Exhibit 99.1
GENTIVA [LOGO]
- --------------------------------------------------------------------------------
Press Release
Financial and Investor Contact:
John R. Potapchuk
631-501-7035
john.potapchuk@gentiva.com
Media Contact:
David Fluhrer
631-501-7102, 516-589-0778
david.fluhrer@gentiva.com
FOR IMMEDIATE RELEASE
Gentiva(R) Announces Fourth Quarter and Fiscal 2005 Results,
and Provides Updated Information on 2006 following Healthfield Acquisition
Melville, N.Y., March 1, 2006 -- Gentiva Health Services, Inc. (NASDAQ: GTIV),
the nation's largest provider of comprehensive home health services, today
reported its fourth quarter and fiscal 2005 results and announced updated
information on 2006 following yesterday's closing of the acquisition of The
Healthfield Group, Inc., a leading provider of home healthcare, hospice and
related services with approximately 130 locations primarily in eight
southeastern states.
"Our 2005 focus on principal strategies for revenue diversification has
created a new Gentiva with an array of opportunities for future growth following
the Healthfield acquisition," said Gentiva Chairman and CEO Ron Malone. "We
believe our patients, customers, employees and shareholders will all benefit as
we now work to transform the Company and extend our leadership in home
healthcare."
Gentiva's performance for the fourth quarter ended January 1, 2006 versus
the fourth quarter ended January 2, 2005 included:
o Net revenues of $222.0 million compared to $225.5 million reported
for the fourth quarter of 2004, including special Medicare items.
o Net Income - As Reported of $6.3 million, or $0.26 per diluted
share, versus $6.9 million, or $0.27 per diluted share, for the
fourth quarter of 2004.
o Net Income - As Adjusted of $4.7 million, or $0.19 per diluted
share, versus $4.8 million, or $0.19 per diluted share, for the
fourth quarter of 2004. (See Supplemental Information for a
reconciliation between "Net Income - As Reported" and "Net Income -
As Adjusted.")
3 Huntington Quadrangle, Suite 200S, Melville, NY 11747-4627
2
All comparisons between 2005 and 2004 results are affected by the fact
that the 2005 fourth quarter and fiscal year comprised activity covering 13
weeks and 52 weeks, respectively, while the prior year periods covered 14 weeks
and 53 weeks, respectively.
Net revenues for the fourth quarter of 2005 included approximately $3.6
million received from a total expected settlement of approximately $5.5 million
relating to the Company's appeal filed with the U.S. Provider Reimbursement
Review Board (PRRB) on the reopening of Gentiva's 1999 Medicare cost reports. In
addition, income before income taxes for the fourth quarter of fiscal 2005
reflected $0.9 million in charges primarily associated with the restructuring of
CareCentrix(R) operations in response to upcoming changes in the nature of
services provided to CIGNA Healthcare members. The fourth quarter 2004 results
reflected receipt of a Medicare special item of $0.3 million as well as a lower
effective tax rate due to the recognition of certain state net operating loss
carryforwards.
Payer Group Results
Fourth quarter 2005 Medicare revenues rose to $71.5 million, or 20.4%,
over the $59.4 million reported in the fourth quarter of 2004, including the
special items. The Medicare increase was driven by growth in admissions to
Gentiva's specialty programs, improvements in revenue per admission compared
with the prior year period, and the impact of the Heritage Home Care Services
acquisition, which closed in May 2005, offset somewhat by the lingering effects
of Hurricane Wilma in southeast Florida.
Revenues from Medicaid and Local Government sources were $37.7 million in
the fourth quarter of 2005, a 2.1% decrease from the $38.5 million reported in
the prior year period.
Commercial Insurance and Other revenues for the fourth quarter of 2005
were $112.9 million, an 11.6% decrease from the $127.6 million reported in the
prior year period. The results reflected changes in various commercial
relationships in CareCentrix, as well as the impact of exiting certain
unprofitable business as the Company pursues more favorable commercial pricing
in home healthcare. Fourth quarter 2005 revenues derived from CIGNA Healthcare,
which are included in Commercial Insurance and Other revenues, were
approximately $65.2 million, a decrease of $3.3 million, or 4.9%, from the prior
year period.
