Odyssey Healthcare (ODSY) 8-K Odyssey Healthcare Reports Second Quarter Earnings

EXHIBIT 99.1

ODYSSEY HEALTHCARE REPORTS SECOND QUARTER EARNINGS

          DALLAS, TEXAS (BUSINESS WIRE)—August 1, 2005)—Odyssey HealthCare, Inc. (Nasdaq: ODSY) DALLAS, one of the largest providers of hospice care in the United States, today announced financial results for the second quarter ended June 30, 2005.

Net patient service revenue for the second quarter of 2005 increased 7.3 percent to $93.2 million, compared to $86.8 million for the second quarter of 2004. Net income for the quarter was $7.3 million, a 22.1 percent decrease from the $9.3 million for the corresponding quarter in 2004. Earnings per diluted share were $0.21, a 16.0 percent decrease from the $0.25 reported for second quarter 2004. Net income for the quarter was impacted by a $2.0 million accrual for the Medicare cap payment. Cash flow from operations for the quarter was $16.4 million.

For the six months ended June 30, 2005,net patient service revenue grew 5.5 percent to $181.0 million, compared to $171.5 million in the first half of last year. Net income for the six-month period was $12.6 million, a 26.8 percent decrease from the $17.2 million for the corresponding period of 2004. Operating cash flow for the first six months of 2005 was $30.7 million. Earnings per diluted share for the six-month period were $0.36, a 21.7 percent decrease from the $0.46 for the first six months of 2004.

The average daily patient census for the second quarter of 2005 was 7,891, a 2.3 percent increase over the 7,714 average daily patient census for the second quarter of 2004.For the six months ended June 30, 2005, the average daily patient census was 7,751, a 3.0 percent increase over the 7,522 average daily patient census for the corresponding period of 2004. The company admitted 8,278 patients in the second quarter of 2005, a 7.1 percent increase over the 7,726 for the corresponding quarter of 2004. The average length of stay for the second quarter of 2005 was 80 days, compared to 79 days in the second quarter of 2004 and 85 days in the first quarter of 2005. The average length of stay for the first six months of 2005 was 83, compared to 77 days for the first six months of 2004.

The trend of increasing average daily patient census continued throughout the second quarter as a result of a variety of growth initiatives the company began in late 2004. The average daily census during the quarter was 7,779 in April, 7,862 in May and 8,033 in June.

The Company also announced that on August 1, 2005 it acquired two hospices, one in Huntsville, Alabama and one in Los Angeles, California. The two acquired hospice programs currently serve approximately fifty patients each.

Odyssey will host a conference call to discuss the quarter on Tuesday, August 2, 2005, at 9 a.m. (EDT). The call will be broadcast live and can be accessed through the Investor Relations section of the company’s website atwww.odsyhealth.com. An online archive of the broadcast, commencing approximately two hours after the live call, will also be available for two weeks.

Headquartered in Dallas, Odyssey has 74 Medicare-certified hospice programs in 30 states. In terms of both average daily patient census and number of locations, the company is one of the largest providers of hospice care in the country. Odyssey seeks to improve the quality of life of terminally ill patients and their families by providing care directed at managing pain and other discomforting symptoms and by addressing the psychosocial and spiritual needs of patients and their families.

Certain statements contained in this press release are forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements are based on management’s current expectations and are subject to known and unknown risks, uncertainties and assumptions which may cause the forward-looking events and circumstances discussed in this press release to differ materially from those anticipated or implied by the forward-looking statements. Such risks, uncertainties and assumptions include, but are not limited to, general market conditions; adverse changes in reimbursement levels under Medicare and Medicaid programs; increases in inflation including inflationary increases in patient care costs; adverse changes in the Medicare payment cap limits and increases in the company’s Medicare payment cap accrual; decline in patient census growth; challenges inherent in and potential changes in the company’s growth and expansion strategy; the ability to attract and retain healthcare professionals; the company’s dependence on patient referral sources and potential adverse changes in patient referral practices of those referral sources; changes in state or federal income, franchise or similar tax laws and regulations; adverse changes in the state and federal licensure and certification laws and regulations; adverse results of regulatory surveys; delays in licensure and/or certification; government and private party legal proceedings and investigations; adverse changes in the competitive environment in which the company operates; and the disclosures contained under the headings “Overview of Government Payments” and “Some Risks Related to Our Business” in “Item 1. Business” and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” respectively, of Odyssey’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 15, 2005, and in Odyssey’s most recent other filings with the Securities and Exchange Commission. Many of these factors are beyond the ability of the company to control or predict. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements, which reflect management’s views only as of the date hereof. The company undertakes no obligation to revise or update any of the forward-looking statements or publicly announce any updates or revisions to any of the forward-looking statements contained herein to reflect any change in the company’s expectations with regard thereto or any change in events, conditions, circumstances or assumptions underlying such statements.

