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 Third Quarter 2004 EPS of $0.17
and Double-Digit Medicare Revenue Increase
Company Repurchases Over One Million Shares during Quarter
Melville, N.Y., October 27, 2004 -- Gentiva Health Services, Inc. (NASDAQ:
GTIV), the nation's largest provider of comprehensive home health services,
today reported net income of $4.4 million, or $0.17 per diluted share, for the
third quarter ended September 26, 2004 compared to $4.5 million, or $0.17 per
diluted share, for the corresponding period of fiscal 2003.
Net Income-As Adjusted for the third quarter of 2004 was $3.7 million,
or $0.14 per diluted share, compared with $3.0 million, or $0.11 per diluted
share, for the third quarter of 2003. See the Supplemental Information for a
reconciliation between "Net Income - As Reported" and "Net Income - As
Adjusted."
During the third quarter of 2004, Gentiva repurchased 1.01 million
shares of its common stock at an aggregate cost of $15.5 million and generated
cash flow from operating activities of $11.2 million. The Company reported cash
items and short-term investments of $106.5 million as of September 26, 2004
versus $111.1 million as of June 27, 2004, the end of the second quarter.
Third quarter 2004 net revenues were $198.1 million versus $199.7
million in the comparable period of 2003. Revenue increases associated with
Medicare and non-CIGNA commercial insurance business were offset by anticipated
lower revenues from CIGNA business and Medicaid and local government programs,
as well as the impact of storms in the southeastern United States. The 2004 net
revenues include approximately $1.1 million received from a $1.4 million
settlement of the Company's appeal filed with the U.S. Provider Reimbursement
Review Board related to the reopening of all of its 1998 Medicare cost reports.
3 Huntington Quadrangle, 200S, Melville, NY 11747-4627
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Gentiva's Medicare revenues for the third quarter of 2004 increased
$7.2 million, or 16.5%, over the third quarter of 2003, excluding the impact of
the special item related to the 1998 cost report. This was the Company's fifth
consecutive quarter of double-digit Medicare growth. The increase was driven by
growth in admissions, including admissions to Gentiva's specialty programs,
higher reimbursement rates compared with the prior year period, and various
operational and clinical process enhancements.
Revenues from Medicaid and local government sources declined by $2.7
million, or 6.6%, in the third quarter versus the prior year period due to the
Company's ongoing plan to reduce participation in certain low-margin, hourly
Medicaid and state and county programs. This was offset somewhat by an increase
in skilled visits within Medicaid programs. Revenues from the Company's third
major payer category - Commercial Insurance and Other - declined by $7.3
million, or 6.3%, due to the reduction in revenues from Gentiva's contract with
CIGNA Healthcare.
Net revenues for the nine months ended September 26, 2004 were $620.2
million versus $610.2 million reported in the prior year period. Excluding
special items and revenues from CIGNA, net revenues for the first nine months of
2004 increased $31.9 million, or 8.2%. Revenues from CIGNA, which declined 13.9%
in the first nine months of 2004, represented approximately 31% of Gentiva's
total net revenues in the first nine months of 2004 versus approximately 36% in
the comparable period of 2003.
Net income for the first nine months of 2004 was $19.6 million, or
$0.74 per diluted share, compared with $15.0 million, or $0.55 per diluted
share, for the same period of 2003. Results for the first nine months of 2004
included a pre-tax gain of $946,000 from the sale of a Canadian investment as
well as special items related to the favorable settlement of the Company's
Medicare cost report appeals for 1997 and 1998, net of a revenue adjustment to
reflect an industrywide repayment of certain Medicare reimbursements. The
Medicare special items contributed $9.1 million to nine-month 2004 net revenues
and income before income taxes.
Net Income - As Adjusted for the first nine months of 2004 as compared
to the same period of 2003 was $0.50 and $0.36 per diluted share, respectively.
The 2004 adjusted results exclude the gain from the sale of the Canadian
investment and the Medicare special items, and the 2003 adjusted results assume
a normalized tax rate, exclusive of adjustments to the valuation allowance,
which were recorded in the 2003 period.
"During the quarter, we achieved solid Medicare growth and an increase
in our non-CIGNA commercial insurance revenues," said Gentiva Chairman and CEO
Ron Malone. "We also continued to report increases in gross margins and
operating income, and generated strong positive cash flow, some of which was
used to repurchase a significant number of shares.
