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Gentiva(R) Health Services Announces First Quarter 2008 Results and Reaffirms Financial Outlook
MELVILLE, N.Y., May 1 /PRNewswire-FirstCall/ -- Gentiva Health Services, Inc. NASDAQ: GTIV, the nation's leading provider of comprehensive home health services, today reported the following financial results for the first quarter ended March 30, 2008: (Logo: http://www.newscom.com/cgi-bin/prnh/20060323/NYTH117LOGO)
-- Net revenues increased 8% to $323.7 million versus the first quarter
ended April 1, 2007.
-- Net income increased 13% to $7.7 million, or $0.27 per diluted share,
versus $6.8 million, or $0.24 per diluted share, for the prior year
period. Average diluted shares were 29.0 million versus 28.4 million in
the 2007 first quarter.
-- Earnings before interest, taxes, depreciation and amortization (EBITDA)
increased 3% to $23.8 million in the first quarter of 2008. EBITDA as a
percentage of net revenues was 7.4% in the 2008 first quarter versus
7.7% in the prior year period.
-- EBITDA included restructuring and integration costs of $0.3 million for
the first quarter of 2008 as compared to $1.0 million for the prior
year period.
"Gentiva's first quarter was an important transitional period as we adapted to new Medicare Prospective Payment System (PPS) rules, integrated our recent Mississippi acquisition and implemented contract renewals within CareCentrix," said Gentiva Chairman and CEO Ron Malone. "While we were pleased with our revenue growth, some of the quarter's events had a short-term, moderating effect on profitability. However, we are able to reaffirm our financial outlook for the full year, based on our review of current business trends, our progress in adapting to the changed Medicare environment, and our commercial business opportunities. We expect 2008 to be another good year for Gentiva." The Company noted the following first quarter performance highlights in its Home Health segment:
-- Home Health revenues were up 6% to $217.0 million versus the prior year
period, driven primarily by continuing growth from the Company's
expanding specialty programs, an increase in revenues from the
segment's commercial business as a result of the Company's ongoing
pricing strategy, and the inclusion of about $3 million in net revenues
from Home Health Care Affiliates, Inc., in Mississippi, which was
acquired by Gentiva on February 29, 2008.
-- Home Health operating contribution rose 4% to $31.2 million, with the
operating contribution margin at 14.4% in the first quarter of 2008
versus 14.6% in the prior year period. While the segment's operating
contribution has continued to benefit from the change in revenue mix to
higher-margin payers, results were affected by costs related primarily
to Gentiva's adoption of new PPS rules and recruitment initiatives to
grow capacity and productivity.
-- Revenues for Gentiva's Medicare PPS home health business increased more
than 7% versus the prior year period. Patient admissions remained
strong, although the current impact of new PPS rules contributed to a
revenue growth rate below those of recent quarters. Medicare Advantage
revenues in Home Health -- under which Gentiva is paid for patient
episodes similar to the rate structure and levels of Medicare PPS --
more than doubled during the first quarter versus the prior year
period. As a result, growth in episodic revenues (the combined
revenues from Medicare PPS and Medicare Advantage business paid on an
episodic basis) was 11% year-over-year, despite the adverse impact of
PPS changes.
Gentiva reported the following results in its CareCentrix and Other Related Services segments:
-- Revenues for CareCentrix rose more than 18% to $77.8 million as this
segment continued to benefit from its servicing of increased
managed care membership enrollments and new business.
-- CareCentrix' operating contribution declined by 9% to $6.3 million due
primarily to expected short-term increases in utilization under
capitated agreements, selected pricing changes resulting from a recent
contract extension with CIGNA HealthCare, and investments in
CareCentrix' expanded sales force. The Company anticipates additional
business opportunities for CareCentrix during the remainder of 2008,
including the continuing shift of CIGNA's membership from capitated to
fee-for-service plans, and potential benefits from CIGNA's
first quarter acquisition of Great-West Healthcare.
-- Net revenues and operating contribution for the smaller Other Related
Services segment, which consists of hospice, respiratory and home
medical equipment, infusion therapy and consulting, were slightly below
the prior year period as the Company continued to make investments and
operational changes aimed at improving the segment's financial
performance.
