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

Form 8-K
0001303313 False 0001303313 2019-11-06 2019-11-06 iso4217:USD xbrli:shares iso4217:USD xbrli:shares
 

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):  November 6, 2019

_______________________________

LHC Group, Inc

(Exact name of registrant as specified in its charter)

_______________________________

Delaware001-3398971-0918189
(State or Other Jurisdiction of Incorporation)(Commission File Number)(I.R.S. Employer Identification No.)

901 Hugh Wallis Road South

Lafayette, Louisiana 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))

Securities registered pursuant to Section 12(b) of the 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

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

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 November 6, 2019, the Company issued a press release announcing its financial results for the third quarter ended September 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 7.01. Regulation FD Disclosure.

Item 2.02 of this Current Report on Form 8-K is incorporated herein by reference.

In addition, a copy of the supplemental slides which will be discussed during the Company’s earnings call at 9:00 a.m. ET on Thursday, November 7, 2019, is attached to this report as Exhibit 99.2 and incorporated herein by reference.

The information furnished pursuant to Item 7.01 and Exhibit 99.2 of this Current Report on Form 8-K shall not be deemed “filed” for purposes of Section 18 of 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 November 6, 2019, announcing the Company’s financial results for the third quarter ended September 30, 2019 (furnished only).
99.2 Third Quarter 2019 Supplemental Financial Information (furnished only).
104 Cover Page Interactive Data File (embedded within the Inline XBRL document)
 
 

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: November 7, 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 Third Quarter 2019 Financial Results

Increases 2019 EPS Guidance
Growth Expected to Accelerate in 2020

LAFAYETTE, La., Nov. 06, 2019 (GLOBE NEWSWIRE) -- LHC Group, Inc. (NASDAQ: LHCG) announced its financial results for the quarter ended September 30, 2019. Unless otherwise noted, all results are compared with the third quarter ended September 30, 2018.

Third Quarter of 2019 Financial Results – LHC Group Legacy Home Health and Hospice and Fully Converted Almost Family Locations Generating Strong Growth

A reconciliation of all non-GAAP financial results in this release appears on page 13.

Operational and Strategic Highlights

Commenting on the results, Keith G. Myers, LHC Group’s Chairman and Chief Executive Officer, said, “We have been able to deliver excellent results in 2019 with strong organic growth, margin improvement and momentum in our M&A strategy. Our growth is highlighted by increasing market share from legacy LHC locations and improving the performance at post-conversion Almost Family locations. We are well positioned to extend our growth posture in 2020 and beyond.”

M&A Strategy - Strong Current Pipeline of Joint Ventures and Acquisitions and Market Consolidation Expected to Accelerate in 2020
On August 1, 2019, LHC Group and Capital Regional Medical Center finalized their joint venture to purchase from SSM Health the assets of three home health and hospice locations in Jefferson City and Mexico, Missouri. LHC Group expects annualized revenue from this joint venture of approximately $3.5 million.

On August 1, 2019, LHC Group and Atmore Community Hospital finalized a JV partnership agreement to purchase and share ownership of a home health provider in Atmore, Alabama. The provider will continue operating under the name Atmore Community Home Care, serving patients and families in the community and the region with in-home healthcare. LHC Group expects annualized revenue from this joint venture of approximately $2.0 million.

On August 1, 2019, LHC Group purchased two home and community based services (HCBS) locations in West Union and Waverly, Ohio from Comfort Home Care. The agreement includes 100 percent of each location’s assets, which will be consolidated under LHC Group’s existing HCBS provider, HomeCare by Blackstone, in Columbus. LHC Group expects annualized revenue from this acquisition of approximately $2.0 million.

On August 1, 2019, LHC Group completed the previously announced acquisition of a home health and HCBS provider located in Baltimore from VNA of Maryland and Elite Home Care Services. LHC Group expects annualized revenue from this acquisition of approximately $35.0 million.

On September 1, 2019, LHC Group finalized a joint venture agreement with Norton Healthcare in Louisville, Kentucky to share ownership of Caregivers Health Network, a home health provider. Under terms of the agreement, Norton Healthcare purchased a minority interest in the agency, which has been renamed Norton Home Health.

On November 5, 2019, LHC Group and LifePoint Health agreed to further expand their existing joint venture partnership with the purchase of one home health provider with a location in Wilmington, Ohio and two hospice providers with a location in Sierra Vista, Arizona and Lewiston, Idaho. The agreement, which is subject to customary closing conditions, is expected to close by December 1, 2019. LHC Group expects annualized revenue from the expansion of this joint venture of approximately $3.6 million.

On November 5, 2019, LHC Group agreed to purchase a single freestanding home health provider – Life Wellness Home Health – in Las Vegas, Nevada. The agreement, which is subject to customary closing conditions, is expected to close by December 1, 2019. LHC Group expects annualized revenue from this joint venture of approximately $2.1 million.

Myers noted, “The common thread throughout all of the recent regulatory rulings and changes is that they shift care into the home and encourage payment models built on delivering value. The new models are now more dependent than ever on providers who can deliver the highest levels of clinical quality across the broadest range of services and within a value-based environment. LHC Group wins in all of these scenarios, and it will increase the value proposition we provide to leading hospital and health systems across the country. With over 30% of existing home health agencies projected to close as a result of PDGM and the elimination of the RAP according to many industry sources, we expect market consolidation through acquisitions and market share gains to help fuel our organic growth as well.”

Full Year 2019 EPS Guidance Raised and Full Year Revenue and EBITDA Guidance Affirmed - 24% Year-over-Year Adjusted Earnings Growth at the Midpoint Continues to be Fueled by Strong Organic Growth and Acquisition Accretion
The Company increased its guidance for full year adjusted earnings per diluted share to a range of $4.35 to $4.45 from a range of $4.25 to $4.35. The Company affirmed its full year 2019 guidance issued on May 8, 2019 for net service revenue in a range of $2.09 billion to $2.14 billion and Adjusted EBITDA, less non-controlling interest, in a range of $214 million to $220 million.

The Company’s guidance ranges do not take into account the impact of future reimbursement changes, if any, future acquisitions, if made, de novo locations, if opened, location closures, if any, or future legal expenses, if necessary. The adjusted earnings guidance for 2019 is presented on a non-GAAP basis, as it does not include the impact of transaction related costs, integration related expenses or other expenses related to the acquisition of Almost Family or other acquisitions. Given the difficulty in predicting the future amount and timing of these expenses, the Company cannot reasonably provide a full reconciliation of its fiscal year 2019 adjusted earnings per share guidance to GAAP earnings per share.

Joshua L. Proffitt, LHC Group’s Chief Financial Officer, added, “LHC Group’s distinct advantages in quality and patient satisfaction scores, national scale, organic growth, accelerating M&A pipeline, available liquidity and compelling value proposition for our partners provide near-term and long-term growth avenues that we have only begun to fully deploy. The strong organic growth we have achieved this year and the strengthening of the Almost Family business in the third quarter position us well for continued growth in 2020. In addition, the favorable rulings by CMS for PDGM and other expected regulatory changes that further enhance our leadership position and differentiated business model position us at the forefront of what we anticipate is a historic consolidation opportunity that can materially drive our growth in 2020 and beyond.”

