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Gentiva Reports Strong Second Quarter led by Home Health Segment

Raises Full Year Financial Outlook

MELVILLE, N.Y., July 31 /PRNewswire-FirstCall/ -- Gentiva Health Services, Inc. (Nasdaq: GTIV), the nation's leading provider of comprehensive home health services, today reported strong second quarter results, led by double-digit increases in Medicare revenues and admissions in the Company's Home Health segment.


Performance highlights for the quarter ended June 29, 2008 included:

-- A 13% increase in net revenues to $346.2 million versus the second quarter ended July 1, 2007.

-- A 34% rise in net income to $12.0 million, or $0.41 per diluted share, versus $9.0 million, or $0.31 per diluted share, for the prior-year period. Average diluted shares were 29.2 million versus 28.5 million in the second quarter of 2007.

-- A 19% increase in earnings before interest, taxes, depreciation and amortization (EBITDA) to $31.5 million in the second quarter of 2008. EBITDA as a percentage of net revenues was 9.1% in the second quarter of 2008 versus 8.6% in the prior-year period. EBITDA included restructuring and integration costs of $0.4 million for the second quarter of 2008 as compared to $0.6 million for the prior-year period.

"Gentiva has generated a strong first half that puts us well on track to achieve our goals for the year," said Chairman and CEO Ron Malone. "We are building our Home Health segment with a focus on growing Medicare admissions, expanding our pioneering specialty programs, and increasing our capacity both organically and through acquisitions, including two transactions completed so nses, 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 second quarter and first half of 2008 included restructuring and integration costs of $0.4 million and $0.7 million, respectively. For the second quarter and first half of 2007, operating contribution and EBITDA included restructuring and integration costs of $0.6 million and $1.6 million, respectively. The restructuring and integration costs were reflected as follows for segment reporting (dollars in millions):

2nd Quarter Six Months

2008 2007 2008 2007

Home Health $0.1 $0.1 $0.2 $0.4

Other Related Services - 0.1 - 0.1

Corporate 0.3 0.4 0.5 1.1

Total $0.4 $0.6 $0.7 $1.6

4) Commercial insurance and other revenues included revenues from Medicare Advantage business paid on an episodic basis of $13.4 million and $24.5 million for the second quarter and first half of 2008, respectively, and $7.2 million and $12.6 million for the second quarter and first half of 2007, respectively.

5) The Company's effective tax rate was 41.6% for the second quarter and first half of 2008, and 42.0% and 42.5% for the second quarter and first half of 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


Media Contacts: David Fluhrer

631-501-7102, 516-589-0778

far this year. We also saw sequential improvement at both CareCentrix and within our Other Related Services segment.

"These achievements, along with the stable reimbursement outlook indicated in the recently passed Medicare legislation, position Gentiva for continued strength in performance through the balance of 2008 and lead us to increase our financial outlook for the year."

Gentiva reported these segment highlights for the quarter:

-- Home Health segment revenues increased 16% versus the prior-year period, while operating contribution rose 27%. Home Health's operating contribution margin reached 16.6% versus 15.2% in the second quarter of 2007. Strong Home Health Medicare revenue growth of 18% was driven by a double-digit increase in episodic patient admissions, increases in revenue per episode, due in part to the Company's expanding specialty programs, and the impact of acquisitions completed in 2008.

-- CareCentrix revenues grew by 8% compared with the 2007 second quarter and by $1.5 million over the 2008 first quarter. Operating contribution declined 18% from the year-ago quarter, but increased by approximately $200,000 sequentially as the Company began to see a reduction in the use of capitated services.

-- Revenues in Gentiva's Other Related Services segment -- which includes hospice, respiratory therapy and home medical equipment, infusion services and consulting -- rose by 2% versus the prior-year period. Operating contribution declined 6% compared to the prior-year period. Sequentially, revenue and operating contribution increased $1.0 million and $0.4 million, respectively, as this segment began to benefit from investments in infrastructure and capacity to support accelerated growth and anticipated increases in demand.

