Exhibit 99.1
{LOGO} Gentiva
HEALTH SERVICES
- --------------------------------------------------------------------------------
Press Release
Financial and Investor Contact:
John R. Potapchuk
631-501-7035
john.potapchuk@gentiva.com
Media Contact:
David Fluhrer
631-501-7102
david.fluhrer@gentiva.com
FOR IMMEDIATE RELEASE
Gentiva Health Services Reports Second Quarter Net Revenue Growth of 6.6%
and Diluted Earnings Per Share of $0.19
Company Reports Cash Items and Investments of Nearly $102 Million at Quarter
End and Completion of Stock Repurchase Program
Melville, N.Y., August 5, 2003--Gentiva Health Services, Inc. (NASDAQ: GTIV),
the nation's largest provider of home health services, today announced second
quarter 2003 financial results marked by a 6.6% increase in net revenues from
the second quarter of 2002, diluted earnings per share (EPS) of $0.19 and a
strong balance sheet with quarter-end cash items and short-term investments of
nearly $102 million.
Net revenues for the quarter ended June 29, 2003 were $208.4 million
compared to $195.6 million from continuing operations reported in the second
quarter of 2002. Each major payor group -- Medicare, Medicaid and other
government, and commercial insurance and other - contributed to the revenue
growth, with commercial insurance representing the largest increase - 9% -- due
in part to the impact of contracts signed in early 2003.
Net income for the second quarter of 2003 was $5.2 million, or $0.19 per
diluted share, compared to net income of $151.3 million, or $5.79 per share, for
the corresponding period of 2002. The second quarter 2002 results included
income from discontinued operations of $185.0 million, or $7.08 per diluted
share, related to both the operating results of Gentiva's Specialty
3 Huntington Quadrangle, 2S, Melville, NY 11747-8903
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Pharmaceutical Services (SPS) business and the gain on its June 2002 sale, net
of related transaction costs and income taxes. Excluding these discontinued
operations, the Company's reported net loss for the second quarter of 2002 was
$33.7 million, or $1.29 per diluted share, including restructuring and special
charges (see Note 3 below), and net of an income tax benefit of $12.3 million.
For the six months ended June 29, 2003, net revenues were $410.5 million,
up 5.7% from the $388.4 million reported in the corresponding period of 2002.
Net income for the first six months of 2003 was $10.4 million, or $0.38 per
diluted share, compared with a loss of $57.9 million, or $2.23 per share, for
the corresponding period of 2002. Excluding the aforementioned discontinued
operations and the cumulative effect of the accounting change relating to
goodwill in 2002, the net loss from continuing operations for the first six
months of 2002 was $59.6 million, or $2.29 per diluted share, including
restructuring and special charges. (See Note 3 below.)
"The second quarter and first six months of 2003 were marked by revenue
growth, and improvements in gross margin and net income, as we moved ahead with
a number of initiatives capitalizing on opportunities in home health care," said
Chairman and CEO Ron Malone, who cited these examples:
o Expanding Gentiva's Nursing sales force over the past year to focus on
revenue generation through more contacts with physicians, case managers
and discharge planners;
o Implementing recent Gentiva's CareCentrix(R) managed care contracts in a
continuing drive to help more managed care organizations improve patient
care, satisfy their members and control costs;
o Advancing initiatives leading to deployment of new proprietary software
and handheld devices to boost efficiencies and enhance patient care;
o Strengthening caregiver recruitment and retention, including the recent
launch of new health benefits programs for caregivers; and
o Advocating Medicare reform legislation favorable to elderly patients and
industry efforts to bring high quality care to Medicare recipients.
"Beginning in late May," he added, "Gentiva went into the open market to
repurchase shares of its common stock, as we said we would do following our
Board's authorization announced on May 16, 2003. As of June 29, 2003, we spent
nearly $8 million to repurchase over 871,000 shares of common stock. The entire
one million stock repurchase program was completed in July at an average price
of $9.08 per common share, or a total cost of approximately $9.1 million. We are
continually evaluating uses of cash, including additional stock repurchases,
dividends, and selective acquisitions to expand service offerings and strengthen
our already broad geographic network."
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The Company reaffirmed its revenue guidance for the 2003 fiscal year in a
range of $800 to $820 million, and raised its earnings guidance to a range of
$0.69 to $0.74 per diluted share (versus the prior range of $0.67 to $0.73),
which reflects the reduction in common shares outstanding following completion
of the stock repurchase program, as well as seasonal softness in demand for home
care services during the fiscal third quarter.
