Exhibit 99.1
[LOGO] Gentiva(R)
HEALTH SERVICES
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Press Release
Financial and Investor Contact:
John R. Potapchuk
631-501-7035
john.potapchuk@gentiva.com
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Media Contact:
David Fluhrer
631-501-7102
516-857-7231
david.fluhrer@gentiva.com
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FOR IMMEDIATE RELEASE
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Gentiva(R) Reports 2005 Third Quarter and Nine-Month Results
Melville, N.Y., November 2, 2005 -- Gentiva Health Services, Inc. (NASDAQ:
GTIV), the nation's largest provider of comprehensive home health services,
today reported net income of $4.3 million, or $0.17 per diluted share, for the
third quarter ended October 2, 2005, compared with net income of $4.4 million,
or $0.17 per diluted share, for the third quarter ended September 26, 2004.
Results for the 2004 third quarter included a special item relating to
Medicare revenue which contributed approximately $0.03 per diluted share.
Excluding the impact of the special item, Net Income - As Adjusted for the third
quarter of 2004 was $3.7 million, or $0.14 per diluted share. See the
Supplemental Information for a reconciliation between "Net Income - As Reported"
and "Net Income - As Adjusted" for both the third quarter and nine-month
periods.
Third quarter 2005 net revenues were $219.6 million, an increase of 10.8%
compared with third quarter 2004 net revenues of $198.1 million. Medicare
revenues for the quarter rose 28.7% and were up over 31%, excluding the special
Medicare item in the 2004 third quarter. Commercial Insurance and Other revenues
increased 6.1%, with contributions from both CIGNA and non-CIGNA business.
Net revenues for the third quarter of 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 its 1998 Medicare cost reports. Excluding this special item, net
revenues rose $22.6 million, or 11.5%, in the third quarter of 2005 versus the
corresponding period of 2004.
3 Huntington Quadrangle, Suite 200S, Melville, NY 11747-4627
2
Third quarter 2005 Medicare revenues reached $67.3 million, driven
primarily by an 18% increase in Medicare admissions and improvements in revenue
per admission, particularly in Gentiva's specialty programs, as well as the
impact of the Heritage Home Care Services acquisition, which closed in May 2005.
Medicaid and Local Government revenues were $37.6 million for the third
quarter of 2005, approximately even with the $37.7 million reported in the third
quarter of last year.
Commercial Insurance and Other revenues for the third quarter of 2005,
including revenues from Gentiva's relationship with CIGNA HealthCare, were
$114.6 million. Revenues derived from CIGNA increased 8.0% to $64.7 million due
primarily to the addition of CIGNA members in five New England states following
the July 1, 2005 amendment to the companies' national contract, as well as
higher volume from CIGNA fee-for-service plans. Excluding revenues from CIGNA,
Commercial Insurance and Other revenues for the third quarter rose 3.7%, driven
by services provided to other managed care customers.
For the nine months ended October 2, 2005, net income was $17.0 million,
or $0.68 per diluted share, compared with $19.6 million, or $0.74 per diluted
share, for the nine months ended September 26, 2004. Net revenues for the first
nine months of 2005 were $646.8 million, up 4.3% versus the $620.2 million
reported in the prior year period.
Results for the 2005 nine-month period included a second quarter $4.2
million income tax benefit due to a favorable resolution of tax audit issues
relating to fiscal 1997 through 2000. Results for the first nine months of 2004
included a pre-tax gain of approximately $0.9 million from the sale of an
investment in a Canadian homecare company, 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 2005 was $12.8
million, or $0.51 per diluted share, compared with $13.4 million, or $0.50 per
diluted share, for the same period of 2004. Excluding Medicare special items and
revenues from CIGNA, nine-month 2005 net revenues increased $41.1 million, or
9.8%. Revenues from CIGNA, which declined 2.9% in the first nine months of 2005,
represented 28.8% of Gentiva's total net revenues for this period versus 30.9%
in the first nine months of 2004.
