Gentiva® Health Services Reports First Quarter 2014 Results

         Gentiva® Health Services Reports First Quarter 2014 Results

PR Newswire

ATLANTA, May 7, 2014

ATLANTA, May 7, 2014 /PRNewswire/ --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 first quarter 2014 results.

Gentiva acquired Harden Healthcare Holdings, Inc. ("Harden") on October 18,
2013. The Company's results for the three months ended March 31, 2014
included Harden's financial results.

First quarter 2014 financial highlights include:

  oTotal net revenues of $487.5 million, an increase of 17% compared to
    $415.6 million for the quarter ended March 31, 2013. Net revenues included
    home health episodic revenues of $224.4 million, an increase of 8%
    compared to $207.4 million in the 2013 first quarter. Hospice revenues
    were $174.4 million, a decrease of 3% compared to $179.5 million in the
    2013 first quarter. Community care revenues were $57.1 million in the
    first quarter of 2014.
  oNet income attributable to Gentiva shareholders of $0.3 million, or $0.01
    per diluted share, compared to net loss attributable to Gentiva
    shareholders of $207.2 million, or $6.73 per diluted share, for the first
    quarter of 2013. During the first quarter of 2013, the Company recorded
    non-cash impairment charges of $224.3 million based on an interim
    impairment test of the Company's goodwill and other long-lived assets that
    was performed during the quarter.
  oAdjusted income attributable to Gentiva shareholders of $4.8 million,
    compared with $7.1 million in the comparable 2013 period. On a diluted per
    share basis, adjusted income attributable to Gentiva shareholders was
    $0.13 for the first quarter of 2014 as compared to $0.23 for the first
    quarter of 2013. First quarter 2014 adjusted income attributable to
    Gentiva shareholders was negatively impacted by approximately $0.05 due to
    widespread, severe weather conditions across the country.
  oAdjusted earnings before interest, taxes, depreciation and amortization
    (Adjusted EBITDA) was $39.0 million in the first quarter of 2014 as
    compared to $39.1 million in the first quarter of 2013. Adjusted EBITDA as
    a percentage of net revenues was 8.0% in the first quarter of 2014 versus
    9.4% in the prior year period. First quarter 2014 Adjusted EBITDA was
    negatively impacted by approximately $2.7 million due to the
    aforementioned severe weather conditions.

Adjusted income attributable to Gentiva shareholders and Adjusted EBITDA
exclude charges related to restructuring, legal settlements, acquisition and
integration activities, losses on closed locations and other special items.

Cash Flow and Balance Sheet Highlights

At March 31, 2014, the Company reported cash and cash equivalents of $62.9
million, compared to $87.0 million at December 31, 2013. Total outstanding
debt was $1.17 billion as of March 31, 2014, compared to $1.18 billion at
December 31, 2013. Total Company days sales outstanding, or DSO's, was 50
days at March 31, 2014 compared to 49 days at December 31, 2013.

For the first quarter of 2014, net cash provided by operating activities was a
negative $17.7 million, compared to a negative $20.6 million in the prior year
period. Free cash flow was a negative $20.9 million for the first quarter of
2014, compared to a negative $23.3 million in the prior year period. As
expected, cash flow for the first quarter of 2014 was impacted by the timing
of interest payments on the Company's senior notes and compensation related
expenses. Free cash flow is calculated as net cash provided by operating
activities less capital expenditures.

Full-Year 2014 Outlook

Gentiva reaffirmed its full-year 2014 outlook. Net revenues are expected to
be in the range of $1.9 billion to $2.1 billion and adjusted income
attributable to Gentiva shareholders is expected to be in the range of $0.85
to $1.15 on a diluted per share basis.

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 locations as the operations are wound
down.

Non-GAAP Financial Measures

The information provided in this press release 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 historical measures to the most directly comparable GAAP measures.

A reconciliation of adjusted income attributable to Gentiva shareholders to
net income, the most directly comparable GAAP measure, is not accessible on a
forward-looking basis without unreasonable effort due to the inherent
difficulties in predicting the costs of restructuring, legal settlements and
merger and acquisition activities and the impact of any future acquisitions or
divestitures, which can fluctuate significantly and may have a significant
impact on net income.

