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FOR IMMEDIATE
RELEASE
Gentiva(R) Reports First Quarter 2004 Increases in EPS and Net Revenues
MELVILLE, N.Y., April 28 /PRNewswire-FirstCall/ -- Gentiva Health Services, Inc.
(Nasdaq: GTIV), the nation's largest provider of comprehensive home health services,
today reported net income of $9.2 million, or $0.34 per diluted share, for the
first quarter ended March 28, 2004 as compared to $5.2 million, or $0.19 per diluted
share, for the corresponding period of fiscal 2003.
Results for the fiscal 2004 period included special items related to the favorable
settlement of the Company's 1997 Medicare cost reports net of a revenue adjustment
to reflect an industrywide repayment of certain Medicare reimbursements relating
to periods since the inception of the Prospective Payment Reimbursement System
in October 2000. The special items contributed $8.0 million to net revenues
and income before income taxes in the 2004 first quarter.
Net income for the first quarter of 2004 -- excluding the impact of the special
items -- was $4.3 million, or $0.16 per diluted share, compared to $3.5 million,
or $0.13 per diluted share, assuming a normalized tax rate of 39% for the first
quarter of 2003. In the 2003 period, the actual effective tax rate was 10.5%,
resulting from the reversal of a portion of Gentiva's deferred tax valuation
allowance. (See Supplemental Information for a reconciliation between Net income
-- As Reported and Net income -- Pro Forma.)
First quarter 2004 net revenues, excluding the $8.0 million in special items,
were $205.9 million compared to the $202.0 million reported in the first quarter
of 2003. Gentiva's Medicare revenues for the first quarter of 2004 increased
28.3% over the first quarter of 2003, excluding the impact of the special items.
Medicare revenue growth was driven by an increase of 20% in admissions, as
well as higher reimbursement rates compared to the prior year period, and various
operational and clinical process enhancements.
Revenues from the Company's two other major payor categories -- Commercial
Insurance and Other, and Medicaid and Other Government -- declined 4.2% and
7.5%, respectively, compared to the first quarter of 2003 due to two factors:
lower revenue from the recently renewed managed care contract with CIGNA HealthCare
that more than offset an increase in other managed care revenue, and continuation
of reductions in reimbursements and services associated with certain Medicaid
and other state and county health programs that remain under state budget pressure.
Net revenues, excluding the special items and revenues from CIGNA, increased
$16.2 million, or 12.9%, in the first quarter of 2004. Revenues from CIGNA,
which declined 16% in the first quarter, represented approximately 30% of Gentiva's
total net revenues in the first quarter of 2004 versus 38% in the comparable
period of 2003.
"Our Company generated positive results in the first quarter because we have
executed the sales, operational and clinical strategies to deal effectively
with expected changes in our revenue mix," said Gentiva Chairman and CEO Ron
Malone. "Excluding the special items, our net revenues grew about 2%, while
our pre-tax income increased 23%. We have said before that our strategies are
designed to generate healthier results in a constantly changing environment.
Our first quarter results continue to demonstrate that those strategies are
working."
Non-GAAP Financial Measures
The information provided in the 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 Web Cast Details
The Company will comment further on its first quarter results during its quarterly
conference call and live web cast to be held tomorrow morning, April 29, 2004,
at 10:00 a.m. Eastern Daylight Time. To participate in the call from the United
States or Canada, dial: (612) 326-1019. The web cast is an audio only, one-way
event. Web cast listeners who wish to ask questions must participate in the
conference call. To hear the web cast, 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 be available on the site within 24 hours after the
call.
About Gentiva Health Services
Gentiva Health Services is the nation's largest provider of comprehensive
home health services. Gentiva serves patients through more than 350 direct service
delivery units within approximately 250 locations in 35 states, and through
CareCentrix(R), 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; disease management education and help with
daily living activities, as well as other therapies and services. 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,
and its investor relations section at http://www.gentiva.com/investor.
(Tables and notes follow)
(in 000's, except per share data) 1st Quarter
2004 2003
Statements of Income
Net revenues $213,905 $202,016
Cost of services sold 130,643 133,250
Gross profit 83,262 68,766
Selling, general and administrative
expenses (66,369) (61,253)
Depreciation and amortization (1,845) (1,745)
Operating income 15,048 5,768
Interest income, net 82 43
Income before income taxes 15,130 5,811
Income tax expense (5,900) (610)
Net income $9,230 $5,201
Earnings per Share
Net income:
Basic $0.36 $0.19
Diluted $0.34 $0.19
Average shares outstanding:
Basic 25,542 26,696
Diluted 27,084 27,752
Condensed Balance Sheets
ASSETS Mar 28, 2004 Dec 28, 2003
Cash, cash equivalents and
restricted cash $111,110 $100,013
Short-term investments -- 10,000
Net receivables 138,127 132,998
Deferred tax assets 22,311 26,464
Prepaid expenses and other current assets 8,275 6,524
Total current assets 279,823 275,999
Fixed assets 18,082 15,135
Deferred tax assets, net 27,006 28,025
Other assets 16,447 15,929
Total assets $341,358 $335,088
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $19,559 $16,079
Payroll and related taxes 12,120 12,932
Medicare liabilities 13,178 12,736
Cost of claims incurred but not reported 27,897 28,525
Obligations under insurance programs 36,708 37,200
Other accrued expenses 30,473 32,230
Total current liabilities 139,935 139,702
Other liabilities 19,805 18,207
Shareholders' equity 181,618 177,179
Total liabilities and
shareholders' equity $341,358 $335,088
Common shares outstanding 25,309 25,598
Note: Cash, cash equivalents and restricted cash includes restricted
cash of $21.8 million at March 28, 2004 and December 28, 2003.