During the third quarter of 2005, Gentiva generated over $19 million of
cash from operating activities, resulting in cash provided by operating
activities of $9.3 million for the nine months ended October 2, 2005. The
Company reported cash items and short-term investments of $94.4 million as of
October 2, 2005 versus $83.4 million as of July 3, 2005, the end of the 2005
second quarter.
In the Home Healthcare Services segment, Gentiva reported a 12.2% increase
in net revenues in the third quarter of 2005 and 28.5% growth in operating
contribution versus the prior year quarterly period, driven primarily by
continued strong Medicare performance. While the CareCentrix segment achieved a
6.9% increase in revenues primarily from growth in fee-for-service business, its
operating contribution declined by 28.9% due in part to lower margins from the
TriWest Healthcare Alliance contract, which ends November 29, 2005.
3
Last week, CareCentrix and CIGNA HealthCare signed a three-year national
contract which runs through January 31, 2009 and calls for CareCentrix to
continue coordination and delivery of homecare services to CIGNA members,
involving home nursing and therapy services, infusion therapy and certain
specialty medical equipment, such as insulin pumps and wound suction devices.
CareCentrix will be ending its coordination of respiratory therapy and certain
durable medical equipment services to CIGNA HealthCare members as of January 31,
2006.
"We're pleased to report strong growth in Medicare, driven by continued
expansion of our specialty programs," said Gentiva Chairman and CEO Ron Malone.
"We've begun to see results from our emphasis on capacity improvement, clinician
recruitment and commercial insurance pricing. During the fourth quarter, we're
continuing to drive Medicare growth and beginning to streamline CareCentrix
operations to meet the demands of the new CIGNA relationship and other managed
care business."
Gentiva announced a revised 2005 financial outlook, with full-year net
revenues expected to range between $865 million and $875 million (versus $870
million to $890 million in the prior outlook) and full-year diluted earnings per
share, excluding special items, between $0.73 to $0.78 per share (versus the
previous $0.75 to $0.83). The revision is based on reduced referral activity
from the expiring TriWest contract, direct costs incurred to improve clinical
capacity in the Home Healthcare Services segment, and the impact of Hurricane
Wilma on Gentiva's South Florida operations.
The Company also expects to record a special item in the fourth quarter of
2005 to reflect incremental Medicare revenues in excess of $5 million relating
to the settlement of the Company's appeal to the PRRB regarding the reopening of
its 1999 Medicare cost reports. As a result of this special item and the second
quarter $4.2 million income tax benefit relating to the resolution of tax audit
issues, full-year 2005 reported earnings are expected to range between $1.02 and
$1.07 per diluted share.
Gentiva also announced a preliminary outlook for fiscal 2006 that
anticipates full-year net revenues of $880 million to $900 million, and net
income in the range of $0.83 to $0.92 per diluted share, excluding the effect of
implementing new accounting rules on equity-based compensation at the beginning
of fiscal 2006 and excluding special items. Gentiva plans to offer additional
commentary 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.
