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Gentiva® Health Services Reports Fourth Quarter and Full-Year 2012 Results

February 7, 2013

ATLANTA, Feb. 7, 2013 /PRNewswire/ — Gentiva Health Services, Inc. (NASDAQ: GTIV), the largest provider of home health and hospice services in the United States based on revenue, today reported fourth quarter and full-year 2012 results.

Full-year 2012 financial highlights include:

  • Total net revenues of $1.71 billion.
  • Adjusted income from continuing operations on a diluted per share basis of $1.27, excluding the $0.03 impact from credit agreement amendment fees incurred in the first quarter of 2012 and the $0.01 impact from Hurricane Sandy in the fourth quarter of 2012.
  • Adjusted EBITDA of $180.5 million.

Fourth quarter 2012 financial highlights include:

  • Total net revenues of $425.0 million, a decrease of 5% compared to $449.2 million for the quarter ended December 31, 2011 due to the impact of the significant home health Medicare rate reduction in 2012 and the sale or closure of branches related to the Company’s comprehensive review of its branch structure in the third quarter of 2011. Excluding the impact of branches sold or closed, total net revenues would have been down 2% compared to the fourth quarter of 2011. Net revenues included home health episodic revenues of $209.8 million, a decline of 3% compared to $217.1 million in the 2011 fourth quarter. Hospice revenues were $187.3 million, a decrease of 6% compared to $200.3 million in the 2011 fourth quarter. Hospice represented 44% of total net revenues in the fourth quarter of 2012, compared to 45% in the 2011 fourth quarter.
  • Income from continuing operations attributable to Gentiva shareholders of $8.6 million, or $0.28 per diluted share, compared to income of $3.4 million, or $0.11 per diluted share, for the fourth quarter of 2011.
  • Adjusted income from continuing operations attributable to Gentiva shareholders of $9.7 million, compared with $11.3 million in the comparable 2011 period. On a diluted per share basis, adjusted income from continuing operations attributable to Gentiva shareholders was $0.31 for the fourth quarter of 2012 as compared to $0.37 for the fourth quarter of 2011. Excluding the $0.01 impact of Hurricane Sandy, adjusted income from continuing operations attributable to Gentiva shareholders was $0.32 on a diluted per share basis for the fourth quarter of 2012.
  • Adjusted earnings before interest, taxes, depreciation and amortization attributable to continuing operations (Adjusted EBITDA) was $44.2 million in the fourth quarter of 2012 as compared to $47.1 million in the fourth quarter of 2011. Adjusted EBITDA as a percentage of net revenues was 10.4% in the fourth quarter of 2012 versus 10.5% in the prior year period.

Adjusted income from continuing operations attributable to Gentiva shareholders and Adjusted EBITDA exclude charges related to restructuring, legal settlements, acquisition and integration activities and other special items.

Highlights for the full-year 2012 include:

  • Total net revenues of $1.71 billion, a decrease of 5% compared to $1.80 billion for the prior year period due to the impact of the significant home health Medicare rate reduction in 2012 and the sale or closure of branches related to the Company’s comprehensive review of its branch structure in the third quarter of 2011. Net revenues included home health episodic revenues of $834.2 million, a decline of 5% as compared to $876.9 million in the comparable 2011 period. Hospice revenues were $764.8 million, a decrease of 3% compared to $786.2 million in the comparable 2011 period.
  • Income from continuing operations attributable to Gentiva shareholders of $26.8 million, or $0.87 per diluted share, compared to a loss of $458.8 million, or $15.13 per diluted share, in the prior year period.
  • Adjusted income from continuing operations attributable to Gentiva shareholders of $37.7 million, compared with $49.2 million in the 2011 period. On a diluted per share basis, adjusted income from continuing operations attributable to Gentiva shareholders was $1.23 for 2012 as compared with $1.60 in the corresponding period of 2011. Excluding the $0.03 impact from expenses associated with the March 6, 2012 credit agreement amendment and the $0.01 impact from Hurricane Sandy, adjusted income from continuing operations attributable to Gentiva shareholders was $1.27 on a diluted per share basis for the 2012 period as compared to $1.68 in the prior year period, which excluded an $0.08 impact from refinancing charges.
  • Adjusted earnings before interest, taxes, depreciation and amortization attributable to continuing operations (Adjusted EBITDA) was $180.5 million as compared to $199.2 million in the 2011 period. Adjusted EBITDA as a percentage of net revenues was 10.5% versus 11.1% in the prior year period.

