Gentiva® Health Services Reports First Quarter 2014 Results - Fox29 WFLX TV, West Palm Beach, Florida-

Gentiva® Health Services Reports First Quarter 2014 Results

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SOURCE Gentiva Health Services, Inc.

ATLANTA, May 7, 2014 /PRNewswire/ -- Gentiva Health Services, Inc. (NASDAQ: GTIV), one of the largest providers of home health, hospice and community care services in the United States, today reported first quarter 2014 results. 

Gentiva acquired Harden Healthcare Holdings, Inc. ("Harden") on October 18, 2013.  The Company's results for the three months ended March 31, 2014 included Harden's financial results.

First quarter 2014 financial highlights include: 

  • Total net revenues of $487.5 million, an increase of 17% compared to $415.6 million for the quarter ended March 31, 2013. Net revenues included home health episodic revenues of $224.4 million, an increase of 8% compared to $207.4 million in the 2013 first quarter. Hospice revenues were $174.4 million, a decrease of 3% compared to $179.5 million in the 2013 first quarter. Community care revenues were $57.1 million in the first quarter of 2014.
  • Net income attributable to Gentiva shareholders of $0.3 million, or $0.01 per diluted share, compared to net loss attributable to Gentiva shareholders of $207.2 million, or $6.73 per diluted share, for the first quarter of 2013. During the first quarter of 2013, the Company recorded non-cash impairment charges of $224.3 million based on an interim impairment test of the Company's goodwill and other long-lived assets that was performed during the quarter.
  • Adjusted income attributable to Gentiva shareholders of $4.8 million, compared with $7.1 million in the comparable 2013 period. On a diluted per share basis, adjusted income attributable to Gentiva shareholders was $0.13 for the first quarter of 2014 as compared to $0.23 for the first quarter of 2013. First quarter 2014 adjusted income attributable to Gentiva shareholders was negatively impacted by approximately $0.05 due to widespread, severe weather conditions across the country.
  • Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) was $39.0 million in the first quarter of 2014 as compared to $39.1 million in the first quarter of 2013. Adjusted EBITDA as a percentage of net revenues was 8.0% in the first quarter of 2014 versus 9.4% in the prior year period. First quarter 2014 Adjusted EBITDA was negatively impacted by approximately $2.7 million due to the aforementioned severe weather conditions.

Adjusted income attributable to Gentiva shareholders and Adjusted EBITDA exclude charges related to restructuring, legal settlements, acquisition and integration activities, losses on closed locations and other special items.

Cash Flow and Balance Sheet Highlights

At March 31, 2014, the Company reported cash and cash equivalents of $62.9 million, compared to $87.0 million at December 31, 2013.  Total outstanding debt was $1.17 billion as of March 31, 2014, compared to $1.18 billion at December 31, 2013.  Total Company days sales outstanding, or DSO's, was 50 days at March 31, 2014 compared to 49 days at December 31, 2013.

For the first quarter of 2014, net cash provided by operating activities was a negative $17.7 million, compared to a negative $20.6 million in the prior year period.  Free cash flow was a negative $20.9 million for the first quarter of 2014, compared to a negative $23.3 million in the prior year period.  As expected, cash flow for the first quarter of 2014 was impacted by the timing of interest payments on the Company's senior notes and compensation related expenses.  Free cash flow is calculated as net cash provided by operating activities less capital expenditures.

Full-Year 2014 Outlook

Gentiva reaffirmed its full-year 2014 outlook.  Net revenues are expected to be in the range of $1.9 billion to $2.1 billion and adjusted income attributable to Gentiva shareholders is expected to be in the range of $0.85 to $1.15 on a diluted per share basis.

Gentiva's 2014 outlook includes the full-year impact of its Harden acquisition and the final 2014 Medicare home health and hospice reimbursement rates issued by the Centers for Medicare and Medicaid Services (CMS).  The 2014 outlook excludes any ongoing losses from closed locations as the operations are wound down.

