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Gentiva Reports Fourth Quarter and Fiscal 2008 Results
Date:2/18/2009

Company Raises 2009 Performance Outlook

MELVILLE, N.Y., Feb. 18 /PRNewswire-FirstCall/ -- Gentiva Health Services, Inc. (Nasdaq: GTIV), a leading provider of comprehensive home health services, today reported fourth quarter results, led by 20% revenue growth and 39% operating contribution growth from its Home Health segment, as the Company continued to execute on its strategy of delivering clinical innovation and quality care to patients.

(Logo: http://www.newscom.com/cgi-bin/prnh/20060323/NYTH117LOGO )

Performance highlights for the quarter ended December 28, 2008 included the following Company results compared to the fourth quarter ended December 30, 2007:

  • Net revenues of $282.9 million compared to $313.4 million, which included net revenues of $76.3 million from its CareCentrix business unit in the 2007 fourth quarter. Excluding prior-year net revenues from CareCentrix, Gentiva's net revenues grew $45.8 million, or 19% in the 2008 fourth quarter. The Company sold a majority interest in CareCentrix to Water Street Healthcare Partners on September 25, 2008.

  • Net income of $12.8 million, or $0.43 per diluted share, compared to net income of $8.8 million or $0.31 per diluted share in the 2007 fourth quarter. Adjusted net income, which excludes special charges related to restructuring and integration activities, was $0.44 per diluted share in the 2008 period compared to $0.31 per diluted share in the prior-year period.

  • A 19% increase in earnings before interest, taxes, depreciation and amortization (EBITDA) to $30.0 million in the fourth quarter of 2008; EBITDA as a percentage of net revenues improved to 10.6% in the fourth quarter of 2008 versus 8.1% in the prior-year period.

"We achieved our results both for the fourth quarter and all of 2008 while focusing on two key objectives: delivering clinical excellence to a more acute patient population and positioning our Company as the employer of choice for clinicians," said Gentiva CEO Tony Strange. "During the fourth quarter we continued the launch of innovative specialty care programs across our branch network and again achieved strong performance in the hiring of new clinicians. Gentiva will continue to address the needs of the nation's growing senior population, for which home healthcare is a cost-effective and patient-preferred solution for the nation's healthcare challenges."

Gentiva reported these segment highlights for the quarter:

  • Home Health's 20% revenue growth to $249.3 million and 39% operating contribution growth to $41.8 million led to an operating contribution margin of 16.8%, as compared with 14.5% in the fourth quarter of 2007. Home Health Medicare revenue growth of 26% was driven by a double-digit increase in episodes as the Company served a growing number of higher acuity patients, expanded specialty programs and integrated acquisitions completed in 2008.

  • Revenues in Gentiva's Other Related Services segment -- which includes hospice, respiratory therapy and home medical equipment, infusion therapy and consulting -- increased 11% to $34.0 million, while operating contribution decreased 3% to $3.5 million compared to the prior-year period. Fourth quarter net revenues and operating contribution for this segment were the highest of any quarter during 2008 as the Company continues to implement initiatives to improve performance.

Companywide performance highlights for the twelve months ended December 28, 2008 included:

  • Net revenues of $1.30 billion versus $1.23 billion in the prior year. Net revenues in 2008 and 2007 included approximately $233 million and $291 million, respectively, relating to CareCentrix. Excluding the revenue contribution from CareCentrix in both years, 2008 net revenues would have been $1.07 billion, an increase of $129 million, or 14%.

  • Net income of $153.5 million, or $5.21 per diluted share, which included a non-recurring pre-tax gain, net of transaction costs, of $107.9 million or $3.72 per diluted share from the sale of a majority interest in its CareCentrix unit in the third quarter. Excluding the net gain from CareCentrix and special charges, adjusted net income was $45.5 million, up 33% compared with $34.3 million in the year-ago period. On a diluted earnings per share basis, adjusted net income was $1.55 compared with $1.20 in 2007.

  • An EBITDA increase of 14% to $114.1 million versus $99.7 million in the prior-year period.

  • Operating cash flow of $70.7 million in 2008 compared with $62.7 million in 2007.

Gentiva ended the fourth quarter with cash and cash equivalents of $69.2 million and long-term debt of $251 million. Days sales outstanding (DSO) at 2008 fiscal year end was 57 days compared with 61 days at the end of the third quarter.