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 2003 results, as well as
earnings and revenue guidance during its quarterly conference call and live web
cast. The conference call and web cast will be held this morning, August 5,
2003, at 10:00 a.m. Eastern Daylight Time. To participate in the call from the
United States or Canada, dial: (612) 326-0027. 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
Gentiva Health Services (NASDAQ: GTIV) is the nation's largest home health
services provider. Gentiva serves patients through more than 350 direct service
delivery units and through CareCentrix(R), which manages home health care
services for many major managed care organizations throughout the United States.
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. The Company brings home health care services to
approximately half a million patients each year. Gentiva's revenues are
generated from commercial insurance, federal and state government programs and
individual consumers. For more information, visit Gentiva's web site,
www.gentiva.com.
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(in 000's, except per share data) 2nd Quarter Six Months
----------------- -----------------
2003 2002 2003 2002
---- ---- ---- ----
Statement of Operations
- -----------------------
Net revenues $ 208,446 $ 195,623 $ 410,462 $ 388,422
Cost of services sold 138,822 138,892 272,072 268,078
---------------------- ----------------------
Gross profit 69,624 56,731 138,390 120,344
Selling, general and administrative expenses (62,341) (101,248) (123,594) (162,110)
Depreciation and amortization (1,730) (1,814) (3,475) (3,741)
---------------------- ----------------------
Operating income (loss) 5,553 (46,331) 11,321 (45,507)
Interest income, net 139 383 182 579
---------------------- ----------------------
Income (loss) before income taxes from continuing operations 5,692 (45,948) 11,503 (44,928)
Income tax expense (benefit) 445 (12,270) 1,055 14,664
---------------------- ----------------------
Income (loss) from continuing operations 5,247 (33,678) 10,448 (59,592)
Discontinued operations, net of tax -- 184,953 -- 192,141
---------------------- ----------------------
Income before cumulative effect of accounting change 5,247 151,275 10,448 132,549
Cumulative effect of accounting change, net of tax -- -- -- (190,468)
---------------------- ----------------------
Net income (loss) $ 5,247 $ 151,275 $ 10,448 $ (57,919)
====================== ======================
Earnings per Share
- ------------------
Basic:
Income (loss) from continuing operations $ 0.20 $ (1.29) $ 0.39 $ (2.29)
Discontinued operations, net of tax -- 7.08 -- 7.39
Cumulative effect of accounting change, net of tax -- -- -- (7.33)
---------------------- ----------------------
Net income (loss) $ 0.20 $ 5.79 $ 0.39 $ (2.23)
====================== ======================
Average shares outstanding 26,530 26,143 26,613 25,993
====================== ======================
Diluted:
Income (loss) from continuing operations $ 0.19 $ (1.29) $ 0.38 $ (2.29)
Discontinued operations, net of tax -- 7.08 -- 7.39
Cumulative effect of accounting change, net of tax -- -- -- (7.33)
---------------------- ----------------------
Net income (loss) $ 0.19 $ 5.79 $ 0.38 $ (2.23)
====================== ======================
Average shares outstanding 27,490 26,143 27,635 25,993
====================== ======================
Balance Sheet
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ASSETS Jun 29, 2003 Dec 29, 2002
------ ------------ ------------
Cash, cash equivalents and restricted cash $ 97,046 $101,241
Short-term investments 4,900 --
Net receivables 133,039 125,078
Prepaid expenses and other current assets 8,973 10,534
----------------------
Total current assets 243,958 236,853
Fixed assets, net 13,122 13,025
Other assets 15,554 14,553
----------------------
Total assets $272,634 $264,431
======================
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Accounts payable $ 17,513 $ 16,865
Payroll and related taxes 12,616 12,377
Medicare liabilities 12,212 11,880
Cost of claims incurred but not reported 31,079 27,899
Obligations under insurance programs 37,950 37,829
Other accrued expenses 27,120 25,664
----------------------
Total current liabilities 138,490 132,514
Other liabilities 17,683 18,869
Shareholders' equity 116,461 113,048
----------------------
Total liabilities and shareholders' equity $272,634 $264,431
======================
Common shares outstanding 25,928 26,385
======================
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2nd Quarter Six Months
--------------- ----------------
2003 2002 2003 2002
---- ---- ---- ----
Supplemental Information
- ------------------------
Net Revenues:
Medicare $ 41,957 $ 40,526 $ 84,525 $ 82,694
Medicaid and Other Government 42,658 41,485 85,003 83,370
Commercial Insurance and Other 123,831 113,612 240,934 222,358
------------------- -------------------
Total net revenues $208,446 $195,623 $410,462 $388,422
=================== ===================
A reconciliation of income (loss) from continuing operations, average diluted
shares outstanding and diluted earnings per share between As Reported and Pro
Forma amounts follows (1):
Income (loss) from Continuing Operations- As Reported $ 5,247 $(33,678) $ 10,448 $(59,592)
Add: income tax expense (benefit) - As Reported (2) 445 (12,270) 1,055 14,664
------------------- -------------------
Income (loss) before income taxes from continuing operations 5,692 (45,948) 11,503 (44,928)
