Exhibit 99.1
Gentiva(R) Health Services' Third Quarter Net Revenues Rise 6% to
$199.7 Million;
Diluted Earnings Per Share Increases 31% to $0.17
MELVILLE, N.Y., Oct. 30 /PRNewswire-FirstCall/ -- Gentiva Health Services,
Inc. (Nasdaq: GTIV), the nation's largest provider of home health services,
today announced third quarter 2003 financial results highlighted by a 6%
increase in net revenues from the third quarter of 2002; a 31% increase in
diluted earnings per share (EPS) to $0.17, driven primarily by a lower
effective tax rate as well as improved operating results; and a strong balance
sheet with quarter-end cash items of $104.3 million.
Net revenues for the third quarter ended September 28, 2003 were $199.7
million compared to $188.4 million reported in the third quarter of 2002.
Revenue growth was fueled by two major payor groups that are the subject of
Gentiva's strategic focus: Medicare, whose third quarter revenue increased 11%
over the same period a year earlier despite lower reimbursement rates that
went into effect in late 2002; and commercial insurance and other, whose
revenue rose 7.5% due primarily to the ongoing positive impact of managed care
contracts signed during the past year. As anticipated, revenue from Medicaid
and other government programs declined slightly as Gentiva continued its
strategy of tapering or terminating participation in certain low-margin
Medicaid and state and county programs.
Net income for the third quarter of 2003 was $4.5 million, or $0.17 per
diluted share, compared to net income of $3.6 million, or $0.13 per diluted
share, for the corresponding period of 2002. Results for the third quarter of
2002 included income from continuing operations of $2.7 million, or $0.10 per
diluted share; a loss from discontinued operations of $0.5 million, or $0.02
per diluted share; and income from the cumulative effect of an accounting
change relating to goodwill of $1.4 million, or $0.05 per diluted share.
Seasonal factors have traditionally made the third quarter the least active of
the year for Gentiva.
For the nine months ended September 28, 2003, net revenues were $610.2
million, up 5.8% from the $576.9 million reported in the corresponding period
of 2002. Net income for the first nine months of 2003 was $15.0 million, or
$0.55 per diluted share, compared with a loss of $54.4 million, or $2.08 per
diluted share, for the corresponding period of 2002. The nine-month 2002
results included income from discontinued operations of $191.6 million, or
$7.34 per share, related to both the operating results of Gentiva's Specialty
Pharmaceutical Services (SPS) business and the gain on its June 2002 sale, net
of related transaction costs and income taxes. Excluding these discontinued
operations and the cumulative effect of the accounting change relating to
goodwill of $189.1 million, or $7.24 per diluted share, in 2002, the net loss
from continuing operations for the first nine months of 2002 was $56.9
million, or $2.18 per diluted share, including restructuring and special
charges. (See Note 3 below.)
"The third quarter and first nine months of 2003 have been marked by
sustained revenue and profit growth, gross margin and balance sheet
improvements, and an ongoing focus on quality, efficiency and stability to
operate effectively in a changing health care environment," said Chairman and
CEO Ron Malone. "Our third quarter Medicare revenue growth demonstrated an
improved referral flow, increasing ability to turn referrals into admissions,
and some initial benefits of investing in an expanded sales force. Our
commercial insurance growth signals progress toward achievement of our managed
care revenue goals."
Malone said the Company's strong cash position allows Gentiva to continue
to make investments in improving the performance of nursing operations,
increasing sales, developing new and expanded offerings, deploying new
technologies for enhanced patient care and greater efficiency, focusing on
recruitment and retention to strengthen the Company's position as an employer
of choice, and funding other strategic areas. He noted, for example, that
Gentiva's more effective, centralized recruiting and retention programs
launched earlier this year had helped to increase Gentiva's full-time
caregiver staff in the third quarter.