Conference Call and Webcast Details

The Company will comment further on its first quarter 2014 results during its
conference call and live webcast to be held today, Wednesday, May 7, 2014 at
10:00 a.m. Eastern Time. To participate in the call from the United States,
Canada or an international location, dial (973) 935-2408 and reference call
#31122421. The webcast is an audio-only, one-way event. Webcast listeners who
wish to ask questions must participate in the conference call. Log onto
http://investors.gentiva.com/events.cfm to hear the webcast. A replay of the
call will be available on May 7 and will remain available continuously through
May 14. To listen to a replay of the call from the United States, Canada or
international locations dial (800) 585-8367 or (404) 537-3406 and enter the
following PIN at the prompt: 31122421. Visit
http://investors.gentiva.com/events.cfm to access the webcast archive. This
press release is accessible at http://investors.gentiva.com/releases.cfm and a
transcript of the conference call will be posted on the Company's website.

About Gentiva Health Services, Inc.

Gentiva Health Services, Inc. is one of the nation's largest providers of home
health, hospice and community care services, delivering innovative, high
quality care to patients across the United States. Gentiva 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; and other therapies and
services. GTIV-G

(unaudited tables and notes follow)




Gentiva Health Services, Inc. and Subsidiaries
Condensed Consolidated Financial Statements and Supplemental Information
(Unaudited)
  (in 000's, except per share data)                    1st Quarter
                                                       2014       2013
Condensed Statements of Comprehensive Loss
  Net revenues                                         $ 487,505  $ 415,591
  Cost of services sold                                273,068    221,573
  Gross profit                                         214,437    194,018
  Selling, general and administrative expenses         (189,020)  (159,877)
  Goodwill and other long-lived asset impairment       —          (224,320)
  Interest income                                      633        785
  Interest expense and other                           (25,131)   (23,078)
  Income (loss) before income taxes                    919        (212,472)
  Income tax (expense) benefit                         (421)      5,416
  Net income (loss)                                    498        (207,056)
  Less: Net income attributable to noncontrolling      (184)      (121)
  interests
  Net income (loss) attributable to Gentiva            $ 314      $ (207,177)
  shareholders
  Total comprehensive income (loss)                    $ 498      $ (207,056)
 Earnings per Share
  Net income (loss) attributable to Gentiva
  shareholders:
  Basic                                                $ 0.01     $ (6.73)
  Diluted                                              $ 0.01     $ (6.73)
  Weighted average shares outstanding:
  Basic                                                36,189     30,785
  Diluted                                              36,677     30,785





    (in 000's)
Condensed Balance Sheets
 ASSETS                                   Mar 31, 2014         Dec 31, 2013
    Cash and cash equivalents             $   62,884           $  86,957
    Accounts receivable, net (A)          291,338              289,905
    Deferred tax assets                   26,090               28,153
    Prepaid expenses and other current    66,668               64,746
    assets
    Total current assets                  446,980              469,761
    Notes receivable from CareCentrix     28,471               28,471
    Fixed assets, net                     47,188               49,375
    Intangible assets, net                254,732              256,282
    Goodwill                              390,081              390,081
    Other assets                          67,482               68,647
    Total assets                          $   1,234,934        $  1,262,617
 LIABILITIES AND SHAREHOLDERS' DEFICIT
    Current portion of long-term debt     $   47,263           $  45,325
    Accounts payable                      12,596               15,659
    Payroll and related taxes             50,221               64,857
    Deferred revenue                      48,902               43,864
    Medicare liabilities                  22,132               23,894
    Obligations under insurance programs  79,076               82,634
    Accrued nursing home costs            20,969               22,219
    Other accrued expenses                66,608               77,018
    Total current liabilities             347,767              375,470
    Long-term debt                        1,118,197            1,124,432
    Deferred tax liabilities, net         14,711               9,825
    Other liabilities                     51,843               53,084
    Total deficit                         (297,584)            (300,194)
    Total liabilities and shareholders'   $   1,234,934        $  1,262,617
    deficit
    Common shares outstanding             36,763               36,375
 (A) Accounts receivable, net included an allowance for doubtful accounts of
 $11.9 million
 and $10.7 million at March 31, 2014 and December 31, 2013, respectively.







