Gentiva Health Services, Inc. (NASDAQ: GTIV), one of the largest providers of home health, hospice and community care services in the United States, today reported net revenues of $498.0 million, adjusted EBITDA of $48.5 million and adjusted income attributable to Gentiva shareholders per diluted share of $0.28. The Company also reaffirmed adjusted full-year 2014 guidance based on the Company's strong year-to-date operating results.
Adjusted EBITDA and adjusted income attributable to Gentiva shareholders excludes charges related to cost savings initiatives and acquisition and integration activities, losses on closed locations, merger related expenses and other special items.
"Our strong results this quarter reflect the continued success of our One Gentiva initiative and the momentum we are seeing across our business as we continue to execute our strategies," said Gentiva CEO Tony Strange. "We are working closely with Kindred to ensure a seamless transition and look forward to completing the transaction in the first quarter of 2015. We are very excited about the combination of Gentiva and Kindred, which will create the largest provider of post-acute integrated care in America and provide Gentiva employees with even greater opportunities in the future. I am proud of what we have accomplished and especially grateful to all of our employees for their continued commitment to our patients and our mission."
Other Highlights
At September 30, 2014, the Company reported cash and cash equivalents of $114.2 million. Total outstanding debt was $1.16 billion as of September 30, 2014. Total Company days sales outstanding, or DSOs, was 49 days at September 30, 2014.
For the third quarter of 2014, net cash provided by operating activities was $13.4 million. Free cash flow was $10.2 million for the third quarter of 2014. Free cash flow is calculated as net cash provided by operating activities less capital expenditures.
Rent expense for the third quarter of 2014 approximated $10.1 million.
Full-Year 2014 Outlook Comments
Based on the Company's strong year-to-date operating results, Gentiva reaffirmed its full-year 2014 Adjusted EBITDA range of $183 million to $195 million and adjusted income attributable to Gentiva shareholders of $0.95 to $1.15 on a diluted per share basis. Additionally, Gentiva reaffirmed its full-year 2014 net revenue range of $1.96 billion to $2.0 billion.
Gentiva's 2014 outlook includes the full-year impact of its Harden acquisition and the final 2014 Medicare home health and hospice reimbursement rates issued by the Centers for Medicare and Medicaid Services (CMS). The 2014 outlook excludes any ongoing losses from closed and consolidated locations as the operations are wound down.
Kindred Transaction Update
On October 9, 2014, Gentiva announced that it had reached a definitive merger agreement with Kindred Healthcare, Inc. ("Kindred") under which Kindred would acquire all of the outstanding shares of Gentiva common stock for $19.50 per share in a combination of cash and stock. The agreement was unanimously approved by the boards of directors of both companies and is expected to close in the first quarter of 2015.
Restatement of Results for License Accounting
Based on a recent review of the Company's licensure accounting for closed or consolidated locations, the Company determined that it should have accounted for the licenses related to closed or consolidated locations differently. Historically, the Company has incorrectly accounted for its indefinite-lived intangible assets related to closed or consolidated licenses on a pooled basis and did not write off license costs when individual locations were closed or consolidated. The Company has determined it should amortize the full license cost over the period of closure or consolidation. The effect of the restatement will be to increase amortization expense in the periods impacted.
This restatement has no effect on the Company's revenues, adjusted EBITDA or adjusted income attributable to Gentiva shareholders and no impact on the Company's cash position or cash flows. Furthermore, this correction has no effect on the transaction with Kindred.
The impact of the restatement is expected to increase non-cash expenses by approximately $0.9 million in 2011, by approximately $4.6 million in 2013 and by approximately $1.1 million in the first quarter of 2014. Furthermore, the Company's 2013 goodwill and other long-lived asset impairment charges will increase by approximately $1.9 million.
Gentiva plans to issue its restated prior periods and full third quarter 2014 financial results by November 14, 2014 after the accounting review is completed.
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