impairments associated with the closure or consolidation of 13 locations in the second quarter of 2019 along wi th residual costs and expenses in connection with the closures in the first quarter of 2019. ($2.1 million pre - tax in the three months ended June 30, 2019 and $5.2 million in the six months ended June 30, 2019). (3) During the six months ended June 30, 2019, the Company recorded $6.0 million of moratoria impairment as a result of the C ent ers for Medicare and Medicaid Services (“CMS”) action to remove all federal moratoria with regard to Medicare provider enrollment.

 

 

Three Months Ended June 30, 2019 Adjusted Segment Results Home health services Adjustments Adjusted Home health services Hospice services Adjustments Adjusted Hospice services HCBS services Adjustments Adjusted HCBS services Net service revenue $375,253 $375,253 $55,057 $55,057 $52,414 $52,414 Cost of service revenue 230,545 (2,804) 227,741 34,858 (139) 34,719 39,505 39,505 Gross margin 144,708 147,512 20,199 20,338 12,909 12,909 General and administrative expenses 108,958 (6,006) 102,952 15,096 (725) 14,371 11,213 (620) 10,593 Impairment of intangibles and other 748 (748) 0 270 (270) 0 0 0 0 Operating income $35,002 $9,558 $44,560 $4,833 $1,134 $5,967 $1,696 $620 $2,316 Add back depreciation 2,409 2,409 430 430 318 318 Less noncontrolling interests (3,948) (3,948) (898) (898) 267 267 Earnings before interest, tax, and depreciation (EBITDA less NCI) $33,463 $9,558 $43,021 $4,365 $1,134 $5,499 $2,281 $620 $2,901 EBITDA less NCI as a percentage of revenue 8.9% 11.5% 7.9% 10.0% 4.4% 5.5% Facility - based services Adjustments Adjusted Facility - based services HCI Adjustments Adjusted HCI services Net service revenue $27,975 $27,975 $7,143 $7,143 Cost of service revenue 17,572 17,572 3,380 3,380 Gross margin 10,403 10,403 3,763 3,763 General and administrative expenses 9,335 (42) 9,293 3,982 (50) 3,932 Impairment of intangibles and other 0 0 0 0 0 0 Operating income (loss) $1,068 $42 $1,110 ($219) $50 ($169) Add back depreciation 769 769 272 272 Less noncontrolling interests (365) (365) 6 6 Earnings before interest, tax, and depreciation (EBITDA less NCI) $1,472 $42 $1,514 $59 $50 $109 EBITDA less NCI as a percentage of revenue 5.3% 5.4% 0.8% 1.5% 11

 

 

Six Months Ended June 30, 2019 Adjusted Segment Results Home health services Adjustments Adjusted Home health services Hospice services Adjustments Adjusted Hospice services HCBS services Adjustments Adjusted HCBS services Net service revenue $738,288 $0 $738,288 $106,793 $0 $106,793 $104,199 $0 $104,199 Cost of service revenue 456,668 (6,207) 450,461 68,034 (340) 67,694 79,360 (194) 79,166 Gross margin 281,620 287,827 38,759 39,099 24,839 25,033 General and administrative expenses 213,797 (9,655) 204,142 29,949 (1,650) 28,299 22,195 (906) 21,289 Impairment of intangibles and other 7,066 (7,066) 0 271 (271) 0 0 0 0 Operating income $60,757 $22,928 $83,685 $8,539 $2,261 $10,800 $2,644 $1,100 $3,744 Add back depreciation 4,812 4,812 856 856 628 628 Less noncontrolling interests (7,728) (7,728) (1,499) (1,499) 577 577 Earnings before interest, tax, and depreciation (EBITDA less NCI) $57,841 $22,928 $80,769 $7,896 $2,261 $10,157 $3,849 $1,100 $4,949 EBITDA less NCI as a percentage of revenue 7.8% 10.9% 7.4% 9.5% 3.7% 4.7% Facility - based services Adjustments Adjusted Facility - based services HCI Adjustments Adjusted HCI services Net service revenue $55,676 $0 $55,676 $15,471 $0 $15,471 Cost of service revenue 35,304 (158) 35,146 7,486 (711) 6,775 Gross margin 20,372 20,530 7,985 8,696 General and administrative expenses 18,512 (239) 18,273 9,352 (411) 8,941 Impairment of intangibles and other 0 0 0 0 0 0 Operating income (loss) $1,860 $397 $2,257 ($1,367) $1,122 ($245) Add back depreciation 1,526 1,526 578 578 Less noncontrolling interests (846) (846) 13 13 Earnings before interest, tax, and depreciation (EBITDA less NCI) $2,540 $397 $2,937 ($776) $1,122 $346 EBITDA less NCI as a percentage of revenue 4.6% 5.3% - 5.0% 2.2% 12