ODYSSEY HEALTHCARE, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands, except per share amounts)

	Three months ended June 30,						Six months ended June 30,
	2005			2004			2005			2004
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Net patient service revenue	$	93,170		$	86,818		$	180,998		$	171,508
Operating expenses:
Direct hospice care		51,733			46,024			100,158			93,351
General and administrative		28,100			22,905			55,204			45,164
Provision for uncollectible accounts		714			1,693			3,301			3,024
Depreciation		894			838			1,797			1,604
Amortization		143			173			291			332
		81,584			71,633			160,751			143,475
Income from operations		11,586			15,185			20,247			28,033
Other income (expense):
Interest income		349			46			518			93
Interest expense		(57	)		(23	)		(103	)		(23	)
		292			23			415			70
Income before provision for income taxes		11,878			15,208			20,662			28,103
Provision for income taxes		4,621			5,898			8,062			10,890
Net income available to common stockholders	$	7,257		$	9,310		$	12,600		$	17,213
Net income per common share:
Basic	$	0.21		$	0.25		$	0.36		$	0.47
Diluted	$	0.21		$	0.25		$	0.36		$	0.46
Weighted average shares outstanding:
Basic		34,343			36,608			34,597			36,583
Diluted		34,935			37,586			35,137			37,719

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ODYSSEY HEALTHCARE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except share amounts)

	June 30,			December 31,
	2005			2004
	(unaudited)			(audited)
ASSETS
Current assets:
Cash and cash equivalents	$	15,233		$	24,851
Short-term investments		37,040			8,407
Accounts receivable from patient services, net of allowance for uncollectible accounts of $3,068 and $3,862 at June 30, 2005 and December 31, 2004, respectively		53,995			59,376
Deferred tax assets		—			30
Income taxes receivable		606			1,679
Prepaid expenses and other current assets		4,716			3,823
Total current assets		111,590			98,166
Property and equipment, net of accumulated depreciation		7,999			7,490
Goodwill		93,933			93,933
Intangibles, net of accumulated amortization		4,447			4,502
Total assets	$	217,969		$	204,091
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	4,805		$	3,664
Accrued compensation		10,847			10,331
Accrued nursing home costs		9,871			9,932
Accrued Medicare cap		7,108			2,915
Other accrued expenses		9,145			8,060
Income taxes payable		445			—
Deferred tax liability		255			—
Current maturities of long-term debt		5			5
Total current liabilities		42,481			34,907
Deferred tax liability		8,593			7,095
Long term debt, less current maturities		6			9
Other liability		443			—
Commitments and contingencies
Stockholders’ equity:
Common stock, $.001 par value:
Authorized shares - 75,000,000
Issued and outstanding shares - 37,075,388 and 36,750,917 at June 30, 2005 and December 31, 2004, respectively		37			37
Additional paid-in capital		97,009			95,822
Deferred compensation		(1,836	)		(2,148	)
Retained earnings		101,236			88,636
Treasury stock, at cost, 2,515,434 and 1,648,600 shares outstanding at June 30, 2005 and December 31, 2004, respectively		(30,000	)		(20,267	)
Total stockholders’ equity		166,446			162,080
Total liabilities and stockholders’ equity	$	217,969		$	204,091

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ODYSSEY HEALTHCARE, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)

	Six months ended June 30,
	2005			2004
	(unaudited)			(unaudited)
Operating Activities
Net income	$	12,600		$	17,213
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		2,088			1,936
Amortization of debt issue costs		55			12
Stock-based compensation		312			119
Deferred tax expense		1,783			3,535
Tax benefit realized for stock option exercises		574			368
Provision for uncollectible accounts		3,301			3,024
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable		2,080			(13,717	)
Other current assets		180			1,457
Accounts payable, accrued nursing home costs,
accrued Medicare cap and other accrued expenses		7,762			2,362
Net cash provided by operating activities		30,735			16,309
Investing Activities
Cash paid for acquisitions and procurement of licenses		(291	)		(28,742	)
Increase in short-term investments		(28,633	)		(2,433	)
Purchase of property and equipment		(2,306	)		(2,803	)
Net cash used in investing activities		(31,230	)		(33,978	)
Financing Activities
Proceeds from issuance of common stock		613			696
Purchases of treasury stock		(9,733	)		—
Payments on debt issue costs		—			(291	)
Payments on debt		(3	)		(2	)
Net cash (used in) provided by financing activities		(9,123	)		403
Net decrease in cash and cash equivalents		(9,618	)		(17,266	)
Cash and cash equivalents, beginning of period		24,851			38,284
Cash and cash equivalents, end of period	$	15,233		$	21,018
Supplemental Cash Flow Information
Interest paid	$	38		$	13
Income taxes paid	$	4,349		$	5,294

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