Filed by Accredo Health, Incorporated pursuant
to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12 under
the Securities Exchange Act of 1934.
Subject Company: Gentiva Health Services, Inc.
Commission File No. 001-15669
Date: April 29, 2002
On April 29, 2002, Accredo Health, Incorporated issued the following press
release:
Accredo Health, Inc. Announces Record Third Quarter Results; Third Quarter
Earnings Increase 88%
MEMPHIS, Tenn.--(BUSINESS WIRE)--April 29, 2002--Accredo Health,
Incorporated (NASDAQ:ACDO) today reported record results for the quarter and
nine months ended March 31, 2002. Net earnings increased 88% to $8,988,000, or
$.33 per diluted share, for the quarter ended March 31, 2002 compared to
$4,789,000, or $.18 per diluted share, for the same period in fiscal 2001. For
the nine months, net earnings increased 79% to $22,082,000, or $0.82 per diluted
share, compared to $12,320,000, or $0.48 per diluted share, for the same period
in fiscal 2001. Revenues for the quarter increased 44% to $178,497,000, compared
to $124,280,000 for the same period in fiscal 2001. For the nine months,
revenues increased 38% to $465,331,000 compared to $337,727,000 for the same
period in fiscal 2001. In addition, gross profit margins improved to 16.5% in
the third quarter compared to 14% in the same period in fiscal 2001, and
earnings before interest,
taxes, depreciation and amortization (EBITDA) as a percentage of revenues
improved to 8.9% for the quarter compared to 6.6% for the same period in fiscal
2001.
"We are very pleased with the record revenues and earnings achieved in
the third quarter as we again exceeded our estimates," said David D. Stevens,
Accredo chairman and CEO. "On a same store basis, our revenues for the March
quarter increased 29% and our earnings increased 55% when compared to the same
quarter last year," continued Mr. Stevens. "This growth is attributed to strong
SYNAGIS(R) revenues and the continued improvement in the availability of
hemophilia factor and intravenous immunoglobulin (IVIG) and demonstrates the
strength of our core business."
Joel Kimbrough, Accredo's chief financial officer, added, "We are
pleased with the continued overall revenue growth in our core products and the
successful growth in seasonal revenue from SYNAGIS(R) during the third quarter.
Sequentially, third quarter revenues grew 11% and net income grew 25% when
compared to the second quarter. As a result of this growth, we are again
increasing our FY 2002 estimates announced last quarter. We estimate that for
our fiscal year ending June 30, 2002, we will achieve revenues in the
$618,000,000 to $622,000,000 range and earnings per share of $1.09 to $1.11.
Last quarter we had indicated estimates of revenues in the $610,000,000 to
$620,000,000 range and earnings per share of $1.05 to $1.10. Assuming
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a continuing consistent supply of hemophilia and IVIG products, we are also
increasing our estimate of gross profit margins to a range of 16.0% to 17.0%.
These estimates assume no new indications for current product lines, new product
launches or future acquisitions. In addition, these estimates do not include the
expected acquisition of the Specialty Pharmaceutical Services division (SPS) of
Gentiva Health Services, Inc. (NASDAQ:GTIV) which we plan to close in our fourth
quarter."
Mr. Kimbrough continued, "Regarding the acquisition of SPS, the
Securities and Exchange Commission (SEC) is currently reviewing the joint
response by Accredo and Gentiva to its comments and the second amendment to the
Form S-4 Registration Statement which was filed on April 22, 2002. We do not
anticipate any significant remaining issues with the SEC review. We will set the
shareholder meeting to approve the acquisition approximately 30 days following
completion of that review with closing to occur after the shareholder vote. All
other aspects of the acquisition continue to be on schedule, including the
potential divestiture of the acute portion of the SPS business. Due to the
timing of the shareholders' meeting and the closing of the transaction, we plan
to discuss more specific revenue and earnings guidance for fiscal 2003 once the
acquisition is completed. The SPS division recorded revenues of $739 million in
calendar year 2001. We intend to retain approximately 75% of those revenues, and
the
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acquisition will be immediately accretive to earnings."