 

 

Three months ended June 30, Six months ended June 30, 2019 Adjusted Home health services % of rev 2018 Adjusted Home health services % of rev 2019 Adjusted Home health services % of rev 2018 Adjusted Home health services % of rev Net service revenue $375,253 $360,826 $738,288 $565,013 Cost of service revenue 227,741 60.7% 223,472 61.9% 450,461 61.0% 353,633 62.6% Gross margin 147,512 39.3% 137,354 38.1% 287,827 39.0% 211,380 37.4% General and administrative expenses 102,952 27.4% 99,527 27.6% 204,142 27.7% 158,454 28.0% Operating income $44,560 11.9% $37,827 10.5% $83,685 11.3% $52,926 9.4% Depreciation 2,409 2,318 4,812 4,465 Noncontrolling interests (3,948) (3,810) (7,728) (6,046) Earnings before interest, tax, and depreciation (EBITDA less NCI) $43,021 $36,335 $80,769 $51,345 EBITDA less NCI as a percentage of revenue 11.5% 10.1% 10.9% 9.1% • Home Health Adjusted EBITDA margin improved 140 basis points in the second quarter of 2019 compared to the same period in 2018. Due to strong cost management in general and administrative expenses, which is down 260 basis points as a percentage of revenue. This was due to an improvement of 120 basis points in gross margin and 20 basis point improvement in general and administrative expense in the second quarter of 2019 as compared to the same period in 2018. • For the six months ended June 30, 2019, EBITDA increased 180 basis points due to 160 basis point improvement in gross margin and 30 basis point improvement in general and administrative expense. 13 Home Health Segment Adjusted Segment Results – 2019 vs 2018

 

 

Three months ended June 30, Six months ended June 30, 2019 Adjusted Hospice services % of rev 2018 Adjusted Hospice services % of rev 2019 Adjusted Hospice services % of rev 2018 Adjusted Hospice services % of rev Net service revenue $55,057 $50,554 $106,793 $93,180 Cost of service revenue 34,719 63.1% 32,998 65.3% 67,694 63.4% 61,016 65.5% Gross margin 20,338 36.9% 17,556 34.7% 39,099 36.6% 32,164 34.5% General and administrative expenses 14,371 26.1% 14,216 28.1% 28,299 26.5% 26,433 28.4% Operating income $5,967 10.8% $3,340 6.6% $10,800 10.1% $5,731 6.2% Depreciation 430 630 856 1,128 Noncontrolling interests (898) (412) (1,499) (829) Earnings before interest, tax, and depreciation (EBITDA less NCI) $5,499 $3,558 $10,157 $6,030 EBITDA less NCI as a percentage of revenue 10.0% 7.0% 9.5% 6.5% • Hospice Adjusted EBITDA margin improved 300 basis points in the second quarter of 2019 compared to the same period in 2018 due to a 220 basis point improvement in the gross margin and 200 basis point improvement in general and administrative expenses as a percentage of revenue. • For the six months ended June 30, 2019, EBITDA increased 300 basis points due to 210 basis point improvement in gross margin and 190 basis point improvement in general and administrative expense. 14 Hospice Segment Adjusted Segment Results – 2019 vs 2018

 

 

Three months ended June 30, Six months ended June 30, 2019 Adjusted HCBS services % of rev 2018 Adjusted HCBS services % of rev 2019 Adjusted HCBS services % of rev 2018 Adjusted HCBS services % of rev Net service revenue $52,414 $52,753 $104,199 $66,844 Cost of service revenue 39,505 75.4% 39,682 75.2% 79,166 76.0% 50,472 75.5% Gross margin 12,909 24.6% 13,071 24.8% 25,033 24.0% 16,372 24.5% General and administrative expenses 10,593 20.2% 11,507 21.8% 21,289 20.4% 14,409 21.6% Operating income $2,316 4.4% $1,564 3.0% $3,744 3.6% $1,963 2.9% Depreciation 318 196 628 307 Noncontrolling interests 267 90 577 69 Earnings before interest, tax, and depreciation (EBITDA less NCI) $2,901 $1,850 $4,949 $2,339 EBITDA less NCI as a percentage of revenue 5.5% 3.5% 4.7% 3.5% • Home and Community - Based Services Adjusted EBITDA margin improved 200 basis points in the second quarter of 2019 compared to the same period in 2018. This was due to 20 basis point improvement in the gross margin and 160 basis point improvement in general and administrative expenses. • For the six months ended June 30, 2019, EBITDA increased 120 basis points due to 50 basis point improvement in gross margin and 120 basis point improvement in general and administrative expense. 15 Home and Community Based Services Segment Adjusted Segment Results – 2019 vs 2018