During the first quarter of 2008, Gentiva used $43 million of cash and incurred an additional $12 million in debt to fund the Home Health Care Affiliates acquisition. Despite the resulting increase in long-term debt to $322 million at March 30, 2008, Gentiva's leverage ratio remains below 3.0 and this has allowed the Company to maintain lower interest margins on its revolving credit and term loan borrowings as compared to the prior year. Gentiva also reaffirmed its 2008 financial outlook of net revenues in a range of $1.28 billion to $1.32 billion and diluted earnings per share in a range between $1.32 and $1.40. Non-GAAP Financial Measures The information provided in this press release includes certain non-GAAP financial measures as defined under Securities and Exchange Commission (SEC) rules. In accordance with SEC rules, the Company has provided, in the supplemental information and the footnotes to the tables, a reconciliation of those measures to the most directly comparable GAAP measures. Conference Call and Web Cast Details The Company will comment further on its first quarter results during its conference call and live web cast to be held Thursday, May 1, 2008, at 10:00 a.m. Eastern Time. To participate in the call from the United States, Canada or an international location, dial (973) 935-2408 and reference call #42736083. The web cast is an audio-only, one-way event. Web cast listeners who wish to ask questions must participate in the conference call. Log onto http://investors.gentiva.com/events.cfm to hear the web cast. This press release is accessible at http://investors.gentiva.com/releases.cfm and a transcript of the conference call is expected to be available on the site within 36 hours after the call. About Gentiva Health Services, Inc. Gentiva Health Services, Inc. is the nation's leading provider of comprehensive home health services. The Company serves patients across the United States, through its direct service delivery units or through CareCentrix(R), which manages home health services for major managed care organizations. Gentiva is a single source for skilled nursing; physical, occupational, speech and neurorehabilitation services; hospice services; social work; nutrition; disease management education; help with daily living activities; respiratory therapy and home medical equipment; infusion therapy services; and other therapies and services. Gentiva's revenues are generated from federal and state government programs, commercial insurance and individual consumers. For more information, visit Gentiva's web site, http://www.gentiva.com, and its investor relations section at http://investors.gentiva.com. GTIV-E
(tables and notes follow)
(in 000's, except per share data) 1st Quarter
2008 2007
Statements of Income
Net revenues $323,722 $299,542
Cost of services and goods sold 187,199 170,121
Gross profit 136,523 129,421
Selling, general and administrative expenses 117,880 111,065
Operating income 18,643 18,356
Interest expense (6,093) (7,139)
Interest income 667 817
Income before income taxes 13,217 12,034
Income tax expense 5,494 5,195
Net income $7,723 $6,839
Earnings per Share
Net income:
Basic $0.27 $0.25
Diluted $0.27 $0.24
Average shares outstanding:
Basic 28,282 27,530
Diluted 29,043 28,439
Condensed Balance Sheets
ASSETS Mar 30, 2008 Dec 30, 2007
Cash, cash equivalents and
restricted cash (A) $16,382 $36,181
Short-term investments (B) 1,350 31,250
Accounts receivable, net (C) 230,190 207,801
Deferred tax assets 17,551 18,859
Prepaid expenses and other current assets 16,041 14,415
Total current assets 281,514 308,506
Long-term investments (B) 12,641 -
Fixed assets, net 62,534 59,562
Intangible assets, net 233,872 211,602
Goodwill 310,909 276,100
Other assets 25,893 26,463
Total assets $927,363 $882,233
LIABILITIES AND SHAREHOLDERS' EQUITY
Current portion of long-term debt $3,072 $2,304
Accounts payable 24,219 20,093
Payroll and related taxes 28,057 17,163
Deferred revenue 31,790 29,015
Medicare liabilities 8,257 7,985
Cost of claims incurred but not reported 22,732 24,321
Obligations under insurance programs 36,733 36,816
Other accrued expenses 39,616 42,282
Total current liabilities 194,476 179,979
Long-term debt 318,928 307,696
Deferred tax liabilities, net 55,218 48,572
Other liabilities 21,672 22,557
Shareholders' equity 337,069 323,429
Total liabilities and
shareholders' equity $927,363 $882,233
Common shares outstanding 28,402 28,046
(A) Cash, cash equivalents and restricted cash included restricted cash of
$0.3 million at March 30, 2008 and $22.0 million at December 30, 2007.
(B) Short-term and long-term investments at March 30, 2008 and
December 30, 2007 consisted of AAA-rated auction rate securities. At
March 30, 2008, long-term investments were presented net of a
$0.4 million valuation allowance, the charge for which was recorded in
Shareholders' Equity.
(C) Accounts receivable, net, included an allowance for doubtful accounts
of $9.3 million and $9.4 million at March 30, 2008 and
December 30, 2007, respectively.