Patient Driven Groupings Model (PDGM) Commentary
“Last week’s final PDGM ruling by CMS of a 4.36% behavioral adjustment was a significant improvement for the home health industry compared with the proposed rule issued in July 2019 with an 8.01% behavioral adjustment,” Myers added. “Despite this positive change, we remain concerned with the lack of transparency in CMS’s use of assumptions to establish payment policy and adjustments. We support payment reform that is evidence-based rather than on assumptions. We will continue to work closely with CMS to urge them to be more transparent in the calculation of payments to providers under the Medicare Home Health benefit”.

“I would like to thank the many sponsors in Congress for their overwhelming support with the regulatory and legislative changes under PDGM and their understanding of the need for the change in the adjustment to preserve access to home health services, particularly in rural areas. This change would not have happened without their help. I would also like to thank Seema Verma, the CMS Administrator, and her staff at CMS and HHS for their multiple meetings with us and their willingness to work collaboratively and listen to the industry’s concerns.”

“I’m extremely proud of how the LHC Group team approached the challenge of PDGM from a clinical perspective and created clinical pathways that ensure our high standards of clinical care and quality outcomes while increasing efficiency that minimizes the financial impact,” noted Myers. “Our clinical leadership team began working on PDGM preparedness in January and initiated pilots in mid-July that proved out the efficacy of our care models. Based on the success of these pilots, we are beginning the rollout of the care model. The benefits of this clinical approach will become more evident in 2020 as we execute our patient care models under the new rulings and demonstrate what it truly means to deliver value in the most appropriate and cost-efficient setting.”

Conference Call
LHC Group will host a conference call on Thursday, November 7, 2019, at 9:00 a.m. Eastern time to discuss its third quarter 2019 results. The toll-free number to call for this interactive teleconference is (866) 393‑1608 (international callers: (973) 890-8327). A telephonic replay of the conference call will be available through midnight on November 14, 2019, by dialing (855) 859‑2056 (international callers: (404) 537-3406) and entering confirmation number 4293488.

The Company has posted supplemental financial information on the third quarter results that it will reference during the conference call. The supplemental information can be found under Quarterly Results on the Company’s Investor Relations page. A live webcast of LHC Group’s conference call will be available under the Investor Relations section of the Company’s website, www.LHCGroup.com. A one-year online replay will be available approximately one hour following the conclusion of the live broadcast.

About LHC Group, Inc.
LHC Group, Inc. is a national provider of in-home healthcare services and innovations, providing quality, value-based healthcare to patients primarily within the comfort and privacy of their home or place of residence. LHC Group’s services cover a wide range of healthcare needs for patients and families dealing with illness, injury, or chronic conditions. The company’s 32,000 employees deliver home health, hospice, home and community based services, and facility-based care in 35 states and the District of Columbia – reaching 60 percent of the U.S. population aged 65 and older. LHC Group is the preferred in-home healthcare partner for 350 leading hospitals around the country. In 2019, the company was named to the inaugural Forbes list of “America’s Best-in-State Employers.”

Forward-looking Statements
This press release contains “forward-looking statements” (as defined in the Securities Litigation Reform Act of 1995) regarding, among other things, future events or the future financial performance of the Company, or anticipated benefits of the transaction. Words such as “anticipate,” “expect,” “project,” “intend,” “believe,” “will,” “estimates,” “may,” “could,” “should” and words and terms of similar substance used in connection with any discussion of future plans, actions or events identify forward-looking statements. Forward-looking statements contained in this press release include, but are not limited to: our 2019 revenue and earnings guidance, statements about the benefits of the acquisition, including anticipated earnings accretion, synergies and cost savings and the timing thereof; the Company’s plans, objectives, expectations, projections and intentions; and other statements relating to the transaction that are not historical facts. Forward-looking statements are based on information currently available to the Company and involve estimates, expectations and projections. Investors are cautioned that all such forward-looking statements are subject to risks and uncertainties, and important factors could cause actual events or results to differ materially from those indicated by such forward-looking statements. With respect to the acquisition, these risks, uncertainties and factors include, but are not limited to: the risk that the businesses will not be integrated successfully; the risk that the cost savings, synergies and growth from the transaction may not be fully realized or may take longer to realize than expected; the diversion of management time on integration-related issues; and the risk that costs associated with the integration of the businesses are higher than anticipated. With respect to the Company’s  businesses, these risks, uncertainties and factors include, but are not limited to: changes in, or failure to comply with, existing government regulations that impact the Company’s businesses; legislative proposals for healthcare reform; the impact of changes in future interpretations of fraud, anti-kickback, or other laws; changes in Medicare and Medicaid reimbursement levels; changes in laws and regulations with respect to Accountable Care Organizations; changes in the marketplace and regulatory environment for Health Risk Assessments; decrease in demand for the Company’s services; the potential impact of the transaction on relationships with customers, joint venture and other partners, competitors, management and other employees, including the loss of significant contracts or reduction in revenues associated with major payor sources; ability of customers to pay for services; risks related to any current or future litigation proceedings; potential audits and investigations by government and regulatory agencies, including the impact of any negative publicity or litigation; the ability to attract new customers and retain existing customers in the manner anticipated; the ability to hire and retain key personnel; increased competition from other entities offering similar services as offered by the  Company; reliance on and integration of information technology systems; ability to protect intellectual property rights; impact of security breaches, cyber-attacks or fraudulent activity on the Company’s reputation; the risks associated with assumptions the parties make in connection with the parties’ critical accounting estimates and legal proceedings; the risks associated with the Company’s expansion strategy, the successful integration of recent acquisitions, and if necessary, the ability to relocate or restructure current facilities; and the potential impact of an economic downturn or effects of tax assessments or tax positions taken, risks related to goodwill and other intangible asset impairment, tax adjustments, anticipated tax rates, benefit or retirement plan costs, or other regulatory compliance costs.

Many of these risks, uncertainties and assumptions are beyond the Company’s ability to control or predict. Because of these risks, uncertainties and assumptions, you should not place undue reliance on these forward-looking statements. Furthermore, forward-looking statements speak only as of the information currently available to the Company on the date they are made, and the Company does not undertake any obligation to update publicly or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this press release. The Company does not give any assurance (1) that the Company will achieve its guidance or expectations, or (2) concerning any result or the timing thereof. All subsequent written and oral forward-looking statements concerning the transaction or other matters and attributable to the Company or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements above.