4
Conference Call and Web Cast Details
The Company will comment further on its third quarter and nine-month 2005
results during its conference call and live web cast to be held Thursday,
November 3, 2005, at 10:00 a.m. Eastern Standard Time. To participate in the
call from the United States or Canada, dial: (612) 332-0932. 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 is expected
to be available on the site within 48 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 more than 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 move than 2,500 third-party provider locations, as
well as Gentiva locations. The Company is a single source for skilled nursing;
physical, occupational, speech and neurorehabilitation 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)
5
(in 000's, except per share data) 3rd Quarter Nine Months
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2005 2004 2005 2004
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Statements of Income
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Net revenues $219,559 $198,070 $ 646,801 $ 620,223
Cost of services sold 138,544 122,539 404,401 383,092
-------- -------- --------- ---------
Gross profit 81,015 75,531 242,400 237,131
Selling, general and administrative expenses (72,026) (67,227) (216,443) (201,405)
Depreciation and amortization (2,291) (1,756) (5,938) (5,505)
-------- -------- --------- ---------
Operating income 6,698 6,548 20,019 30,221
Gain on sale of Canadian investment -- -- -- 946
Interest income, net 385 248 1,262 538
-------- -------- --------- ---------
Income before income taxes 7,083 6,796 21,281 31,705
Income tax expense (2,832) (2,397) (4,255) (12,111)
-------- -------- --------- ---------
Net income $ 4,251 $ 4,399 $ 17,026 $ 19,594
======== ======== ========= =========
Earnings per Share
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Net income:
Basic $ 0.18 $ 0.18 $ 0.73 $ 0.78
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Diluted $ 0.17 $ 0.17 $ 0.68 $ 0.74
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Average shares outstanding:
Basic 23,329 24,422 23,349 25,011
======== ======== ========= =========
Diluted 25,076 26,034 25,018 26,645
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Condensed Balance Sheets
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ASSETS Oct 2, 2005 Jan 2, 2005
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Cash, cash equivalents and restricted cash $ 52,234 $ 31,924
Short-term investments 42,150 81,100
Net receivables 142,339 132,002
Deferred tax assets 22,894 23,861
Prepaid expenses and other current assets 8,013 6,057
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Total current assets 267,630 274,944
Fixed assets 20,688 19,687
Deferred tax assets, net 17,792 21,233
Goodwill 6,865 1,325
Other assets 22,896 14,909
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Total assets $335,871 $332,098
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LIABILITIES AND SHAREHOLDERS' EQUITY
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Accounts payable $ 23,542 $ 25,896
Payroll and related taxes 15,772 9,356
Medicare liabilities 6,864 9,949
Cost of claims incurred but not reported 26,244 27,361
Obligations under insurance programs 32,228 34,660
Other accrued expenses 30,306 31,117
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Total current liabilities 134,956 138,339
Other liabilities 19,814 21,819
Shareholders' equity 181,101 171,940
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Total liabilities and shareholders' equity $335,871 $332,098
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Common shares outstanding 23,357 23,722
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6
Nine Months
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Condensed Statements of Cash Flows 2005 2004
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OPERATING ACTIVITIES:
Net income $ 17,026 $ 19,594
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 5,938 5,505
Provision for doubtful accounts 4,329 4,708
Gain on sale of Canadian investment -- (946)
Reversal of tax audit reserves (4,200) --
Deferred income taxes 4,408 9,743
Changes in assets and liabilities:
Accounts receivable (14,666) 945
Prepaid expenses and other current assets (1,856) (1,144)
Current liabilities (1,902) (12,102)
Other, net 178 657
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Net cash provided by operating activities 9,255 26,960
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INVESTING ACTIVITIES:
Purchase of fixed assets (6,043) (7,607)
Proceeds from sale of assets -- 4,123
Acquisition of business (12,059) --
Purchases of short-term investments available-for-sale (125,000) (80,000)
Maturities of short-term investments available-for-sale 153,950 25,000
Purchases of short-term investments held to maturity -- (10,000)
Maturities of short-term investments held to maturity 10,000 10,000
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Net cash provided by (used in) investing activities 20,848 (58,484)
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FINANCING ACTIVITIES:
Proceeds from issuance of common stock 5,650 3,420
Changes in book overdrafts (1,635) 2,300
Repurchases of common stock (13,514) (30,163)
Repayment of capital lease obligations (294) (228)
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Net cash used in financing activities (9,793) (24,671)
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Net change in cash, cash equivalents and restricted cash 20,310 (56,195)
Cash, cash equivalents and restricted cash at beginning of period 31,924 97,438
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Cash, cash equivalents and restricted cash at end of period $ 52,234 $ 41,243
========= ========
Note: Cash, cash equivalents and restricted cash includes restricted cash of
$22.0 million and $21.8 million at the beginning and end of the 2005 and 2004
periods, respectively.
