Vasta Platform 8-K VistaCare Reports Fiscal Second Quarter 2007 Results

Exhibit 99.1

FINAL

VistaCare Reports Fiscal Second Quarter 2007 Results

Company Creates Special Committee to Review All Strategic Alternatives; Hires Investment Bank RA
Capital Advisors

SCOTTSDALE, Ariz., May 9, 2007—VistaCare, Inc. (Nasdaq: VSTA), a leading provider of hospice services in the United States, today reported results for the fiscal second quarter ended March 31, 2007. The Company’s Board of Directors also announced the formation of a Special Committee to review all strategic alternatives, and the engagement of RA Capital Advisors to advise the Special Committee.

Second Quarter Operating Results

Net patient revenue for the quarter was $59.0 million, a 5.5% increase from net patient revenue of $55.9 million for the quarter ended March 31, 2006. The Company reported a net loss of $3.2 million, or $0.19 per share, for the fiscal second quarter compared with a net loss of $2.0 million, or $0.12 per share, for the second quarter of fiscal 2006.

On a pro forma basis, the Company generated a net loss of $2.5 million, or $0.15 per share compared to a pro forma net loss of $3.2 million, or $0.19 per share for the second quarter of fiscal 2006, in each case excluding one time charges and adjustments. Please see attached table in supplemental financial information for pro forma net income reconciliation.

“The second quarter produced some positive operating trends, most notably a seven percent sequential increase in admissions, a continued reduction in our projected Medicare Cap expense and restructuring initiatives that began to produce improvements, albeit with significant up-front costs,” said Richard R. Slager, Chairman and CEO. “Although our operating results for the second quarter were disappointing and unacceptable, the long term benefit of our restructuring program warrants even greater emphasis. As a result, we are implementing a number of new and important strategic and operational initiatives.”

Review of Strategic Alternatives

Based on its conclusion that maximization of shareholder value requires a thorough and objective analysis of all strategic alternatives, the VistaCare Board of Directors has established a Special Committee to oversee the strategic alternatives review process. The Special Committee is chaired by

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Pete Klisares, the Company’s lead independent director, and includes three additional independent directors.

On behalf of the Special Committee, Mr. Klisares stated, “Our Board of Directors and our management team are unified in their commitment to deliver value to our shareholders, while continuing to provide high quality care to our patients and their families. Our committee has retained RA Capital Advisors (formerly Relational Advisors), a firm whose heritage is assisting companies in value creation and unlocking that value for shareholders. We have begun working with RA Capital Advisors and have requested that they engage in dialogue with our shareholders to gain their input and perspectives. This input will be carefully considered by the Board and management as we assess all strategic alternatives.”
Mr. Slager added, “The management team fully supports this strategic review and looks forward to working closely with the committee and RA Capital Advisors to maximize shareholder value.”

Restructuring Initiatives

During the fiscal second quarter, VistaCare closed four underperforming programs and one inpatient unit (IPU). These actions, combined with SG&A expense reductions, are expected to result in approximately $11 million in annualized cost savings. The impact of these cost reduction efforts was substantially offset by a decline in patient census at the remaining programs due to increased competition in key growth markets, and higher patient care costs attributable primarily to industry-wide care giver compensation increases and higher pharmaceutical costs.

Mr. Slager added, “We are encouraged by the increasing number of programs now meeting or exceeding targeted EBITDA margins and the reduction in the number of underperforming programs. We are continuing to address the limited number of underperforming programs in consultation with our Special Committee process and will either improve their performance or initiate their consolidation, sale or closure within the next 90 days. We are taking a very hard look at our SG&A costs and have already identified an additional $4 to $5 million in annual cost reductions that are capable of being implemented during the fiscal third quarter of 2007.”

Second Quarter Operations Review

In the second quarter of fiscal 2007, net patient revenue of $59.0 million reflected a 3.4% increase in the Medicare reimbursement rate, effective October 1, 2006, and an increase in inpatient days, which have a higher per diem reimbursement rate. These increases were partially offset by a 0.7% decrease in the average daily census (ADC) as compared to the prior year’s second fiscal quarter. The results for the recent second quarter also included a $1.2 million reduction in patient revenue for Medicare Cap, which was approximately the same amount recorded in the second quarter of the prior fiscal year.

Patient care expenses increased 7.3% from the second quarter of fiscal 2006 to $40.1 million, primarily reflecting higher salary expense as noted above. SG&A expenses increased 2.3% to $21.3 million, largely due to restructuring costs. Excluding restructuring expenses in the second quarter of fiscal 2007 of $1.0 million for severance, early lease terminations and fixed asset write-offs, SG&A expense was $20.3 million versus $20.8 million in the second quarter of fiscal 2006. For comparative purposes, the fiscal second quarter 2006 pro forma net loss of $3.2 million excludes a $1.3 million tax benefit due to a valuation allowance for deferred taxes that the Company recorded pursuant to SFAS 109 at the end of fiscal 2006.