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

 September 30,
 2019
 December 31, 2018
ASSETS   
Current assets:   
Cash$29,302  $49,363 
Receivables:   
Patient accounts receivable288,114  252,592 
Other receivables11,205  6,658 
Amounts due from governmental entities963  830 
Total receivables300,282  260,080 
Prepaid income taxes1,316  11,788 
Prepaid expenses19,994  24,775 
Other current assets22,140  20,899 
Total current assets373,034  366,905 
Property, building and equipment, net of accumulated depreciation of $66,219 and $55,253, respectively84,288  79,563 
Goodwill1,216,227  1,161,717 
Intangible assets, net of accumulated amortization of $16,127 and $15,176, respectively304,517  297,379 
Assets held for sale2,500  2,850 
Operating lease right of use asset95,427   
Other assets21,871  20,301 
Total assets$2,097,864  $1,928,715 
LIABILITIES AND STOCKHOLDERS’ EQUITY   
Current liabilities:   
Accounts payable and other accrued liabilities$76,458  $77,135 
Salaries, wages, and benefits payable105,582  84,254 
Self-insurance reserves31,798  32,776 
Current operating lease liabilities29,362   
Current portion of long-term debt  7,773 
Amounts due to governmental entities1,249  4,174 
Total current liabilities244,449  206,112 
Deferred income taxes50,200  43,306 
Income taxes payable3,582  4,297 
Revolving credit facility232,000  235,000 
Long term notes payable  930 
Operating lease payable70,109   
  Total liabilities600,340  489,645 
Noncontrolling interest — redeemable15,594  14,596 
Stockholders’ equity:   
LHC Group, Inc. stockholders’ equity:   
Preferred stock – $0.01 par value; 5,000,000 shares authorized; none issued or outstanding   
Common stock — $0.01 par value; 60,000,000 shares authorized; 35,857,938 and 35,636,414 shares issued in 2019 and 2018, respectively359  356 
Treasury stock —  5,060,266 and 4,958,721 shares at cost, respectively(58,796) (49,374)
Additional paid-in capital945,575  937,968 
Retained earnings501,898  427,975 
Total LHC Group, Inc. stockholders’ equity1,389,036  1,316,925 
Noncontrolling interest — non-redeemable92,894  107,549 
Total equity1,481,930  1,424,474 
Total liabilities and equity$2,097,864  $1,928,715 


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

 Three Months Ended
September 30,
 Nine Months Ended
 September 30,
 2019 2018 2019 2018
Net service revenue$528,499  $507,043  $1,548,926  $1,300,121 
Cost of service revenue334,768  322,196  981,620  831,818 
Gross margin193,731  184,847  567,306  468,303 
General and administrative expenses146,829  149,572  440,634  390,817 
Other intangible impairment charge197  345  7,534  1,123 
Operating income46,705  34,930  119,138  76,363 
Interest expense(2,596) (3,264) (8,533) (7,916)
Income before income taxes and noncontrolling interest44,109  31,666  110,605  68,447 
Income tax expense9,508  6,685  22,665  14,832 
Net income34,601  24,981  87,940  53,615 
Less net income attributable to noncontrolling interests4,534  3,751  14,017  10,593 
Net income attributable to LHC Group, Inc.’s common stockholders$30,067  $21,230  $73,923  $43,022 
        
Earnings per share:       
Basic$0.97  $0.69  $2.39  $1.63 
Diluted$0.96  $0.68  $2.37  $1.61 
Weighted average shares outstanding:       
Basic30,971  30,750  30,919  26,393 
Diluted31,247  31,084  31,203  26,641 


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

 Nine Months Ended
 September 30,
 2019 2018
Operating activities:   
Net income$87,940  $53,615 
Adjustments to reconcile net income to net cash provided by operating activities:   
Depreciation and amortization expense12,812  11,986 
Amortization of operating lease right of use asset22,952   
Stock-based compensation expense6,382  7,336 
Deferred income taxes8,102  2,915 
Loss (gain) on disposal of assets337  4 
  Impairment of intangibles and other7,534  1,123 
Changes in operating assets and liabilities, net of acquisitions:   
Receivables(42,928) (5,693)
Prepaid expenses and other assets2,018  (7,489)
Prepaid income taxes8,258  9,710 
Accounts payable and accrued expenses(4,668) 13,862 
Income taxes payable(715) (313)
Net amounts due to/from governmental entities(3,234) (722)
Net cash provided by operating activities104,790  86,334 
Investing activities:   
Purchases of property, building and equipment(15,401) (18,889)
Cash paid for acquisitions, net of cash acquired(54,120) 9,070 
Net cash used in investing activities(69,521) (9,819)
Financing activities:   
Proceeds from line of credit84,000  292,084 
Payments on line of credit(87,000) (300,884)
Proceeds from employee stock purchase plan1,540  1,015 
Payments on debt(7,650) (196)
  Payments on deferred financing fees  (1,881)
Noncontrolling interest distributions(18,944) (8,720)
Withholding taxes paid on stock-based compensation(9,422) (6,719)
Purchase of additional controlling interest(18,763) (412)
Exercise of options153   
Sale of noncontrolling interest756  3,322 
Net cash (used in) financing activities(55,330) (22,391)
Change in cash(20,061) 54,124 
Cash at beginning of period49,363  2,849 
Cash at end of period$29,302  $56,973 
Supplemental disclosures of cash flow information:   
Interest paid$8,549  $6,127 
Income taxes paid$8,015  $2,929 

Non-cash operating activity: The Company recorded $115.2 million in operating lease right of use assets in exchange for lease obligations.

Non-cash financing activity:  The Company accrued $1.5 million for capital expenditures primarily related to the home office expansion project during the nine months ended September 30, 2019.


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

 Three Months Ended September 30, 2019
 Home health services Hospice services Home and community-based services Facility-based services HCI Total
Net service revenue$375,599  $62,028  $53,411  $28,715  $8,746  $528,499 
Cost of service revenue237,414  35,819  39,694  18,508  3,333  334,768 
General and administrative expenses108,318  15,218  10,809  9,498  2,986  146,829 
Other intangible impairment charge197          197 
Operating income29,670  10,991  2,908  709  2,427  46,705 
Interest expense(1,758) (310) (272) (174) (82) (2,596)
Income before income taxes and noncontrolling interest27,912  10,681  2,636  535  2,345  44,109 
Income tax expense5,900  1,689  1,299  144  476  9,508 
Net income22,012  8,992  1,337  391  1,869  34,601 
Less net income (loss) attributable to
noncontrolling interests
3,577  1,213  (180) (67) (9) 4,534 
Net income attributable to LHC Group, Inc.'s common stockholder$18,435  $7,779  $1,517  $458  $1,878  $30,067 
Total assets$1,458,991  $235,865  $243,779  $88,905  $70,324  $2,097,864 


 Three Months Ended September 30, 2018
 Home health services Hospice services Home and community-based services Facility-based services HCI Total
Net service revenue$360,000  $52,962  $52,773  $27,891  $13,417  $507,043 
Cost of service revenue222,765  34,540  39,860  20,146  4,885  322,196 
General and administrative expenses105,112  14,685  12,922  9,823  7,030  149,572 
Other intangible impairment charge345          345 
Operating income (loss)31,778  3,737  (9) (2,078) 1,502  34,930 
Interest expense(2,284) (491) (163) (163) (163) (3,264)
Income (loss) before income taxes and noncontrolling interest29,494  3,246  (172) (2,241) 1,339  31,666 
Income tax expense (benefit)6,209  774  (74) (541) 317  6,685 
Net income (loss)23,285  2,472  (98) (1,700) 1,022  24,981 
Less net income (loss) attributable to noncontrolling interests3,425  386  (87) 27    3,751 
Net income (loss) attributable to LHC Group, Inc.'s common stockholders$19,860  $2,086  $(11) $(1,727) $1,022  $21,230 
Total assets$1,316,792  $203,921  $246,963  $61,089  $81,999  $1,910,764 

