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
516-857-7231
david.fluhrer@gentiva.com
FOR IMMEDIATE RELEASE
Gentiva(R) Reports Second Quarter 2004 EPS Increase and
Raises 2004 Financial Outlook
Melville, N.Y., July 28, 2004 -- Gentiva Health Services, Inc. (NASDAQ: GTIV),
the nation's largest provider of comprehensive home health services, today
reported net income of $6.0 million, or $0.22 per diluted share, for the second
quarter ended June 27, 2004 compared to $5.2 million, or $0.19 per diluted
share, for the corresponding period of fiscal 2003.
Net income - as adjusted for the second quarter of 2004 was $5.4 million,
or $0.20 per diluted share, compared with $3.5 million, or $0.13 per diluted
share, for the second quarter of 2003. The 2004 adjusted results exclude a
nonrecurring, pre-tax gain of approximately $0.9 million from the sale of
Gentiva's investment in a Canadian homecare company. The 2003 adjusted results
assume a normalized tax rate of 39%, although the effective tax rate for this
period was 7.8% due to the reversal of a portion of Gentiva's deferred tax
valuation allowance. (See Supplemental Information for a reconciliation between
Net income - as reported and Net income - as adjusted.)
The Company also announced a revised 2004 financial outlook - excluding
special items -- that raises expected full year earnings to a range of $0.64 to
$0.67 per diluted share, up from the previous $0.57 to $0.63 per diluted share,
and changes full year net revenues to a range of $840 million to $850 million,
as compared with the prior range of $835 million to $850 million.
2
Second quarter 2004 net revenues were $208.2 million compared with $208.4
million reported in the second quarter of 2003. Gentiva's Medicare revenues for
the second quarter of 2004 increased $11.9 million, or 28.3%, over the second
quarter of 2003. Medicare revenue growth was driven by an increase in
admissions, the contribution of Gentiva's growing specialty services,
operational and clinical process enhancements, and higher reimbursement rates
compared with the prior year period.
Revenues from Medicaid and local government sources declined by $3.7
million, or 8.6%, in the second quarter due to a reduction in the Company's
participation in certain low-margin, hourly Medicaid and state and county
programs. Revenues from the Company's third major payer category - Commercial
Insurance and Other - declined by $8.4 million, or 6.8%, due to a reduction in
revenue from CIGNA Healthcare.
For the six months ended June 27, 2004, net income was $15.2 million, or
$0.56 per diluted share, compared with $10.4 million, or $0.38 per diluted
share, in the first six months of 2003. Net revenues for the first six months of
2004 were $422.2 million versus $410.5 million reported in the same prior year
period.
Results for the first half of 2004 included the second quarter gain on the
sale of the Canadian investment as well as first quarter special items related
to the favorable settlement of the Company's 1997 Medicare cost reports, net of
a revenue adjustment to reflect an industrywide repayment of certain Medicare
reimbursements. The Medicare special items contributed $8.0 million to first
half 2004 net revenues and income before income taxes.
First half 2004 net revenues, excluding the special items and revenues
from CIGNA, increased $25.8 million, or 10.1%. Revenues from CIGNA, which
declined 14.4% in the first half of 2004, represented approximately 31% of
Gentiva's total net revenues in the first half of 2004 versus 38% in the
comparable period of 2003.
Net income - as adjusted for the first half of 2004 versus the same period
of 2003 was $0.36 versus $0.25 per diluted share, respectively. The 2004
adjusted results exclude the gain on the sale of the Canadian investment and the
special items recorded during this period, and the 2003 adjusted results assume
a normalized tax rate of 39%.
"Thanks to the expansion of our sales force, the continued growth of our
specialty services and operating improvements within our branch structure, we
have shown solid growth in our Medicare business," said Gentiva Chairman and CEO
Ron Malone. "We have also reconfigured our CareCentrix(R) managed care provider
network to better serve our customers and to drive improvements in operating
margins. Furthermore, our CareCentrix model continues to attract interest, as
evidenced by the recently announced TriWest Healthcare Alliance contract to
serve military personnel and their families in 21 states."
Malone said that Gentiva's revised 2004 outlook reflects operating
performance in the first half of the year, anticipated lower seasonal demand for
homecare in the fiscal third quarter, and the reduction in diluted shares
resulting from stock repurchases, including 587,000 shares repurchased during
the second quarter of 2004.
3
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 results during its
conference call and live web cast to be held Thursday, July 29, 2004, at 10:00
a.m. Eastern Time. To participate in the call from the United States or Canada,
dial: (612) 326-1003. 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, Inc.