In addition to the previous discussions, we are providing the following
questions and answers related to our operating results and our on-going
business:
Q1) Why are gross profit, EBITDA and net income margins improving?
A1) For the March quarter, gross profit margins improved to 16.5%,
EBITDA improved to 8.9% and net income improved to 5.0% primarily as a result of
product mix changes with a larger percentage of our revenues generated from
hemophilia and IVIG.
Q2) What is the status of Recombinant Factor VIII product availability?
A2) The amount of recombinant hemophilia factor VIII product that we
received from Baxter International, Inc. and Genetics Institute, Inc. during the
March quarter was greater than the amount received in any quarterly period in
the last twelve months. This allowed us to not only continue to serve our
existing patients and to accept new hemophilia recombinant referrals throughout
the quarter but also to return our patients' inventory levels back to normal
amounts. While Bayer Corporation is still not releasing a material amount of
recombinant product, we anticipate that product availability from all
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manufacturers will continue to improve in future quarters.
Q3) Why does the revenue and earnings guidance indicate a sequential
decline from the third quarter to the fourth quarter?
A3) For fiscal year 2002, SYNAGIS(R), which is a seasonal drug for
Accredo, will achieve revenues at the high end of the $60 to $65 million range
announced last quarter. The majority of the revenue and the related earnings
from SYNAGIS(R) are generated in the second and third quarters. We therefore
expect a sequential decline in both revenues and earnings in the fourth quarter.
Q4) Why did bad debts increase to 1.0% of net revenues in the quarter
versus .6% in the previous quarter?
A4) The cause of the increase in bad debts as a percentage of revenue
is primarily due to the increased percentage of the Company's revenue from the
sale of hemophilia factor and IVIG.
Q5) What is your guidance for cash flow from operations for fiscal year
2002?
A5) During the third quarter, cash flow from operations was impacted
primarily by an increase in DSO to 69 days and an increase in inventory levels.
The increase in DSO is primarily due to product mix, which included strong
revenues of SYNAGIS(R), hemophilia factor and
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IVIG. In addition, due to historical product shortages in hemophilia factor and
IVIG, we added to our inventory levels as the product became available resulting
in more inventory of these products on hand than in any period in our history.
We would expect to see a reduction in accounts receivable and inventory in the
fourth quarter due to the end of the SYNAGIS(R) season. We estimate that for
fiscal 2002, cash flow from operations will be approximately $24 to $26 million.
Q6) What impact did the recent Food and Drug Administration's (FDA)
approval of Rebif(R) for the treatment of multiple sclerosis (MS) in the United
States have on Accredo?
A6) On March 8, 2002, the FDA approved a fourth injectable product
(Rebif(R)) for the treatment of multiple sclerosis. Rebif(R) becomes the third
MS medication to compete with Biogen, Inc.'s market leading product, AVONEX(R).
As expected, we have seen very few of Accredo's current AVONEX(R) patients
switch to Rebif(R).
We expect any potential effect on Accredo will be in the competition
for newly diagnosed MS patients. While it is too soon after FDA approval of
Rebif(R) to make any conclusions about its potential impact, Accredo experienced
normal AVONEX(R) new patient referral volumes in the month of March.
Q7) What is the status of your Centocor preferred distribution
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agreement for REMICADE(R)?
A7) As previously disclosed, since the summer of 2001, we have been
negotiating the status of our preferred relationship with Centocor. Both parties
have agreed to terminate the current agreement effective July 1, 2002.
Historically REMICADE(R) has represented less than one million dollars in net
revenues per quarter for Accredo Health.
