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FOR IMMEDIATE
RELEASE
Gentiva Health Services Reports First Quarter 2003 Results
Highlights Include First Quarter Revenue Growth of 4.8% and Diluted EPS
of $0.19
Melville, N.Y., May 6, 2003—Gentiva Health Services, Inc. (Nasdaq: GTIV),
the nation's leading provider of home health services, today announced its first
quarter 2003 financial results, highlighted by higher quarterly revenues, diluted
earnings per share (EPS) of $0.19 and a strong balance sheet with quarter end
cash items and short-term investments of $106 million.
Net revenues for the quarter grew by 4.8% to $202.0 million, compared with
$192.8 million on a continuing operations basis for the first quarter of 2002.
Revenue growth was reported in each major payor group, driven in particular
by the Company's commercial insurance business, which grew from both existing
contracts and new contracts that were signed in early 2003.
"The quarter's performance was driven by a combination of net revenue
growth, gross margin improvement, operating expense control and positive results
from our sales investments," commented Ron Malone, chairman and chief executive
officer of Gentiva Health Services. For the first quarter of 2003, net income
was $5.2 million, or $0.19 per share, compared with a net loss of $209.2 million,
or $8.10 per share, for the corresponding period of 2002. Total company net
loss in the first quarter of 2002 included a loss from continuing operations
of $25.9 million, or $1.00 per share, income from discontinued operations, net
of tax, of $7.2 million, or $0.28 per share, and a loss relating to the cumulative
effect of an accounting change, net of tax, of $190.5 million, or $7.38 per
share.
Discontinued operations reported in the 2002 period included the operating
results of the Specialty Pharmaceutical Services (SPS) business, which was sold
to Accredo Health, Incorporated on June 13, 2002. The cumulative effect of the
accounting change, which reflects the net write-off of substantially all of
the Company's goodwill, represented the non-cash charge resulting from the adoption
of FAS 142 (Goodwill and Other Intangible Assets) during the first quarter of
2002.
The Company also reaffirmed its revenue guidance for 2003 in a range of $800
to $820 million. In addition, the Company announced that it now anticipates
its effective tax rate for 2003 to be at the lower end of the previously guided
range of 10% to 15% of pre-tax income. As a result, the Company is adjusting
its 2003 earnings per share guidance for reporting purposes from a range of
$0.63 to $0.73 per diluted share to a range of $0.67 to $0.73 per diluted share
as a result of using a lower tax rate.
Non-GAAP Financial Measures
The information provided in following tables 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 Webcast Details
The Company will comment further on its first quarter 2003 earnings and revenue
guidance in its previously announced quarterly conference call and live webcast.
The conference call and webcast will be held this morning, May 6, 2003, at 10:00
a.m. Eastern Daylight Time. To participate in the call from the United States
or Canada, dial: (612) 326-1003. The webcast is an audio only, one-way event.
Listeners of the webcast who have questions must phone into the conference call.
To hear the webcast, log onto http://www.gentiva.com/investor/events.asp.
This press release is also accessible at the same link, and a transcript of
the conference call will also be available there within 24 hours of the call.
About Gentiva Health Services
Gentiva Health Services (Nasdaq: GTIV) is the nation's leading home health
services provider. Gentiva serves patients directly through more than 200 community
locations and through CareCentrix, which manages home health care services for
many major managed care organizations throughout the United States. The Company
is a single source for skilled nursing; physical, occupational, speech and neuro-rehabilitation
services; social work, nutrition and disease management education and help with
daily living activities, as well as other therapies and services. The Company
brings home health care services to approximately half a million patients each
year. Gentiva's revenues are generated from commercial insurance, federal and
state government programs and individual consumers. For more information, visit
Gentiva's web site, www.gentiva.com.
| (in 000's, except per share data) |
1st Quarter
|
| |
2003 |
2002 |
| Statement of Operations |
| Net revenues |
$202,016 |
$192,799 |
| Cost of services sold |
133,250 |
129,186 |
| Gross profit |
68,766 |
63,613 |
| Selling, general and administrative expenses |
(61,253) |
(60,862) |
| Depreciation and amortization |
(1,745) |
(1,927) |
| Operating income |
5,768 |
824 |
| Interest income, net |
43 |
196 |
| Income before income taxes from continuing operations |
5,811 |
1,020 |
| Income tax expense |
610 |
26,934 |
| Income (loss) from continuing operations |
5,201 |
(25,914) |
| Discontinued operations, net of tax |
- |
7,188 |
| Income (loss) before cumulative effect of accounting
change |
5,201 |
(18,726) |
| Cumulative effect of accounting change, net of tax |
- |
(190,468) |
| Net income (loss) |
$5,201 |
$(209,194) |
| |
| Earnings per Share |
| Basic: |
| Income (loss) from continuing operations |
$0.19 |
$(1.00) |
| Discontinued operations, net of tax |
- |
0.28 |
| Cumulative effect of accounting change, net of tax |
- |
(7.38) |
| Net income (loss) |
$0.19 |
$(8.10) |
| |
| Average shares outstanding |
26,696 |
25,842 |
| |
| Diluted: |
| Income (loss) from continuing operations |
$0.19 |
$(1.00) |
| Discontinued operations, net of tax |
- |
0.28 |
| Cumulative effect of accounting change, net of tax |
- |
(7.38) |
| Net income (loss) |
$0.19 |
$(8.10) |
| |
| Average shares outstanding |