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The Company reported cash and cash equivalents of $23.2 million, short-term investments of $20.6 million and had no outstanding debt at March 31, 2007.

Key Operating Metrics

	2Q07		2Q06		1Q07
Average Daily Census		5,053		5,091		5,184
Ending Census		5,125		5,201		5,154
Patient days		454,803		458,183		476,971
In-patient days		6,748		4,941		5,936
Admissions		4,333		4,435		4,043
Average Length of Stay		116		110		107
Median Length of Stay		30		28		29

Conference Call

VistaCare will host a conference call and webcast on Thursday, May 10, 2007 at 11:00 a.m. Eastern Time (8:00 a.m. Pacific) to discuss VistaCare’s fiscal second quarter results and recent corporate developments. The dial-in number for the conference call is 800-366-7449 for domestic participants and 303-262-2175 for international participants. A taped replay of the conference call will also be available beginning approximately one hour after the call’s conclusion. The replay will remain available through Midnight Eastern Time on Thursday, May 24 and can be accessed by dialing 800-405-2236 for domestic callers and 303-590-3000 for international callers, using pass code 11088123#. To access the live webcast of the call, go to VistaCare’s website at www.vistacare.com and click on Investor Relations. An archived webcast will also be available on VistaCare’s website.

Use of Non-GAAP Financials

In addition, to supplement the GAAP financial information, we have provided non-GAAP net income and earnings per share information. The second quarter of fiscal 2007 pro forma net loss excludes restructuring expenses of $1.0 million for severance, early lease terminations and fixed asset write-offs. The second quarter of fiscal 2006 pro forma net loss excludes a $1.3 million tax benefit due to a valuation allowance for deferred taxes that the Company recorded pursuant to SFAS 109 at the end of fiscal 2006. We are providing this information because we believe doing so provides a more meaningful and consistent comparison of our ongoing operating results compared with historical results. A table reconciling the GAAP financial information to non-GAAP information is included in the tables accompanying today’s release.

About VistaCare

VistaCare is a leading provider of hospice services in the United States. Through interdisciplinary teams of physicians, nurses, home healthcare aides, social workers, spiritual and other counselors and volunteers, VistaCare provides care primarily designed to reduce pain and enhance the quality of life of terminally ill patients, most commonly in the patient’s home or other residence of choice.

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Forward-Looking Statements

Certain statements contained in this press release and the accompanying tables, including statements with respect to VistaCare’s anticipated growth in net patient revenue, organic patient census and diluted earnings per share, or ability to effect improvements in operational performance or consummate strategic initiatives, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believe,” “expect,” “hope,” “anticipate,” “plan,” “expectations,” “forecast,” “goal,” “targeted” and similar expressions identify forward-looking statements, which speak only as of the date the statement was made. VistaCare does not undertake and specifically disclaim any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. These statements are based on current expectations and assumptions and involve various risks and uncertainties, which could cause VistaCare’s actual results to differ from those expressed in such forward-looking statements. These risks and uncertainties arise from, among other things, possible changes in regulations governing the hospice care industry, periodic changes in reimbursement levels and procedures under Medicare and Medicaid programs, difficulties predicting patient length of stay and estimating potential Medicare reimbursement obligations, patient discharge rate, challenges inherent in VistaCare’s growth strategy, the current shortage of qualified nurses and other healthcare professionals, VistaCare’s dependence on patient referral sources, the ability to grow patient census in the future, the successful closing of business transactions or other strategic initiatives and other factors detailed under the caption “Factors that May Affect Future Results” or “Risk Factors” in VistaCare’s most recent report on form 10-K and its other filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on such forward-looking statements and there are no assurances that the matters contained in such statements will be achieved.

Company Contact:	Investor Contacts:	Media Contacts:
Henry Hirvela	Doug Sherk/Jenifer Kirtland	Steve DiMattia
Chief Financial Officer	EVC Group	EVC Group
(480)648-4545	(415)896-6820	(646) 201-5445
ir@vistacare.com	dsherk@evcgroup.com	sdimattia@evcgroup.com

(Tables to follow)

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VISTACARE, INC.
CONSOLIDATED BALANCE SHEETS

(in thousands, except share information)