   (in 000's)
                                                    1st Quarter
Condensed Statements of Cash Flows                  2014         2013
   OPERATING ACTIVITIES:
   Net income (loss)                                $ 498        $ (207,056)
   Adjustments to reconcile net income (loss) to
   net cash used in operating activities:
          Depreciation and amortization             6,447        4,781
          Amortization of debt issuance costs       1,576        3,331
          Provision for doubtful accounts           1,999        1,007
          Equity-based compensation expense         2,221        1,813
          Windfall tax benefits associated with     (6)          (72)
          equity-based compensation
          Goodwill and other long-lived asset       —            224,320
          impairment
          Deferred income tax expense (benefit)     4,301        (9,360)
   Changes in assets and liabilities, net of
   effects from acquisitions and dispositions:
          Accounts receivable                       (3,432)      (4,855)
          Prepaid expenses and other current assets (1,922)      (162)
          Current liabilities                       (28,352)     (35,258)
   Other, net                                       (1,073)      951
   Net cash used in operating activities            (17,743)     (20,560)
   INVESTING ACTIVITIES:
   Purchase of fixed assets                         (3,158)      (2,698)
   Proceeds from the sale of assets                 191          —
   Net cash used in investing activities            (2,967)      (2,698)
   FINANCING ACTIVITIES:
   Proceeds from issuance of common stock           597          992
   Windfall tax benefits associated with            6            72
   equity-based compensation
   Repayment of long-term debt                      (4,581)      (25,000)
   Minority interest capital contribution           1,160        —
   Distribution to minority interests               (115)        (240)
   Other                                            (430)        (23)
   Net cash used in financing activities            (3,363)      (24,199)
   Net change in cash and cash equivalents          (24,073)     (47,457)
   Cash and cash equivalents at beginning of period 86,957       207,052
   Cash and cash equivalents at end of period       $ 62,884     $ 159,595
   SUPPLEMENTAL DISCLOSURES OF CASH FLOW
   INFORMATION:
   Interest paid                                    $ 33,047     $ 28,728
   Income taxes paid                                $ 108        $ 194
                                                    1st Quarter
A reconciliation of Free cash flow to Net cash used 2014         2013
in operating activities follows:
          Net cash used in operating activities     $ (17,743)   $ (20,560)
          Less: Purchase of fixed assets            (3,158)      (2,698)
          Free cash flow                            $ (20,901)   $ (23,258)
          (in 000's)
Supplemental Information                            1st Quarter
                                                    2014         2013
Segment Information (2)
   Net revenues
          Home Health                               $ 255,976    $ 236,061
          Hospice                                   174,402      179,530
          Community Care                            57,127       —
   Total net revenues                               $ 487,505    $ 415,591
   Operating contribution (4)
          Home Health                               $ 29,603     $ 30,188
          Hospice                                   17,544       27,421
          Community Care                            9,279        —
   Total operating contribution                     56,426       57,609
   Corporate administrative expenses                (24,562)     (18,687)
   Goodwill and other long-lived asset impairment   —            (224,320)
   (5)
   Depreciation and amortization                    (6,447)      (4,781)
   Interest expense and other, net                  (24,498)     (22,293)
   Income (loss) before income taxes                $ 919        $ (212,472)
   Home Health operating contribution margin %      11.6%        12.8%
   Hospice operating contribution margin %          10.1%        15.3%
   Community Care operating contribution margin %   16.2%        —%
                                                    1st Quarter
Net Revenues by Major Payer Source:                 2014         2013
   Medicare
   Home Health                                      $ 208,766    $ 193,120
   Hospice                                          163,209      167,274
   Total Medicare                                   371,975      360,394
   Medicaid and local government                    71,127       18,269
   Commercial insurance and other:
   Paid at episodic rates                           15,599       14,255
   Other                                            28,804       22,673
   Total commercial insurance and other             44,403       36,928
   Total net revenues                               $ 487,505    $ 415,591
                                                    1st Quarter
A reconciliation of Adjusted EBITDA to Net income
(loss) attributable to Gentiva shareholders         2014         2013

follows: (3)
          Adjusted EBITDA (3)                       $ 38,976     $ 39,063
          Cost savings initiatives and acquisition  (5,341)      (141)
          and integration activities (4)
          Impact of closed locations                (1,771)      —
          Goodwill and other long-lived asset       —            (224,320)
          impairment (5)
          EBITDA (4)                                31,864       (185,398)
          Depreciation and amortization             (6,447)      (4,781)
          Interest expense and other, net           (24,498)     (22,293)
          Income (loss) before income taxes         919          (212,472)
          Income tax (expense) benefit (6)          (421)        5,416
          Net income (loss)                         498          (207,056)
          Less: Net income attributable to          (184)        (121)
          noncontrolling interests
          Net income (loss) attributable to Gentiva $ 314        $ (207,177)
          shareholders