Segment Results
Fourth quarter 2005 results were driven by continued improvement in
Gentiva's Home Healthcare Services segment, with operating contribution,
including special items, reaching $17.7 million as compared to $10.7 million in
the fourth quarter of 2004. Gentiva also benefited from lower corporate
expenses, which were $11.3 million in the 2005 fourth quarter as compared to
$13.9 million in the prior year period, including a $1.4 million writedown of
capitalized software. These improvements were offset by a decline in the
CareCentrix segment's operating contribution, which was $5.7 million in the 2005
fourth quarter and $13.0 million in the prior year period.
3
Fiscal 2005 Results
Gentiva reported the following companywide results for fiscal 2005:
o Net revenues were $868.8 million versus $845.8 million reported for
the year ended January 2, 2005, including special items.
o Net Income - As Reported was $23.4 million, or $0.94 per diluted
share, versus $26.5 million, or $1.00 per diluted share for fiscal
2004.
o Net Income - As Adjusted was $17.5 million, or $0.70 per diluted
share, versus $18.2 million, or $0.69 per diluted share, for the
prior year period. (See Supplemental Information for a
reconciliation between "Net Income - As Reported" and "Net Income -
As Adjusted.")
The As Adjusted fiscal year results exclude the fourth quarter 2005
special items mentioned above, as well as other items described in the
Supplemental Information and accompanying footnotes.
In fiscal 2005, Gentiva's net cash provided by operating activities was
$19.9 million versus $34.9 million in the prior year period. Gentiva reported
cash items and short-term investments of $88.4 million as of January 1, 2006
versus $113.0 million as of January 2, 2005. During the fourth quarter of fiscal
2005, the Company purchased 502,900 shares of Gentiva common stock at a total
cost of $7.6 million, or $15.10 per share. For the year ended January 1, 2006,
the Company purchased 1,325,000 shares at a total cost of $21.1 million.
2006 Information
Gentiva has also provided updated information for 2006 to include the
effect of: 1) the Healthfield acquisition, which closed on February 28, 2006; 2)
2006 Medicare reimbursement rates approved by Congress for home health, which
included a freeze in non-rural rates and an increase in rural reimbursement; and
3) new accounting rules for equity-based compensation, which became effective
for the Company at the beginning of 2006. The Company anticipates net revenues
in a range of $1.12 billion to $1.16 billion, and earnings before interest,
taxes, depreciation and amortization (EBITDA) in a range between $75 million and
$80 million. The EBITDA outlook reflects a charge of approximately $5 million
relating to the value of stock options. (See Supplemental Information for a
reconciliation between EBITDA and net income.) The 2006 information excludes the
impact of any restructuring charges resulting from the Healthfield acquisition.
Gentiva does not plan to update its 2006 earnings per share information.
Management believes that EBITDA may be a more useful measure of operating
performance this year, particularly as the Company evaluates recent changes in
its capital structure and the valuation of identifiable intangible assets
resulting from the Healthfield acquisition. Gentiva plans to offer additional
commentary on tomorrow's conference call and live web cast.
4
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 fourth quarter and fiscal 2005
results during its conference call and live web cast to be held Thursday, March
2, 2006, at 10:00 a.m. Eastern Standard Time. To participate in the call from
the United States, Canada or an international location, dial (973) 935-8599 and
reference call #7044852. The web cast is an audio only, one-way event. Web cast
listeners who wish to ask questions must participate in the conference call. Log
onto http://www.gentiva.com/investors/FinancialEvents.asp to hear the web cast.
This press release is accessible at http://www.gentiva.com/investors/
PressReleases.asp, and a transcript of the conference call is expected to be
available on the site within 36 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 500 direct
service delivery units within over 400 locations in 36 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 2,500 third-party provider locations, as
well as Gentiva locations. The Company is a single source for skilled nursing;
physical, occupational, speech and neurorehabilitation services; hospice
services, social work; nutrition; disease management education; help with daily
living activities; durable medical and respiratory equipment; infusion therapy
services; and 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/investors.