For the fourth quarter of 2012, the Company reported net income attributable to Gentiva shareholders of $8.6 million, or $0.28 per diluted share, compared to net income of $4.6 million, or $0.15 per diluted share, in the fourth quarter of 2011. For the full-year 2012, net income attributable to Gentiva shareholders was $26.8 million, or $0.87 per diluted share, compared with a net loss of $450.5 million, or $14.85 per diluted share, for the full-year 2011. These results included charges related to the special items discussed above as well as the results from discontinued operations.

Cash Flow and Balance Sheet Highlights

At December 31, 2012, the Company reported cash and cash equivalents of $207.1 million, compared to $156.0 million at September 30, 2012. Total outstanding debt was $935.2 million as of December 31, 2012, compared to $938.1 million at September 30, 2012. Total Company days sales outstanding, or DSO’s, was 51 days at December 31, 2012, down from 52 days at September 30, 2012.

For the fourth quarter of 2012, net cash provided by operating activities was $51.3 million, compared to negative $9.2 million in the prior year period. Free cash flow was $48.8 million for the fourth quarter of 2012, compared to negative $13.9 million in the prior year period.

Full-year 2012 free cash flow was $114.2 million. Free cash flow is calculated as net cash provided by operating activities less capital expenditures.

Full-Year 2013 Outlook Comments

The Company will provide its 2013 guidance once the final sequestration rules have been issued by the Centers for Medicare and Medicaid Services (CMS) given the current uncertainties associated with when and how sequestration will be implemented.

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 EBITDA 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, the results of discontinued operations 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 fourth quarter 2012 results during its conference call and live webcast to be held today, Thursday, February 7, 2013 at 9:00 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 #90049215. 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 February 7 and will remain available continuously through February 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: 90049215. 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 the nation’s largest provider of home health and hospice services based on revenue, 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)                                                                                                                                                4th Quarter                                            Fiscal Year
                                                                                                                                                                                                         -----------                                            -----------
                                                                                                                                                                                                   2012       2011                          2012       2011
                                                                                                                                                                                                   ----       ----                          ----       ----
    Condensed Statements of Comprehensive Income
    --------------------------------------------
                        Net revenues                                                                                                                                                                      $425,017                                 $449,209                          $1,712,804                          $1,798,778
                        Cost of services sold                                                                                                                                                   229,254               240,605                       908,741                948,455
                                                                                                                                                                                                -------               -------                       -------                -------
                        Gross profit                                                                                                                                                            195,763               208,604                       804,063                850,323
                        Selling, general and administrative expenses                                                                                                                           (156,924)            (183,402)                     (655,766)               (730,407)
                        Goodwill, intangibles and other long-lived asset impairment                                                                                                                   -                     -                       (19,132)              (643,305)
                        Gain on sale of assets and businesses, net                                                                                                                                2,567                 1,061                         8,014                  1,061
                        Dividend income                                                                                                                                                               -                     -                             -                  8,590
                        Interest income                                                                                                                                                             650                   723                         2,661                  2,686
                        Interest expense and other                                                                                                                                              (23,546)              (20,991)                      (92,608)               (91,296)
                                                                                                                                                                                                -------               -------                       -------                -------
                        Income (loss) from continuing operations before income taxes and
                           equity in net earnings of CareCentrix                                                                                                                                 18,510                 5,995                        47,232               (602,348)
                        Income tax (expense) benefit                                                                                                                                             (6,373)               (1,239)                      (17,251)                75,768
                        Equity in net earnings of CareCentrix                                                                                                                                    (3,307)               (1,201)                       (2,301)                68,381
                                                                                                                                                                                                 ------                ------                        ------                 ------
                        Income (loss) from continuing operations                                                                                                                                  8,830                 3,555                        27,680               (458,199)
                        Discontinued operations, net of tax                                                                                                                                           -                 1,219                             -                  8,315
                                                                                                                                                                                                    ---                 -----                           ---                  -----
                        Net income (loss)                                                                                                                                                         8,830                 4,774                        27,680               (449,884)
                        Less: Net income attributable to noncontrolling interests                                                                                                                  (260)                 (189)                         (884)                  (641)
                                                                                                                                                                                                   ----                  ----                          ----                   ----
                        Net income (loss) attributable to Gentiva shareholders                                                                                                                              $8,570                                   $4,585                             $26,796                           $(450,525)
                                                                                                                                                                                                            ======                                   ======                             =======                           =========