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 historical measures to the most directly comparable GAAP measures.

A reconciliation of adjusted income attributable to Gentiva shareholders to net income, the most directly comparable GAAP measure, is not accessible on a forward-looking basis without unreasonable effort due to the inherent difficulties in predicting the costs of restructuring, legal settlements and merger and acquisition activities and the impact of any future acquisitions or divestitures, which can fluctuate significantly and may have a significant impact on net income.

Conference Call and Webcast Details

The Company will comment further on its first quarter 2014 results during its conference call and live webcast to be held today, Wednesday, May 7, 2014 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 #31122421. The webcast is an audio-only, one-way event. Webcast listeners who wish to ask questions must participate in the conference call. Log onto http://investors.gentiva.com/events.cfm to hear the webcast. A replay of the call will be available on May 7 and will remain available continuously through May 14. To listen to a replay of the call from the United States, Canada or international locations dial (800) 585-8367 or (404) 537-3406 and enter the following PIN at the prompt: 31122421. Visit http://investors.gentiva.com/events.cfm to access the webcast archive. This press release is accessible at http://investors.gentiva.com/releases.cfm and a transcript of the conference call will be posted on the Company's website.

About Gentiva Health Services, Inc.

Gentiva Health Services, Inc. is one of the nation's largest providers of home health, hospice and community care 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; and other therapies and services. GTIV-G

(unaudited tables and notes follow)

 

 

Gentiva Health Services, Inc. and Subsidiaries

Condensed Consolidated Financial Statements and Supplemental Information

(Unaudited)







(in 000's, except per share data)

1st Quarter




2014


2013


Condensed Statements of Comprehensive Loss








Net revenues

$

487,505


$

415,591




Cost of services sold

273,068


221,573




Gross profit

214,437


194,018




Selling, general and administrative expenses

(189,020)


(159,877)




Goodwill and other long-lived asset impairment

-


(224,320)




Interest income

633


785




Interest expense and other

(25,131)


(23,078)




Income (loss) before income taxes

919


(212,472)




Income tax (expense) benefit

(421)


5,416




Net income (loss)

498


(207,056)




Less: Net income attributable to noncontrolling interests

(184)


(121)




Net income (loss) attributable to Gentiva shareholders

$

314


$

(207,177)











Total comprehensive income (loss)

$

498


$

(207,056)










Earnings per Share








Net income (loss) attributable to Gentiva shareholders:








Basic

$

0.01


$

(6.73)




Diluted

$

0.01


$

(6.73)












Weighted average shares outstanding:








Basic

36,189


30,785




Diluted

36,677


30,785


 

 



(in 000's)






Condensed Balance Sheets







ASSETS

Mar 31, 2014


Dec 31, 2013



Cash and cash equivalents

$

62,884



$

86,957




Accounts receivable, net (A)

291,338



289,905




Deferred tax assets

26,090



28,153




Prepaid expenses and other current assets

66,668



64,746




Total current assets

446,980



469,761












Notes receivable from CareCentrix

28,471



28,471




Fixed assets, net

47,188



49,375




Intangible assets, net

254,732



256,282




Goodwill

390,081



390,081




Other assets

67,482



68,647




Total assets

$

1,234,934



$

1,262,617











LIABILITIES AND SHAREHOLDERS' DEFICIT








Current portion of long-term debt

$

47,263



$

45,325




Accounts payable

12,596



15,659




Payroll and related taxes

50,221



64,857




Deferred revenue

48,902



43,864




Medicare liabilities

22,132



23,894




Obligations under insurance programs

79,076



82,634




Accrued nursing home costs

20,969



22,219




Other accrued expenses

66,608



77,018




Total current liabilities

347,767



375,470












Long-term debt

1,118,197



1,124,432




Deferred tax liabilities, net

14,711



9,825




Other liabilities

51,843



53,084




Total deficit

(297,584)



(300,194)




Total liabilities and shareholders' deficit

$

1,234,934



$

1,262,617












Common shares outstanding

36,763



36,375











(A) Accounts receivable, net included an allowance for doubtful accounts of $11.9 million


and $10.7 million at March 31, 2014 and December 31, 2013, respectively.

