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Gentiva Reports Second Quarter 2009 Results
Date:7/30/2009

ATLANTA, July 30 /PRNewswire-FirstCall/ -- Gentiva Health Services, Inc. (Nasdaq: GTIV), a leading provider of comprehensive home health services, today reported the following 2009 second quarter results:

  • Net revenues of $298.1 million for the quarter ended June 28, 2009 compared to $344.2 million, which included net revenues of $79.3 million from its CareCentrix business unit, for the quarter ended June 29, 2008. Excluding prior year's second quarter net revenues from CareCentrix, Gentiva's net revenues grew about $33 million, or 12% in the 2009 second quarter. The Company sold a majority interest in CareCentrix to Water Street Healthcare Partners on September 25, 2008.

  • Net income of $17.1 million, or $0.58 per diluted share compared to net income of $12.0 million or $0.41 per diluted share in the 2008 second quarter.

  • Adjusted net income for the 2009 second quarter was $17.5 million, up 43% compared with the prior year period. On a diluted earnings per share basis, adjusted net income in the 2009 second quarter was $0.59 compared with $0.42 in the corresponding period of 2008. Adjusted net income for both second quarter periods excludes special charges of $0.01 per diluted share relating to restructuring and integration activities.

  • Earnings before interest, taxes, depreciation and amortization (EBITDA) increased 12% to $35.4 million in the second quarter of 2009. EBITDA as a percentage of net revenues improved to 11.9% in the second quarter of 2009 versus 9.2% in the prior-year period. EBITDA included restructuring and integration costs of $0.6 million in the second quarter of 2009 as compared to $0.4 million for the prior year period.

"Gentiva had a very good second quarter driven by continued success in executing our core strategies: rolling out our specialty programs, serving the needs of higher acuity seniors and increasing both the capacity and productivity of our growing clinician base," said Gentiva CEO Tony Strange. "Our performance demonstrates the commitment of our employees as well as the growing belief of the healthcare community in the power of home care as a key part of the solution to the nation's healthcare challenges."

Gentiva reported these segment highlights for the quarter:

  • Home Health revenue growth of 12% to $265.6 million and operating contribution growth of 23% to $48.6 million.

  • Revenues in the All Other segment - which includes hospice, respiratory therapy and home medical equipment, infusion therapy and consulting - increased 14% to $33.0 million, while operating contribution increased 19% to $3.9 million compared to the prior-year period.

Gentiva reported these highlights for the six months ended June 28, 2009:

  • Net revenues of $587.0 million versus $665.8 million in the prior year period. Net revenues in the 2008 period included approximately $157 million relating to CareCentrix. Excluding the revenue contribution from CareCentrix, Gentiva's net revenues grew about $77 million, or 15%, in the six-month period ended June 28, 2009.

  • Net income of $35.1 million, or $1.19 per diluted share which included (i) a non-recurring pre-tax net gain of $5.7 million or $0.20 per diluted share resulting from the 2009 first quarter sale of certain branch offices that specialized primarily in pediatric home health care services and (ii) special pre-tax charges of $1.5 million or $0.03 per diluted share relating to restructuring and integration costs. These results compared to net income of $19.7 million or $0.68 per diluted share in the 2008 period which included special pre-tax charges of $0.7 million or $0.01 per diluted share relating to restructuring and integration costs.

  • Adjusted net income was $30.2 million, up 50% compared with the prior year period. On a diluted earnings per share basis, adjusted net income in the 2009 period was $1.02 compared with $0.69 in the corresponding period of 2008.

  • EBITDA increased 15% to $63.6 million versus $55.3 million in the prior-year period.

  • Operating cash flow was $49.5 million in the 2009 period compared to $20.8 million in the comparable 2008 period.

At June 28, 2009, the Company reported cash and cash equivalents of $99.5 million and long-term debt of $237 million.

Full-Year 2009 Outlook

Gentiva announced that it is raising its revenue and earnings outlook for fiscal 2009 based on its year-to- date performance and prospects for the remainder of this year. Gentiva now anticipates full-year 2009 net revenues will range between $1.19 billion to $1.21 billion, as compared to prior guidance of $1.14 billion to $1.18 billion. On a diluted earnings per share basis, adjusted net income is expected to be in a range between $2.04 and $2.10, up from the $1.72 and $1.80 range provided earlier this year. Gentiva's 2009 outlook represents an increase in net revenues of 12% to 14% and an increase in diluted earnings per share of 45% to 50% 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 special charges relating to restructuring and integration costs which are expected to range between $3 million and $4 million for the year and non-recurring charges and credits. The outlook includes the impact of recently announced acquisitions and also reflects 53 weeks of activity in fiscal 2009.

