Exhibit 99.1
VistaCare Reports Operational Progress in Fiscal Fourth Quarter 2007
Restructuring Plan Implementation Continues to Achieve Results
Q4 Headcount & Operating Expense Reductions Met Expectations
Q4 and Annual Net Loss Lowered by More Than One-Third vs Fiscal 2006 Periods
Q4 Headcount & Operating Expense Reductions Met Expectations
Q4 and Annual Net Loss Lowered by More Than One-Third vs Fiscal 2006 Periods
SCOTTSDALE, Ariz., December 11, 2007—VistaCare, Inc. (Nasdaq: VSTA), a leading provider of hospice services in the United States, today reported its financial results for the fiscal fourth quarter and full year ended September 30, 2007. The Company also provided an update on its corporate restructuring activities announced in June 2007 and reviewed the operational progress made during the fiscal fourth quarter.
Fourth Quarter Operating Highlights
| * | Increase in net patient revenue despite program closures | |
| * | Sequential ADC growth at core programs and gross margin improvement | |
| * | Sequential reduction in patient care and SG&A salaries and related expenses | |
| * | Headcount reduced by an additional 5.2% from fiscal third quarter | |
| * | Three additional site consolidations | |
| * | EBITDA loss narrows by 45% from fiscal third quarter |
Fiscal Fourth Quarter Financial Results
Net patient revenue for the fiscal fourth quarter of 2007 was $61.2 million, an increase of 1.2% from $60.5 million in the fourth quarter of 2006 and 2.2% above net patient revenue of $59.9 million in the fiscal third quarter of 2007. At September 30, 2007, the Company had 47 programs and six inpatient units (IPUs) compared with 50 programs and five IPUs at June 30, 2007 and 56 programs and five IPUs at September 30, 2006.
The Company reported a net loss on a GAAP basis of $1.8 million, or $0.11 per share, for the recent fiscal fourth quarter, compared with a net loss of $10.9 million, or $0.66 per share, for the fourth quarter of fiscal 2006 and a net loss of $2.8 million, or $0.17 per share, for the fiscal third quarter of 2007, a 84% and 37% decrease respectively. Included in the net loss for the fiscal fourth quarter were pre-tax severance costs totaling approximately $200,000, consulting and other costs directly associated with the Company’s strategic initiative efforts totaling approximately $100,000 and costs associated with site consolidations of approximately $100,000. On a pro forma basis, excluding severance, site closure expense and costs
directly associated with the Company’s strategic initiative efforts, the Company generated a net loss of $1.5 million, or $0.09 per share in fiscal fourth quarter 2007. This compares to a pro forma net loss of $2.7 million, or $0.16 per share, in the 2006 fiscal fourth quarter, which excludes an $8.3 million valuation allowance for deferred tax assets, and a pro forma net loss of $2.3 million, or $0.14 per share, for the fiscal third quarter of 2007. There is a reconciliation of GAAP to pro forma net income in a supplemental table attached to this release. In addition, the net loss for the fiscal fourth quarter included pre-tax legal settlement costs and related expenses totaling approximately $500,000 and approximately $1 million in additional accruals primarily for prior year Medicare Cap pro-ration adjustments and allowance for denials. For fiscal 2007, Medicare Cap accruals on a GAAP basis declined 20% from fiscal 2006.
“We made significant operational progress during the quarter and we began to realize the benefits of the restructuring plan announced at the end of June,” said Richard R. Slager, Chairman and CEO of VistaCare. “In the fourth quarter, we reduced our headcount by 140 positions and we consolidated three additional programs. During fiscal 2007, we reduced total headcount by 218 or approximately eight percent, sold, closed, or consolidated nine programs and focused on operating efficiencies and process improvements. We are beginning to see the benefits in our improved financial performance. For example, we realized savings in patient care and SG&A labor expense and in many non-labor patient care expense categories. However, we are continuing to address challenges in ADC growth, patient care staffing, particularly in our IPUs, process inefficiencies and the ongoing impact of the CMS medical reviews that negatively impacted our fourth quarter results. We are addressing these challenges through continuing implementation of the restructuring plan and other initiatives.”
“On the revenue side, we did generate ADC growth as compared to the third quarter of fiscal 2007 despite the reduction in the number of programs, and began to develop a favorable trend in GIP days as compared to the fourth quarter 2006. In addition, we continued to improve the management of our Medicare Cap expense during fiscal 2007 and achieved approximately a 60% reduction compared to fiscal 2005. While we expect to continue to incur additional restructuring-related expenses over the next several quarters, we believe they will decline and the benefits of our efforts should be increasingly evident in our financial performance,” Mr. Slager continued.