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

 Nine Months Ended September 30, 2019
 Home health services Hospice services Home and community-based services Facility-based services HCI Total
Net service revenue$1,113,887  $168,821  $157,610  $84,391  $24,217  $1,548,926 
Cost of service revenue694,082  103,853  119,054  53,812  10,819  981,620 
General and administrative expenses322,115  45,167  33,004  28,010  12,338  440,634 
Other intangible impairment charge7,263  271        7,534 
Operating income90,427  19,530  5,552  2,569  1,060  119,138 
Interest expense(5,919) (976) (857) (524) (257) (8,533)
Income before income taxes and noncontrolling interest84,508  18,554  4,695  2,045  803  110,605 
Income tax expense17,178  3,716  1,279  297  195  22,665 
Net income67,330  14,838  3,416  1,748  608  87,940 
Less net income (loss) attributable to
noncontrolling interests
11,305  2,712  (757) 779  (22) 14,017 
Net income attributable to LHC Group, Inc.'s common stockholder$56,025  $12,126  $4,173  $969  $630  $73,923 


 Nine Months Ended September 30, 2018
 Home health services Hospice services Home and community-based services Facility-based services HCI Total
Net service revenue$924,463  $146,142  $119,617  $86,345  $23,554  $1,300,121 
Cost of service revenue576,416  95,557  90,331  59,102  10,412  831,818 
General and administrative expenses277,075  43,090  28,664  29,571  12,417  390,817 
Other intangible impairment charge636      487    1,123 
Operating income70,336  7,495  622  (2,815) 725  76,363 
Interest expense(5,627) (1,181) (393) (395) (320) (7,916)
Income (loss) before income taxes and noncontrolling interest64,709  6,314  229  (3,210) 405  68,447 
Income tax expense (benefit)14,022  1,368  50  (695) 87  14,832 
Net income (loss)50,687  4,946  179  (2,515) 318  53,615 
Less net income (loss) attributable to noncontrolling interests9,472  1,215  (157) 129  (66) 10,593 
Net income (loss) attributable to LHC Group, Inc.'s common stockholders$41,215  $3,731  $336  $(2,644) $384  $43,022 


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

  Three Months Ended
September 30,
 Nine Months Ended
September 30,
Key Data: 2019 2018 2019 2018
         
Home Health Services:        
Locations 555  565  555  565 
Acquired 19  2  32  256 
De novo        
Divested/consolidated (3) (5) (16) (10)
Total new admissions 97,647  92,643  286,519  239,671 
Medicare new admissions 57,496  57,118  172,343  149,158 
Average daily census 76,905  75,479  76,573  76,080 
Average Medicare daily census 49,016  49,948  49,418  50,768 
Medicare completed and billed episodes 91,956  93,389  276,751  244,297 
Average Medicare case mix for completed and billed Medicare episodes 1.09  1.10  1.10  1.09 
Average reimbursement per completed and billed Medicare episodes $3,070  $2,929  $3,060  $2,890 
Total visits 2,619,073  2,471,979  7,702,229  6,472,307 
Total Medicare visits 1,695,148  1,662,610  5,048,298  4,375,408 
Average visits per completed and billed Medicare episodes 18.4  17.8  18.2  17.9 
Organic growth excluding Almost Family (1)(2)        
Net revenue 7.9% 9.3% 7.2% 9.1%
Net Medicare revenue 4.1% 4.6% 3.5% 4.8%
Total new admissions 11.1% 9.7% 8.6% 8.1%
Medicare new admissions 5.4% 4.6% 2.5% 4.8%
Average daily census 7.2% 2.9% 5.1% 2.9%
Average Medicare daily census 2.6% (0.9)% 0.0 % (0.8)%
Medicare completed and billed episodes 3.6% 0.7% 1.0% 1.0%
         
Hospice Services:        
Locations 109  104  109  104 
Acquired 5  1  10  16 
De novo        
Divested/Consolidated   (3) (5) (3)
Admissions 4,522  4,557  13,746  13,139 
Average daily census 4,187  3,763  4,002  3,525 
Patient days 385,164  346,153  1,093,039  962,839 
Average revenue per patient day $152.47  $155.40  $153.74  $154.03 
Organic growth excluding Almost Family: (1)(2)        
Total new admissions 2.1% 5.1% 5.9% 4.2%
         
Home and Community-Based Services:        
Locations (3) 105     105    
Average daily census 13,676  14,455  13,914  14,491 
Billable hours 2,276,984  2,295,450  6,841,598  5,002,064 
Revenue per billable hour $23.97  $23.30  $23.62  $24.30 
         
         
         
Facility-Based Services:        
Long-term Acute Care        
Locations 13  12  13  12 
Acquired 1    1   
Divested/Consolidated       (2)
Patient days 18,918  21,617  58,524  65,480 
Average revenue per patient day $1,377  $1,183  $1,310  $1,244 
Occupancy rate 66.3% 75.8% 69.2% 73.5%
  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 are expected to be completed by the end of 2019.
     
  3. The number of locations for HCBS has been updated to not only include the physical standalone locations but also the locations that are part of a home health provider.


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

  Three Months Ended
 September 30,
Nine Months Ended
 September 30,
  2019 2018 2019 2018
Revenue $532,026  $514,118  $1,568,084  $1,319,840 
Less:  Implicit price concession (1) 3,527  7,075  19,158  19,719 
Net service revenue $528,499  $507,043  $1,548,926  $1,300,121 

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

  Three Months Ended
 September 30,
Nine Months Ended
 September 30,
  2019 2018 2019 2018
Net income attributable to LHC Group, Inc.’s common stockholders $30,067  $21,230  $73,923  $43,022 
Add (net of tax):        
  AFAM and other acquisition expenses (2) 8,482  7,118  20,463  19,289 
  Closures/relocations/consolidations (3) 941  2,335  4,722  4,799 
  Excess tax benefit  (4)   (1,200)   (1,200)
  Income tax effect of adjustments to income       689 
  Provider moratorium impairment (5)     4,332   
Adjusted net income attributable to LHC Group, Inc.’s common stockholders $39,490  $29,483  $103,440  $66,599 

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

  Three Months Ended
 September 30,
Nine Months Ended
 September 30,
  2019 2018 2019 2018
Net income attributable to LHC Group, Inc.’s common stockholders $0.96  $0.68  $2.37  $1.61 
Add (net of tax):        
  AFAM and other acquisition expenses (2) 0.27  0.23  0.66  0.72 
  Closures/relocations/consolidations (3) 0.03  0.08  0.15  0.18 
  Excess tax benefit  (4)   (0.04)   (0.05)
  Income tax effect of adjustments to income       0.03 
  Provider moratorium impairment (5)     0.14   
Adjusted net income attributable to LHC Group, Inc.’s common stockholders $1.26  $0.95  $3.32  $2.49 
  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 ($11.7 million pre-tax in the three months ended Sept 30, 2019 and $28.3 million in the nine months ended Sept 30, 2019).
  3. Expenses and impairments associated with the closure or consolidation of 3 locations in the third quarter of 2019 along with residual costs and expenses in connection with closures in prior periods ($1.3 million pre-tax in the three months ended Sept 30, 2019 and $6.5 million in the nine months ended Sept 30, 2019).
  4. Tax benefit due to the exercise of stock options related to the Almost Family acquisition.
  5. During the nine months ended September 30, 2019, the Company recorded $6.0 million of moratoria impairment as a result of the Centers for Medicare and Medicaid Services (“CMS”) action to remove all federal moratoria with regard to Medicare provider enrollment.