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 2009 results during its conference call and live web cast to be held Thursday, July 30, 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 #19324792. 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 July 30, beginning at approximately 1 p.m. ET, and will remain available continuously through August 6. 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: 19324792. 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 48 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

(unaudited tables and notes follow)

    (in 000's, except per share data)     2nd Quarter          Six Months
                                         --------------      --------------
                                         2009      2008      2009      2008
                                         ----      ----      ----      ----
    Statements of Income
    --------------------
        Net revenues                  $298,103  $344,213  $587,020  $665,846
        Cost of services and
         goods sold                    141,175   192,733   281,984   377,843
                                       -------   -------   -------   -------
        Gross profit                   156,928   151,480   305,036   288,003
        Selling, general and
         administrative expenses      (127,186) (125,569) (252,541) (243,449)
        (Loss) gain on sale of
         assets, net                       (85)        -     5,747         -
        Interest income                    817       273     1,618       940
        Interest expense and other      (2,688)   (5,592)   (5,880)  (11,685)
                                       -------   -------   -------   -------
        Income before income taxes      27,786    20,592    53,980    33,809
        Income tax expense              10,954     8,568    19,404    14,062
                                       -------   -------   -------   -------
        Income before equity
         in net earnings of affiliate   16,832    12,024    34,576    19,747
        Equity in net earnings of
         affiliate                         263         -       541         -
                                       -------   -------   -------   -------
        Net income                     $17,095   $12,024   $35,117   $19,747
                                       =======   =======   =======   =======

      Earnings per Share
      ------------------
        Net income:
           Basic                         $0.59     $0.42     $1.21     $0.70
                                       =======   =======   =======   =======
           Diluted                       $0.58     $0.41     $1.19     $0.68
                                       =======   =======   =======   =======

        Average shares outstanding:
           Basic                        28,959    28,497    28,952    28,389
                                       =======   =======   =======   =======
           Diluted                      29,396    29,240    29,606    29,147
                                       =======   =======   =======   =======

    Condensed Balance Sheets
    ------------------------
                                       Jun 28,   Dec 28,
      ASSETS                            2009      2008
      ------                          --------  --------
        Cash and cash equivalents      $99,470   $69,201
        Short-term
         investments (A)                 4,450         -
        Accounts receivable,
         net (B)                       174,631   177,201
        Deferred tax assets             13,840    11,933
        Prepaid expenses and
         other current assets           14,458    13,141
                                      --------  --------
             Total current assets      306,849   271,476

        Long-term investments (A)        4,250    11,050
        Note receivable                 25,000    25,000
        Investment in affiliate         23,805    23,264
        Fixed assets, net               67,529    63,815
        Intangible assets, net         249,274   250,432
        Goodwill                       308,868   308,213
        Other assets                    21,989    20,247
                                      --------  --------
            Total assets            $1,007,564  $973,497
                                    ==========  ========

      LIABILITIES AND
       SHAREHOLDERS' EQUITY
      ---------------------
        Accounts payable                $8,593    $8,027
        Payroll and related taxes       17,959    17,869
        Deferred revenue                38,108    32,976
        Medicare liabilities             6,309     6,680
        Obligations under
         insurance programs             38,059    39,628
        Other accrued expenses          38,428    40,895
                                      --------  --------
             Total current
              liabilities              147,456   146,075

        Long-term debt                 237,000   251,000
        Deferred tax
         liabilities, net               68,408    64,262
        Other liabilities               18,777    17,189
        Shareholders' equity           535,923   494,971
                                      --------  --------
             Total liabilities and
              shareholders'
              equity                $1,007,564  $973,497
                                    ==========  ========

        Common shares outstanding       29,011    28,864
                                    ==========  ========

    (A) Short-term and long-term investments consisted of auction rate
        securities with underlying guarantees carrying a AAA rating.
        Short-term investments were presented net of a valuation allowance of
        $0.6 million, the charge for which was recorded in interest expense
        and other in the 2009 second quarter.  At June 28, 2009 and December
        28, 2008, long-term investments were presented net of a valuation
        allowance of $0.8 million and $1.9 million, respectively.
    (B) Accounts receivable, net, included an allowance for doubtful accounts
        of $8.0 million and $8.2 million at June 28, 2009 and December 28,
        2008, respectively.