(tables and notes follow)
5
(in 000's, except per share data) 4th Quarter Fiscal Year
---------------- ----------------
2005 2004 2005 2004
---- ---- ---- ----
Statements of Income (13 weeks) (14 weeks) (52 weeks) (53 weeks)
Net revenues $ 222,042 $ 225,541 $ 868,843 $ 845,764
Cost of services sold 137,692 138,743 542,093 521,835
---------------------- ----------------------
Gross profit 84,350 86,798 326,750 323,929
Selling, general and administrative expenses (72,252) (76,937) (288,695) (278,342)
Depreciation and amortization (2,153) (1,824) (8,091) (7,329)
---------------------- ----------------------
Operating income 9,945 8,037 29,964 38,258
Gain on sale of Canadian investment -- -- -- 946
Interest income, net 616 439 1,878 977
---------------------- ----------------------
Income before income taxes 10,561 8,476 31,842 40,181
Income tax expense (4,222) (1,582) (8,477) (13,693)
---------------------- ----------------------
Net income $ 6,339 $ 6,894 $ 23,365 $ 26,488
====================== ======================
Earnings per Share
Net income:
Basic $ 0.28 $ 0.29 $ 1.00 $ 1.07
====================== ======================
Diluted $ 0.26 $ 0.27 $ 0.94 $ 1.00
====================== ======================
Average shares outstanding:
Basic 23,021 23,865 23,267 24,724
====================== ======================
Diluted 24,401 25,487 24,927 26,365
====================== ======================
Condensed Balance Sheets
ASSETS Jan 1, 2006 Jan 2, 2005
----------- -----------
Cash and cash equivalents $ 16,603 $ 9,910
Restricted cash 22,014 22,014
Short-term investments 49,750 81,100
Net receivables 139,635 132,002
Deferred tax assets 18,507 23,861
Prepaid expenses and other current assets 7,816 6,057
----------------------
Total current assets 254,325 274,944
Fixed assets, net 24,969 19,687
Deferred tax assets, net 15,566 21,233
Goodwill 6,976 1,325
Other assets 24,729 14,909
----------------------
Total assets $ 326,565 $ 332,098
======================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 13,870 $ 25,896
Payroll and related taxes 9,777 9,356
Medicare liabilities 7,220 9,949
Cost of claims incurred but not reported 25,276 27,361
Obligations under insurance programs 32,883 34,660
Other accrued expenses 33,440 31,117
----------------------
Total current liabilities 122,466 138,339
Other liabilities 21,945 21,819
Shareholders' equity 182,154 171,940
----------------------
Total liabilities and shareholders' equity $ 326,565 $ 332,098
======================
Common shares outstanding 23,035 23,722
======================
6
Fiscal Year
-------------------
Condensed Statements of Cash Flows 2005 2004
---- ----
OPERATING ACTIVITIES: (52 weeks) (53 weeks)
Net income $ 23,365 $ 26,488
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation and amortization 8,091 7,329
Provision for doubtful accounts 6,172 6,722
Gain on sale of Canadian investment -- (946)
Loss on disposal / writedown of
fixed assets -- 1,361
Reversal of tax audit reserves (4,200) --
Deferred income taxes 11,021 9,114
Changes in assets and liabilities:
Accounts receivable (13,805) (5,726)
Prepaid expenses and other
current assets (1,759) 25
Current liabilities (9,473) (10,372)
Other, net 450 858
------------------------
Net cash provided by operating activities 19,862 34,853
------------------------
INVESTING ACTIVITIES:
Purchase of fixed assets (11,622) (12,593)
Proceeds from sale of assets -- 4,123
Acquisition of business (12,077) --
Purchases of short-term investments
available-for-sale (173,050) (145,950)
Maturities of short-term investments
available-for-sale 194,400 84,850
Purchases of short-term investments
held to maturity -- (10,000)
Maturities of short-term investments
held to maturity 10,000 10,000
Deposits into restricted cash -- (264)
------------------------
Net cash provided by (used in)
investing activities 7,651 (69,834)
------------------------
FINANCING ACTIVITIES:
Proceeds from issuance of common stock 7,955 6,675
Changes in book overdrafts (7,253) 1,223
Repurchases of common stock (21,106) (38,402)
Repayment of capital lease obligations (416) (293)
------------------------
Net cash used in financing activities (20,820) (30,797)
------------------------
Net change in cash and cash equivalents 6,693 (65,778)
Cash and cash equivalents at
beginning of period 9,910 75,688
------------------------
Cash and cash equivalents at
end of period $ 16,603 $ 9,910
========================
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4th Quarter Fiscal Year