Companywide performance highlights for the six months ended June 29, 2008 included:

-- A 10% increase in net revenues to approximately $670 million versus the prior-year period.

-- A 25% rise in net income to $19.7 million, or $0.68 per diluted share, versus $15.8 million, or $0.56 per diluted share, for the first half of 2007.

-- An 11% increase in EBITDA to $55.3 million versus $49.6 million in the prior-year period. Excluding charges for restructuring and integration costs, EBITDA for the period would have been $56.0 million, or $0.69 per diluted share, compared to $51.2 million and $0.59 per diluted share in the prior-year period.

Gentiva announced that it is raising its 2008 outlook for net revenues to a range of $1.32 billion to $1.35 billion, as compared to $1.28 billion to $1.32 billion, and now expects its diluted earnings per share to be between $1.36 and $1.43, up from the $1.32 to $1.40 range announced earlier this year. Projected earnings exclude special items and restructuring and integration costs.

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 second quarter results during its conference call and live web cast to be held Thursday, July 31, 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 #56178391. 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 to hear the web cast. This press release is accessible at 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,, and its investor relations section at GTIV-E

(tables and notes follow)

(in 000's, except per share data) 2nd Quarter Six Months

2008 2007 2008 2007

Statements of Income

Net revenues $346,225 $307,277 $669,947 $606,819

Cost of services and goods sold 194,745 176,276 381,944 346,397

Gross profit 151,480 131,001 288,003 260,422

Selling, general and

administrative expenses 125,569 109,431 243,449 220,496

Operating income 25,911 21,570 44,554 39,926

Interest expense (5,592) (6,946) (11,685) (14,085)

Interest income 273 809 940 1,626

Income before income taxes 20,592 15,433 33,809 27,467

Income tax expense 8,568 6,481 14,062 11,676

Net income $12,024 $8,952 $19,747 $15,791

Earnings per Share

Net income:

Basic $0.42 $0.32 $0.70 $0.57

Diluted $0.41 $0.31 $0.68 $0.56

Average shares outstanding:

Basic 28,497 27,703 28,389 27,616

Diluted 29,240 28,540 29,147 28,447

Condensed Balance Sheets

ASSETS Jun 29, 2008 Dec 30, 2007

Cash, cash equivalents and

restricted cash (A) $22,079 $36,181

Short-term investments (B) - 31,250

Accounts receivable, net (C) 233,478 207,801

Deferred tax assets 11,306 18,859

Prepaid expenses and other current

assets 14,455 14,415

Total current assets 281,318 308,506

Long-term investments (B) 12,641 -

Fixed assets, net 66,181 59,562

Intangible assets, net 240,158 211,602

Goodwill 316,069 276,100

Other assets 26,008 26,463

Total assets $942,375 $882,233


Current portion of long-term debt $ - $2,304

Accounts payable 22,207 20,093

Payroll and related taxes 19,094 17,163

Deferred revenue 33,624 29,015

Medicare liabilities 8,782 7,985

Cost of claims incurred but not

reported 22,089 24,321

Obligations under insurance

programs 38,805 36,816

Other accrued expenses 34,138 42,282

Total current liabilities 178,739 179,979

Long-term debt 331,000 307,696

Deferred tax liabilities, net 57,152 48,572

Other liabilities 22,109 22,557

Shareholders' equity 353,375 323,429

Total liabilities and

shareholders' equity $942,375 $882,233

Common shares outstanding 28,507 28,046

(A) Cash, cash equivalents and restricted cash included restricted cash of $0.3 million at June 29, 2008 and $22.0 million at December 30, 2007.

(B) Short-term and long-term investments at June 29, 2008 and December 30, 2007 consisted of AAA-rated auction rate securities. At June 29, 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 $10.5 million and $9.4 million at June 29, 2008 and December 30, 2007, respectively.