 

 

Facility - Based Services Segment Adjusted Segment Results – 2019 vs 2018 Three months ended June 30, Six months ended June 30, 2019 Adjusted Facility - based services % of rev 2018 Adjusted Facility - based services % of rev 2019 Adjusted Facility - based services % of rev 2018 Adjusted Facility - based services % of rev Net service revenue $27,975 $28,304 $55,676 $58,454 Cost of service revenue 17,572 62.8% 18,449 65.2% 35,146 63.1% 38,098 65.2% Gross margin 10,403 37.2% 9,855 34.8% 20,530 36.9% 20,356 34.8% General and administrative expenses 9,293 33.2% 9,056 32.0% 18,273 32.8% 18,202 31.1% Operating income $1,110 4.0% $799 2.8% $2,257 4.1% $2,154 3.7% Depreciation 769 727 1,526 1,264 Noncontrolling interests (365) 207 (846) (102) Earnings before interest, tax and depreciation (EBITDA less NCI) $1,514 $1,733 $2,937 $3,316 EBITDA less NCI as a percentage of revenue 5.4% 6.1% 5.3% 5.7% 16

 

 

Assumptions • Estimated effective tax rate of 27.5% to 28.5% • Weighted average diluted shares of approximately 31.3 million for the full year of 2019 • 5% to 7% organic growth in home health admissions in legacy LHC Group locations • 6% to 8% organic growth in hospice admissions in legacy LHC Group locations • Implicit price concession of 1.5% to 1.7% as a percentage of revenue 2019 Guidance compared to 2018 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 $2,115 +16.9% EPS $3.55 $4.30 +21.1% EBITDA $162 $217 +34.0% • Affirmed guidance issued on May 8, 2019 • Net service revenue of $2.09 billion to $2.14 billion • Adjusted earnings per share of $4.25 to $4.35 • Adjusted EBITDA of $214 million to $220 million 17

 

 

Almost Family Integration Updates Have achieved a realized annual cost synergy run rate of $31.2 million Adjusted Almost Family home health contribution margin up over 300 bps from Q2 2018 The quality star ratings of Almost Family agencies was up to 3.78 in the CMS July release, compared with 3.76 in May and 3.63 in January. On pace to finish system conversions by end of 2019 18 Although each quarter CMS recalibrates its calculation of the raw score, the underlying performance indicators that result in the Patient satisfaction star rating in the Almost Family agencies continue to improve each quarter.

 

 

Accelerated Acquisition and Joint Venture Momentum in 2019 Joint Venture Partner State Date Closed Locations Annual Revenue Unity Health Homecare Unity Health Arkansas 1/31/2019 2 $3,500,000 Geisinger Home Health and Hospice Geisinger/AtlantiCare Pennsylvania/ New Jersey 4/1/2019 6/1/2019 13 $35,000,000 VNA of Maryland Maryland 8/1/2019 2 $35,000,000 Central Missouri Home Health Capital Regional Medical Center Missouri 8/1/2019 3 $3,500,000 Atmore Hospital Home Health Atmore Community Hospital Alabama 8/1/2019 1 $2,000,000 Comfort Home Care Ohio 8/1/2019 2 $2,000,000 Total acquired revenue in 2019 $81,000,000 19

 

 

Industry - Leading Quality and Patient Satisfaction • 99% of LHC locations have CMS 4 stars or greater for quality • 91% of LHC same - store locations have CMS 4 stars or greater for patient satisfaction 20 Quality July 2019 LHCG Actual July 2019 National Average Apr 2019 LHCG Actual Apr 2019 National Average LHC Group 4.65 3.27 4.61 3.27 Almost Family 3.78 3.27 3.76 3.27 Combined 4.27 3.27 4.25 3.27 Patient Satisfaction July 2019* LHCG Actual July 2019* National Average Apr 2019 LHCG Actual Apr 2019 National Average LHC Group 4.26 3.64 4.48 3.87 Almost Family 3.72 3.64 3.98 3.87 Combined 4.05 3.64 4.27 3.87 • 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 * CMS recalibrated the raw score calculation from April to July.

