Gentiva Beats, Affirms Outlook

Gentiva Health Services Inc. (GTIV - Analyst Report) reported second-quarter 2012 operating net earnings of 35 cents per share, ahead of the Zacks Consensus Estimate of 28 cents but lower than the year-ago quarter level of 47 cents per share. Operating net income of $10.7 million also compares unfavorably with $14.0 million in the year-ago quarter.

Including all one-time charges and income from gains on sales of businesses of $3.25 million or 11 cents per share and expenses related to restructuring, legal settlement and acquisition and integration costs of $0.03 million, Gentiva posted net income of $13.9 million or 46 cents per share, increasing substantially from the prior-year income of $4.5 million or 15 cents per share.

Gentiva’s net revenues declined 4.7% year over year to $427.7 million, and also missed the Zacks Consensus Estimate of $435.0 million. The year-over-year decline was largely due to the sale and closure of some branches coupled with a 7.3% decline in the Home Health Episodic segment revenue to $235.7 million, arising from reduced Medicare reimbursement rates. This was followed by a marginal year-over-year decline of 1.2% related to the Hospice segment revenue of $192.0 million.

Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) attributable to continuing operations decreased 6.6% to $48.3 million from $51.7 million in the prior-year quarter.

Financial Update

Gentiva exited the quarter with cash and cash equivalents of approximately $155.3 million down from $164.9 million as of December 31, 2011. Long-term debt was $922.7 million, down from $973.2 million at 2011 end.

During the reported quarter, net cash from operating activities amounted to $83.8 million versus $17.2 million in the prior-year period. Free cash flow also improved considerably to $80.7 million from $11.8 million in the second-quarter of 2011, primarily due to fall in company’s day sales outstanding and better operating results.

As of June 30, 2012, Gentiva had total assets of $1.48 billion and shareholders’ equity of $220.3 million, as compared with $1.53 billion and $202.5 million, respectively, as of December 31, 2011.

Divestiture

Gentiva received $5.9 million as proceeds from the sale of branches in Louisiana -- eight home health branches and four hospice branches. This was with respect to an asset purchase agreement worth $6.4 million. About $0.5 million remains unpaid.

Outlook for Fiscal 2012

Gentiva affirmed its net revenue guidance at $1.70–1.76 billion and adjusted income from continuing operations guidance at $1.00–1.20 per share.

Zacks Rank

Gentiva carries a Zacks #3 Rank, which translates into a short-term Hold rating. Amedisys Inc. (AMED - Snapshot Report) also shares the same Zacks #3 Rank with Gentiva, and is expected to release its second-quarter 2012 earnings before the market opens on August 7, 2012. According to the Zacks Consensus Estimate, Amedisys is expected to report operating earnings of 25 cents a share, falling 62.7% from its prior-year quarter earnings.