 

 

 


(in 000's)









1st Quarter

Condensed Statements of Cash Flows

2014


2013



OPERATING ACTIVITIES:







Net income (loss)

$

498



$

(207,056)



Adjustments to reconcile net income (loss) to net cash used in operating activities:








Depreciation and amortization

6,447



4,781




Amortization of debt issuance costs

1,576



3,331




Provision for doubtful accounts

1,999



1,007




Equity-based compensation expense

2,221



1,813




Windfall tax benefits associated with equity-based compensation

(6)



(72)




Goodwill and other long-lived asset impairment

-



224,320




Deferred income tax expense (benefit)

4,301



(9,360)



Changes in assets and liabilities, net of effects from acquisitions and dispositions:








Accounts receivable

(3,432)



(4,855)




Prepaid expenses and other current assets

(1,922)



(162)




Current liabilities

(28,352)



(35,258)



Other, net

(1,073)



951



Net cash used in operating activities

(17,743)



(20,560)











INVESTING ACTIVITIES:







Purchase of fixed assets

(3,158)



(2,698)



Proceeds from the sale of assets

191



-



Net cash used in investing activities

(2,967)



(2,698)











FINANCING ACTIVITIES:







Proceeds from issuance of common stock

597



992



Windfall tax benefits associated with equity-based compensation

6



72



Repayment of long-term debt

(4,581)



(25,000)



Minority interest capital contribution

1,160



-



Distribution to minority interests

(115)



(240)



Other

(430)



(23)



Net cash used in financing activities

(3,363)



(24,199)











Net change in cash and cash equivalents

(24,073)



(47,457)



Cash and cash equivalents at beginning of period

86,957



207,052



Cash and cash equivalents at end of period

$

62,884



$

159,595











SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:















Interest paid

$

33,047



$

28,728



Income taxes paid

$

108



$

194













1st Quarter

A reconciliation of Free cash flow to Net cash used in operating activities follows:

2014


2013




Net cash used in operating activities

$

(17,743)


$

(20,560)




Less: Purchase of fixed assets

(3,158)


(2,698)




Free cash flow

$

(20,901)


$

(23,258)










(in 000's)






Supplemental Information

1st Quarter




2014


2013


Segment Information (2)






Net revenues







Home Health

$

255,976


$

236,061




Hospice

174,402


179,530




Community Care

57,127


-



Total net revenues

$

487,505


$

415,591










Operating contribution (4)







Home Health

$

29,603


$

30,188




Hospice

17,544


27,421




Community Care

9,279


-



Total operating contribution

56,426


57,609










Corporate administrative expenses

(24,562)


(18,687)



Goodwill and other long-lived asset impairment (5)

-


(224,320)



Depreciation and amortization

(6,447)


(4,781)



Interest expense and other, net

(24,498)


(22,293)



Income (loss) before income taxes

$

919


$

(212,472)










Home Health operating contribution margin %

11.6%


12.8%



Hospice operating contribution margin %

10.1%


15.3%



Community Care operating contribution margin %

16.2%


-%



















1st Quarter

Net Revenues by Major Payer Source:

2014



2013



Medicare







Home Health

$

208,766



$

193,120



Hospice

163,209



167,274



Total Medicare

371,975



360,394



Medicaid and local government

71,127



18,269



Commercial insurance and other:







Paid at episodic rates

15,599



14,255



Other

28,804



22,673



Total commercial insurance and other

44,403



36,928



Total net revenues

$

487,505



$

415,591





















1st Quarter

A reconciliation of Adjusted EBITDA to Net income (loss) attributable to Gentiva shareholders

follows: (3)

2014



2013




Adjusted EBITDA (3)

$

38,976



$

39,063




Cost savings initiatives and acquisition and integration activities (4)