 

 

Debt and Liquidity Metrics Outstanding Debt ( amounts in thousands ) As of June 30, 2019 Total Debt – Balance Sheet $230,000 Less: Cash $26,737 Net Debt $203,263 Net debt to estimated 2019 adjusted EBITDA ratio 0.94x Credit Facility ( amounts in thousands ) As of June 30, 2019 Revolver Size $500,000 Less: Outstanding Revolver $230,000 Less: Letters of Credit $22,344 Available Revolver $247,656 Plus: Cash $26,737 Plus: Accordion $200,000 Total Liquidity $474,393 Cash Flow ( amounts in thousands ) As of June 30, 2019 Free Cash Flow (6 Months Ended) $41,471 + Cash adjustments to Q2 2019 EBITDA 20,416 = Adjusted Free Cash Flow (6 Months Ended) $61,887 DSO’s 48 days 21

 

 

Focus for 2019 Maintain disciplined capital allocation with new joint ventures and other M&A activity Complete the system conversion in the Almost Family locations Continue to lead industry with regulatory lobbying and readiness for PDGM 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 22 Continue to lead the industry in quality and patient satisfaction scores Continue our focus as an industry leader in key areas around employee recruitment and retention including vacancy rate and voluntary turnover

 

 

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 June 30, Six Months Ended June 30, 2019 2018 2019 2018 Net Service Revenue, pre - adoption $525,120 $509,742 $ 1,036,057 $ 805,722 Less: Implicit price concession (1) 7,278 7,718 15,630 12,644 Net Service Revenue, post - adoption $517,842 $502,024 $ 1,020,427 $ 793,078 Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Net income attributable to LHC Group, Inc.’s common stockholders $25,000 $16,797 $43,856 $21,792 Add (net of tax): Almost Family and other acquisition expenses (2) 6,713 5,860 11,981 12,171 Closures/relocations/consolidations (3) 1,537 2,464 3,781 2,464 Income tax effect of adjustments to income (4) ─ 689 ─ 689 Provider moratorium impairment (5) ─ ─ 4,332 ─ Adjusted net income attributable to LHC Group, Inc.’s common stockholders $33,250 $25,810 $63,950 $37,116 23 Footnotes are on page 24

 

 

Non - GAAP Reconciliations (Amounts in thousands, unaudited ) RECONCILIATION OF ADJUSTED NET INCOME ATTRIBUTABLE TO LHC GROUP PER DILUTED SHARE Three Months Ended June 30, Six Months Ended June 30, 2019 2018 2019 2018 Net income attributable to LHC Group, Inc.’s common stockholders $0.80 $0.55 $1.41 $0.89 Add (net of tax): Almost Family and other acquisition expenses (2) 0.22 0.19 0.39 0.53 Closures/relocations/consolidations (3) 0.05 0.08 0.12 0.08 Income tax effect of adjustments to income (4) ─ 0.02 ─ 0.02 Provider moratorium impairment (5) ─ ─ 0.14 ─ Adjusted net income attributable to LHC Group, Inc.’s common stockholders $1.07 $0.84 $2.06 $1.52 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, integration and Homecare Homebase conversion expenses and other costs associated with the acquisition of Almost Family and other recently announced or completed acquisitions ( $ 9 . 3 million pre - tax in the three months ended June 30 , 2019 and $ 16 . 6 million in the six months ended June 30 , 2019 , which includes a $ 2 . 2 million lease termination charge that occurred in the second quarter of 2019 ) . 3. Expenses and impairments associated with the closure or consolidation of 13 locations in the second quarter of 2019 along with residual costs and expenses in connection with the closures in the first quarter of 2019 . ( $ 2 . 1 million pre - tax in the three months ended June 30 , 2019 and $ 5 . 2 million in the six months ended June 30 , 2019 ) . 4. During the six months ended June 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 . 24

 

 

• Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA) Three Months Ended June 30 , Six Months Ended June 30 , 2019 2018 2019 2018 Net income $25,000 $16,797 $43,856 $21,792 Add: Income tax expense 9,557 7,170 13,157 8,147 Interest expense, net 2,885 3,202 5,937 4,652 Depreciation and amortization 4,198 4,255 8,400 7,548 Adjustment items (1) 11,404 11,875 27,808 20,714 Adjusted EBITDA $53,044 $43,299 $99,158 $62,853 (1) Adjustment items (pre - tax): Almost Family merger and other acquisition expenses $9,279 $8,361 $16,574 $17,200 Closures/relocation/consolidations $2,125 $3,514 $5,234 $3,514 Provider moratorium impairment $0 $0 $6,000 $0 Total adjustments $11,404 $11,875 $27,808 $20,714 Non - GAAP Reconciliations (Amounts in thousands, unaudited) 25

 

 

 

 

 

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