RECONCILIATION OF ADJUSTED EBITDA
(Amounts in thousands)

(Unaudited)

  Three Months Ended
 September 30,
Nine Months Ended
 September 30,
  2019 2018 2019 2018
Net income attributable to LHC Group, Inc.’s common stockholders $30,067  $21,230  $73,923  $43,022 
Add:        
  Income tax expense 9,508  6,685  22,665  14,832 
  Interest expense, net 2,596  3,264  8,533  7,916 
  Depreciation and amortization 4,412  4,438  12,812  11,986 
  Adjustment items (6) 13,033  13,165  40,841  33,879 
Adjusted EBITDA $59,616  $48,782  $158,774  $111,635 


(6) Adjustment items (pre-tax):        
  Almost Family merger and other acquisition expenses 11,731  9,914  28,305  27,114 
  Closures/relocation/consolidations 1,302  3,251  6,536  6,765 
  Provider moratorium impairment     6,000   
Total adjustments $13,033  $13,165  $40,841  $33,879 

Contact: 
Eric Elliott

Senior Vice President of Finance
(337) 233-1307
[email protected]



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Section 3: EX-99.2 (EXHIBIT 99.2)

EXHIBIT 99.2

 

Supplemental Financial Information Third Quarter Ended September 30, 2019 November 6, 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 Select key segment statistical and financial data ……………… .. ……………………… ............. 6 Consolidated results ……………………………………………………………… ........................ ……… 7 - 8 Adjustments to net income …………………………………………………………………………… ... …… . 9 Segment results …………………………………………………………………………………………… ..... 10 - 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 2020………………………………………………………………………………………………….……22 Non - GAAP reconciliations…………………………………………………………………………….....23 - 25

 

 

Home Health Hospice HCBS Home Health & Hospice Home Health & HCBS Home Health, Hospice, & HCBS LHC Group Overview 72.0% 10.7% 10.3% 5.4% 1.6% % of Revenue HH Hospice HCBS Facility-based HCI 4 555 home health locations 60% Of U.S. population aged 65+ included in service area 109 hospice locations 105 * home & community based services locations 13 Long term acute care hospitals locations 27 other service locations 809 total locations 350 leading hospital JV partners 35 states and District of Columbia * The number of locations for HCBS has been updated to not only include the physical standalone locations but also the locations that are part of a home health provider.

 

 

• Net service revenue up 4.2% for Q3 as compared to Q3 2018 • Adjusted Earnings Per Share increases 32.6% for Q3 2019 as compared to Q3 2018 • Organic growth in admissions for Legacy LHC Group home health locations was 11.1% for the quarter and 8.6% year to date. • Organic growth in admissions for hospice was 2.1% for the quarter and 5.9% year to date. • LHC Group quality and patient satisfaction scores continue to lead the industry • Maintained strong pace of acquisitions – acquired or announced acquisitions of $86.7 million in annualized revenue year to date in 2019 • 130 Almost Family locations fully converted to LHC Group’s version of Homecare Homebase prior to the third quarter and demonstrated sequential organic growth in home health admissions of 1.2% in the third quarter as compared to the second quarter. Commentary on Q3 2019 5

 

 

Select Key Segment Statistical and Financial Data Organic growth excluding Almost Family: (1)(2) Net revenue 7.9% 9.3% 7.2% 9.1% Net Medicare revenue 4.1% 4.6% 3.5% 4.8% Total new admissions 11.1% 9.7% 8.6% 8.1% Medicare new admissions 5.4% 4.6% 2.5% 4.8% Average daily census 7.2% 2.9% 5.1% 2.9% Average Medicare daily census 2.6% (0.9)% 0.0% (0.8)% Medicare completed and billed episodes 3.6% 0.7% 1.0% 1.0% Three Months Ended September 30 , Nine Months Ended September 30, 2019 2018 2019 2018 Home Health Average daily census 13,676 14,455 13,914 14,491 Billable hours 2,276,984 2,295,450 6,841,598 5,002,064 Revenue per billable hour $23.97 $23.30 $23.62 $24.30 Home and Community - Based Admissions 4,522 4,557 13,746 13,139 Average daily census 4,187 3,763 4,002 3,525 Patient days 385,164 346,153 1,093,039 962,839 Average revenue per patient day $152.47 $155.40 $153.74 $154.03 Organic growth excluding Almost Family: (1)(2) Total new admissions 2.1% 5.1% 5.9% 4.2% Average daily census 9.2% (3.5)% 8.9% (7.1)% Hospice Patient days 18,918 21,617 58,524 65,480 Average revenue per patient day $1,377 $1,183 $1,310 $1,244 Occupancy rate 66.3% 75.8% 69.2% 73.5% 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 is expected to be completed by the end of 2019. 3Q 2019 Consolidated Growth 6 • Revenue: +4.2% • Adjusted EPS: +32.6% • Adjusted EBITDA: +22.2% • Revenue: +70.3% • Adjusted EPS: +46.7% • Adjusted EBITDA: +84.5% YTD 2019 Consolidated Growth • Revenue: +19.1% • Adjusted EPS: +33.3% • Adjusted EBITDA: +42.2%

 

 

2019 Adjusted Consolidated Results Three months ended September 30 Nine months ended September 30 Consolidated Total Adjustments Adjusted Consolidated Consolidated Total Adjustments Adjusted Consolidated Net service revenue $528,499 $0 $528,499 $1,548,926 $0 $1,548,926 Cost of service revenue 334,768 (3,335) 331,433 981,620 (10,945) 970,675 Gross margin 193,731 197,066 567,306 578,251 General and administrative expenses 146,829 (9,501) 137,328 440,634 (22,362) 418,272 Impairment of intangibles and other 197 (197) 0 7,534 (7,534) 0 Operating income $46,705 $13,033 $59,738 $119,138 $40,841 $159,979 Add back depreciation 4,412 0 4,412 12,812 0 12,812 Less noncontrolling interests (4,534) 0 (4,534) (14,017) 0 (14,017) Earnings before interest, tax, and depreciation (EBITDA less NCI) $46,583 $13,033 $59,616 $117,933 $40,841 $158,774 EBITDA less NCI as a percentage of revenue 8.8% 11.3% 7.6% 10.3% 7

 

