LHCG

LHC Group (LHCG)

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LHC Group, Inc. (LHCG)

Q3 2008 Earnings Call Transcript

October 30, 2008 11:00 am ET

Executives

Eric Elliott – VP, IR

Keith Myers – Chairman and CEO

Pete Roman – SVP, CFO and Treasurer

John Indest – President and COO

Analysts

Art Henderson – Jefferies & Company

Eric Gommel – Stifel Nicolaus

David MacDonald – SunTrust

Kevin Ellich – RBC Capital Markets

Darren Lehrich – Deutsche Bank

Newton Juhng – BB&T Capital Markets

Whit Mayo – Robert Baird & Company

Sheryl Skolnick – CRT Capital Group

Greg Williams – Sidoti & Company

Derrick Dagnan – Avondale Partners

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the third quarter 2008 LHC Group, Inc. earnings conference call. My name is Erica, and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session toward the end of this conference. (Operator instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Eric Elliott, Vice President of Investor Relations. You may proceed, sir.

Eric Elliott

Thank you, Erica. And welcome everyone to LHC Group's third quarter 2008 financial results conference call. In a moment, we'll hear from Keith Myers, Chief Executive Officer of LHC Group; John Indest, President and Chief Operating Officer; and Pete Roman, Chief Financial Officer.

Before that, I would like to remind everyone that statements included in this conference call may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, comments regarding our financial results for 2008 and beyond.

Such statements are subject to a number of risks and uncertainties such as changes in reimbursement, changes in government regulations, changes in the company's relationships with referral sources, increased competition for its services, increased competition for joint venture and acquisition candidates, and changes in the interpretation of government regulations. Therefore, actual results may differ materially from any financial outlook presented herein.

Further information or potential factors that could affect the company's financial results can be found in the company's Form 10-K for the year ended December 31, 2007. LHC Group shall have no obligation to update the information provided on this call to reflect subsequent events.

Now I’m pleased to introduce the CEO of LHC Group, Keith Myers.

Keith Myers

Thanks, Eric. And good morning, everyone. We are very happy this morning to present another very strong performance from the LHC Group family. Without question, the third quarter of 2008 was our best quarter in the history of the company by every measure.

Our continued ability to deliver our strong return on assets, return on capital, and return on equity was recently recognized once again when we were named number eight on Forbes 2008 list of Best Small Companies in America. This is the second year in a row that LHC Group has made the top ten. As a result of the hard work and dedication of our revenue cycle management team and the engagement of Simione Consultants over the past year, we continue to see improvement in DSOs, which are at our historical low this quarter, down 33% from this time last year.

Given our significant financial strength and flexibility, the current strength of our back office and the continued consistent performance of our clinical operations team, which is second to none in terms of industry knowledge and experience, we could not be better positioned to take advantage of the current cycle of consolidation in our industry, which we expect to continue for several years.

I’ll touch on some of the highlights of the quarter first and then turn it over to Pete Roman, our CFO, to review the financial results, and then John Indest, our President and Chief Operating Officer, will provide an update on operations.

So starting with acquisitions since our last earnings call, on July 1, we entered into a joint venture relationship with Grant Memorial Hospital, a 61-bed hospital located in Petersburg, West Virginia, to provide home health and hospice services in Petersburg and the surrounding areas. The primary service area has an estimated total population of 33,000 with almost 17% over the age of 65. The combined net revenue for the most recent 12 months for these agencies was approximately $554,000.

And on August 1, through our partnership with the University of Tennessee Medical Center, we acquired 100% of assets of Morristown-Hamblen Home Health and Hospice located in Morristown, Tennessee from Morristown-Hamblen Healthcare System. The primary service area has an estimated total population of 1.2 million people with nearly 15% over the age of 65. The combined net revenue for the most recent 12 months for these agencies was approximately $2.8 million.

On September 1, we acquired 100% of assets of Mountaineer Home Health located in Charleston, West Virginia, and we acquired 100% of the Home Health assets of the Jackson County Board of Healthy located in Ripley, West Virginia. The combined primary service area of these agencies has an estimated total population of 6,000, with almost 16% over the age of 65. The combined net revenue for the most recent 12 months for these agencies was approximately $1.3 million. With these two acquisitions, LHC Group now operates 12 home nursing agencies covering 31 counties and 49% of the total population in the CON State of West Virginia.

On September 17, we announced that we entered into a home health joint venture with West Tennessee Healthcare, recently listed as one of the top ten largest public non-profit health systems in the United States. This joint venture includes three agency locations in the Certificate of Need State of Tennessee. These locations are located in Jackson, Bolivar, and Trenton. The primary service area of this joint venture has an estimated total population of 500,000, with almost 15% over the age of 65. The combined net revenue for the most recent 12 months for these agencies was approximately $3.8 million.

On September 25, we announced that we entered into a joint venture with Cape Fear Valley Health System in Fayetteville, North Carolina to provide home nursing and hospice services. This joint venture represented LHC Group’s initial entry into the Certificate of Need State of North Carolina. The primary service area of this joint venture has an estimated total population of 1.2 million with almost 12% over the age of 65. The combined net revenue for the most recent 12 months for these agencies was approximately $5.3 million.

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