Add: restructuring and special charges (3) -- 46,056 -- 46,056
------------------- -------------------
Income before income taxes and restructuring and special
charges from continuing operations 5,692 108 11,503 1,128
Less: income tax expense - At assumed 39% rate 2,220 42 4,486 440
------------------- -------------------
Income from Continuing Operations - Pro Forma $ 3,472 $ 66 $ 7,017 $ 688
=================== ===================
Average diluted shares outstanding - As Reported 27,490 26,143 27,635 25,993
Add: common stock equivalents (4) -- 1,226 -- 1,304
------------------- -------------------
Average diluted shares outstanding - Pro Forma 27,490 27,369 27,635 27,297
=================== ===================
Diluted Earnings per Share
--------------------------
Income (loss) from Continuing Operations - As Reported $ 0.19 $ (1.29) $ 0.38 $ (2.29)
=================== ===================
Income from Continuing Operations - Pro Forma $ 0.13 $ 0.00 $ 0.25 $ 0.03
=================== ===================
Notes:
1) Although Income from Continuing Operations - Pro Forma is a non-GAAP
financial measure, management believes that the presentation of income
from continuing operations as calculated using an effective tax rate of
39% and excluding restructuring and special charges is a useful adjunct to
Income (Loss) from Continuing Operations - 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 2003 and
fiscal 2002. In addition, Income from Continuing Operations - Pro Forma
facilitates comparison between Gentiva and other companies. Furthermore,
due to the unusual historical relationship between income tax expense and
income before income taxes from continuing operations as described in Note
2, the presentation of Income from Continuing Operations - Pro Forma
incorporates an effective tax rate, which may be more representative of
the Company's normalized rate. Management also believes that the
restructuring and special charges recorded in the second quarter of fiscal
2002 should be excluded from Income from Continuing Operations - Pro
Forma, as these costs represent non-recurring charges associated with
business realignment activities related to the sale of the SPS business
and other costs described in Note 3. For these reasons, management
believes that Income from Continuing Operations - Pro Forma is useful to
investors. Investors should not view Income from Continuing Operations -
Pro Forma as an alternative to the GAAP measure of Income (Loss) from
Continuing Operations.
2) For the second quarter and first six months of 2003, income tax expense
approximated $0.4 million and $1.1 million, respectively, representing
effective tax rates of 7.8% and 9.2%, respectively. The estimated income
tax expense was comprised of state income and federal alternative minimum
taxes. The effective tax rates were lower than the statutory tax rate due
to the reversal of a portion of the valuation allowance relating to the
realization of tax benefits associated with a net operating loss carry
forward and other net deferred tax assets. During the first six months of
2002, income tax expense relating to continuing operations was $14.7
million. The estimated income tax expense includes a provision of $26.9
million that was recorded in the first quarter of fiscal 2002 to establish
a valuation allowance against certain deferred tax assets that were
recorded with the adoption of FAS No. 142 and the subsequent write-off of
goodwill; the corresponding tax benefit for the same amount was recorded
in the cumulative effect of accounting change line during the 2002 period.
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3) Restructuring and special charges recorded by Gentiva during the second
quarter and first six months of 2002 aggregated $46.1 million, of which
$6.3 million was recorded in cost of services sold and $39.8 million was
recorded in selling, general and administrative expenses. These charges
consisted primarily of restructuring charges relating to severance and
lease payments associated with the realignment and consolidation of
business activities of $6.8 million; cash payments and related expenses in
connection with the Company's tender offer to purchase and cancel
outstanding stock options of $21.4 million; settlement costs of $7.7
million; a refinement of the estimation process associated with the
Company's actuarially determined workers' compensation and professional
liability insurance reserves of $6.3 million; and, asset writedowns and
the write-off of deferred debt issuance costs associated with the
terminated credit facility of $3.8 million.
4) The computations of diluted earnings per share for the Company's Income
from Continuing Operations - Pro Forma for the second quarter and first
six months of 2002 include the effect of an incremental 1,226,000 shares
and 1,304,000 shares, respectively, that would be issuable upon the
assumed exercise of stock options under the treasury stock method. For
purposes of the computation of diluted earnings (loss) per share for the
Company's Income (Loss) from Continuing Operations - As Reported for 2002,
these incremental shares were excluded, since their inclusion would be
antidilutive on earnings.
Forward-Looking Statement
Certain statements contained in this news release, including, without
limitation, statements containing the words "believes," "anticipates,"
"intends," "expects" 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 payor 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 29, 2002.
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