 

Adjusted Consolidated Results – 2019 vs 2018 Three months ended September 30 Nine months ended September 30 2019 Adjusted Consolidated % of rev 2018 Adjusted Consolidated % of rev 2019 Adjusted Consolidated % of rev 2018 Adjusted Consolidated % of rev Net service revenue $528,499 $507,043 $1,548,926 $1,300,671 Cost of service revenue 331,433 62.7% 319,326 63.0% 970,675 62.7% 827,922 63.7% Gross margin 197,066 37.3% 187,717 37.0% 578,251 37.3% 472,749 36.3% General and administrative expenses 137,328 26.0% 139,622 27.5% 418,272 27.0% 362,507 27.9% Operating income $59,738 11.3% $48,095 9.5% $159,979 10.3% $110,242 8.5% Depreciation 4,412 4,438 12,812 11,986 Noncontrolling interests (4,534) (3,751) (14,017) (10,593) Earnings before interest, tax, and depreciation (EBITDA less NCI) $59,616 $48,782 $158,774 $111,635 EBITDA less NCI as a percentage of revenue 11.3% 9.6% 10.3% 8.6% • Consolidated Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) increased 170 basis points as a percentage of revenue. This was due to an improvement of 30 basis points in gross margin and 160 basis point improvement in general and administrative expense in the third quarter of 2019 as compared to the same period in 2018. • For the nine months ended September 30, 2019, adjusted EBITDA increased 170 basis points due to 100 basis point improvement in gross margin and 90 basis point improvement in general and administrative expense. 8

 

 

Adjustments to Net Income PRE - TAX ADJUSTMENTS Q3 2019 Q3 2018 YTD 2019 YTD 2018 Almost Family and other acquisition expenses (1) $11,731 $9,914 $28,305 $27,114 Closures/relocations/consolidations (2) $1,302 $3,251 $6,536 $6,765 Provider moratorium impairment (3) $0 $0 $6,000 $0 Total $13,033 $13,165 $40,841 $33,879 ADJUSTMENTS NET OF TAX Q3 2019 Q3 2018 YTD 2019 YTD 2018 Almost Family and other acquisition expenses (1) $8,482 $7,118 $20,463 $19,289 Closures/relocations/consolidations (2) $941 $2,335 $4,722 $4,799 Excess tax benefit (4) $0 $(1,200) $0 $(1,200) Income tax effect of adjustments to income $0 $0 $0 $689 Provider moratorium impairment (3) $0 $0 $4,332 $0 Total $9,423 $8,253 $29,517 $23,577 ADJUSTMENTS NET OF TAX Q3 2019 Q3 2018 YTD 2019 YTD 2018 Almost Family and other acquisition expenses (1) $0.27 $0.23 $0.66 $0.72 Closures/relocations/consolidations (2) $0.03 $0.08 $0.15 $0.18 Excess tax benefit (4) $0.00 $(0.04) $0.00 $(0.05) Income tax effect of adjustments to income $0.00 $0.00 $0.00 $0.03 Provider moratorium impairment (3) $0.00 $0.00 $0.14 $0.00 Total $0.30 $0.27 $0.95 $0.88 9 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 ($11.7 million pre - tax in the three months ended Sept 30, 2019 and $28.3 million in the nine months ended Sept 30, 2019). (2) Expenses and impairments associated with the closure or consolidation of 3 locations in the third quarter of 2019 along w ith residual costs and expenses in connection with closures in prior periods ($1.3 million pre - tax in the three months ended Sept 30, 2019 and $6.5 million in the nine months ended Sept 30, 2019). (3) During the nine months ended Sept 30, 2019, the Company recorded $6.0 million of moratoria impairment as a result of the Cen ters for Medicare and Medicaid Services (“CMS”) action to remove all federal moratoria with regard to Medicare provider enrollment. (4) Tax benefit due to the exercise of stock options related to the Almost Family acquisition.

 

 

Three Months Ended September 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 $375,599 $375,599 $62,028 $62,028 $53,411 $53,411 Cost of service revenue 237,414 (2,685) 234,729 35,819 (322) 35,497 39,694 (328) 39,366 Gross margin 138,185 140,870 26,209 26,531 13,717 14,045 General and administrative expenses 108,318 (9,275) 99,043 15,218 (137) 15,081 10,809 (89) 10,720 Impairment of intangibles and other 197 (197) 0 0 0 0 0 0 0 Operating income $29,670 $12,157 $41,827 $10,991 $459 $11,450 $2,908 $417 $3,325 Add back depreciation 2,557 2,557 455 455 338 338 Less noncontrolling interests (3,577) (3,577) (1,213) (1,213) 180 180 Earnings before interest, tax, and depreciation (EBITDA less NCI) $28,650 $12,157 $40,807 $10,233 $459 $10,692 $3,426 $417 $3,843 EBITDA less NCI as a percentage of revenue 7.6% 10.9% 16.5% 17.2% 6.4% 7.2% Facility - based services Adjustments Adjusted Facility - based services HCI Adjustments Adjusted HCI services Net service revenue $28,715 $28,715 $8,746 $8,746 Cost of service revenue 18,508 18,508 3,333 3,333 Gross margin 10,207 10,207 5,413 5,413 General and administrative expenses 9,498 9,498 2,986 2,986 Impairment of intangibles and other 0 0 0 0 0 0 Operating income (loss) $709 $0 $709 $2,427 $0 $2,427 Add back depreciation 785 785 277 277 Less noncontrolling interests 67 67 9 9 Earnings before interest, tax, and depreciation (EBITDA less NCI) $1,561 $0 $1,561 $2,713 $0 $2,713 EBITDA less NCI as a percentage of revenue 5.4% 5.4% 31.0% 31.0% 10

 

 

Nine Months Ended September 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 $1,113,887 $0 $1,113,887 $168,821 $0 $168,821 $157,610 $0 $157,610 Cost of service revenue $694,082 ($8,892) 685,190 $103,853 ($662) 103,191 $119,054 ($522) 118,532 Gross margin 419,805 428,697 64,968 65,630 38,556 39,078 General and administrative expenses 322,115 (18,930) 303,185 45,167 (1,787) 43,380 33,004 (995) 32,009 Impairment of intangibles and other 7,263 (7,263) 0 271 (271) 0 0 0 0 Operating income $90,427 $35,085 $125,512 $19,530 $2,720 $22,250 $5,552 $1,517 $7,069 Add back depreciation 7,369 7,369 1,311 1,311 966 966 Less noncontrolling interests (11,305) (11,305) (2,712) (2,712) 757 757 Earnings before interest, tax, and depreciation (EBITDA less NCI) $86,491 $35,085 $121,576 $18,129 $2,720 $20,849 $7,275 $1,517 $8,792 EBITDA less NCI as a percentage of revenue 7.8% 10.9% 10.7% 12.3% 4.6% 5.6% Facility - based services Adjustments Adjusted Facility - based services HCI Adjustments Adjusted HCI services Net service revenue $84,391 $0 $84,391 $24,217 $0 $24,217 Cost of service revenue $53,812 ($158) 53,654 $10,819 ($711) 10,108 Gross margin 30,579 30,737 13,398 14,109 General and administrative expenses 28,010 (239) 27,771 12,338 (411) 11,927 Impairment of intangibles and other 0 0 0 0 0 0 Operating income (loss) $2,569 $397 $2,966 $1,060 $1,122 $2,182 Add back depreciation 2,310 2,311 856 855 Less noncontrolling interests (779) (779) 22 22 Earnings before interest, tax, and depreciation (EBITDA less NCI) $4,101 $397 $4,498 $1,937 $1,122 $3,059 EBITDA less NCI as a percentage of revenue 4.9% 5.3% 8.0% 12.6% 11