Gentiva updated its revenue guidance for the 2003 fiscal year to a range
of $810 to $820 million (versus the prior range of $800 to $820 million) and
its earnings guidance to a range of $0.71 to $0.75 per diluted share (versus
the prior range of $0.69 to $0.74), which assumes an effective tax rate of
under 9%.
The Company also announced its preliminary outlook for 2004 with full year
net income in the range of $0.55 to $0.62 per diluted share. The diluted
earnings per share range assumes that the Company returns to a normalized tax
rate as a result of the reversal of the valuation allowance against net
deferred tax assets. Gentiva expects growth in full year 2004 revenues,
excluding Gentiva's largest customer, CIGNA Health Corporation (CIGNA), to be
in a range of 8% to 12%. Malone said that negotiations for the 2004 contract
with CIGNA are not complete and that each part of the contract is being
examined closely by both parties. While the Company currently expects to reach
an agreement with CIGNA, the agreement is likely to differ from the contracts
of previous years and could adversely impact Gentiva's actual financial
results for the coming year.
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 third quarter 2003 results and its
2004 preliminary outlook during its quarterly conference call and live web
cast to be held this morning, October 30, 2003, at 10:00 a.m. Eastern Standard
Time. To participate in the call from the United States or Canada, dial: (952)
556-2844. 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 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, and its investor relations section at
http://www.gentiva.com/investor.
(in 000's, except per share data) 3rd Quarter Nine Months
----------- -----------
2003 2002 2003 2002
---- ---- ---- ----
Statement of Operations
Net revenues $ 199,698 $ 188,443 $ 610,160 $ 576,865
Cost of services sold 130,457 124,898 402,529 392,976
------- ------- -------- ---------
Gross profit 69,241 63,545 207,631 183,889
Selling, general and administrative expenses (62,738) (57,480) (186,332) (219,590)
Depreciation and amortization (1,689) (1,724) (5,164) (5,465)
------- ------- -------- ---------
Operating income (loss) 4,814 4,341 16,135 (41,166)
Interest income, net 93 162 275 741
------- ------- -------- ---------
Income (loss) before income taxes from
continuing operations 4,907 4,503 16,410 (40,425)
Income tax expense 360 1,765 1,415 16,429
------- ------- -------- ---------
Income (loss) from continuing operations 4,547 2,738 14,995 (56,854)
Discontinued operations, net of tax -- (563) -- 191,578
------- ------- -------- ---------
Income before cumulative effect of accounting change 4,547 2,175 14,995 134,724
Cumulative effect of accounting change, net of tax -- 1,392 -- (189,076)
------- ------- -------- ---------
Net income (loss) $ 4,547 $ 3,567 $ 14,995 $ (54,352)
======= ======= ======== =========
Earnings per Share
Basic:
Income (loss) from continuing operations $ 0.18 $ 0.10 $ 0.57 $ (2.18)
Discontinued operations, net of tax -- (0.02) -- 7.34
Cumulative effect of accounting change, net of tax -- 0.06 -- (7.24)
------- ------- -------- ---------
Net income (loss) $ 0.18 $ 0.14 $ 0.57 $ (2.08)
======= ======= ======== =========
Average shares outstanding 25,972 26,365 26,399 26,117
======= ======= ======== =========
Diluted:
Income (loss) from continuing operations $ 0.17 $ 0.10 $ 0.55 $ (2.18)
Discontinued operations, net of tax -- (0.02) -- 7.34
Cumulative effect of accounting change, net of tax -- 0.05 -- (7.24)
------- ------- -------- ---------
Net income (loss) $ 0.17 $ 0.13 $ 0.55 $ (2.08)
======= ======= ======== =========
Average shares outstanding 27,098 27,483 27,452 26,117
======= ======= ======== =========
Balance Sheet
ASSETS Sep 28, 2003 Dec 29, 2002
------ ------------ ------------
Cash, cash equivalents and restricted cash $ 104,327 $ 101,241
Net receivables 130,307 125,078
Prepaid expenses and other current assets 6,924 10,534
--------- ---------
Total current assets 241,558 236,853