        (in 000's)                                       Six Months
                                                        -------------
    Condensed Statements of Cash Flows                  2009     2008
    ----------------------------------                  ----     ----
      OPERATING ACTIVITIES:
      Net income                                     $35,117  $19,747
      Adjustments to reconcile net income to net cash
      provided by operating activities:
        Depreciation and amortization                 11,145   10,753
        Amortization of debt issuance costs              681      593
        Provision for doubtful accounts                4,045    6,124
        Equity-based compensation expense              3,466    3,220
        Windfall tax benefits associated
         with equity-based compensation                 (585)  (1,306)
        Impairment loss on auction rate securities     1,000        -
        Gain on sale of assets, net                   (5,747)       -
        Equity in net earnings of affiliate             (541)       -
        Deferred income taxes                          1,458   10,829
      Changes in assets and liabilities, net of
       effects from acquisitions and dispositions:
        Accounts receivable                           (1,082) (24,960)
        Prepaid expenses and other current assets     (1,602)  (1,508)
        Current liabilities                            1,836   (3,240)
      Other, net                                         271      529
                                                     -------   ------
      Net cash provided by operating activities       49,462   20,781
                                                     -------   ------

      INVESTING ACTIVITIES:
      Purchase of fixed assets                       (12,403) (13,831)
      Proceeds from sale of assets, net of cash
       transferred                                     5,619        -
      Acquisition of businesses, net of cash
       acquired                                       (2,200) (59,217)
      Purchases of short-term investments
       available-for-sale                                  -  (28,000)
      Maturities of short-term investments
       available-for-sale                              2,550   46,250
                                                     -------   ------
      Net cash used in investing activities           (6,434) (54,798)
                                                     -------   ------

      FINANCING ACTIVITIES:
      Proceeds from issuance of common stock           5,910    6,211
      Windfall tax benefits associated with equity-
       based compensation                                585    1,306
      Borrowings under revolving credit facility           -   24,000
      Home Health Care Affiliates debt repayments          -   (7,420)
      Debt issuance costs                                  -     (557)
      Repayments under the Company's term loan       (14,000)  (3,000)
      Repurchases of common stock                     (4,813)       -
      Repayment of capital lease obligations            (441)    (625)
                                                     -------   ------
      Net cash (used in) provided by financing
       activities                                    (12,759)  19,915
                                                     -------   ------

      Net change in cash and cash equivalents         30,269  (14,102)
      Cash and cash equivalents at beginning of
       period                                         69,201   36,181
                                                     -------   ------
      Cash and cash equivalents at end of period     $99,470  $22,079
                                                     =======  =======

      SUPPLEMENTAL DISCLOSURES
       OF CASH FLOW INFORMATION:

      Interest paid                                   $5,172  $11,355
      Income taxes paid                              $15,831   $7,197



        (in 000's)
    Supplemental Information             2nd Quarter          Six Months
    ------------------------            --------------      --------------
                                        2009      2008      2009      2008
                                        ----      ----      ----      ----
    Segment Information (1)
      Net revenues
        Home Health                  $265,581  $236,876  $523,326  $453,876
        CareCentrix                         -    79,323         -   157,171
        All Other (3)                  32,987    28,827    64,558    56,556
        Intersegment revenues            (465)     (813)     (864)   (1,757)
                                     --------  --------  --------  --------
      Total net revenues (3)         $298,103  $344,213  $587,020  $665,846
                                     ========  ========  ========  ========

      Operating contribution (4)
        Home Health                   $48,633   $39,423   $91,858   $70,625
        CareCentrix (5)                     -     6,523         -    12,849
        All Other                       3,891     3,278     7,121     6,123
                                     --------  --------  --------  --------
      Total operating contribution     52,524    49,224    98,979    89,597
      Corporate expenses              (17,124)  (17,711)  (35,339)  (34,290)
      (Loss) gain on sale of
       assets, net                        (85)        -     5,747         -
      Depreciation and amortization    (5,658)   (5,602)  (11,145)  (10,753)
      Interest expense, net (6)        (1,871)   (5,319)   (4,262)  (10,745)
                                     --------  --------  --------  --------
      Income before income taxes      $27,786   $20,592   $53,980   $33,809
                                      =======   =======   =======   =======