--------------------- -------------------
2005 2004 2005 2004
---- ---- ---- ----
Supplemental Information (13 weeks) (14 weeks) (52 weeks) (53 weeks)
Net Revenues by Major Payer Source:
Medicare (1) $ 71,449 $ 59,365 $ 265,830 $ 228,114
Medicaid and local government 37,717 38,528 149,756 154,388
Commercial insurance and other 112,876 127,648 453,257 463,262
-------------------------- ---------------------------
Total net revenues $ 222,042 $ 225,541 $ 868,843 $ 845,764
========================== ===========================
Segment Information
Net revenues
Home Healthcare Services $ 142,638 $ 134,054 $ 552,516 $ 523,017
CareCentrix 82,438 96,841 333,010 343,541
Intersegment revenues (3,034) (5,354) (16,683) (20,794)
-------------------------- ---------------------------
Total net revenues $ 222,042 $ 225,541 $ 868,843 $ 845,764
========================== ===========================
Operating contribution (2)
Home Healthcare Services $ 17,741 $ 10,740 $ 54,531 $ 56,069
CareCentrix 5,685 12,977 26,006 36,783
-------------------------- ---------------------------
Total operating contribution 23,426 23,717 80,537 92,852
Corporate expenses (11,328) (13,856) (42,482) (47,265)
Gain on sale of Canadian investment -- -- -- 946
Depreciation and amortization (2,153) (1,824) (8,091) (7,329)
Interest income, net 616 439 1,878 977
-------------------------- ---------------------------
Income before income taxes $ 10,561 $ 8,476 $ 31,842 $ 40,181
========================== ===========================
A reconciliation of net income between As Reported and
As Adjusted amounts, and the related diluted earnings
per share, follow (3):
Net income - As Reported $ 6,339 $ 6,894 $ 23,365 $ 26,488
Income tax expense - As Reported (4) 4,222 1,582 8,477 13,693
-------------------------- ---------------------------
Income before income taxes - As Reported 10,561 8,476 31,842 40,181
Less: Gain on sale of Canadian investment (5) -- -- -- (946)
Less: Medicare cost report settlement (1) (3,603) (278) (3,603) (10,365)
Add: Revenue adjustment for estimated Medicare
repayment (1) -- -- -- 1,000
Add: Restructuring and other costs (6) 911 -- 911 --
-------------------------- ---------------------------
Income before income taxes - As Adjusted 7,869 8,198 29,150 29,870
Less: income tax expense - At normalized rate (4) (3,147) (3,371) (11,602) (11,649)
-------------------------- ---------------------------
Net income - As Adjusted $ 4,722 $ 4,827 $ 17,548 $ 18,221
========================== ===========================
Diluted Earnings per Share
Net income - As Reported $ 0.26 $ 0.27 $ 0.94 $ 1.00
========================== ===========================
Net income - As Adjusted $ 0.19 $ 0.19 $ 0.70 $ 0.69
========================== ===========================
- ------------------------------------------------------------------------------------------------------------------------------------
A Reconciliation of Projected 2006 EBITDA to
Net Income (7)
(in millions) Low Range High Range
--------- ----------
EBITDA before equity-based compensation
expense (8) $ 80.0 $ 85.0
Equity-based compensation expense (5.0) (5.0)
--------------------------
EBITDA (8) 75.0 80.0
Depreciation and amortization (9) (22.0) (22.0)
Interest expense, net (10) (20.0) (20.0)
--------------------------
Income before income taxes 33.0 38.0
Income taxes (12.5) (14.5)
--------------------------
Net Income $ 20.5 $ 23.5
==========================
8
Notes:
1) Fourth quarter 2005 results included approximately $3.6 million recorded
and received in partial settlement of the Company's appeal filed with the
U.S. Provider Reimbursement Review Board ("PRRB") related to the reopening
of all of its 1999 cost reports. Fourth quarter 2004 results included
approximately $0.3 million received in settlement of the Company's appeal
filed with the PRRB related to the reopening of all of its 1998 and 1997
cost reports. Fiscal 2004 results included $10.4 million received in
settlement of the Company's appeal to the PRRB regarding the 1998 and 1997
cost reports, net of a $1 million revenue adjustment to reflect an
estimated repayment to Medicare 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) The Company's senior management evaluates performance and allocates
resources based on operating contributions of the reportable segments,
which exclude corporate expenses, depreciation, amortization, and interest
income, but include revenues and all other costs directly attributable to
the specific segment.