1st Quarter
Condensed Statements of Cash Flows 2004 2003
OPERATING ACTIVITIES:
Net income $9,230 $5,201
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation and amortization 1,845 1,745
Provision for doubtful accounts 2,047 2,031
Gain on sale / disposal of
businesses and fixed assets -- (191)
Deferred income taxes 5,172 --
Changes in assets and liabilities,
net of acquisitions/divestitures (8,927) (1,118)
Other, net (13) (5)
Net cash provided by operating activities 9,354 7,663
INVESTING ACTIVITIES:
Purchase of fixed assets (3,370) (2,487)
Proceeds from sale of assets / business -- 200
Acquisition of businesses -- (1,300)
Maturities (purchase) of short-term
investments 10,000 (10,000)
Net cash provided by (used in)
investing activities 6,630 (13,587)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 1,039 714
Repurchases of common stock (5,830) --
Repayment of capital lease obligations (96) --
Net cash (used in) provided by
financing activities (4,887) 714
Net change in cash, cash equivalents
and restricted cash 11,097 (5,210)
Cash, cash equivalents and
restricted cash at beginning of period 100,013 101,241
Cash, cash equivalents and
restricted cash at end of period $111,110 $96,031
Supplemental Schedule of Non-Cash
Investing and Financing Activities:
Fixed assets acquired under capital lease $1,443 $--
1st Quarter
2004 2003
Supplemental Information
Net Revenues by Major Payor Source:
Medicare (1) $62,601 $42,568
Medicaid and other government 39,167 42,345
Commercial insurance and other 112,137 117,103
Total net revenues $213,905 $202,016
A reconciliation of net income between
As Reported and Pro Forma amounts follows (2):
Net income - As Reported $9,230 $5,201
Add: income tax expense - As Reported (3) 5,900 610
Income before income taxes - As Reported 15,130 5,811
Less: Medicare cost report settlement (1) (9,003) --
Add: Revenue adjustment for
estimated Medicare repayment (1) 1,000 --
Income before income taxes - Pro Forma 7,127 5,811
Less: income tax expense - At
assumed 39% rate (3) 2,780 2,266
Net income - Pro Forma $4,347 $3,545
Diluted Earnings per Share
Net income - As Reported $0.34 $0.19
Net income - Pro Forma $0.16 $0.13
Notes:
1) Medicare revenues for the first quarter of fiscal 2004 included
approximately $9 million received in settlement of the Company's appeal
filed with the U.S. Provider Reimbursement Review Board ("PRRB")
related to the reopening of all of its 1997 cost reports net of a
$1 million estimated repayment to Medicare in connection with services
rendered to certain patients since the inception of the Prospective
Payment Reimbursement System in October 2000. The Centers for Medicare
& Medicaid Services has recently determined that homecare providers
should have received lower reimbursements for certain services rendered
to beneficiaries discharged from inpatient hospitals within fourteen
days immediately preceding admission to home healthcare.
2) Although "Net income - Pro Forma" is a non-GAAP financial measure,
management believes that the presentation of net income as calculated
using an effective tax rate of 39% and excluding the PRRB settlement
and the estimated Medicare repayments as described in Note 1, is a
useful adjunct to "Net income - As Reported" under GAAP because it
measures the Company's performance in a consistent manner between the
results for the first quarter of fiscal years 2004 and 2003. In
addition, "Net income - Pro Forma" facilitates comparison between
Gentiva and other companies. Furthermore, due to the lower effective
tax rate for the first quarter of fiscal 2003 as described in Note 3,
the presentation of "Net income - Pro Forma" incorporates an effective
tax rate which is more representative of the Company's normalized rate.
Management also believes that the PRRB settlement net of the Medicare
estimated repayment recorded in the first quarter of fiscal 2004 should
be excluded from "Net income - Pro Forma" for fiscal year 2004, as
these items relate to reimbursement activities from prior periods as
described in Note 1. For these reasons, management believes that "Net
income - Pro Forma" is useful to investors. Investors should not view
"Net income - Pro Forma" as an alternative to the GAAP measure of Net
income.
3) For the first quarter of fiscal 2003, the Company's effective tax rate
was 10.5%. This effective rate was lower than the statutory income tax
rate due to the reversal of a portion of the Company's valuation
allowance relating to the realization of tax benefits associated with a
net operating loss carry forward and other net deferred tax assets. A
39% effective tax rate is more representative of the Company's
normalized tax rate for reporting purposes.
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. 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 contained in the Company's annual report
on Form 10-K for the year ended December 28, 2003.
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