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3rd Quarter Nine Months
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2005 2004 2005 2004
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Supplemental Information
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Net Revenues by Major Payer Source:
Medicare (1) $ 67,329 $ 52,308 $194,381 $168,749
Medicaid and local government 37,610 37,715 112,039 115,860
Commercial insurance and other 114,620 108,047 340,381 335,614
-------- -------- -------- --------
Total net revenues $219,559 $198,070 $646,801 $620,223
======== ======== ======== ========
A reconciliation of net income between As Reported and As Adjusted amounts,
and the related diluted earnings per share, follow (2):
Net income - As Reported $ 4,251 $ 4,399 $ 17,026 $ 19,594
Income tax expense - As Reported (3) 2,832 2,397 4,255 12,111
-------- -------- -------- --------
Income before income taxes - As Reported 7,083 6,796 21,281 31,705
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 7,083 5,712 21,281 21,672
Less: income tax expense - At normalized rate (3) (2,832) (2,054) (8,455) (8,278)
-------- -------- -------- --------
Net income - As Adjusted $ 4,251 $ 3,658 $ 12,826 $ 13,394
======== ======== ======== ========
Diluted Earnings per Share
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Net income - As Reported $ 0.17 $ 0.17 $ 0.68 $ 0.74
======== ======== ======== ========
Net income - As Adjusted $ 0.17 $ 0.14 $ 0.51 $ 0.50
======== ======== ======== ========
Segment Information
Net revenues
Home Healthcare Services $139,128 $123,957 $409,878 $388,963
CareCentrix 84,569 79,085 250,572 246,700
Intersegment revenues (4,138) (4,972) (13,649) (15,440)
-------- -------- -------- --------
Total net revenues $219,559 $198,070 $646,801 $620,223
======== ======== ======== ========
Operating contribution
Home Healthcare Services $ 13,073 $ 10,177 $ 36,790 $ 45,329
CareCentrix 6,314 8,877 20,321 23,806
-------- -------- -------- --------
Total operating contribution 19,387 19,054 57,111 69,135
Corporate expenses (10,398) (10,750) (31,154) (33,409)
Gain on sale of Canadian investment -- -- -- 946
Depreciation and amortization (2,291) (1,756) (5,938) (5,505)
Interest income, net 385 248 1,262 538
-------- -------- -------- --------
Income before income taxes $ 7,083 $ 6,796 $ 21,281 $ 31,705
======== ======== ======== ========
Notes:
1) Medicare revenues for the third quarter and first nine months of fiscal
2004 included approximately $1.1 million and $10.1 million, respectively,
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 1998 and 1997 cost reports, net of a $1 million estimated
repayment to Medicare recorded for the first nine months of fiscal 2004 in
connection with services rendered to certain patients since the inception
of the Prospective Payment Reimbursement System in October 2000. The
Centers for Medicare & Medicaid Services 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, which excludes the nonrecurring tax benefit
as described in Note 3, and excluding the PRRB settlement and the
estimated Medicare repayment 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 third
quarter and first nine months of fiscal years 2005 and 2004. Management
believes the favorable resolution of tax audit issues as described in Note
3 should be excluded from "Net Income - As Adjusted" as this is a
nonrecurring item which relates to prior periods. In addition, the PRRB
8
settlement in the first nine months of fiscal 2004, reduced by the
Medicare estimated repayment, should be excluded from "Net Income - As
Adjusted" as these items relate to reimbursement activities for the
periods described in Note 1. Furthermore, 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 first nine months of fiscal year 2005, the Company's income tax
expense included a $4.2 million income tax benefit resulting from a
favorable resolution of tax audit issues relating to fiscal 1997 through
2000. Management has excluded this nonrecurring item and has incorporated
a normalized tax rate in its presentation of "Net Income - As Adjusted."
4) Income before income taxes for the first nine months of fiscal 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 Gentiva
Health Services, Inc.'s ("the Company") 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, as amended, for the year ended January 2, 2005.
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