Full-Year 2009 Outlook

Gentiva also announced that it has raised its outlook for fiscal 2009, which was previewed in the Company's third quarter earnings release issued October 30, 2008. Full-year net revenues are expected to be in a range of $1.14 billion to $1.18 billion, as compared to the preview of $1.12 billion to $1.17 billion. Diluted earnings per share is expected to be in a range between $1.72 and $1.80, up from the $1.62 to $1.72 range provided in October, based on an estimated 30.5 million average outstanding shares. Gentiva's 2009 outlook represents an increase in diluted earnings per share of 20% to 30% when compared with 2008 pro forma financial results, which reflect the Company's performance as if the CareCentrix divestiture had occurred at the beginning of fiscal 2008. The 2009 outlook excludes the impact of special items, restructuring or non-recurring charges and any future acquisitions.

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 fourth quarter and fiscal 2008 results during its conference call and live web cast to be held Wednesday, February 18, 2009 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 #80349319. 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. A replay of the call will be available on February 18, beginning at approximately 1 p.m. ET, and will remain available continuously through February 25. To listen to a replay of the call from the United States, Canada or international locations, dial (800) 642-1687 or (706) 645-9291 and enter the following PIN at the prompt: 80349319. Visit http://investors.gentiva.com/events.cfm to access the web cast archive. 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 a leading provider of comprehensive home health services, delivering innovative, high quality care to patients across the United States. 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. 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)                   4th Quarter               Fiscal Year
                                   -----------               -----------
                                2008          2007        2008        2007
                                ----          ----        ----        ----
    Statements of Income
    --------------------
    Net revenues              $282,930      $313,396  $1,300,438  $1,229,297
    Cost of services and
     goods sold                139,378       180,154     717,903     705,592
                               -------       -------     -------     -------
    Gross profit               143,552       133,242     582,535     523,705
    Selling, general
     and administrative
     expenses                 (119,093)     (113,247)   (490,451)   (444,042)
    Gain on sale
     of business, net               61             -     107,933           -
    Interest expense            (3,501)       (6,636)    (19,377)    (27,285)
    Interest income              1,012           768       2,290       3,204
                                 -----           ---       -----       -----
    Income before income
     taxes                      22,031        14,127     182,930      55,582
    Income tax expense           9,165         5,281      29,445      22,754
                                 -----         -----      ------      ------
      Income before equity in
       net loss of
       affiliate                12,866         8,846     153,485      32,828
    Equity in net loss
     of affiliate                  (55)            -         (35)          -
                                   ---           ---         ---         ---
    Net income                 $12,811        $8,846    $153,450     $32,828
                               =======        ======    ========     =======

    Earnings per Share
    ------------------
    Net income:
       Basic                     $0.44         $0.32       $5.37       $1.18
                                 =====         =====       =====       =====
       Diluted                   $0.43         $0.31       $5.21       $1.15
                                 =====         =====       =====       =====
    Average shares
     outstanding:
       Basic                    28,845        28,006      28,578      27,798
                                ======        ======      ======      ======
       Diluted                  29,861        28,781      29,439      28,599
                                ======        ======      ======      ======

    Condensed Balance
     Sheets (A)
    -----------------
    ASSETS                   Dec 28, 2008  Dec 30, 2007
    ------                  ------------  ------------
      Cash and cash
       equivalents             $69,201       $14,167
      Restricted cash                -        22,014
      Short-term
       investments (B)               -        31,250
      Accounts receivable,
       net (C)                 177,201       207,801
      Deferred tax assets       11,933        18,859
      Prepaid expenses
       and other
       current assets           13,141        14,415
                                ------        ------
           Total current
            assets             271,476       308,506

      Long-term
       investments (B)          11,050             -
      Note receivable           25,000             -
      Investment in
       affiliate                23,264             -
      Fixed assets, net         63,815        59,562
      Intangible assets,
       net                     250,432       211,602
      Goodwill                 308,213       276,100
      Other assets              20,247        26,463
                                ------        ------
          Total assets        $973,497      $882,233
                              ========      ========

    LIABILITIES AND
     SHAREHOLDERS'
     EQUITY
    ---------------
      Current portion of
       long-term debt               $-        $2,304
      Accounts payable           8,027        20,093
      Payroll and related
       taxes                    17,869        17,163
      Deferred revenue          32,976        29,015
      Medicare liabilities       6,680         7,985
      Cost of claims
       incurred but not
       reported                      -        24,321
      Obligations under
       insurance programs       39,628        36,816
      Other accrued
       expenses                 40,895        42,282
                                ------        ------
           Total current
            liabilities        146,075       179,979

      Long-term debt           251,000       307,696
      Deferred tax
       liabilities, net         64,262        48,572
      Other liabilities         17,189        22,557
      Shareholders' equity     494,971       323,429
                               -------       -------
           Total liabilities
            and shareholders'
            equity            $973,497      $882,233
                              ========      ========
      Common shares
       Outstanding              28,864        28,046
                              ========      ========

    ( A ) The Condensed Balance Sheet as of December 28, 2008 reflects
          the impact of the CareCentrix transaction in various line items.
    ( B ) Short-term and long-term investments at December 28, 2008 and
          December 30, 2007 consisted of AAA-rated auction rate securities.
          At December 28, 2008, long-term investments were presented net of a
          $1.9 million valuation allowance, the charge for which was recorded
          in Shareholders' Equity.
    ( C ) Accounts receivable, net, included an allowance for doubtful
          Accounts of $8.2 million and $9.4 million at December 28, 2008 and
          December 30, 2007, respectively.