                        Total comprehensive income (loss)                                                                                                                                                   $8,830                                   $4,774                             $27,680                           $(450,362)
                                                                                                                                                                                                            ======                                   ======                             =======                           =========

                        Earnings per Share
                        ------------------
                        Basic earnings per common share:
                        Income (loss) from continuing operations attributable to Gentiva
                           shareholders                                                                                                                                                                      $0.28                                    $0.11                               $0.88                             $(15.13)
                        Discontinued operations, net of tax                                                                                                                                           -                  0.04                             -                   0.28
                                                                                                                                                                                                    ---                  ----                           ---                   ----
                        Net income (loss) attributable to Gentiva shareholders                                                                                                                               $0.28                                    $0.15                               $0.88                             $(14.85)
                                                                                                                                                                                                             =====                                    =====                               =====                             =======

                        Weighted average shares outstanding                                                                                                                                      30,548                30,402                        30,509                 30,336
                                                                                                                                                                                                 ======                ======                        ======                 ======

                        Diluted earnings per common share:
                        Income (loss) from continuing operations attributable to Gentiva
                           shareholders                                                                                                                                                                      $0.28                                    $0.11                               $0.87                             $(15.13)
                        Discontinued operations, net of tax                                                                                                                                           -                  0.04                             -                   0.28
                                                                                                                                                                                                    ---                  ----                           ---                   ----
                        Net income (loss) attributable to Gentiva shareholders                                                                                                                               $0.28                                    $0.15                               $0.87                             $(14.85)
                                                                                                                                                                                                             =====                                    =====                               =====                             =======

                        Weighted average shares outstanding                                                                                                                                      30,891                30,541                        30,687                 30,336
                                                                                                                                                                                                 ======                ======                        ======                 ======

                        Amounts attributable to Gentiva shareholders:
                        Income (loss) from continuing operations                                                                                                                                            $8,570                                   $3,366                             $26,796                           $(458,840)
                        Discontinued operations, net of tax                                                                                                                                           -                 1,219                             -                  8,315
                                                                                                                                                                                                    ---                 -----                           ---                  -----
                        Net income (loss)                                                                                                                                                                   $8,570                                   $4,585                             $26,796                           $(450,525)
                                                                                                                                                                                                            ======                                   ======                             =======                           =========

                     (in 000's)
    Condensed Balance Sheets
    ------------------------
                     ASSETS                                                                                             December 31, 2012   December 31,
                                                                                                                                                 2011
                                                                                                                ------  -----------------  -------------
                     Cash and cash equivalents                                                                                                  $207,052                        $164,912
                     Accounts receivable, net (A)                                                                                 251,080                 290,589
                     Deferred tax assets                                                                                           12,263                  26,451
                     Prepaid expenses and other current assets                                                                     45,632                  38,379
                                                                                                                                   ------                  ------
                     Total current assets                                                                                         516,027                 520,331