Accredo Health, Incorporated and its two wholly owned subsidiaries,
Hemophilia Health Services, Inc. and Nova Factor, Inc., provide specialized
contract pharmacy and related services pursuant to agreements with
biopharmaceutical drug manufacturers relating to the treatment of patients with
certain costly, chronic diseases. The Company's services include collection of
timely drug utilization and patient compliance information, patient education
and monitoring through the use of written materials and telephonic consultation,
reimbursement expertise and overnight drug delivery.
As previously announced, the Company's conference call to discuss the
third quarter results is scheduled for Monday, April 29, 2002, at 9:00 a.m. CDT.
The conference call will be web-cast live on the Accredo Health, Incorporated
web site. Interested parties may access the web-cast at www.accredohealth.com
beginning at 9:00 a.m. CDT on April 29, 2002. A replay of the call will be
available, and there will
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also be a playback of the conference call available over the Internet beginning
approximately one hour after the end of the conference call. Both the replay of
the call and the Internet playback option will be available until May 13, 2002
at 5:00 p.m. CDT. To access the replay call, dial 402/220-2491 and enter the
code 11860840. To access the Internet playback, go to www.accredohealth.com.
In addition to historical information, certain of the statements in the
preceding paragraphs, particularly those anticipating future financial
performance, business prospects and growth and operating strategies constitute
forward-looking statements within the meaning of the "safe harbor" provisions of
the Private Securities Litigation Reform Act of 1995. Such statements may be
identified by words such as anticipate, believe, estimate, expect, intend,
predict, hope or similar expressions. Such statements, which include estimated
financial information or results and the quoted comments of Mr. Kimbrough above,
are based on management's current expectations and are subject to a number of
factors and uncertainties which could cause actual results to differ materially
from those described in the forward-looking statements, including, without
limitation, satisfaction of approvals and conditions applicable to the SPS
purchase transaction described above, the loss of a biopharmaceutical
relationship, our inability to sell existing products, the impact of
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pharmaceutical industry regulation, the difficulty of predicting FDA and other
regulatory authority approvals, the regulatory environment and changes in
healthcare policies and structure, acceptance and demand for new pharmaceutical
products and new therapies, the impact of competitive products and pricing, the
ability to obtain products from suppliers, reliance on strategic alliances, the
ability to expand through joint ventures and acquisitions, the ability to
maintain pricing arrangements with suppliers that preserve margins, the need for
and ability to obtain additional capital, the seasonality and variability of
operating results, the Company's ability to implement its strategies and achieve
its objectives and the risks and uncertainties described in reports filed by
Accredo with the Securities and Exchange Commission under the Securities
Exchange Act of 1934, as amended, including without limitation, cautionary
statements under the heading "Risk Factors" made in Accredo's 2001 Annual Report
on Form 10-K, Accredo's latest quarterly report on 10-Q and the Form S-4
Registration Statement as amended jointly filed by Accredo and Gentiva Health
Services, Inc.
