Gentiva Health Services announces fourth-quarter and fiscal year 2009 results

Feb 18 2010

Gentiva Health Services, Inc. (Nasdaq: GTIV), a leading provider of home health and hospice services, today reported fourth quarter and full year fiscal 2009 results.

Highlights for the three and twelve months ended January 3, 2010 are presented as results from continuing operations.  This presentation reflects the sale of Gentiva's respiratory therapy and home medical equipment and infusion therapy businesses in February 2010, which are reported as discontinued operations for all periods presented in this press release.  

Fourth quarter 2009 highlights, which reflect 14 weeks of activity compared to 13 weeks in 2008, include:  

• Total net revenues from continuing operations of $310.0 million, an increase of 16% compared to $267.3 million for the quarter ended December 28, 2008. Total net revenues included home health episodic revenues of $235.6 million, up 23% compared to $191.1 million in the comparable 2008 period; and hospice revenues of $19.8 million, up 16% from $17.1 million in the 2008 fourth quarter.
  

• Income from continuing operations of $19.0 million, or $0.63 per diluted share compared to net income of $11.9 million or $0.40 per diluted share in the 2008 fourth quarter.
  

• Adjusted income from continuing operations of $18.8 million, up 54% compared with the prior year period. Adjusted income from continuing operations, which excludes non-recurring transaction gains and special charges related to restructuring and merger and acquisition activities, was $0.63 per diluted share in the 2009 fourth quarter compared with $0.41 per diluted share in the corresponding period of 2008.
  

• Earnings before interest, taxes, depreciation and amortization (EBITDA) attributable to continuing operations increased 25% to $34.0 million in the fourth quarter of 2009 as compared to $27.1 million in the fourth quarter of 2008. EBITDA as a percentage of net revenues improved to 11.0% in the fourth quarter of 2009 versus 10.1% in the prior-year period. EBITDA in the 2008 period included restructuring and merger and acquisition costs of $0.6 million.
  

"Gentiva finished 2009 with strong fourth quarter results, and we have set the stage for solid growth in 2010 as well," said Gentiva CEO Tony Strange. "We have done that by executing on core strategic initiatives and narrowing our focus to our home health and hospice operations.  We enter 2010 with a business that is performing well and a strong balance sheet that gives us the financial flexibility to invest both internally and externally in initiatives that will further solidify our industry leadership."

Gentiva reported these highlights from continuing operations for the twelve months ended January 3, 2010, reflecting 53-weeks of activity in 2009 compared to 52-weeks in 2008:

• Net revenues from continuing operations of $1.15 billion versus $1.24 billion in the prior year period.  Net revenues in the 2008 period included $232.7 million relating to CareCentrix, of which Gentiva sold a majority ownership interest in September 2008.  Excluding the revenue contribution from CareCentrix, Gentiva's net revenues grew approximately $144 million, or 14%, in the twelve month period ended January 3, 2010. Total net revenues in 2009 included home health episodic revenues of $861.8 million, up 23% compared to $701.2 million in 2008; and hospice revenues of $74.3 million, up 20% from $61.9 million in 2008.
  

• Income from continuing operations of $69.8 million, or $2.34 per diluted share, which included (i) a non-recurring pre-tax net gain of $6.0 million or $0.20 per diluted share resulting primarily from the 2009 first quarter sale of certain branch offices that specialized in pediatric home health care services; and, (ii) special pre-tax charges of $2.4 million or $0.05 per diluted share relating to restructuring and merger and acquisition costs. These results compared to income from continuing operations of $151.4 million or $5.15 per diluted share in the 2008 period which included a net gain of $3.72 per diluted share from the sale of  CareCentrix and special pre-tax charges of $2.7 million or $0.06 per diluted share relating to restructuring and merger and acquisition costs.
  

• Adjusted income from continuing operations of $65.3 million, up 50% compared with the prior year period. On a diluted earnings per share basis, adjusted income from continuing operations in the 2009 period was $2.19 compared with $1.49 in the corresponding period of 2008. Adjusted income from continuing operations excludes non-recurring transaction gains and special charges relating to restructuring and merger and acquisition activities in both periods.
  

• EBITDA attributable to continuing operations increased 19% to $125.0 million versus $105.2 million in the prior-year period.
  

• Operating cash flow was $105.1 million in the 2009 period compared to $70.7 million in the comparable 2008 period.
  

For the fourth quarter of 2009, the Company reported net income of $8.7 million or $0.29 per diluted share compared to $12.8 million or $0.43 per diluted share in the fourth quarter of 2008. For the full year, net income was $59.2 million or $1.98 per diluted share in 2009 compared to $153.5 million or $5.21 per diluted share in 2008. These results included non-recurring transaction gains and special charges as discussed above as well as the results from discontinued operations.

At January 3, 2010, the Company reported cash and cash equivalents of $152.4 million and outstanding debt under its credit agreement of $237.0 million.

Results from Discontinued Operations

Results of discontinued operations in 2009 included net revenues of $55.3 million, adjusted EBITDA, excluding asset impairment charges, of $4.4 million and a net loss of $10.6 million or $0.36 per diluted share. The net loss from discontinued operations consisted of an operating loss of $1.0 million or $0.04 per diluted share and a fourth quarter asset impairment charge of $9.6 million or $0.32 per diluted share.  For the full year 2008, results of discontinued operations included net revenues of $52.3 million, EBITDA of $8.9 million and net income of $2.0 million or $0.06 per diluted share.

Full-Year 2010 Outlook

Gentiva announced its financial outlook for fiscal 2010. The Company expects net revenues will range between $1.23 billion to $1.26 billion and adjusted net income on a diluted earnings per share basis will range between $2.57 and $2.67. The 2010 estimates exclude the results from the divested businesses and corresponding charges, any future acquisitions and special items.

Gentiva's outlook is consistent with the past several years of strong episodic revenue growth in the Home Health business. Revenue growth in 2010 is expected to be driven primarily by organic volume growth and expansion of the Company's innovative specialty programs.  Gentiva's 2010 revenue guidance incorporates the policy and payment updates for Medicare Home Health announced by the Centers for Medicare & Medicaid Services (CMS) on October 30, 2009. These updates to 2010 reimbursement rates include, among other items, a 2.0% market basket update, a 2.5% increase in the Medicare home health base rate resulting from the lowering of total outlier payment targets and a "case mix creep" reduction of 2.75%. Any changes to these published rates resulting from a healthcare reform bill currently being discussed in Washington would likely impact Gentiva's 2010 outlook.