Restructuring Update
“Since the beginning of fiscal 2007, we have sold, closed or consolidated a total of nine programs and one IPU,” said Mr. Slager. “At September 30, 2007, we had a total of 47 programs and six IPUs. Our target upon completion of the restructuring plan program consolidation remains 42 programs and six IPUs. The timing of the remaining closures will be impacted by the outcome of the Company’s strategic initiative review process.”
“Since the beginning of fiscal 2007, we have reduced headcount by approximately eight percent. These reductions have been evenly split between SG&A and patient care labor, as we have improved the patient care labor efficiency in our underperforming programs while maintaining our high level of patient and family care. These actions along with process improvements and organizational streamlining initiatives are beginning to produce the savings that we identified in the restructuring plan announced in June. During
fiscal 2007 we have implemented $17 million of the $29 million annualized net benefits targeted in the restructuring plan, some of which will take several quarters to be fully realized. In the fourth quarter some of these benefits were offset by charges as well as other expenses associated with the restructuring. We are continuing to aggressively implement the restructuring plan to achieve the targeted annual net savings. Finally, our strategic review process is still underway and we hope to have resolution in the near term,” Mr. Slager concluded.
Further Review of Fiscal Fourth Quarter Results
Net patient revenue was $61.2 million for the fourth quarter of fiscal 2007, increasing one percent from the fourth quarter of fiscal 2006. The increase reflected the FY 2007 CMS reimbursement increase of 3.4% and a 50% decrease in Medicare Cap expense partially offset by a four percent decrease in inpatient days. The average daily census (ADC) during the fiscal fourth quarter of 2007 was 5,078 compared with 5,089 in the fiscal third quarter, and 5,253 in the fourth quarter of fiscal 2006.
Patient care expenses as a percentage of revenue increased one percent from the fourth quarter of fiscal 2006 to $41.9 million in the fourth quarter of fiscal 2007. This small increase reflected higher patient care labor rates and higher costs for subcontract care and medical supplies, partially offset by patient care labor, staffing reductions in the fiscal fourth quarter, as well as declines in pharmacy and durable medical equipment expenses. Patient care expense as a percentage of revenue is expected to decline over the next several quarters with the full impact of all of the patient care expense improvement initiatives completed by the end of calendar year 2008. SG&A expenses decreased nine percent to $20.4 million in the fiscal fourth quarter of 2007 compared to $22.5 million in the fiscal fourth quarter of 2006, primarily due to site closures and headcount reductions.
Working capital at the end of fiscal 2007 was $43.3 million compared to $42.7 million at the end of the third quarter of fiscal 2007. The Company reported cash, cash equivalents and short-term investments of $29.4 million as of September 30, 2007 versus $29.1 million as of June 30, 2007. The Company had no outstanding debt at September 30, 2007.
Fiscal 2007 Financial Results
Net patient revenue for fiscal 2007 totaled $241.1 million, 2.2% above the $236.0 million in net patient revenue in fiscal 2006. The Company reported a net loss of $7.4 million, or $0.45 per share, on a GAAP basis for fiscal 2007 compared with a net loss of $11.7 million, or $0.71 per share, for fiscal 2006, a reduction of 37%. On a pro forma basis, excluding one-time charges and adjustments related to restructuring activities, the Company generated a net loss of $5.9 million, or $0.36 per share, in fiscal 2007. This compares with a pro-forma net loss of $3.4 million, or $0.21 per share, after exclusion of the $8.3 million valuation allowance for deferred tax assets in fiscal 2006. There is a reconciliation of GAAP to pro forma net income in a supplemental table attached to this release.
Conference Call
VistaCare will host a conference call and webcast on Tuesday, December 11, 2007 at 5:00 p.m. Eastern Time (2:00 p.m. Pacific Time) to discuss its fiscal fourth quarter and full year results and recent corporate developments. The dial-in number for the conference call is 800-366-7640 for domestic participants and 303-262-2138 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 for seven days and can be accessed by dialing 800-405-2236 for domestic callers and 303-590-3000 for international callers, using pass code 11103772#. 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 fourth quarter of fiscal 2007 pro forma net loss excludes restructuring expenses of $0.4 million for severance, early lease terminations, direct restructuring plan expenses and fixed asset write-offs. 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.
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 | jkirtland@evcgroup.com | sdimattia@evcgroup.com |
(tables to follow)
VISTACARE, INC.
