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Gentiva Health Services Inc. ((GTIV - Analyst Report) reported fourth-quarter 2011 adjusted operating earnings of $11.3 million or 37 cents per share, surpassing the Zacks Consensus Estimate of 31 cents. However, the income compares unfavorably with $20.9 million or 69 cents earned in the year-ago quarter.
The adjusted earnings in the reported quarter exclude the impact of pre-tax charges for cost savings initiatives of $12.4 million or 24 cents per share, pre-tax charges for restructuring, legal settlements and acquisition and integration costs of $1.9 million or 3 cents per share, incremental tax expense on goodwill, intangibles and other long-lived asset impairment of $0.6 million or 2 cents per share.
Further, it includes a tax adjustment charge to gain on sale of CareCentrix included in the net earnings of CareCentrix of $1.2 million or 4 cents per share, pre-tax gain on sale of assets of $1.1 million or 2 cents per share and tax benefit on legal settlements of $1.7 million or 5 cents per share.
Additionally, the prior-year quarter excludes $5.3 million pre-tax or 10 cents per share related to legal settlement, restructuring, and acquisition and integration costs.
Including all one-time charges, Gentiva posted net income of $4.6 million or 15 cents per share, as opposed to the prior-year income of $15.8 million or 52 cents per share.
Gentiva’s net revenue declined 2.0% year over year to $449.2 million, surpassing the Zacks Consensus Estimate of $442.0 million.
The decrease in revenue was due to a 3% decline in the Home Health Episodic segment revenue to $217.1 million. However, this was partly offset by a 3% year-over-year rise in the Hospice segment revenue, which increased to $200.3 million from $195.2 million in the prior-year quarter.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) attributable to continuing operations decreased 26% to $47.1 million from $63.9 million in the prior-year quarter. Adjusted EBITDA also excludes all the one-time charges, which are excluded from adjusted operating income.
Full-Year 2011 Highlights
For full year 2011, Gentiva reported operating net income of $49.2 billion or $1.68 per share, substantially lower than $83.6 billion or $2.74 per share in 2010. However, earnings per share exceeded the Zacks Consensus Estimate by three cents. Net loss came in at $450.5 million or $14.85 per share versus prior-year income of $52.2 million or $1.71 per share.
Net revenue was $1.80 billion, up 27% year over year from $1.41 billion while marginally lagging the Zacks Consensus Estimate of $1.81 billion.
Gentiva exited the quarter with cash and cash equivalents of approximately $164.9 million and outstanding debt of $988.1 million. During the reported quarter, the company repaid $20 million on term loans. The company has repaid $116.9 million on its revolving credit facility and term loans since the completion of the Odyssey acquisition.
During the reported quarter, net cash used in operating activities was $9.2 million, declining sharply from cash flow of $51 million in the prior-year period, mainly due to the severance, lease termination and other charges related to the cost reduction initiatives along with tax payments on asset sales completed in the third quarter of 2011. Free cash flow also declined to a negative $13.9 million from $44.1 million in the fourth quarter of 2010.
As of December 31, 2011, Gentiva had total assets of $1.53 billion and shareholders’ equity of $202.5 million, as compared to $2.12 billion and $638.2 million, respectively, as of December 31, 2010.
During the third quarter of 2011, Gentiva undertook a comprehensive review of its expenditures, with a view to reduce costs. Consequently, during the fourth quarter, the company closed 25 home health branches and 9 hospice branches and sold 9 home health branches. The severance, lease termination and other charges related to the cost reduction initiatives amounted to $12.4 million, before tax.
Further, Gentiva sold 8 home health branches and 2 hospice branches in the first quarter of 2012.
Outlook for Fiscal 2012
Gentiva expects to generate net revenues of $1.70–1.76 billion and adjusted EBITDA of $170–190 million in 2012. The adjusted EBITDA guidance excludes expenses related to acquisitions, restructuring, integration activities, legal settlements, dividend income and impairment of goodwill, intangible asset and other long-lived asset.
Gentiva’s competitor, Amedisys Inc. ((AMED - Snapshot Report) is expected to release its fourth quarter and full year 2011 earnings before the market opens on February 28, 2012.
Gentiva carries a Zacks #3 Rank, which translates into a short-term Hold rating.