        (in 000's)                                         Fiscal Year
                                                           -----------
    Condensed Statements of Cash Flows                    2008     2007
    ----------------------------------                    ----     ----
      OPERATING ACTIVITIES:
      Net income                                        $153,450  $32,828
      Adjustments to reconcile net income to net cash
       provided by operating activities:
        Depreciation and amortization                     22,044   20,014
        Amortization of debt issuance costs                1,753    1,063
        Provision for doubtful accounts                   11,010    9,939
        Reversal of tax audit reserves                         -     (450)
        Equity-based compensation expense                  5,757    6,812
        Windfall tax benefits associated with equity-
         based compensation                               (2,227)    (856)
        Gain on sale of business, net                   (107,933)       -
        Equity in net loss of affiliate                       35        -
        Deferred income taxes                             14,127   20,923
      Changes in assets and liabilities, net of effects
       from acquisitions and dispositions:
        Accounts receivable                              (25,555) (36,423)
        Prepaid expenses and other current assets         (2,118)  (3,531)
        Current liabilities                                 (750)  12,606
      Other, net                                           1,107     (254)
                                                           -----     ----
      Net cash provided by operating activities           70,700   62,671
                                                          ------   ------

      INVESTING ACTIVITIES:
      Purchase of fixed assets                           (24,004) (24,064)
      Proceeds from sale of business, net of cash
       transferred                                        83,160        -
      Acquisition of businesses, net of cash acquired    (60,736)  (3,820)
      Purchases of short-term investments available-
       for-sale                                          (28,000) (96,850)
      Maturities of short-term investments available-
       for-sale                                           46,250   89,925
      Withdrawal from restricted cash                     22,014        -
                                                          ------   ------
      Net cash provided by (used in) investing
       activities                                         38,684  (34,809)
                                                          ------  -------

      FINANCING ACTIVITIES:
      Proceeds from issuance of common stock              11,547    7,882
      Windfall tax benefits associated with equity-
       based compensation                                  2,227      856
      Borrowings under revolving credit facility          24,000        -
      Debt repayments of acquired company                 (7,420)       -
      Debt issuance costs                                   (557)       -
      Other debt repayments                              (83,000) (32,000)
      Repayment of capital lease obligations              (1,147)  (1,329)
                                                          ------   ------
      Net cash used in financing activities              (54,350) (24,591)
                                                         -------  -------

      Net change in cash and cash equivalents             55,034    3,271
      Cash and cash equivalents at beginning of year      14,167   10,896
                                                          ------   ------
      Cash and cash equivalents at end of year           $69,201  $14,167
                                                         =======  =======

      SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

      Interest paid                                      $21,081  $27,469
      Income taxes paid                                  $10,561   $2,389



        (in 000's)
     Supplemental Information         4th Quarter           Fiscal Year
    -------------------------         -----------           -----------
                                    2008      2007        2008        2007
                                    ----      ----        ----        ----
    Segment Information (1)
      Net revenues
        Home Health             $249,306  $207,494    $942,526    $821,829
        CareCentrix                    -    76,275     232,717     290,786
        Other Related Services    33,989    30,575     128,229     121,797
        Intersegment revenues       (365)     (948)     (3,034)     (5,115)
                                    ----      ----      ------      ------
      Total net revenues        $282,930  $313,396  $1,300,438  $1,229,297
                                ========  ========  ==========  ==========

      Operating
       contribution (3)
        Home Health              $41,769   $30,069    $151,235    $122,053
        CareCentrix (4)                -     7,180      18,074      29,070
        Other Related Services     3,489     3,593      12,535      13,821
                                   -----     -----      ------      ------
      Total operating
       contribution               45,258    40,842     181,844     164,944
      Corporate expenses         (15,249)  (15,539)    (67,716)    (65,268)
      Gain on sale of
       business, net                  61         -     107,933           -
      Depreciation and
       amortization               (5,550)   (5,308)    (22,044)    (20,013)
      Interest expense, net       (2,489)   (5,868)    (17,087)    (24,081)
                                  ------    ------     -------     -------
      Income before income
       taxes                     $22,031   $14,127    $182,930     $55,582
                                 =======   =======    ========     =======