Gentiva Health Services, Inc. is the nation's largest provider of comprehensive
home health services. Gentiva serves patients through more than 350 direct
service delivery units within approximately 250 locations in 35 states, and
through CareCentrix(R), which manages home healthcare services for many major
managed care organizations throughout the United States and delivers them in all
50 states through a network of more than 2,000 third-party provider locations,
as well as Gentiva locations. 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. 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.
(Tables and notes follow)
4
(in 000's, except per share data) 2nd Quarter Six Months
----------- ----------
2004 2003 2004 2003
---- ---- ---- ----
Statements of Income
Net revenues $ 208,248 $ 208,446 $ 422,153 $ 410,462
Cost of services sold 129,910 138,822 260,553 272,072
-------------------------- --------------------------
Gross profit 78,338 69,624 161,600 138,390
Selling, general and administrative expenses (67,809) (62,341) (134,178) (123,594)
Depreciation and amortization (1,904) (1,730) (3,749) (3,475)
-------------------------- --------------------------
Operating income 8,625 5,553 23,673 11,321
Gain on sale of Canadian investment 946 -- 946 --
Interest income, net 208 139 290 182
-------------------------- --------------------------
Income before income taxes 9,779 5,692 24,909 11,503
Income tax expense (3,814) (445) (9,714) (1,055)
-------------------------- --------------------------
Net income $ 5,965 $ 5,247 $ 15,195 $ 10,448
========================== ==========================
Earnings per Share
Net income:
Basic $ 0.24 $ 0.20 $ 0.60 $ 0.39
========================== ==========================
Diluted $ 0.22 $ 0.19 $ 0.56 $ 0.38
========================== ==========================
Average shares outstanding:
Basic 25,068 26,530 25,305 26,613
========================== ==========================
Diluted 26,818 27,490 26,967 27,635
========================== ==========================
Condensed Balance Sheets
ASSETS Jun 27, 2004 Dec 28, 2003
------------ ------------
Cash, cash equivalents and restricted cash $101,104 $100,013
Short-term investments 10,000 10,000
Net receivables 133,778 132,998
Deferred tax assets 23,210 26,464
Prepaid expenses and other current assets 7,890 6,524
------------------------
Total current assets 275,982 275,999
Fixed assets 18,121 15,135
Deferred tax assets, net 23,631 28,025
Other assets 14,885 15,929
------------------------
Total assets $332,619 $335,088
========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 12,205 $ 16,079
Payroll and related taxes 13,845 12,932
Medicare liabilities 13,331 12,736
Cost of claims incurred but not reported 28,287 28,525
Obligations under insurance programs 36,583 37,200
Other accrued expenses 28,742 32,230
------------------------
Total current liabilities 132,993 139,702
Other liabilities 20,375 18,207
Shareholders' equity 179,251 177,179
------------------------
Total liabilities and
shareholders' equity $332,619 $335,088
========================
Common shares outstanding 24,859 25,598
========================
Note: Cash, cash equivalents and restricted cash includes restricted cash of
$21.8 million at June 27, 2004 and December 28,2003.
5
Six Months
----------
Condensed Statements of Cash Flows 2004 2003
---- ----
OPERATING ACTIVITIES:
Net income $ 15,195 $ 10,448
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 3,749 3,475
Provision for doubtful accounts 3,414 3,608
Gain on sale of Canadian investment (946) --
Deferred income taxes 7,433 --
Changes in assets and liabilities, net of
acquisitions/divestitures
Accounts receivable (4,194) (11,569)
Prepaid expenses and other current assets (1,616) 1,613
Current liabilities (7,458) 6,358
Other, net 169 (1,200)
----------------------
Net cash provided by operating activities 15,746 12,733
----------------------
INVESTING ACTIVITIES:
Purchase of fixed assets (5,493) (3,928)
Proceeds from sale of assets 4,123 200
Acquisition of businesses -- (1,300)
Maturities of short-term investments 10,000 10,035
Purchase of short-term investments (10,000) (14,900)
----------------------
Net cash used in investing activities (1,370) (9,893)
----------------------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 1,579 822
Repurchases of common stock (14,702) (7,857)
Repayment of capital lease obligations (162) --
----------------------
Net cash used in financing activities (13,285) (7,035)
----------------------
Net change in cash, cash equivalents and
restricted cash 1,091 (4,195)
Cash, cash equivalents and restricted cash
at beginning of period 100,013 101,241
----------------------
Cash, cash equivalents and restricted
cash at end of period $ 101,104 $ 97,046
======================
6
2nd Quarter Six Months
----------- ----------
2004 2003 2004 2003
---- ---- ---- ----
Supplemental Information
Net Revenues:
Medicare (1) $ 53,839 $ 41,957 $ 116,441 $ 84,525
Medicaid and other government 38,978 42,658 78,145 85,003
Commercial insurance and other 115,431 123,831 227,567 240,934
----------------------- -----------------------
Total net revenues $ 208,248 $ 208,446 $ 422,153 $ 410,462
======================= =======================
A reconciliation of net income between as reported and as adjusted,
and the related diluted earnings per share amounts follows (2):
Net income - as reported $ 5,965 $ 5,247 $ 15,195 $ 10,448
Add: income tax expense - as reported (3) 3,814 445 9,714 1,055
----------------------- -----------------------
Income before income taxes - as reported 9,779 5,692 24,909 11,503
Less: Gain on sale of Canadian investment (4) (946) -- (946) --
Less: Medicare cost report settlement (1) -- -- (9,003) --
Add: Revenue adjustment for estimated Medicare repayment (1) -- -- 1,000 --
----------------------- -----------------------
Income before income taxes - as adjusted 8,833 5,692 15,960 11,503
Less: income tax expense - at assumed 39% rate (3,445) (2,220) (6,224) (4,486)
----------------------- -----------------------
Net income - as adjusted $ 5,388 $ 3,472 $ 9,736 $ 7,017
======================= =======================
Diluted Earnings per Share
Net income - as reported $ 0.22 $ 0.19 $ 0.56 $ 0.38
======================= =======================
Net income - as adjusted $ 0.20 $ 0.13 $ 0.36 $ 0.25
======================= =======================
Notes:
1) Medicare revenues for the first six months of fiscal 2004 included
approximately $9 million received in settlement of the Company's appeal
filed with the U.S. Provider Reimbursement Review Board ("PRRB") related
to the reopening of all of its 1997 cost reports net of a $1 million
estimated repayment to Medicare in connection with services rendered to
certain patients since the inception of the Prospective Payment
Reimbursement System in October 2000. In connection with the estimated
repayment, the Centers for Medicare & Medicaid Services has determined
that homecare providers should have received lower reimbursements for
certain services rendered to beneficiaries discharged from inpatient
hospitals within fourteen days immediately preceding admission to home
healthcare.
2) Although "Net income - as adjusted" is a non-GAAP financial measure,
management believes that the presentation of net income as calculated
using a normalized tax rate of 39% and excluding the PRRB settlement and
the estimated Medicare repayments in the first six months of 2004, as
described in Note 1, as well as the second quarter 2004 gain on the sale
of Gentiva's investment in a Canadian homecare company, as described in
Note 4, is a useful adjunct to "Net income - 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
years 2004 and 2003. Furthermore, due to the lower effective tax rate for
the second quarter and first six months of fiscal 2003 as described in
Note 3, the presentation of "Net income - as adjusted" incorporates an
effective tax rate which is more representative of the Company's
normalized rate. Management also believes that the PRRB settlement, net of
the Medicare estimated repayment recorded in the first six months of
fiscal 2004, should be excluded from "Net income - as adjusted" as these
items relate to reimbursement activities from prior periods as described
in Note 1. In addition, the gain on the sale of the Canadian investment
should be excluded from "Net income - as adjusted," since this is a
nonrecurring item. For these reasons, management believes that "Net income
- as adjusted" is useful to investors. Investors should not view "Net
income - as adjusted" as an alternative to the GAAP measure of Net income.
3) For the second quarter and first six months of fiscal 2003, the Company's
effective tax rates were 7.8% and 10.1%, respectively. These effective
rates were lower than the statutory income tax rate due to the reversal of
a portion of the Company's valuation allowance relating to the realization
of tax benefits associated with a net operating loss carry forward and
other net deferred tax assets. A 39% tax rate is more representative of
the Company's normalized tax rate for reporting purposes, and is the rate
being utilized for the 2004 periods.
7
4) Income before income taxes for the second quarter and first six months of
2004 included a gain of approximately $946,000 from the sale of Gentiva's
19.9% interest in a Canadian homecare company to whom Gentiva sold its
Canadian operations in November 2000.
Forward-Looking Statement
Certain statements contained in this news release, including, without
limitation, statements containing the words "believes," "anticipates,"
"intends," "expects," "assumes," "trends" 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 payer 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 28, 2003.
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