	March 31,			September 30,
	2007			2006
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	23,233		$	21,583
Short-term investments		20,553			19,148
Patient accounts receivable (net of allowance for denials of $2,237 and $1,502 at March 31, 2007 and September 30, 2006, respectively)		26,572			27,600
Patient accounts receivable — room & board (net of allowance for denials of $822 and $692 at March 31, 2007 and September 30, 2006, respectively)		8,532			9,662
Prepaid expenses and other current assets		5,372			4,653
Tax receivable		1,360			1,375
Total current assets		85,622			84,021
Fixed assets, net		6,090			6,409
Goodwill		24,002			24,002
Other assets		2,696			5,360
Total assets	$	118,410		$	119,792
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,505		$	2,591
Accrued expenses and other current liabilities		27,037			28,116
Accrued Medicare Cap		12,311			9,849
Total current liabilities		40,853			40,556
Deferred tax liability-non-current		1,210			1,144
Stockholders’ equity:
Class A Common Stock, $0.01 par value; authorized 33,000,000 shares; 16,747,851 and 16,610,500 shares issued and outstanding at March 31, 2007 and September 30, 2006, respectively.		167			166
Additional paid-in capital		111,448			110,378
Accumulated deficit		(35,268	)		(32,452	)
Total stockholders’ equity		76,347			78,092
Total liabilities and stockholders’ equity	$	118,410		$	119,792

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VISTACARE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share information)

	Three Months Ended									Six Months Ended
	March 31,			Dec. 31,			March 31,			March 31,
	2007			2006			2006			2007			2006
Net patient revenue	$	58,975		$	60,983		$	55,888		$	119,958		$	115,561
Operating expenses:
Patient care		40,088			40,108			37,317			80,196			73,238
Sales, general and administrative		21,293			20,922			20,855			42,216			41,052
Depreciation		608			600			625			1,208			1,239
Amortization		257			372			651			628			1,299
Gain on sale of hospice program		—			(1,105	)		—			(1,105	)		—
Total operating expenses		62,246			60,897			59,448			123,143			116,828
Operating (loss) income		(3,271	)		86			(3,560	)		(3,185	)		(1,267	)
Non-operating income (expense):
Interest income		397			444			370			840			679
Other expense		(153	)		(71	)		(146	)		(224	)		(240	)
Total non-operating income		244			373			224			616			439
Net (loss) income before income taxes		(3,027	)		459			(3,336	)		(2,569	)		(828	)
Income tax expense (benefit)		180			68			(1,320	)		248			(279	)
Net (loss) income	$	(3,207	)	$	391		$	(2,016	)	$	(2,817	)	$	(549	)
Net (loss) income per share:
Basic net (loss) income per share	$	(0.19	)	$	0.02		$	(0.12	)	$	(0.17	)	$	(0.03	)
Diluted net (loss) income per share	$	(0.19	)	$	0.02		$	(0.12	)	$	(0.17	)	$	(0.03	)
Weighted average shares outstanding:
Basic		16,736			16,650			16,399			16,693			16,383
Diluted		16,736			17,012			16,399			16,693			16,383

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VISTACARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(in thousands)

	Six Months Ended
	March 31,
	2007			2006
Operating activities
Net loss	$	(2,817	)	$	(549	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation		1,208			1,239
Amortization		628			1,299
Share-based compensation		939			1,024
Deferred income tax expense (benefit)		66			(290	)
Gain on sale of hospice program assets		(1,105	)		—
Loss on disposal of assets		140			146
Changes in operating assets and liabilities:
Patient accounts receivable, net		2,095			(6,474	)
Prepaid expenses and other		(376	)		136
Payment of Medicare Cap assessments — decrease in accrued Medicare Cap		(164	)		(6,121	)
Increase in accrual for Medicare Cap		2,626			2,396
Accounts payable and accrued expenses		(2,653	)		(3,320	)
Net cash provided by (used in) operating activities		587			(10,514	)
Investing activities
Short-term investments purchased		(9,515	)		(2,076	)
Short-term investments sold		8,110			1,740
Purchases of equipment		(797	)		(2,241	)
Internally developed software expenditures		—			(215	)
Proceeds from sale of hospice program assets		1,200			—
Decrease in other assets		1,933			560
Net cash provided by (used in) investing activities		931			(2,232	)
Financing activities
Proceeds from issuance of common stock from exercise of stock options and employee stock purchase plan		132			184
Net cash provided by financing activities		132			184
Net increase (decrease) in cash and cash equivalents		1,650			(12,562	)
Cash and cash equivalents, beginning of period		21,583			25,962
Cash and cash equivalents, end of period	$	23,233		$	13,400
Cash and cash equivalents and short-term investments, end of period	$	43,786		$	41,149

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Proforma Net Income and Earning Per Share with Adjustments
(in thousands, except per share information)

	Q2					Q1					Q2
	FY07					FY07					FY06
Published Net (Loss)/Income and EPS	$	(3,207	)	(0.19	)	$	391		0.02		$	(2,016	)	(0.12	)
Adjustments:
Severance & Closure Costs		1,036					155					138
Gain on Sale of Cincinnati							(1,105	)
Deferred Tax Asset Valuation Allowance*												(1,250	)
Tax Effect*		(363	)				333					(48	)
Adjusted Net Income/EPS (tax adjusted)	$	(2,534	)	(0.15	)	$	(227	)	(0.01	)	$	(3,176	)	(0.19	)

* These numbers are management’s estimates.

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