"The hurricanes have had an impact on our business in Florida, which
caused us to temper our revenue outlook for 2004," Malone added. "However, we
were able to limit the impact due to our disaster recovery plans and the
commitment of our people. Because we activated our plans well in advance of the
storms, we responded quickly and were open for business when patients and
referral sources needed us most."
Due primarily to the third quarter impact of the storms and their
anticipated residual effect on fourth quarter performance, Gentiva's revenue
outlook for the 2004 fiscal year - excluding special items -- has been
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adjusted to approximately $828 million to $835 million (versus the previously
announced range of $840 million to $850 million). However, the outlook for 2004
earnings - excluding special items - continues within the previously announced
range of $0.64 to $0.67 per diluted share, and remains unchanged due to the
improvement of operating margins, a lower effective tax rate, and the effect of
the share repurchase program.
Gentiva also announced a preliminary outlook for the 2005 fiscal year
that anticipates full-year net revenues of $870 million to $890 million, and net
income in the range of $0.78 to $0.85 per diluted share. The Company plans to
offer additional commentary on this outlook on tomorrow's conference call and
live web cast.
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 results during its
conference call and live web cast to be held Thursday, October 28, 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)
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(in 000's, except per share data) 3rd Quarter Nine Months
----------- -----------
2004 2003 2004 2003
---- ---- ---- ----
Statements of Income
Net revenues $ 198,070 $ 199,698 $ 620,223 $ 610,160
Cost of services sold 122,539 130,457 383,092 402,529
-------------------------- --------------------------
Gross profit 75,531 69,241 237,131 207,631
Selling, general and administrative expenses (67,227) (62,738) (201,405) (186,332)
Depreciation and amortization (1,756) (1,689) (5,505) (5,164)
-------------------------- --------------------------
Operating income 6,548 4,814 30,221 16,135
Gain on sale of Canadian investment -- -- 946 --
Interest income, net 248 93 538 275
-------------------------- --------------------------
Income before income taxes 6,796 4,907 31,705 16,410
Income tax expense (2,397) (360) (12,111) (1,415)
-------------------------- --------------------------
Net income $ 4,399 $ 4,547 $ 19,594 $ 14,995
========================== ==========================
Earnings per Share
Net income:
Basic $ 0.18 $ 0.18 $ 0.78 $ 0.57
========================== ==========================
Diluted $ 0.17 $ 0.17 $ 0.74 $ 0.55
========================== ==========================
Weighted average shares outstanding:
Basic 24,422 25,972 25,011 26,399
========================== ==========================
Diluted 26,034 27,098 26,645 27,452
========================== ==========================
Condensed Balance Sheets
ASSETS Sep 26, 2004 Dec 28, 2003
------------ ------------
Cash, cash equivalents and restricted cash $ 96,518 $100,013
Short-term investments 10,000 10,000
Net receivables 127,345 132,998
Deferred tax assets 21,667 26,464
Prepaid expenses and other current assets 7,227 6,524
------------------------
Total current assets 262,757 275,999
Fixed assets 18,457 15,135
Deferred tax assets, net 22,798 28,025
Other assets 15,009 15,929
------------------------
Total assets $319,021 $335,088
========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 13,236 $ 16,079
Payroll and related taxes 9,976 12,932
Medicare liabilities 12,591 12,736
Cost of claims incurred but not reported 26,297 28,525
Obligations under insurance programs 36,591 37,200
Other accrued expenses 29,772 32,230
------------------------
Total current liabilities 128,463 139,702
Other liabilities 20,528 18,207
Shareholders' equity 170,030 177,179
------------------------
Total liabilities and
shareholders' equity $319,021 $335,088
========================
Common shares outstanding 24,080 25,598
========================
Note: Cash, cash equivalents and restricted cash includes restricted cash of
$21.8 million at September 26, 2004 and December 28, 2003.