A reconciliation of Adjusted income attributable to Gentiva shareholders to
Net income (loss) (all items presented are net of tax): (3)
                                       1st Quarter
                                       2014                 2013
        Adjusted income attributable   $    4,799           $   7,107
        to Gentiva shareholders
        Cost savings initiatives and
        acquisition and integration    (3,302)              (86)
        activities (4)
        Impact of closed locations     (1,183)              —
        Goodwill and other long-lived  —                    (214,198)
        asset impairment (5)
        Income (loss) attributable to  314                  (207,177)
        Gentiva shareholders
        Add back: Net income
        attributable to noncontrolling 184                  121
        interests
        Net income (loss)              $    498             $   (207,056)
        Adjusted income attributable
        to Gentiva shareholders per    $    0.13            $   0.23
        diluted share
        Cost savings initiatives and
        acquisition and integration    (0.09)               —
        activities (4)
        Impact of closed locations     (0.03)               —
        Goodwill and other long-lived  —                    (6.96)
        asset impairment (5)
        Income (loss) attributable to
        Gentiva shareholders per       0.01                 (6.73)
        diluted share
        Add back: Net income
        attributable to noncontrolling —                    —
        interests
        Net income (loss) per diluted  $    0.01            $   (6.73)
        share
        Operating Metrics              1st Quarter
                                       2014                 2013
        Home Health
        Episodic admissions            54,400               50,400
        Total episodes                 82,600               72,200
        Episodes per admission         1.52                 1.43
        Revenue per episode            $    2,715           $   2,875
        Hospice
        Admissions                     12,900               13,500
        Average daily census           13,000               12,700
        Patient days (in thousands)    1,168                1,146
        Revenue per patient day ^ (a)  $    149             $   157
        Length of stay at discharge    104                  99
        (in days)
        Services by patient type:
        Routine                        99%                  98%
        General Inpatient & Other      1%                   2%
        Community Care
        Billed hours (in thousands)    4,200                —
        Revenue per hour               $    14              —



Notes:

1.The comparability between reporting periods has been affected by the
following items:

  a. The Company completed the Harden transaction on October 18, 2013,
  affecting the reporting periods presented. Annualized net revenues of Harden
  at acquisition date approximated $145 million of Home Health, $109 million
  of Hospice and $220 million of Community Care. Net revenues specific to
  Harden for the first quarter of 2014 are not available as, subsequent to the
  acquisition date, the Company has undertaken significant consolidations and
  closures of Harden branches in overlapping and smaller markets for which
  reporting of separate results is no longer available. As a result of this
  transaction, the Company's net revenues comparisons were positively impacted
  for the first quarter 2014 as compared to the corresponding period of 2013.

  b. The Company closed a significant number of branch operations relating to
  the branch rationalization initiative which began in 2013, affecting the
  reporting periods presented. As a result of these activities, the Company's
  net revenues comparisons were negatively impacted for the first quarter 2014
  by approximately $8 million as compared to the corresponding period of 2013.

2.The Company's senior management evaluates performance and allocates
resources based on operating contributions of the operating segments, which
exclude corporate expenses, depreciation, amortization, interest income, and
interest expense and other, but include revenue and all other costs directly
attributable to the specific segment.

3.Adjusted EBITDA, a non-GAAP financial measure, is defined as income before
interest expense and other (net of interest income), income taxes,
depreciation and amortization and excluding charges relating to (i) cost
savings initiatives and acquisition and integration activities, (ii) impact of
closed locations and (iii) goodwill and other long-lived asset impairment.
Management uses Adjusted EBITDA to evaluate overall performance and compare
current operating results with other companies in the healthcare industry.
Adjusted EBITDA should not be considered in isolation or as a substitute for
income from continuing operations, net income, operating income or cash flow
statement data determined in accordance with accounting principles generally
accepted in the United States. Because Adjusted EBITDA is not a measure of
financial performance under accounting principles generally accepted in the
United States and is susceptible to varying calculations, it may not be
comparable to similarly titled measures in other companies.