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS
| September 30, | September 30, | |||||||
| 2007 | 2006 | |||||||
| (In thousands, except share | ||||||||
| information) | ||||||||
ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 22,737 | $ | 21,583 | ||||
| Short-term investments | 6,625 | 19,148 | ||||||
| Patient accounts receivable (net of allowance for denials of $2,354 and $1,502 at September 30, 2007 and 2006, respectively) | 38,131 | 27,600 | ||||||
| Patient accounts receivable — room & board (net of allowance for denials of $1,869 and $692 at September 30, 2007 and 2006, respectively) | 7,929 | 9,662 | ||||||
| Tax receivable | 1,391 | 1,375 | ||||||
| Prepaid expenses and other current assets | 5,808 | 4,653 | ||||||
| Total current assets | 82,621 | 84,021 | ||||||
| Fixed assets, net | 6,253 | 6,409 | ||||||
| Goodwill | 24,002 | 24,002 | ||||||
| Other assets | 2,729 | 5,360 | ||||||
| Total assets | $ | 115,605 | $ | 119,792 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 2,295 | $ | 2,591 | ||||
| Accrued Medicare Cap | 11,623 | 9,849 | ||||||
| Accrued expenses and other current liabilities | 25,447 | 27,262 | ||||||
| Total current liabilities | 39,365 | 39,702 | ||||||
| Deferred rent liability | 1,862 | 854 | ||||||
| Deferred tax liability | 1,472 | 1,144 | ||||||
| Stockholders’ equity: | ||||||||
| Class A Common Stock, $0.01 par value; authorized 33,000,000 shares; 16,866,093 and 16,610,500 shares issued and outstanding at September 30, 2007 and 2006, respectively. | 169 | 166 | ||||||
| Additional paid-in capital | 112,589 | 110,378 | ||||||
| Accumulated deficit | (39,852 | ) | (32,452 | ) | ||||
| Total stockholders’ equity | 72,906 | 78,092 | ||||||
| Total liabilities and stockholders’ equity | $ | 115,605 | $ | 119,792 | ||||
VISTACARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended | Year Ended | Year Ended | ||||||||||
| September 30, | September 30, | September 30, | ||||||||||
| 2007 | 2006 | 2005 | ||||||||||
| (In thousands) | ||||||||||||
Operating activities | ||||||||||||
| Net loss | $ | (7,400 | ) | $ | (11,651 | ) | $ | (2,257 | ) | |||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
| Depreciation | 2,356 | 2,365 | 1,959 | |||||||||
| Amortization | 1,175 | 2,583 | 2,645 | |||||||||
| Share-based compensation | 1,506 | 2,431 | 304 | |||||||||
| Deferred income tax expense | 328 | 7,224 | 819 | |||||||||
| Gain on sale of hospice program | (1,105 | ) | — | — | ||||||||
| Loss on disposal of assets | 570 | 270 | 480 | |||||||||
| Tax benefit of stock option exercises | — | — | 136 | |||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Patient accounts receivable, net | (8,798 | ) | (7,911 | ) | (9,416 | ) | ||||||
| Prepaid expenses and other assets | (1,452 | ) | 1,898 | (1,722 | ) | |||||||
| Payment of Medicare Cap assessment | (3,481 | ) | (14,996 | ) | (7,045 | ) | ||||||
| Increase in accrual for Medicare Cap | 5,255 | 6,788 | 11,868 | |||||||||
| Accounts payable, accrued expenses and other liabilities | (1,376 | ) | 1,605 | 2,207 | ||||||||
| Net cash used in operating activities | (12,422 | ) | (9,394 | ) | (22 | ) | ||||||
Investing activities | ||||||||||||
| Short-term investments purchased | (17,637 | ) | (12,291 | ) | (23,740 | ) | ||||||
| Short-term investments sold/matured | 30,160 | 20,540 | 29,492 | |||||||||
| Acquisition | — | — | (4,868 | ) | ||||||||
| Purchases of equipment | (2,601 | ) | (3,174 | ) | (2,769 | ) | ||||||
| Internally developed software expenditures | — | (464 | ) | (913 | ) | |||||||
| Proceeds from sale of hospice program assets | 1,200 | — | — | |||||||||
| Decrease (increase) in other assets | 1,746 | (46 | ) | (1,057 | ) | |||||||
| Net cash provided by (used in) investing activities | 12,868 | 4,565 | (3,855 | ) | ||||||||
Financing activities | ||||||||||||
| Proceeds from issuance of common stock from exercise of stock options and employee stock purchases | 708 | 450 | 1,152 | |||||||||
| Net cash provided by financing activities | 708 | 450 | 1,152 | |||||||||
| Net increase (decrease) in cash | 1,154 | (4,379 | ) | (2,725 | ) | |||||||
| Cash and cash equivalents, beginning of year | 21,583 | 25,962 | 28,687 | |||||||||
| Cash and cash equivalents, end of year | $ | 22,737 | $ | 21,583 | $ | 25,962 | ||||||
| Cash and short-term investments, end of year | $ | 29,362 | $ | 40,731 | $ | 53,375 | ||||||
| Supplemental cash flow data | ||||||||||||
| Medicare Cap liability paid through receivables reductions | $ | — | $ | — | $ | 6,349 | ||||||
VistaCare, Inc.