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Nine Months
-----------
Condensed Statements of Cash Flows 2004 2003
---- ----
OPERATING ACTIVITIES:
Net income $ 19,594 $ 14,995
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 5,505 5,164
Provision for doubtful accounts 4,708 5,544
Gain on sale of Canadian investment (946) --
Deferred income taxes 9,743 --
Changes in assets and liabilities,
net of acquisitions/divestitures
Accounts receivable 945 (10,773)
Prepaid expenses and other current assets (1,144) 3,682
Current liabilities (12,102) (969)
Other, net 657 (1,295)
----------------------
Net cash provided by operating activities 26,960 16,348
----------------------
INVESTING ACTIVITIES:
Purchase of fixed assets (7,607) (4,725)
Proceeds from sale of assets 4,123 200
Acquisition of businesses -- (1,300)
Purchase of short-term investments (10,000) (14,900)
Maturities of short-term investments 10,000 14,935
----------------------
Net cash used in investing activities (3,484) (5,790)
----------------------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 3,420 2,179
Repurchases of common stock (30,163) (9,651)
Repayment of capital lease obligations (228) --
----------------------
Net cash used in financing activities (26,971) (7,472)
----------------------
Net change in cash, cash equivalents
and restricted cash (3,495) 3,086
Cash, cash equivalents and restricted
cash at beginning of period 100,013 101,241
----------------------
Cash, cash equivalents and restricted
cash at end of period $ 96,518 $ 104,327
======================
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3rd Quarter Nine Months
----------- -----------
2004 2003 2004 2003
---- ---- ---- ----
Supplemental Information
Net Revenues:
Medicare (1) $ 52,308 $ 43,977 $ 168,749 $ 128,502
Medicaid and local government 38,017 40,718 116,162 125,721
Commercial insurance and other 107,745 115,003 335,312 355,937
----------------------- -----------------------
Total net revenues $ 198,070 $ 199,698 $ 620,223 $ 610,160
======================= =======================
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 $ 4,399 $ 4,547 $ 19,594 $ 14,995
Add: income tax expense - as reported (3) 2,397 360 12,111 1,415
----------------------- -----------------------
Income before income taxes - as reported 6,796 4,907 31,705 16,410
Less: Gain on sale of Canadian investment (4) -- -- (946) --
Less: Medicare cost report settlement (1) (1,084) -- (10,087) --
Add: Revenue adjustment for estimated Medicare repayment (1) -- -- 1,000 --
----------------------- -----------------------
Income before income taxes - as adjusted 5,712 4,907 21,672 16,410
Less: income tax expense - at normalized tax rate (3) (2,054) (1,914) (8,278) (6,400)
----------------------- -----------------------
Net Income - As Adjusted $ 3,658 $ 2,993 $ 13,394 $ 10,010
======================= =======================
Diluted Earnings per Share
Net Income - As Reported $ 0.17 $ 0.17 $ 0.74 $ 0.55
======================= =======================
Net Income - As Adjusted $ 0.14 $ 0.11 $ 0.50 $ 0.36
======================= =======================
Notes:
1) Medicare revenues for the third quarter of fiscal 2004 included
approximately $1.1 million received from a $1.4 million settlement of the
Company's appeal filed with the U.S. Provider Reimbursement Review Board
("PRRB") related to the reopening of all of its 1998 cost reports. Medicare
revenues for the first nine months of fiscal 2004 included approximately
$10.1 million received in settlement of the Company's appeals filed with
the PRRB related to the reopening of all of its 1997 and 1998 cost reports
reduced by 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
normalized tax rates for each period and excluding the PRRB settlements and
the estimated Medicare repayment as described in Note 1, as well as the
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 third quarter and first nine months of
fiscal years 2004 and 2003. Furthermore, due to the lower effective tax
rate for the third quarter and first nine 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 tax rate for reporting purposes. Management also
believes that the PRRB settlements in the third quarter and first nine
months of fiscal 2004, reduced by the Medicare estimated repayment recorded
in the first nine 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.
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3) For the third quarter and first nine months of fiscal 2003, the Company's
effective tax rates were 7.3% and 8.6%, 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. For fiscal 2003, a 39% tax rate was more
representative of the Company's normalized tax rate for reporting purposes,
exclusive of the adjustment to the valuation allowance. For fiscal 2004,
the Company's annual effective tax rate is estimated to be 38.2%.
4) Income before income taxes for the first nine months of 2004 included a
gain of $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;
business disruption due to natural disasters or terrorist acts; 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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