(in 000's) 1st Quarter
Condensed Statements of Cash Flows 2008 2007
OPERATING ACTIVITIES:
Net income $7,723 $6,839
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 5,151 4,783
Amortization of debt issuance costs 287 206
Provision for doubtful accounts 2,600 1,992
Equity-based compensation expense 1,734 1,652
Windfall tax benefits associated
with equity-based compensation (1,235) (241)
Deferred income taxes 4,848 3,699
Changes in assets and liabilities,
net of acquired business:
Accounts receivable (19,598) (17,741)
Prepaid expenses and other current assets (2,151) (4,863)
Current liabilities 8,825 18,660
Other, net (49) 695
Net cash provided by operating activities 8,135 15,681
INVESTING ACTIVITIES:
Purchase of fixed assets (6,624) (6,445)
Acquisition of businesses, net of
cash acquired (47,405) -
Purchases of short-term investments
available-for-sale (28,000) (17,000)
Maturities of short-term investments
available-for-sale 44,900 12,800
Net cash used in investing
activities (37,129) (10,645)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 4,119 2,188
Windfall tax benefits associated
with equity-based compensation 1,235 241
Borrowings under revolving credit facility 12,000 -
Home Health Care Affiliates debt repayments (7,420) -
Debt issuance costs (432) -
Other debt repayments - (7,000)
Repayment of capital lease obligations (307) (294)
Net cash provided by (used in)
financing activities 9,195 (4,865)
Net change in cash, cash equivalents
and restricted cash (19,799) 171
Cash, cash equivalents and restricted cash
at beginning of period 36,181 32,910
Cash, cash equivalents and
restricted cash at end of period $16,382 $33,081
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Interest paid $5,702 $7,912
Income taxes paid, net of refunds $416 $286
(in 000's)
Supplemental Information 1st Quarter
2008 2007
Segment Information (1)
Net revenues
Home Health $217,000 $205,031
CareCentrix 77,848 65,890
Other Related Services 29,818 30,563
Intersegment revenues (944) (1,942)
Total net revenues $323,722 $299,542
Operating contribution (3)
Home Health $31,202 $29,988
CareCentrix 6,326 6,954
Other Related Services 2,845 3,987
Total operating contribution 40,373 40,929
Corporate expenses (16,579) (17,790)
Depreciation and amortization (5,151) (4,783)
Interest expense, net (5,426) (6,322)
Income before income taxes $13,217 $12,034
1st Quarter
2008 2007
Net Revenues by Major Payer Source:
Medicare
Home Health $145,106 $135,254
Other 14,574 15,289
Total Medicare 159,680 150,543
Medicaid and local government 35,365 38,327
Commercial insurance and other (4) 128,677 110,672
Total net revenues $323,722 $299,542
A reconciliation of EBITDA to Net income
- As Reported amounts follows: (2)
1st Quarter
2008 2007
EBITDA (3) $23,794 $23,139
Depreciation and amortization (5,151) (4,783)
Interest expense, net (5,426) (6,322)
Income before income taxes 13,217 12,034
Income tax expense (5) (5,494) (5,195)
Net income - As Reported $7,723 $6,839
Notes:
(1) The Company's senior management evaluates performance and allocates
resources based on operating contributions of the reportable segments,
which exclude corporate expenses, depreciation, amortization, and
interest expense (net), but include revenues and all other costs
directly attributable to the specific segment.
(2) EBITDA, a non-GAAP financial measure, is defined as income before
interest expense (net of interest income), income taxes, depreciation
and amortization. Management uses EBITDA to evaluate overall
performance and compare current operating results with other companies
in the healthcare industry. EBITDA should not be considered in
isolation or as a substitute for net income, operating income or cash
flow statement data determined in accordance with accounting
principles generally accepted in the United States. Because EBITDA is
not a measure of financial performance under accounting principles
generally accepted in the United States and is susceptible to varying
calculations, it may not be comparable to similarly titled measures in
other companies.
(3) Operating contribution and EBITDA for the first quarter of 2008
included restructuring and integration costs of $0.3 million, of which
$0.1 million is associated with the Home Health segment, and
$0.2 million is included in corporate expenses. For the first quarter
of 2007, operating contribution and EBITDA included $0.3 million
associated with the Home Health segment and $0.7 million associated
with corporate expenses.
(4) Commercial insurance and other revenues included revenues from
Medicare Advantage business paid on an episodic basis of $11.1 million
for the first quarter of 2008 and $5.4 million for the first quarter
of 2007.
(5) The Company's effective tax rate was 41.6% and 43.2% for the first
quarters of 2008 and 2007, respectively.
Forward-Looking Statement Certain statements contained in this news release, including, without limitation, statements containing the words "believes," "anticipates," "intends," "expects," "assumes," "trends" and similar expressions, constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon the Company's current plans, expectations and projections about future events. However, such statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors include, among others, the following: economic and business conditions; demographic changes; changes in, or failure to comply with, existing governmental regulations; legislative proposals for healthcare reform; changes in Medicare and Medicaid reimbursement levels, including changes to the Medicare home health Prospective Payment System effective January 1, 2008; effects of competition in the markets in which the Company operates; liability and other claims asserted against the Company; ability to attract and retain qualified personnel; availability and terms of capital; loss of significant contracts or reduction in revenues associated with major payer sources; ability of customers to pay for services; business disruption due to natural disasters or terrorist acts; ability to successfully integrate the operations of acquisitions the Company may make and achieve expected synergies and operational efficiencies within expected time-frames; effect on liquidity of the Company's debt service requirements; a material shift in utilization within capitated agreements; and changes in estimates and judgments associated with critical accounting policies and estimates. For a detailed discussion of certain of these and other factors that could cause actual results to differ from those contained in this news release, please refer to the Company's various filings with the Securities and Exchange Commission (SEC), including the "Risk Factors" section contained in the Company's annual report on Form 10-K for the year ended December 30, 2007.
Financial and Investor Contact: John R. Potapchuk
631-501-7035
john.potapchuk@gentiva.com
Media Contact: David Fluhrer
631-501-7102
516-589-0778
david.fluhrer@gentiva.com
Website: http://www.gentiva.com/ |
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