 

 

Three months ended September 30, Nine months ended September 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 $375,599 $360,000 $1,113,887 $925,013 Cost of service revenue 234,729 62.5% 221,806 61.6% 685,190 61.5% 575,439 62.2% Gross margin 140,870 37.5% 138,194 38.4% 428,697 38.5% 349,574 37.8% General and administrative expenses 99,043 26.4% 97,973 27.2% 303,185 27.2% 256,427 27.7% Operating income $41,827 11.1% $40,221 11.2% $125,512 11.3% $93,147 10.1% Depreciation 2,557 2,469 7,369 6,934 Noncontrolling interests (3,577) (3,425) (11,305) (9,471) Earnings before interest, tax, and depreciation (EBITDA less NCI) $40,807 $39,265 $121,576 $90,610 EBITDA less NCI as a percentage of revenue 10.9% 10.9% 10.9% 9.8% • Home Health Adjusted EBITDA margin in the third quarter of 2019 was in line with the Adjusted EBITDA margin in the same period in 2018. Gross margin declined by 90 basis points but was offset by 80 basis improvement in general and administrative expenses. • For the nine months ended September 30, 2019, EBITDA increased 110 basis points due to 70 basis point improvement in gross margin and 50 basis point improvement in general and administrative expense. 12 Home Health Segment Adjusted Segment Results – 2019 vs 2018

 

 

Three months ended September 30, Nine months ended September 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 $62,028 $52,962 $168,821 $146,142 Cost of service revenue 35,497 57.2% 34,119 64.4% 103,191 61.1% 95,135 65.1% Gross margin 26,531 42.8% 18,843 35.6% 65,630 38.9% 51,007 34.9% General and administrative expenses 15,081 24.3% 13,518 25.5% 43,380 25.7% 39,951 27.3% Operating income $11,450 18.5% $5,325 10.1% $22,250 13.2% $11,056 7.6% Depreciation 455 636 1,311 1,764 Noncontrolling interests (1,213) (386) (2,712) (1,215) Earnings before interest, tax, and depreciation (EBITDA less NCI) $10,692 $5,575 $20,849 $11,605 EBITDA less NCI as a percentage of revenue 17.2% 10.5% 12.3% 7.9% • Hospice Adjusted EBITDA margin was 17.2% in the third quarter of 2019 which included a $3.0m improvement in the implicit price concession that was a result of better overall cash collections. Normalized Adjusted EBITDA margin for the third quarte r is 13.0%. • For the nine months ended September 30, 2019, EBITDA increased 440 basis points due to improved gross margin and general and administrative expense driven by higher patient days. 13 Hospice Segment Adjusted Segment Results – 2019 vs 2018

 

 

Three months ended September 30, Nine months ended September 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 $53,411 $52,773 $157,610 $119,617 Cost of service revenue 39,366 73.7% 39,691 75.2% 118,532 75.2% 90,163 75.4% Gross margin 14,045 26.3% 13,082 24.8% 39,078 24.8% 29,454 24.6% General and administrative expenses 10,720 20.1% 11,944 22.6% 32,009 20.3% 26,353 22.0% Operating income $3,325 6.2% $1,138 2.2% $7,069 4.5% $3,101 2.6% Depreciation 338 151 966 458 Noncontrolling interests 180 87 757 156 Earnings before interest, tax, and depreciation (EBITDA less NCI) $3,843 $1,376 $8,792 $3,715 EBITDA less NCI as a percentage of revenue 7.2% 2.6% 5.6% 3.1% • Home and Community - Based Services Adjusted EBITDA margin improved 460 basis points in the third quarter of 2019 compared to the same period in 2018. This was due to 150 basis point improvement in the gross margin and 250 basis point improvement in general and administrative expenses. • For the nine months ended September 30, 2019, EBITDA increased 250 basis points due to 20 basis point improvement in gross margin and 170 basis point improvement in general and administrative expense. 14 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 September 30, Nine months ended September 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 $28,715 $27,891 $84,391 $86,345 Cost of service revenue 18,508 64.5% 19,007 68.1% 53,654 63.6% 57,105 66.1% Gross margin 10,207 35.5% 8,884 31.9% 30,737 36.4% 29,240 33.9% General and administrative expenses 9,498 33.1% 9,386 33.7% 27,771 32.9% 27,588 32.0% Operating income (loss) $709 2.5% ($502) - 1.8% $2,966 3.5% $1,652 1.9% Depreciation 785 767 2,310 2,031 Noncontrolling interests 67 (27) (779) (129) Earnings before interest, tax and depreciation (EBITDA less NCI) $1,561 $238 $4,497 $3,554 EBITDA less NCI as a percentage of revenue 5.4% 0.9% 5.3% 4.1% 15 • Facility - based Adjusted EBITDA margin improved 450 basis points in the third quarter of 2019 compared to the same period in 2018. This was due to an improvement in revenue per patient day from higher acuity driven by higher percentage of patients that meet the criteria for LTACH rates. • For the nine months ended September 30, 2019, EBITDA increased 120 basis points.

 

 

Home Care Innovations Segment Adjusted Segment Results – 2019 vs 2018 Three months ended September 30, Nine months ended September 30, 2019 Adjusted HCI services % of rev 2018 Adjusted HCI services % of rev 2019 Adjusted HCI services % of rev 2018 Adjusted HCI services % of rev Net service revenue $8,746 $13,417 $24,217 $23,554 Cost of service revenue 3,333 38.1% 4,703 35.1% 10,108 41.7% 10,080 42.8% Gross margin 5,413 61.9% 8,714 64.9% 14,109 58.3% 13,474 57.2% General and administrative expenses 2,986 34.1% 6,801 50.7% 11,927 49.3% 12,188 51.7% Operating income (loss) $2,427 27.7% $1,913 14.3% $2,182 9.0% $1,286 5.5% Depreciation 277 415 856 799 Noncontrolling interests 9 0 22 66 Earnings before interest, tax and depreciation (EBITDA less NCI) $2,713 $2,328 $3,060 $2,151 EBITDA less NCI as a percentage of revenue 31.0% 17.4% 12.6% 9.1% 16 • Home Care Innovation Services Adjusted EBITDA margin improved in the third quarter of 2019 compared to the same period in 2018 due to the improvement in general and administrative expense driven by cost restructuring and synergies. • The decrease in revenue in the third quarter of 2019 as compared to the third quarter in 2018 is mainly due to the sale of th e Ingenios Health business which occurred in March 2019. • For the nine months ended September 30, 2019, EBITDA increased 350 basis points.