(5,341)



(141)




Impact of closed locations

(1,771)



-




Goodwill and other long-lived asset impairment (5)

-



(224,320)




EBITDA (4)

31,864



(185,398)




Depreciation and amortization

(6,447)



(4,781)




Interest expense and other, net

(24,498)



(22,293)




Income (loss) before income taxes

919



(212,472)




Income tax (expense) benefit (6)

(421)



5,416




Net income (loss)

498



(207,056)




Less: Net income attributable to noncontrolling interests

(184)



(121)




Net income (loss) attributable to Gentiva shareholders

$

314



$

(207,177)


 

A reconciliation of Adjusted income attributable to Gentiva shareholders to Net income (loss) (all items presented are net of tax): (3)








1st Quarter




2014



2013




Adjusted income attributable to Gentiva shareholders

$

4,799



$

7,107




Cost savings initiatives and acquisition and integration activities (4)

(3,302)



(86)




Impact of closed locations

(1,183)



-




Goodwill and other long-lived asset impairment (5)

-



(214,198)




Income (loss) attributable to Gentiva shareholders

314



(207,177)




Add back: Net income attributable to noncontrolling interests

184



121




Net income (loss)

$

498



$

(207,056)












Adjusted income attributable to Gentiva shareholders per diluted share

$

0.13



$

0.23




Cost savings initiatives and acquisition and integration activities (4)

(0.09)



-




Impact of closed locations

(0.03)



-




Goodwill and other long-lived asset impairment (5)

-



(6.96)




Income (loss) attributable to Gentiva shareholders per diluted share

0.01



(6.73)




Add back: Net income attributable to noncontrolling interests

-



-




Net income (loss) per diluted share

$

0.01



$

(6.73)




















Operating Metrics

1st Quarter




2014


2013




Home Health







Episodic admissions

54,400


50,400




Total episodes

82,600


72,200




Episodes per admission

1.52


1.43




Revenue per episode

$

2,715


$

2,875












Hospice








Admissions

12,900


13,500




Average daily census

13,000


12,700




Patient days (in thousands)

1,168


1,146




Revenue per patient day (a)

$

149


$

157




Length of stay at discharge (in days)

104


99




Services by patient type:








Routine

99%


98%




General Inpatient & Other

1%


2%












Community Care








Billed hours (in thousands)

4,200


-




Revenue per hour

$

14


-


 


Notes:

1. The comparability between reporting periods has been affected by the following items:

a.  The Company completed the Harden transaction on October 18, 2013, affecting the reporting periods presented. Annualized net revenues of Harden at acquisition date approximated $145 million of Home Health, $109 million of Hospice and $220 million of Community Care. Net revenues specific to Harden for the first quarter of 2014 are not available as, subsequent to the acquisition date, the Company has undertaken significant consolidations and closures of Harden branches in overlapping and smaller markets for which reporting of separate results is no longer available. As a result of this transaction, the Company's net revenues comparisons were positively impacted for the first quarter 2014 as compared to the corresponding period of 2013.

b. The Company closed a significant number of branch operations relating to the branch rationalization initiative which began in 2013, affecting the reporting periods presented. As a result of these activities, the Company's net revenues comparisons were negatively impacted for the first quarter 2014 by approximately $8 million as compared to the corresponding period of 2013.

2. The Company's senior management evaluates performance and allocates resources based on operating contributions of the operating segments, which exclude corporate expenses, depreciation, amortization, interest income, and interest expense and other, but include revenue and all other costs directly attributable to the specific segment. 

3. Adjusted EBITDA, a non-GAAP financial measure, is defined as income before interest expense and other (net of interest income), income taxes, depreciation and amortization and excluding charges relating to (i) cost savings initiatives and acquisition and integration activities, (ii) impact of closed locations and (iii) goodwill and other long-lived asset impairment. Management uses Adjusted EBITDA to evaluate overall performance and compare current operating results with other companies in the healthcare industry. Adjusted EBITDA should not be considered in isolation or as a substitute for income from continuing operations, net income, operating income or cash flow statement data determined in accordance with accounting principles generally accepted in the United States.  Because Adjusted 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.