27,752 |
25,842 |
| |
| Balance Sheet |
| ASSETS |
Mar 30, 2003 |
Dec 29, 2002 |
| Cash, cash equivalents and restricted cash |
$96,031 |
$101,241 |
| Short-term investments |
10,000 |
- |
| Net receivables |
128,406 |
125,078 |
| Prepaid expenses and other current assets |
6,866 |
10,534 |
| Total current assets |
241,303 |
236,853 |
| |
| Fixed assets |
13,532 |
13,025 |
| Other assets |
14,337 |
14,553 |
| Total assets |
$269,172 |
$264,431 |
| |
| LIABILITIES AND SHAREHOLDERS' EQUITY |
| Accounts payable |
$18,078 |
$16,865 |
| Payroll and related taxes |
10,204 |
12,377 |
| Medicare liabilities |
12,141 |
11,880 |
| Cost of claims incurred but not reported |
30,249 |
27,899 |
| Obligations under insurance programs |
38,216 |
37,829 |
| Other accrued expenses |
23,873 |
25,664 |
| Total current liabilities |
132,761 |
132,514 |
| |
| Other liabilities |
17,448 |
18,869 |
| Shareholders' equity |
118,963 |
113,048 |
| Total liabilities and shareholders' equity |
$269,172 |
$264,431 |
| |
| Common shares outstanding |
26,756 |
26,385 |
| |
| |
1st Quarter
|
| |
2003 |
2002 |
| Supplemental Information |
| |
| Net Revenues: |
|
|
| Medicare |
$42,568 |
$42,168 |
| Medicaid and Other Government |
42,345 |
41,885 |
| Commercial Insurance and Other |
117,103 |
108,746 |
| Total net revenues |
$202,016 |
$192,799 |
| |
| A reconciliation between income
(loss) from continuing operations, average shares outstanding and
diluted earnings per share between As Reported and Pro Forma amounts
were as follows (1): |
| |
| Income (loss) from Continuing Operations- As Reported |
$5,201 |
$(25,914) |
| Add: income tax expense - As Reported (2) |
610 |
26,934 |
| Income before income taxes from continuing operations |
5,811 |
1,020 |
| Less: income tax expense - At assumed 39% rate |
(2,266) |
(398) |
| Income from Continuing Operations - Pro Forma |
$3,545 |
$622 |
| |
| Average shares outstanding - As Reported |
27,752 |
25,842 |
| Add: common stock equivalents (3) |
- |
1,254 |
| Average shares outstanding - Pro Forma |
27,752 |
27,096 |
| |
| Diluted Earnings per Share |
| Income (Loss) from Continuing Operations - As Reported |
$0.19 |
$(1.00) |
| Income from Continuing Operations - Pro Forma |
$0.13 |
$0.02 |
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Notes:
1) Although Income from Continuing Operations – Pro Forma, is a non-GAAP
financial measure, management believes that the presentation of income from continuing
operations as calculated using an effective tax rate of 39% is a useful adjunct
to Income (Loss) from Continuing Operations – As Reported under GAAP because
it measures the Company's performance in a consistent manner between the results
for the first quarter of fiscal 2003 and fiscal 2002. In addition, Income from
Continuing Operations – Pro Forma facilitates comparison between Gentiva
and other companies. Furthermore, due to the unusual historical relationship
between income tax expense and income before income taxes from continuing operations,
the presentation of Income from Continuing Operations – Pro Forma incorporates
an effective tax rate, which may be more representative of the Company’s
normalized rate. For these reasons, management believes that Income from Continuing
Operations – Pro Forma is useful to investors. Investors should not view
Income from Continuing Operations – Pro Forma as an alternative to the
GAAP measure of Income (Loss) from Continuing Operations as a measure of performance.
2) For the first quarter of 2003, income tax expense approximated $0.6 million,
representing an effective tax rate of 10.5%. The estimated income tax expense
was comprised of state income and federal alternative minimum taxes. The effective
tax rate was lower than the statutory tax rate due to the reversal of a portion
of the valuation allowance relating to the realization of tax benefits associated
with a net operating loss carry forward and other net deferred tax assets.
During the first quarter of 2002, income tax expense relating to continuing
operations was $26.9 million, which reflects the establishment of a valuation
allowance against certain deferred tax assets that were recorded with the adoption
of FAS No. 142 and the subsequent write-off of goodwill; the corresponding
tax benefit for the same amount was recorded in the cumulative effect of accounting
change line during the 2002 period.
3) The computation of diluted earnings per share for the Company’s Income
from Continuing Operations – Pro Forma for the first quarter of 2002
includes the effect of an incremental 1,254,000 shares that would be issuable
upon the assumed exercise of stock options under the treasury stock method.
For purposes of the computation of diluted earnings (loss) per share for the
Company’s Income (Loss) from Continuing Operations – As Reported
for 2002, these incremental shares were excluded, since their inclusion would
be antidilutive on earnings.
Certain statements contained in this news release, including, without limitation, statements containing the words "believes," "anticipates," "intends," "expects" 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. Such factors include, among others, general economic and business conditions; demographic changes; changes in, or failure to comply with, existing governmental regulations; legislative proposals for health care reform; changes in Medicare and Medicaid reimbursement levels; effects of competition in the markets the Company operates in; 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 payor sources; ability of customers to pay for services; a material shift in utilization within capitated agreements; and changes in estimates and judgments associated with critical accounting policies. For a detailed discussion 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.
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