3) 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 benefits
as described in Note 4, and excluding the PRRB settlements and the
estimated Medicare repayments as described in Note 1, and the
restructuring and other items referred to in Note 6, as well as the second
quarter 2004 gain on the sale of Gentiva's investment in a Canadian
homecare company as described in Note 5, 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 fourth
quarters and fiscal years 2005 and 2004. Management believes the favorable
resolution of tax audit issues as described in Note 4 should be excluded
from "Net Income - As Adjusted" as this is a nonrecurring item which
relates to prior periods. In addition, the PRRB settlement in the fourth
quarter of fiscal 2005 and the PRRB settlements in fiscal 2004, reduced by
the Medicare estimated repayment in fiscal 2004, should be excluded from
"Net Income - As Adjusted" as these items relate to reimbursement
activities for the periods described in Note 1. Furthermore, the
restructuring and other items and gain on the sale of the Canadian
investment should be excluded from "Net Income - As Adjusted," since these
represent special or nonrecurring items. 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.
4) For fiscal 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. For the fourth quarter and
fiscal year 2004, the Company's effective tax rates were approximately
18.7% and 34.1%, respectively, due primarily to the recognition of certain
state net operating loss carryforwards. Management has excluded these
unusual items and has incorporated a normalized tax rate in its
presentation of "Net Income - As Adjusted."
5) Income before income taxes for 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.
6) Restructuring and other costs for the fourth quarter of fiscal 2005
relates primarily to a restructuring plan for the CareCentrix operations,
which provides for the closing and consolidation of two regional care
centers in response to changes in the nature of services provided to CIGNA
Healthcare members under a new contract which commenced in early 2006. The
Company expects to complete this restructuring during the second quarter
of fiscal 2006.
7) Projected 2006 EBITDA includes the operating results of The Healthfield
Group, Inc. from March 1, 2006.
8) EBITDA before equity-based compensation expense and EBITDA are non-GAAP
financial measures. EBITDA is defined as income before interest expense
(net of interest income), income taxes, depreciation and amortization.
Following the acquisition of Healthfield, management expects to review
EBITDA before equity-based compensation expense and EBITDA to evaluate
overall performance and compare current operating results with other
companies in the health care industry. EBITDA should not be considered in
isolation or as a substitute for net income, operating income or cash flow
statement data determined in accordance with accounting principles
generally accepted in the United States. Because EBITDA before
equity-based compensation and EBITDA are not measures of financial
performance under accounting principles generally accepted in the United
States and are susceptible to varying calculations, they may not be
comparable to similarly titled measures in other companies.
9
9) Depreciation and amortization reflects an assumption that amortization of
identifiable intangible assets acquired in connection with the Healthfield
acquisition will approximate $10 million in 2006. Actual amortization of
such intangible assets cannot be determined until the completion of a full
valuation study of Healthfield's intangible assets later in 2006.
10) Interest expense, net includes interest expense on a $370 million term
loan, fees associated with a $75 million revolving credit facility and
amortization of debt financing costs, net of interest income.
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: the Company's ability to successfully integrate
the operations of The Healthfield Group, Inc., and to achieve expected synergies
and operating efficiencies within expected time frames or at all; the
possibility that revenues may be lower than expected following the transaction;
the possibility that difficulties in maintaining relationships with employees,
customers, or suppliers may be greater than expected following the transaction;
the Company's ability to service debt incurred as a result of the transaction;
general economic and business conditions; demographic changes; changes in, or
failure to comply with, existing governmental regulations; legislative proposals
for healthcare 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 certain 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.
# # #