 

 

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 $4.40 +23.9% EBITDA $162 $217 +34.0% • Raised EPS guidance to a range of $4.35 to $4.45 » Tax benefit in the third quarter of 2019 in the amount of $1.4 million, or $0.05 per diluted share » Improvement in adjusted hospice and HCBS segment margins • Affirmed revenue and EBITDA guidance: » Net service revenue of $2.09 billion to $2.14 billion » Adjusted EBITDA of $214 million to $220 million 17

 

 

Almost Family Integration Updates The quality star ratings of Almost Family agencies was up to 3.82 in the CMS October release, compared with 3.62 at the time of merger. 60% of AFAM agencies are now 4 stars or greater compared to 47% at the time of merger. On pace to finish system conversions by end of 2019 18 AFAM sequential home health same store admission growth from Q3 2019 to Q4 2019 is pacing to approximately a positive 2% as compared to negative 3% from Q3 2018 to Q4 2018 as system conversions wind down. 87% of Almost Family locations are converted to LHC Group version of Homecare Homebase; those locations have already demonstrated 1.2% sequential growth since conversion.

 

 

Accelerated Acquisition and Joint Venture Momentum in 2019 Acquisition/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 N/A 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 N/A Ohio 8/1/2019 2 $2,000,000 LifePoint Health LifePoint Health Arizona/Idaho/ Ohio 12/1/2019E 3 $3,600,000 Life Wellness Home Health N/A Nevada 12/1/2019E 1 $2,100,000 Total acquired or announced revenue in 2019 $86,700,000 19

 

 

Industry - Leading Quality and Patient Satisfaction • 97% of LHC locations have CMS 4 stars or greater for quality • 93% of LHC same - store locations have CMS 4 stars or greater for patient satisfaction 20 Quality Oct 2019 LHCG Actual Oct 2019 National Average July 2019 LHCG Actual July 2019 National Average LHC Group 4.65 3.28 4.65 3.27 Almost Family 3.82 3.28 3.78 3.27 Combined 4.30 3.28 4.27 3.27 Patient Satisfaction Oct 2019 LHCG Actual Oct 2019 National Average July 2019 LHCG Actual July 2019 National Average LHC Group 4.41 3.72 4.26 3.64 Almost Family 3.86 3.72 3.72 3.64 Combined 4.19 3.72 4.05 3.64 • 100% of LHC Group agencies are Joint Commission accredited or are in the accreditation process • Fewer than 15% of all home care agencies nationwide earn Joint Commission accreditation

 

 

Debt and Liquidity Metrics Outstanding Debt ( amounts in thousands ) As of Sept 30, 2019 Total Debt – Balance Sheet $232,000 Less: Cash $29,302 Net Debt $202,698 Net debt to estimated 2019 adjusted EBITDA ratio 0.93x Credit Facility ( amounts in thousands ) As of Sept 30, 2019 Revolver Size $500,000 Less: Outstanding Revolver $232,000 Less: Letters of Credit $22,300 Available Revolver $245,700 Plus: Cash $29,302 Plus: Accordion $200,000 Total Liquidity $475,002 Cash Flow ( amounts in thousands ) As of Sept 30, 2019 Free Cash Flow (9 Months Ended) $75,372 + Cash adjustments to Q3 2019 EBITDA 33,227 = Adjusted Free Cash Flow (9 Months Ended) $108,599 DSO’s 50 days 21

 

 

Focus for 2020 Successful execution of our PDGM clinical pathway and efficiency plan Maintain disciplined capital allocation with new joint ventures and other M&A activity Accelerate plans for unlocking untapped potential of co - location strategy Maximize value of Healthcare Innovations business Continue to capture incremental growth from raising Almost Family quality scores to LHCG standards Continue to lead the industry in quality and patient satisfaction scores Capture market share gains and incremental contributions from recent joint ventures and other acquisitions 22 Capture opportunistic share in each market from anticipated consolidation caused by PDGM and RAP elimination 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 September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Net Service Revenue, pre - adoption $532,026 $514,118 $ 1,568,084 $ 1,319,840 Less: Implicit price concession (1) 3,527 7,075 19,158 19,719 Net Service Revenue, post - adoption $528,499 $507,043 $ 1,548,926 $ 1,300,121 Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Net income attributable to LHC Group, Inc.’s common stockholders $30,067 $21,230 $73,923 $43,022 Add (net of tax): Almost Family and other acquisition expenses (2) 8,482 7,118 20,463 19,289 Closures/relocations/consolidations (3) 941 2,335 4,722 4,799 Excess tax benefit (4) ─ (1,200) ─ (1,200) Income tax effect of adjustments to income ─ ─ ─ 689 Provider moratorium impairment (5) ─ ─ 4,332 ─ Adjusted net income attributable to LHC Group, Inc.’s common stockholders $39,490 $29,483 $103,440 $66,599 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 September 30, Six Months Ended September 30, 2019 2018 2019 2018 Net income attributable to LHC Group, Inc.’s common stockholders $0.96 $0.68 $2.37 $1.61 Add (net of tax): Almost Family and other acquisition expenses (2) 0.27 0.23 0.66 0.72 Closures/relocations/consolidations (3) 0.03 0.08 0.15 0.18 Excess tax benefit (4) ─ (0.04) ─ (0.05) Income tax effect of adjustments to income ─ ─ ─ 0.03 Provider moratorium impairment (5) ─ ─ 0.14 ─ Adjusted net income attributable to LHC Group, Inc.’s common stockholders $1.26 $0.95 $3.32 $2.49 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 ( $ 11 . 7 million pre - tax in the three months ended Sept 30 , 2019 and $ 28 . 3 million in the nine months ended Sept 30 , 2019 ) . 3. Expenses and impairments associated with the closure or consolidation of 3 locations in the third quarter of 2019 along with residual costs and expenses in connection with closures in prior periods ( $ 1 . 3 million pre - tax in the three months ended Sept 30 , 2019 and $ 6 . 5 million in the nine months ended Sept 30 , 2019 ) . 4. Tax benefit due to the exercise of stock options related to the Almost Family acquisition . 5. 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 Sept 30 , Nine Months Ended Sept 30 , 2019 2018 2019 2018 Net income $30,067 $21,230 $73,923 $43,022 Add: Income tax expense 9,508 6,685 22,665 14,832 Interest expense, net 2,596 3,264 8,533 7,916 Depreciation and amortization 4,412 4,438 12,812 11,986 Adjustment items (1) 13,033 13,165 40,841 33,879 Adjusted EBITDA $59,616 $48,782 $158,774 $111,635 (1) Adjustment items (pre - tax): Almost Family merger and other acquisition expenses $11,731 $9,914 $28,305 $27,114 Closures/relocation/consolidations 1,302 3,251 6,536 6,765 Provider moratorium impairment 0 0 6,000 0 Total adjustments $13,033 $13,165 $40,841 $33,879 Non - GAAP Reconciliations (Amounts in thousands, unaudited) 25

 

 

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