Almost Family reports record net service revenues of $96.3 million in Q4 2013

Mar 11 2014

Almost Family, Inc. (Nasdaq: AFAM), a leading regional provider of home health nursing and personal care services, announced today its financial results for the three months and full year ended December 31, 2013.

Fourth Quarter Highlights:

• Record net service revenues of $96.3 million
• Net income attributable to Almost Family, Inc. of $328,000, or $0.03 per diluted share
• Diluted EPS from continuing operations of $0.04 including $0.26 of acquisition related expenses, excluding which diluted EPS would have been $0.30
• Cash flows from operations of $7.6 million
• Visiting Nurse segment net revenues were $74.7 million and Personal Care segment revenues were $21.7 million
• Results include the acquisition of SunCrest on December 6, 2013, which added $0.05 to diluted EPS from continuing operations for both the quarter and the year.

Full Year Highlights:

• Record net service revenues of $357.8 million
• Net income attributable to Almost Family, Inc. was $8.2 million, or $0.88 per diluted share
• Diluted EPS from continuing operations of $0.91 including $0.32 of acquisition related expenses, excluding which diluted EPS would have been $1.23
• Cash flows from operations of $19.8 million
• Visiting Nurse segment net revenues were $275.8 million
• Personal Care segment net revenues grew to $82.0 million.

Comments on 2013 Results

William Yarmuth, Chief Executive Officer, commented on the year: "We are pleased with where the Company is positioned for the future after another difficult year for the industry on the reimbursement and regulatory front.  Although the recent rebasing rule creates ongoing challenges over the next few years, we remain confident that home health care is key to an effective health care delivery system over the long term.  We are equally confident that the Company is very well positioned to capitalize on the opportunities that will inevitably present themselves over this timeframe.  Our development activities over the last half of the year, capped by our significant acquisition of SunCrest in December, demonstrate our strong belief in the future."

Yarmuth concluded:  "I want to take this opportunity to welcome all of the members of the SunCrest team to our organization. We are excited about building on the strengths that they bring to our Company."

Fourth Quarter Financial Results

Almost Family reported fourth quarter results that included the impact of the following acquisitions, as compared to our results for the fourth quarter of 2012:

• The December 6, 2013 acquisition of SunCrest added $8.8 million to revenue ($7.8 million VN and $1.0 million PC) and $0.05 to diluted EPS from continuing operations
• As previously disclosed, one-time transaction costs, severance, wind-down, lease abandonment and transition costs related to the SunCrest transaction are expected to be between $7 million and $8 million incurred over the period from closing through the end of 2014.  Approximately $3.3 million ($0.26 per diluted share) of such costs have been incurred in the period from closing through December 31, 2013.
• The July 19, 2013 acquisition of Indiana Home Care Network added $2.8 million of revenue to the VN segment and $0.03 to diluted EPS from continuing operations
• The October 4, 2013 acquisition of our 61% interest in Imperium lowered diluted EPS from continuing operations by $0.01.  Operating costs of $482,000 associated with Imperium are included in our corporate expenses.  Imperium did not generate any material revenue in the period.

In addition to our acquisition activity, Medicare rate cuts, primarily sequestration, combined with 2014 rate cuts which affect episodes started in 2013 and ending in 2014 reduced revenue and operating income by $1.35 million and diluted EPS from continuing operations by $0.09.  VN segment Medicare admissions decreased organically by 5.9%, primarily in our Florida operations, where we have overlap with SunCrest operations.  Due to the size, complexity and risks associated with the integration of the SunCrest acquisition, particularly in Florida, the Company urges investors to temper expectations as we proceed through the balance of our integration work over 2014.  Our PC segment hours of service and revenues grew organically by 8.4% and 7.1%, respectively.

Our effective tax rate for the fourth quarter of 2013 was 78.6% compared to 40.1% for the fourth quarter of 2012, due to certain deal and transaction costs that are not currently deductible and that do not result in the establishment of a deferred tax asset.  We currently anticipate a normalized effective tax rate of 39.5% and have used that rate in the presentation of income and diluted EPS from continuing operations.

Full Year Ended December 31, 2013

Almost Family reported full year results that included the impact of the following acquisitions, as compared to our results for the full year of 2012:

• The July 19, 2013 acquisition of Indiana Home Care Network added $5.0 million of revenue to the VN segment and $0.07 to diluted EPS from continuing operations
• Because they occurred in the fourth quarter of 2013, the impact of SunCrest and Imperium for the full year was the same as for the fourth quarter

In addition to our acquisition activity, Medicare rate cuts, primarily sequestration, reduced revenue and operating income by $4.4 million and diluted EPS from continuing operations by $0.28.  VN segment Medicare admissions increased organically by 0.2%.  Our PC segment hours of service and revenues grew organically by 6.8% and 5.1%, respectively.

Our effective tax rate for 2013 was 41.9% compared to 39.2% for 2012, primarily due to certain deal and transaction costs that are not currently deductible and that do not result in the establishment of a deferred tax asset.  We currently anticipate a normalized effective tax rate of 39.5% and have used that rate in the presentation of income and diluted EPS from continuing operations.

Acquisitions During 2013

On July 19, 2013, we completed the acquisition of the assets of the Medicare-certified home health agencies owned by IHCN for $12.5 million.  Under the IHCN umbrella we operate six home health locations, primarily in northern Indiana.

On October 4, 2013, we acquired a controlling interest in Imperium Health Management, LLC, (Imperium) a Louisville, KY based development-stage enterprise that provides strategic health management services to Accountable Care Organizations (ACO's).

On December 6, 2013, we acquired the stock of SunCrest HealthCare.  The total purchase price for the stock was $75.5 million, subject to a working capital adjustment.  The transaction was funded from borrowings from our senior secured revolving credit facility and cash on hand.