Adjusted income attributable to Gentiva shareholders is defined as income attributable to Gentiva shareholders, excluding (i) charges relating to cost savings initiatives and acquisition and integration activities, (ii) impact of closed locations and (iii) goodwill and other long-lived asset impairment.

4. Operating contribution and EBITDA included charges relating to cost savings and other restructuring, legal settlements and acquisition and integration activities of $5.3 million for the first quarter 2014 as compared to $0.1 million for the corresponding period of 2013.

For the first quarter 2014, the Company recorded charges relating to cost savings initiatives associated with the Company's branch rationalization initiative of $2.7 million and charges of $2.6 million associated with acquisition and integration activities of Harden.

For the first quarter 2013, the Company recorded acquisition and integration activities of $0.1 million associated with the Company's acquisitions of North Mississippi Hospice and Family Home Care, Inc. in 2012.

These charges were reflected as follows for segment reporting purposes (dollars in millions):


1st Quarter


2014


2013

Home Health

$

0.6


$

-

Hospice

2.9


-

Corporate expenses

1.9


0.1

Total

$

5.3


$

0.1

5. During the first quarter of 2013, the Company recorded non-cash charges of $224.3 million related to goodwill and other long-lived assets.

At March 31, 2013, the Company performed an interim impairment test of its Hospice reporting unit due to lower than expected average daily census and higher than expected discharge rates during the first quarter. Based on the results of the interim impairment test, the Company recorded a non-cash impairment charge relating to goodwill of approximately $220.8 million.  As part of that analysis, the Company reviewed the valuation of its owned real estate utilized in the Hospice business. The analysis indicated that two of the Company's hospice inpatient units had estimated fair values lower than their carrying values and, as such, the Company recorded a non-cash impairment charge of approximately $1.9 million.

In addition, the Company conducted an evaluation of the various systems used to support its field operations. In connection with that review, the Company made a strategic decision to replace its business intelligence software platform and, as such, recorded a non-cash impairment charge, related to developed software, of approximately $1.6 million.

6. The Company's effective tax rate was a tax expense of 45.9% for the first quarter 2014 as compared to a benefit of 2.5% for the first quarter 2013.

During the first quarter of 2013, the Company recorded non-cash impairment charges of $224.3 million related to goodwill and other long-lived assets (see note 5).  Excluding the impact of the impairment charges, the Company's effective tax rate would have been 39.9% for the first quarter of 2013.

Forward-Looking Statements

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: general economic and business conditions; demographic changes; changes in, or failure to comply with, existing governmental regulations; the impact on our Company of healthcare reform legislation and its implementation through governmental regulations; legislative proposals for healthcare reform; changes in Medicare, Medicaid and commercial payer reimbursement levels; the outcome of any inquiries into the Company's operations and business practices by governmental authorities; compliance with any corporate integrity agreement affecting the Company's operations; 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; ability to access capital markets; 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 severe weather conditions, natural disasters, pandemic outbreaks, terrorist acts or cyber-attacks; availability, effectiveness, stability and security of the Company's information technology systems; ability to successfully integrate the operations of acquisitions the Company may make and achieve expected synergies and operational efficiencies within expected time-frames; ability to maintain compliance with its financial covenants under the Company's credit agreement; 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, including the "Risk Factors" section contained in the Company's annual report on Form 10-K for the year ended December 31, 2013.

Financial and Investor Contact:


Eric Slusser


770-951-6101


eric.slusser@gentiva.com

or

John Mongelli


770-951-6496


john.mongelli@gentiva.com



Media Contact:


Scott Cianciulli


Brainerd Communicators


212-986-6667


cianciulli@braincomm.com

 

©2012 PR Newswire. All Rights Reserved.

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