Consolidated Statement of Operations
(unaudited)
(in thousands, except per share information)
Consolidated Statement of Operations
(unaudited)
(in thousands, except per share information)
| Three Months Ended | Fiscal Year Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||
Net patient revenue | $ | 61,239 | $ | 60,518 | $ | 241,085 | $ | 235,993 | ||||||||
Operating expenses: | ||||||||||||||||
| Patient care | 41,893 | 41,426 | 163,652 | 152,879 | ||||||||||||
| Sales, general and administrative | 20,417 | 22,523 | 82,918 | 84,198 | ||||||||||||
| Depreciation | 573 | 490 | 2,356 | 2,365 | ||||||||||||
| Amortization | 271 | 648 | 1,175 | 2,583 | ||||||||||||
| Loss on disposal of assets | 40 | 85 | 570 | 270 | ||||||||||||
| Gain on sale of hospice program assets | — | — | (1,105 | ) | — | |||||||||||
Total operating expenses | 63,194 | 65,172 | 249,566 | 242,295 | ||||||||||||
Operating loss | (1,955 | ) | (4,654 | ) | (8,481 | ) | (6,302 | ) | ||||||||
Non-operating income (expense): | ||||||||||||||||
| Interest income, net | 370 | 442 | 1,581 | 1,459 | ||||||||||||
| Other expense | (36 | ) | (52 | ) | (161 | ) | (184 | ) | ||||||||
Total non-operating income, net | 334 | 390 | 1,420 | 1,275 | ||||||||||||
Net loss before income taxes | (1,621 | ) | (4,264 | ) | (7,061 | ) | (5,027 | ) | ||||||||
Income tax expense | 151 | 6,645 | 339 | 6,624 | ||||||||||||
Net loss | $ | (1,772 | ) | $ | (10,909 | ) | $ | (7,400 | ) | $ | (11,651 | ) | ||||
Net loss per share: | ||||||||||||||||
| Basic and diluted | $ | (0.11 | ) | $ | (0.66 | ) | $ | (0.45 | ) | $ | (0.71 | ) | ||||
Weighted average shares outstanding: | ||||||||||||||||
| Basic and diluted | 16,593 | 16,433 | 16,542 | 16,406 | ||||||||||||
Profoma Net Income and Earning Per Share with Adjustments
(in thousands, except per share information)
(in thousands, except per share information)
| Q4 FY07 | Q3 FY07 | Q4 FY06 | ||||||||||||||||||||||
| Published Net Loss and EPS Adjustments: | $ | (1,772 | ) | (0.11 | ) | $ | (2,812 | ) | (0.17 | ) | $ | (10,909 | ) | (0.66 | ) | |||||||||
| Severance & Closure Costs | 324 | 715 | ||||||||||||||||||||||
| Deferred Tax Asset Valuation Allowance | 8,250 | |||||||||||||||||||||||
| Costs Associated with Restructuring Plan | 100 | 100 | ||||||||||||||||||||||
| Tax Effect Of Adjustments* | (148 | ) | (285 | ) | — | |||||||||||||||||||
| Adjusted Net Loss/EPS (tax adjusted) | $ | (1,496 | ) | (0.09 | ) | $ | (2,282 | ) | (0.14 | ) | $ | (2,659 | ) | (0.16 | ) | |||||||||
| FY07 | FY06 | |||||||||||||||||||||||
| Published Net Loss and EPS Adjustments: | $ | (7,400 | ) | (0.45 | ) | $ | (11,651 | ) | (0.71 | ) | ||||||||||||||
| Severance & Closure Costs | 2,075 | |||||||||||||||||||||||
| Deferred Tax Asset Valuation Allowance | 8,250 | |||||||||||||||||||||||
| Costs Associated with Restructuring Plan | 200 | |||||||||||||||||||||||
| Tax Effect Of Adjustments* | (796 | ) | — | |||||||||||||||||||||
| Adjusted Net Loss/EPS (tax adjusted) | $ | (5,921 | ) | (0.36 | ) | $ | (3,401 | ) | (0.21 | ) | ||||||||||||||
* The tax effect is an estimate