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Accredo Health, Incorporated
Condensed Consolidated Statements of Income
(amounts in thousands, except share data)
(Unaudited) (Unaudited)
Nine Months Ended Three Months Ended
March 31, March 31,
--------------------------------- ---------------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
Net patient revenues $ 451,408 $ 325,814 $ 173,563 $ 120,406
Other revenue 12,478 11,075 4,362 3,551
Equity in net income
of joint ventures 1,445 838 572 323
------------ ------------ ------------ ------------
Total revenues 465,331 337,727 178,497 124,280
Cost of sales 391,766 289,320 148,995 106,861
------------ ------------ ------------ ------------
Gross profit 73,565 48,407 29,502 17,419
General &
administrative 31,154 21,861 11,851 7,650
Bad debts 3,826 4,729 1,770 1,535
Depreciation and
amortization 2,369 3,061 907 1,021
------------ ------------ ------------ ------------
Income from operations 36,216 18,756 14,974 7,213
Interest income, net 838 2,126 38 870
Minority interest in
consolidated
subsidiary (966) (476) (333) (170)
------------ ------------ ------------ ------------
Net income before
income taxes 36,088 20,406 14,679 7,913
Provision for income
taxes 14,006 8,086 5,691 3,124
------------ ------------ ------------ ------------
Net income $ 22,082 $ 12,320 $ 8,988 $ 4,789
============ ============ ============ ============
Earnings per share:
Basic $ 0.85 $ 0.50 $ 0.34 $ 0.19
Diluted $ 0.82 $ 0.48 $ 0.33 $ 0.18
Weighted average
shares outstanding:
Basic 26,075,638 24,700,863 26,174,890 25,662,716
Diluted 26,973,016 25,897,891 27,145,619 26,735,847
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Condensed Consolidated Balance Sheets
(amounts in thousands)
(Unaudited)
March 31, June 30,
2002 2001
-------- --------
Cash & cash equivalents $ 1,103 $ 54,520
Marketable securities 1,000 2,000
Accounts receivable, net 129,179 76,952
Other current assets 86,295 51,666
Fixed assets, net 11,317 8,195
Other assets 140,436 95,911
-------- --------
Total assets $369,330 $289,244
======== ========
Current liabilities $148,834 $ 96,850
Long-term debt -- --
Other liabilities 5,048 3,224
Stockholders' equity 215,448 189,170
-------- --------
Total liabilities and
stockholders' equity $369,330 $289,244
======== ========
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Condensed Consolidated Statements of Cash Flow
(amounts in thousands)
(Unaudited) (Unaudited)
Nine Months Ended Three Months Ended
March 31, March 31,
------------------------- ------------------------
2002 2001 2002 2001
-------- -------- -------- -------
Net cash provided by
(used in) operating
activities $ 3,472 $ 10,473 $ (5,481) $14,957
Net cash provided by
(used in) investing
activities (52,738) (4,121) (9,259) 8,560
Net cash provided by
(used in) financing
activities (4,151) 53,442 478 1,308
-------- -------- -------- -------
Increase (decrease)
in cash and cash
equivalents $(53,417) $ 59,794 $(14,262) $24,825
======== ======== ======== =======
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CONTACT: Accredo Health, Incorporated, Memphis
Financial Contact:
Joel Kimbrough, 901/385-3621
or
Investor Relations Contact:
Kerry Finney, 901/381-7442
ADDITIONAL INFORMATION AND WHERE TO FIND IT
In connection with the proposed transaction, Accredo and Gentiva have filed a
joint proxy statement/prospectus and Accredo has filed a registration statement
on Form S-4 with the Securities and Exchange Commission. INVESTORS AND SECURITY
HOLDERS ARE ADVISED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND
REGISTRATION STATEMENT BECAUSE IMPORTANT INFORMATION IS CONTAINED THEREIN.
Investors and security holders may obtain a free copy of the joint proxy
statement/prospectus and registration statement and other documents filed by
Accredo and Gentiva with the Commission at the Commission's web site at
http://www.sec.gov. Free copies of the joint proxy statement/prospectus and
registration statement and each company's other filings with the Commission may
also be obtained from the respective companies. Free copies of Accredo's filings
may be obtained by directing a request to Accredo Health, Incorporated, 1640
Century Center Parkway, Suite 101, Memphis, TN 38134, Attn: Thomas W. Bell, Jr.
Free copies of Gentiva's filings may be obtained by directing a request to
Gentiva Health Services, Inc., 3 Huntington Quadrangle 2S, Melville, NY
11747-8943, Attn: Michael Johns, Vice President, Communications.
PARTICIPANTS IN THE SOLICITATION
Accredo, Gentiva and their respective directors, executive officers and other
members of their management and employees may be soliciting proxies from their
respective stockholders in favor of the transaction. Information concerning
persons who may be considered participants in the solicitation of Accredo's and
Gentiva's stockholders under the rules of the Commission is set forth in public
filings filed by Accredo and Gentiva with the Commission and in the joint proxy
statement/prospectus.
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