(in 000's) Six Months

Condensed Statements of Cash Flows 2008 2007


Net income $19,747 $15,791

Adjustments to reconcile net income to

net cash provided by operating activities:

Depreciation and amortization 10,753 9,698

Amortization of debt issuance costs 593 509

Provision for doubtful accounts 6,124 3,886

Equity-based compensation expense 3,220 3,477

Windfall tax benefits associated

with equity-based compensation (1,306) (656)

Deferred income taxes 10,829 9,187

Changes in assets and liabilities,

net of acquired businesses:

Accounts receivable (24,960) (28,321)

Prepaid expenses and other current assets (1,508) (4,372)

Current liabilities (3,240) 11,112

Other, net 529 1,200

Net cash provided by operating

activities 20,781 21,511


Purchase of fixed assets (13,831) (12,486)

Acquisition of businesses, net of

cash acquired (59,217) -

Purchases of short-term investments

available-for-sale (28,000) (39,100)

Maturities of short-term investments

available-for-sale 46,250 43,150

Net cash used in investing activities (54,798) (8,436)


Proceeds from issuance of common stock 6,211 6,462

Windfall tax benefits associated

with equity-based compensation 1,306 656

Borrowings under revolving credit facility 24,000 -

Home Health Care Affiliates debt repayments (7,420) -

Debt issuance costs (557) -

Other debt repayments (3,000) (18,000)

Repayment of capital lease obligations (625) (587)

Net cash provided by (used in)

financing activities 19,915 (11,469)

Net change in cash, cash equivalents

and restricted cash (14,102) 1,606

Cash, cash equivalents and

restricted cash at beginning of period 36,181 32,910

Cash, cash equivalents and

restricted cash at end of period $22,079 $34,516



Interest paid $11,355 $15,739

Income taxes paid, net of refunds $6,071 $1,107

(in 000's)

Supplemental Information 2nd Quarter Six Months

2008 2007 2008 2007

Segment Information (1)

Net revenues

Home Health $236,876 $204,894 $453,876 $409,925

CareCentrix 79,323 73,326 157,171 139,216

Other Related Services 30,839 30,332 60,657 60,895

Intersegment revenues (813) (1,275) (1,757) (3,217)

Total net revenues $346,225 $307,277 $669,947 $606,819

Operating contribution (3)

Home Health $39,423 $31,101 $70,625 $61,089

CareCentrix 6,523 7,987 12,849 14,941

Other Related Services 3,278 3,479 6,123 7,466

Total operating contribution 49,224 42,567 89,597 83,496

Corporate expenses (17,711) (16,082) (34,290) (33,872)

Depreciation and amortization (5,602) (4,915) (10,753) (9,698)

Interest expense, net (5,319) (6,137) (10,745) (12,459)

Income before income taxes $20,592 $15,433 $33,809 $27,467

2nd Quarter Six Months

2008 2007 2008 2007

Net Revenues by Major Payer



Home Health $161,257 $136,829 $306,362 $272,083

Other 15,727 14,858 30,301 30,146

Total Medicare 176,984 151,687 336,663 302,229

Medicaid and local government 36,608 40,331 71,974 78,659

Commercial insurance

and other (4) 132,633 115,259 261,310 225,931

Total net revenues $346,225 $307,277 $669,947 $606,819

A reconciliation of EBITDA to Net

income - As Reported amounts

follows: (2) 2nd Quarter Six Months

2008 2007 2008 2007

EBITDA (3) $31,513 $26,485 $55,307 $49,624

Depreciation and amortization (5,602) (4,915) (10,753) (9,698)

Interest expense, net (5,319) (6,137) (10,745) (12,459)

Income before income taxes 20,592 15,433 33,809 27,467

Income tax expense (5) (8,568) (6,481) (14,062) (11,676)

Net income - As Reported $12,024 $8,952 $19,747 $15,791


1) The Company's senior management evaluates performance and allocates resources based on operating contributions of the reportable segments, which exclude corporate expe

SOURCE Gentiva Health Services, Inc.
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