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FOR IMMEDIATE
RELEASE
Gentiva(R) Reports Second Quarter 2004 EPS Increase and Raises 2004 Financial Outlook
MELVILLE, N.Y., July 28 /PRNewswire-FirstCall/ -- Gentiva Health
Services, Inc. (Nasdaq: GTIV), the nation's largest provider of comprehensive
home health services, today reported net income of $6.0 million, or $0.22 per
diluted share, for the second quarter ended June 27, 2004 compared to $5.2 million,
or $0.19 per diluted share, for the corresponding period of fiscal 2003.
Net income - as adjusted for the second quarter of 2004 was $5.4 million, or
$0.20 per diluted share, compared with $3.5 million, or $0.13 per diluted share,
for the second quarter of 2003. The 2004 adjusted results exclude a nonrecurring,
pre-tax gain of approximately $0.9 million from the sale of Gentiva's investment
in a Canadian homecare company. The 2003 adjusted results assume a normalized
tax rate of 39%, although the effective tax rate for this period was 7.8% due
to 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 - as adjusted.)
The Company also announced a revised 2004 financial outlook -- excluding special
items -- that raises expected full year earnings to a range of $0.64 to $0.67
per diluted share, up from the previous $0.57 to $0.63 per diluted share, and
changes full year net revenues to a range of $840 million to $850 million, as
compared with the prior range of $835 million to $850 million.
Second quarter 2004 net revenues were $208.2 million compared with $208.4 million
reported in the second quarter of 2003. Gentiva's Medicare revenues for the
second quarter of 2004 increased $11.9 million, or 28.3%, over the second quarter
of 2003. Medicare revenue growth was driven by an increase in admissions, the
contribution of Gentiva's growing specialty services, operational and clinical
process enhancements, and higher reimbursement rates compared with the prior
year period.
Revenues from Medicaid and local government sources declined by $3.7 million,
or 8.6%, in the second quarter due to a reduction in the Company's participation
in certain low-margin, hourly Medicaid and state and county programs. Revenues
from the Company's third major payer category -- Commercial Insurance and Other
-- declined by $8.4 million, or 6.8%, due to a reduction in revenue from CIGNA
Healthcare.
For the six months ended June 27, 2004, net income was $15.2 million, or $0.56
per diluted share, compared with $10.4 million, or $0.38 per diluted share,
in the first six months of 2003. Net revenues for the first six months of 2004
were $422.2 million versus $410.5 million reported in the same prior year period.
Results for the first half of 2004 included the second quarter gain on the
sale of the Canadian investment as well as first quarter 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. The Medicare special items contributed $8.0 million to first
half 2004 net revenues and income before income taxes.
First half 2004 net revenues, excluding the special items and revenues from
CIGNA, increased $25.8 million, or 10.1%. Revenues from CIGNA, which declined
14.4% in the first half of 2004, represented approximately 31% of Gentiva's
total net revenues in the first half of 2004 versus 38% in the comparable period
of 2003.
Net income - as adjusted for the first half of 2004 versus the same period
of 2003 was $0.36 versus $0.25 per diluted share, respectively. The 2004 adjusted
results exclude the gain on the sale of the Canadian investment and the special
items recorded during this period, and the 2003 adjusted results assume a normalized
tax rate of 39%.
"Thanks to the expansion of our sales force, the continued growth of our specialty
services and operating improvements within our branch structure, we have shown
solid growth in our Medicare business," said Gentiva Chairman and CEO Ron Malone.
"We have also reconfigured our CareCentrix(R) managed care provider network
to better serve our customers and to drive improvements in operating margins.
Furthermore, our CareCentrix model continues to attract interest, as evidenced
by the recently announced TriWest Healthcare Alliance contract to serve military
personnel and their families in 21 states."
Malone said that Gentiva's revised 2004 outlook reflects operating performance
in the first half of the year, anticipated lower seasonal demand for homecare
in the fiscal third quarter, and the reduction in diluted shares resulting from
stock repurchases, including 587,000 shares repurchased during the second quarter
of 2004.
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 second quarter results during its conference
call and live web cast to be held Thursday, July 29, 2004, at 10:00 a.m. Eastern
Time. To participate in the call from the United States or Canada, dial: (612)
326-1003. 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, Inc.
Gentiva Health Services, Inc. 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 healthcare services for many major managed
care organizations throughout the United States and delivers them in all 50
states through a network of more than 2,000 third-party provider locations,
as well as Gentiva locations. 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, http://www.gentiva.com/, and its investor relations
section at http://www.gentiva.com/investor.
(in 000's, except per share
data) 2nd Quarter Six Months
2004 2003 2004 2003
Statements of Income
Net revenues $208,248 $208,446 $422,153 $410,462
Cost of services sold 129,910 138,822 260,553 272,072
Gross profit 78,338 69,624 161,600 138,390
Selling, general and
administrative expenses (67,809) (62,341) (134,178) (123,594)
Depreciation and amortization (1,904) (1,730) (3,749) (3,475)
Operating income 8,625 5,553 23,673 11,321
Gain on sale of Canadian
investment 946 -- 946 --
Interest income, net 208 139 290 182
Income before income taxes 9,779 5,692 24,909 11,503
Income tax expense (3,814) (445) (9,714) (1,055)
Net income $5,965 $5,247 $15,195 $10,448
Earnings per Share
Net income:
Basic $0.24 $0.20 $0.60 $0.39
Diluted $0.22 $0.19 $0.56 $0.38
Average shares outstanding:
Basic 25,068 26,530 25,305 26,613
Diluted 26,818 27,490 26,967 27,635
Condensed Balance Sheets
ASSETS Jun 27, 2004 Dec 28, 2003
Cash, cash equivalents and
restricted cash $101,104 $100,013
Short-term investments 10,000 10,000
Net receivables 133,778 132,998
Deferred tax assets 23,210 26,464
Prepaid expenses and other
current assets 7,890 6,524
Total current assets 275,982 275,999
Fixed assets 18,121 15,135
Deferred tax assets, net 23,631 28,025
Other assets 14,885 15,929
Total assets $332,619 $335,088
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $12,205 $16,079
Payroll and related taxes 13,845 12,932
Medicare liabilities 13,331 12,736
Cost of claims incurred but not
reported 28,287 28,525
Obligations under insurance programs 36,583 37,200
Other accrued expenses 28,742 32,230
Total current liabilities 132,993 139,702
Other liabilities 20,375 18,207
Shareholders' equity 179,251 177,179
Total liabilities and
shareholders' equity $332,619 $335,088
Common shares outstanding 24,859 25,598
Note: Cash, cash equivalents and restricted cash includes restricted
cash of $21.8 million at June 27, 2004 and December 28,2003.