Fixed assets, net 12,268 13,025
Other assets 16,050 14,553
--------- ---------
Total assets $ 269,876 $ 264,431
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Accounts payable $ 16,080 $ 16,865
Payroll and related taxes 9,392 12,377
Medicare liabilities 11,823 11,880
Cost of claims incurred but not reported 30,577 27,899
Obligations under insurance programs 37,665 37,829
Other accrued expenses 25,627 25,664
--------- ---------
Total current liabilities 131,164 132,514
Other liabilities 18,141 18,869
Shareholders' equity 120,571 113,048
--------- ---------
Total liabilities and shareholders' equity $ 269,876 $ 264,431
========= =========
Common shares outstanding 25,967 26,385
========= =========
3rd Quarter Nine Months
----------- -----------
2003 2002 2003 2002
---- ---- ---- ----
Supplemental Information
Net Revenues:
Medicare $ 43,977 $ 39,541 $ 128,502 $ 122,235
Medicaid and Other Government 40,718 41,939 125,721 125,309
Commercial Insurance and Other 115,003 106,963 355,937 329,321
--------- --------- --------- ---------
Total net revenues $ 199,698 $ 188,443 $ 610,160 $ 576,865
========= ========= ========= =========
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 $ 4,547 $ 2,738 $ 14,995 $ (56,854)
Add: income tax expense - As Reported (2) 360 1,765 1,415 16,429
------- ------- -------- ---------
Income (loss) before income taxes from continuing
operations 4,907 4,503 16,410 (40,425)
Add: restructuring and special charges (3) -- -- -- 46,056
------- ------- -------- ---------
Income before income taxes and restructuring and special
charges from continuing operations 4,907 4,503 16,410 5,631
Less: income tax expense - At assumed 39% rate 1,914 1,756 6,400 2,196
------- ------- -------- ---------
Income from Continuing Operations - Pro Forma $ 2,993 $ 2,747 $ 10,010 $ 3,435
======= ======= ======== =========
Average diluted shares outstanding - As Reported 27,098 27,483 27,452 26,117
Add: common stock equivalents (4) -- -- -- 1,242
------- ------- -------- ---------
Average diluted shares outstanding - Pro Forma 27,098 27,483 27,452 27,359
======= ======= ======== =========
Diluted Earnings per Share
Income (loss) from Continuing Operations -
As Reported $ 0.17 $ 0.10 $ 0.55 $ (2.18)
======= ======= ======== =========
Income from Continuing Operations - Pro Forma $ 0.11 $ 0.10 $ 0.36 $ 0.13
======= ======= ======== =========
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 third quarter and first
nine months of fiscal 2003 and 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 for the nine months of fiscal 2002, 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 third quarter and first nine months of 2003, income tax
expense approximated $0.4 million and $1.4 million, respectively,
representing effective tax rates of 7.3% and 8.6%, respectively. The
estimated income tax expense was comprised of state income 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 nine
months of 2002, income tax expense relating to continuing operations
was $16.4 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.
3) Restructuring and special charges recorded by Gentiva during the first
nine 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 first nine
months of 2002 include the effect of an incremental 1,242,000 shares
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 the first nine months of
fiscal 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," "assumes," 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.
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
SOURCE Gentiva Health Services, Inc.
-0- 10/30/2003
/CONTACT: Financial and Investors - John R. Potapchuk, +1-631-501-7035,
john.potapchuk@gentiva.com or Media - David Fluhrer, +1-631-501-7102,
david.fluhrer@gentiva.com, both of Gentiva Health Services, Inc./
/Company News On-Call: http://www.prnewswire.com/comp/657293.html /
/Web site: http://www.gentiva.com
http://www.gentiva.com/investor/events.asp /
(GTIV)
CO: Gentiva Health Services, Inc.
ST: New York
IN: HEA
SU: ERN CCA