Adjusted income attributable to Gentiva shareholders is defined as income
attributable to Gentiva shareholders, excluding (i) charges relating to cost
savings initiatives and acquisition and integration activities, (ii) impact of
closed locations and (iii) goodwill and other long-lived asset impairment.

4.Operating contribution and EBITDA included charges relating to cost savings
and other restructuring, legal settlements and acquisition and integration
activities of $5.3 million for the first quarter 2014 as compared to $0.1
million for the corresponding period of 2013.

For the first quarter 2014, the Company recorded charges relating to cost
savings initiatives associated with the Company's branch rationalization
initiative of $2.7 million and charges of $2.6 million associated with
acquisition and integration activities of Harden.

For the first quarter 2013, the Company recorded acquisition and integration
activities of $0.1 million associated with the Company's acquisitions of North
Mississippi Hospice and Family Home Care, Inc. in 2012.

These charges were reflected as follows for segment reporting purposes
(dollars in millions):

                   1st Quarter
                   2014   2013
Home Health        $ 0.6  $ —
Hospice            2.9    —
Corporate expenses 1.9    0.1
Total              $ 5.3  $ 0.1

5.During the first quarter of 2013, the Company recorded non-cash charges of
$224.3 million related to goodwill and other long-lived assets.

At March 31, 2013, the Company performed an interim impairment test of its
Hospice reporting unit due to lower than expected average daily census and
higher than expected discharge rates during the first quarter. Based on the
results of the interim impairment test, the Company recorded a non-cash
impairment charge relating to goodwill of approximately $220.8 million. As
part of that analysis, the Company reviewed the valuation of its owned real
estate utilized in the Hospice business. The analysis indicated that two of
the Company's hospice inpatient units had estimated fair values lower than
their carrying values and, as such, the Company recorded a non-cash impairment
charge of approximately $1.9 million.

In addition, the Company conducted an evaluation of the various systems used
to support its field operations. In connection with that review, the Company
made a strategic decision to replace its business intelligence software
platform and, as such, recorded a non-cash impairment charge, related to
developed software, of approximately $1.6 million.

6.The Company's effective tax rate was a tax expense of 45.9% for the first
quarter 2014 as compared to a benefit of 2.5% for the first quarter 2013.

During the first quarter of 2013, the Company recorded non-cash impairment
charges of $224.3 million related to goodwill and other long-lived assets (see
note 5). Excluding the impact of the impairment charges, the Company's
effective tax rate would have been 39.9% for the first quarter of 2013.

Forward-Looking Statements

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. These
factors include, among others, the following: general economic and business
conditions; demographic changes; changes in, or failure to comply with,
existing governmental regulations; the impact on our Company of healthcare
reform legislation and its implementation through governmental regulations;
legislative proposals for healthcare reform; changes in Medicare, Medicaid and
commercial payer reimbursement levels; the outcome of any inquiries into the
Company's operations and business practices by governmental authorities;
compliance with any corporate integrity agreement affecting the Company's
operations; effects of competition in the markets in which the Company
operates; liability and other claims asserted against the Company; ability to
attract and retain qualified personnel; ability to access capital markets;
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 severe weather conditions, natural
disasters, pandemic outbreaks, terrorist acts or cyber-attacks; availability,
effectiveness, stability and security of the Company's information technology
systems; ability to successfully integrate the operations of acquisitions the
Company may make and achieve expected synergies and operational efficiencies
within expected time-frames; ability to maintain compliance with its financial
covenants under the Company's credit agreement; effect on liquidity of the
Company's debt service requirements; and changes in estimates and judgments
associated with critical accounting policies and estimates. 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,
including the "Risk Factors" section contained in the Company's annual report
on Form 10-K for the year ended December 31, 2013.

Financial and Investor Contact:
     Eric Slusser
     770-951-6101
     eric.slusser@gentiva.com
or   John Mongelli
     770-951-6496
     john.mongelli@gentiva.com
Media Contact:
     Scott Cianciulli
     Brainerd Communicators
     212-986-6667
     cianciulli@braincomm.com



SOURCE Gentiva Health Services, Inc.

Website: http://www.gentiva.com
 
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