                                          2nd Quarter         Six Months
                                        --------------      --------------
                                        2009      2008      2009      2008
                                        ----      ----      ----      ----
      Net Revenues by Major
       Payer Source:
        Medicare
          Home Health                $194,140  $161,257  $380,210  $306,362
          Other                        20,891    17,292    40,948    33,492
                                     --------  --------  --------  --------
          Total Medicare              215,031   178,549   421,158   339,854
        Medicaid and local
         government                    24,830    32,953    52,972    64,520
        Commercial Insurance
         and Other:
          Paid at episodic rates       19,164    13,402    35,294    24,548
          Other                        39,078   119,309    77,596   236,924
                                     --------  --------  --------  --------
          Total Commercial
           Insurance and Other         58,242   132,711   112,890   261,472
                                     --------  --------  --------  --------
             Total net revenues      $298,103  $344,213  $587,020  $665,846
                                     ========  ========  ========  ========



    A reconciliation of EBITDA to
     Net income - As Reported
     amounts follows: (2)                 2nd Quarter         Six Months
                                        --------------      --------------
                                        2009      2008      2009      2008
                                        ----      ----      ----      ----

        EBITDA (4)                    $35,400   $31,513   $63,640   $55,307
        (Loss) gain on sale of
         assets, net                      (85)        -     5,747         -
        Depreciation and
         amortization                  (5,658)   (5,602)  (11,145)  (10,753)
        Interest expense, net (6)      (1,871)   (5,319)   (4,262)  (10,745)
                                     --------  --------  --------  --------
        Income before income taxes     27,786    20,592    53,980    33,809
        Income tax expense (7)        (10,954)   (8,568)  (19,404)  (14,062)
                                     --------  --------  --------  --------
        Income before equity in net
         earnings of affiliate         16,832    12,024    34,576    19,747
        Equity in net earnings
         of affiliate                     263         -       541         -
                                     --------  --------  --------  --------
        Net income - As Reported      $17,095   $12,024   $35,117   $19,747
                                     ========  ========  ========  ========

Notes:

(1) The Company's senior management evaluates performance and allocates resources based on operating contributions of the operating 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) Certain reclassifications have been made to the 2008 second quarter and first half statements of income and supplemental information to conform to the current year presentation. The primary impact of the reclassifications was to reduce (i) net revenues in All Other and (ii) cost of services and goods sold by approximately $2.0 million and $4.1 million, in the second quarter and first half of 2008, respectively, relating to the reimbursement of nursing home room and board charges for hospice patients.

(4) Operating contribution and EBITDA for the second quarter and first half of 2009 included special charges of $0.6 million and $1.5 million, respectively. For the second quarter and first half of 2008, operating contribution and EBITDA included special charges of $0.4 million and $0.7 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):

                                    2nd Quarter   Six Months
                                   ------------  ------------
                                   2009    2008  2009    2008
                                   ----    ----  ----    ----
        Home Health                $0.4    $0.1  $0.5    $0.2
        Corporate expenses          0.2     0.3   1.0     0.5
                                   ----    ----  ----    ----
        Total                      $0.6    $0.4  $1.5    $0.7
                                   ====    ====  ====    ====

(5) Operating contribution for CareCentrix, in which the Company sold a majority ownership interest on September 25, 2008, was comprised of the following (dollars in thousands):

                                    2nd Quarter   Six Months
                                   ------------  ------------
                                   2009    2008  2009    2008
                                   ----    ----  ----    ----
        Gross profit                 $- $14,580    $- $28,870
        Selling, general and
         administrative expenses      -  (8,184)    - (16,261)
        Add: depreciation             -     127     -     240
                                    ---     ---   ---     ---
        Operating contribution       $-  $6,523    $- $12,849
                                    ===  ======   === =======

(6) Interest expense, net for the second quarter and first half of 2009 included impairment losses on auction rate securities of $0.6 million and $1.0 million, respectively.

(7) The Company's effective tax rate was 39.4% and 35.9% for the second quarter and first half of 2009, respectively, and 41.6% for the second quarter and first half of 2008. During the first half of 2009, the Company recorded a pre-tax gain, net of transaction costs, of $5.7 million relating to the sale of several branch offices that specialized primarily in pediatric home health care services. There was no income tax expense relating to the gain on sale of assets due to the utilization of a capital loss carryforward. Excluding the impact of the non-recurring gain, the Company's effective tax rate would have been 40.2% for the first half of 2009.

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; 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 28, 2008.

    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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