Six Months
Condensed Statements of Cash Flows 2004 2003
OPERATING ACTIVITIES:
Net income $15,195 $10,448
Adjustments to reconcile net
income to net cash
provided by operating activities
Depreciation and amortization 3,749 3,475
Provision for doubtful accounts 3,414 3,608
Gain on sale of Canadian investment (946) --
Deferred income taxes 7,433 --
Changes in assets and liabilities,
net of acquisitions/divestitures
Accounts receivable (4,194) (11,569)
Prepaid expenses and other current assets (1,616) 1,613
Current liabilities (7,458) 6,358
Other, net 169 (1,200)
Net cash provided by operating activities 15,746 12,733
INVESTING ACTIVITIES:
Purchase of fixed assets (5,493) (3,928)
Proceeds from sale of assets 4,123 200
Acquisition of businesses -- (1,300)
Maturities of short-term investments 10,000 10,035
Purchase of short-term investments (10,000) (14,900)
Net cash used in investing activities (1,370) (9,893)
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 1,579 822
Repurchases of common stock (14,702) (7,857)
Repayment of capital lease obligations (162) --
Net cash used in financing activities (13,285) (7,035)
Net change in cash, cash
equivalents and restricted cash 1,091 (4,195)
Cash, cash equivalents and
restricted cash at beginning of period 100,013 101,241
Cash, cash equivalents and
restricted cash at end of period $101,104 $97,046
2nd Quarter Six Months
2004 2003 2004 2003
Supplemental Information
Net Revenues:
Medicare (1) $53,839 $41,957 $116,441 $84,525
Medicaid and other government 38,978 42,658 78,145 85,003
Commercial insurance and other 115,431 123,831 227,567 240,934
Total net revenues $208,248 $208,446 $422,153 $410,462
A reconciliation of net income
between as reported and as
adjusted, and the related
diluted earnings
per share amounts follows (2):
Net income - as reported $5,965 $5,247 $15,195 $10,448
Add: income tax expense - as
reported (3) 3,814 445 9,714 1,055
Income before income taxes - as
reported 9,779 5,692 24,909 11,503
Less: Gain on sale of Canadian
investment (4) (946) -- (946) --
Less: Medicare cost report
settlement (1) -- -- (9,003) --
Add: Revenue adjustment for
estimated Medicare repayment(1) -- -- 1,000 --
Income before income taxes - as
adjusted 8,833 5,692 15,960 11,503
Less: income tax expense - at
assumed 39% rate (3,445) (2,220) (6,224) (4,486)
Net income - as adjusted $5,388 $3,472 $9,736 $7,017
Diluted Earnings per Share
Net income - as reported $0.22 $0.19 $0.56 $0.38
Net income - as adjusted $0.20 $0.13 $0.36 $0.25
Notes:
1) Medicare revenues for the first six months 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. In
connection with the estimated repayment, the Centers for Medicare &
Medicaid Services has 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 - as adjusted" is a non-GAAP financial measure,
management believes that the presentation of net income as calculated
using a normalized tax rate of 39% and excluding the PRRB settlement
and the estimated Medicare repayments in the first six months of 2004,
as described in Note 1, as well as the second quarter 2004 gain on the
sale of Gentiva's investment in a Canadian homecare company, as
described in Note 4, 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 second quarter and first
six months of fiscal years 2004 and 2003. Furthermore, due to the
lower effective tax rate for the second quarter and first six months
of fiscal 2003 as described in Note 3, the presentation of "Net
income - as adjusted" 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 six months of fiscal 2004, should be
excluded from "Net income - as adjusted" as these items relate to
reimbursement activities from prior periods as described in Note 1. In
addition, the gain on the sale of the Canadian investment should be
excluded from "Net income - as adjusted," since this is a nonrecurring
item. For these reasons, management believes that "Net income - as
adjusted" is useful to investors. Investors should not view "Net
income - as adjusted" as an alternative to the GAAP measure of Net
income.
3) For the second quarter and first six months of fiscal 2003, the
Company's effective tax rates were 7.8% and 10.1%, respectively.
These effective rates were 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%
tax rate is more representative of the Company's normalized tax rate
for reporting purposes, and is the rate being utilized for the 2004
periods.
4) Income before income taxes for the second quarter and first six months
of 2004 included a gain of approximately $946,000 from the sale of
Gentiva's 19.9% interest in a Canadian homecare company to whom
Gentiva sold its Canadian operations in November 2000.
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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. 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 payer 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.
Financial and Investor Contact: John R. Potapchuk
631-501-7035
john.potapchuk@gentiva.com
Media Contact: David Fluhrer
631-501-7102
516-857-7231
david.fluhrer@gentiva.com
SOURCE Gentiva Health Services, Inc.
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