                                      4th Quarter            Fiscal Year
                                      -----------            -----------
                                    2008      2007        2008        2007
                                    ----      ----        ----        ----
      Net Revenues by Major
       Payer Source:
        Medicare
          Home Health           $176,508  $140,111    $648,022    $549,262
          Other                   20,117    15,527      68,052      60,285
                                  ------    ------      ------      ------
          Total Medicare         196,625   155,638     716,074     609,547
        Medicaid and local
         government               33,326    36,536     141,953     153,078
        Commercial insurance and
         other (5)                52,978   121,222     442,411     466,672
                                  ------   -------     -------     -------
             Total net revenues $282,929  $313,396  $1,300,438  $1,229,297
                                ========  ========  ==========  ==========

    A reconciliation of
     EBITDA to Net income -
     As Reported amounts
     follows: (2)                     4th Quarter            Fiscal Year
                                      -----------            -----------
                                    2008      2007        2008        2007
                                    ----      ----        ----        ----
        EBITDA (3)               $30,009   $25,303    $114,128     $99,676
        Gain on sale of
         business, net                61         -     107,933           -
        Depreciation and
         amortization             (5,550)   (5,308)    (22,044)    (20,013)
        Interest expense, net     (2,489)   (5,868)    (17,087)    (24,081)
                                  ------    ------     -------     -------
        Income before income
         taxes                    22,031    14,127     182,930      55,582
        Income tax expense (6)    (9,165)   (5,281)    (29,445)    (22,754)
                                  ------    ------     -------     -------
        Income before equity in
         net loss of affiliate    12,866     8,846     153,485      32,828
        Equity in net loss of
         affiliate                   (55)        -         (35)          -
                                     ---       ---         ---         ---
        Net income - As Reported $12,811    $8,846    $153,450     $32,828
                                 =======    ======    ========     =======


    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 fourth quarter and fiscal
       year 2008 included restructuring and integration costs of $0.6 million
       and $2.7 million, respectively. For the fourth quarter and fiscal year
       2007, operating contribution and EBITDA included special charges of
       $0.3 million and $2.4 million, respectively.  The special charges,
       which included restructuring and integration costs and costs and
       professional fees associated with merger and acquisition activities,
       were reflected as follows for segment reporting (dollars in millions):


                                 4th Quarter   Fiscal Year
                                 -----------   -----------
                                 2008   2007   2008   2007
                                 ----   ----   ----   ----
        Home Health              $0.1   $0.1   $0.4   $0.6
        Other Related Services      -      -      -    0.1
        Corporate expenses        0.5    0.2    2.3    1.7
                                  ---    ---    ---    ---
        Total                    $0.6   $0.3   $2.7   $2.4
                                 ====   ====   ====   ====


    4)  Operating contribution for CareCentrix was comprised of the following
        (dollars in thousands):


                                  4th Quarter     Fiscal Year
                                  -----------     -----------
                                 2008    2007     2008     2007
                                 ----    ----     ----     ----
        Gross profit               $- $15,134  $42,539  $59,100
        Selling, general and
         administrative
         expenses                   -  (8,080) (24,850) (30,524)
        Add: depreciation           -     126      385      494
                                  ---     ---      ---      ---
        Operating Contribution     $-  $7,180  $18,074  $29,070
                                 ====  ======  =======  =======


    5)  Commercial Insurance and Other revenues included revenues paid on an
        episodic basis of $14.5 million and $53.2 million for the fourth
        quarter and fiscal year 2008, respectively, and $9.0 million and
        $29.3 million for the fourth quarter and fiscal year 2007,
        respectively, reflecting services rendered to Medicare beneficiaries
        enrolled in managed Medicare plans.

    6)  The Company's effective tax rate was 41.6% for the fourth quarter and
        16.1% for fiscal year 2008, and 37.4% and 40.9% for the fourth
        quarter and fiscal year 2007, respectively.  During the fiscal year
        2008 period, the Company recorded a pre-tax gain, net of transaction
        costs, of $107.9 million and an income tax benefit of approximately
        $1.6 million relating to the sale of a majority interest in its
        CareCentrix unit. The CareCentrix transaction generated a capital
        loss carryforward for federal tax purposes. Excluding the impact of
        the CareCentrix transaction, the Company's effective tax rate would
        have been 41.4% for fiscal year 2008.

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, including the ability to access capital markets; demographic changes; changes in, or failure to comply with, existing governmental regulations; legislative proposals for healthcare reform; changes in Medicare and Medicaid reimbursement levels; 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
    or    Brandon Ballew
          770-221-6700
          brandon.ballew@gentiva.com

    Media Contact:
          Jennifer Gery-Egan
          Brainerd Communicators
          212-986-6667
          gery@braincomm.com


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SOURCE Gentiva Health Services, Inc.
Copyright©2009 PR Newswire.
All rights reserved


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