                     Notes receivable from CareCentrix                                                                             28,471                  25,000
                     Investment in affiliate                                                                                          916                       -
                     Fixed assets, net                                                                                             41,414                  46,246
                     Intangible assets, net                                                                                       193,613                 214,874
                     Goodwill                                                                                                     656,364                 641,669
                     Other assets                                                                                                  74,129                  82,208
                                                                                                                                   ------                  ------
                     Total assets                                                                                                             $1,510,934                      $1,530,328
                                                                                                                                              ==========                      ==========

                     LIABILITIES AND EQUITY
                     ----------------------
                     Current portion of long-term debt                                                                                           $25,000                         $14,903
                     Accounts payable                                                                                              13,445                  12,613
                     Payroll and related taxes                                                                                     45,357                  42,027
                     Deferred revenue                                                                                              37,444                  34,114
                     Medicare liabilities                                                                                          27,122                  23,066
                     Obligations under insurance programs                                                                          56,536                  54,976
                     Accrued nursing home costs                                                                                    18,428                  24,223
                     Other accrued expenses                                                                                        66,567                  89,270
                                                                                                                                   ------                  ------
                     Total current liabilities                                                                                    289,899                 295,192

                     Long-term debt                                                                                               910,182                 973,222
                     Deferred tax liabilities, net                                                                                 42,165                  32,498
                     Other liabilities                                                                                             33,988                  26,885
                     Total equity                                                                                                 234,700                 202,531
                                                                                                                                  -------                 -------
                     Total liabilities and equity                                                                                             $1,510,934                      $1,530,328
                                                                                                                                              ==========                      ==========

                     Common shares outstanding                                                                                     30,756                  30,779
                                                                                                                                   ======                  ======

    (A) Accounts receivable, net included an allowance for doubtful accounts of $8.8 million and $11.6 million at December 31, 2012 and December 31, 2011, respectively.

    (in 000's)
                                                                                                              Fiscal Year
                                                                                                             -----------
    Condensed Statements of Cash Flows                                                                 2012       2011
    ----------------------------------                                                                 ----       ----
    OPERATING ACTIVITIES:
    Net income (loss)                                                                                          $27,680            $(449,884)
    Adjustments to reconcile net income (loss) to net cash provided by operating activities:
                        Depreciation and amortization                                              26,580                30,140
                        Amortization and write-off of debt issuance costs                          13,761                16,263
                        Provision for doubtful accounts                                             4,066                 8,541
                        Equity-based compensation expense                                           7,645                 7,548
                        Windfall tax benefits associated with equity-based compensation               (88)                 (192)
                        Goodwill, intangibles and other long-lived asset impairment                19,132               643,305
                        (Gain) loss on sale of assets and businesses, net                          (8,014)              (12,536)
                        Equity in net earnings of CareCentrix, including gain on sale, net of tax   2,301               (68,381)
                        Deferred income tax expense (benefit)                                      23,513               (86,012)
    Changes in assets and liabilities, net of effects from acquisitions and dispositions:
                        Accounts receivable                                                        34,882               (39,542)
                        Prepaid expenses and other current assets                                 (15,447)               10,467
                        Current liabilities                                                       (15,979)              (54,111)
    Other, net                                                                                      5,936                  (465)
                                                                                                    -----                  ----
    Net cash provided by operating activities                                                     125,968                 5,141
                                                                                                  -------                 -----

    INVESTING ACTIVITIES:
    Purchase of fixed assets                                                                      (11,779)              (19,231)
    Proceeds from sale of businesses, net of cash transferred                                       9,220               146,315
    Acquisition of businesses, net of cash acquired                                               (22,335)                 (320)
                                                                                                  -------                  ----
    Net cash (used in) provided by investing activities                                           (24,894)              126,764
                                                                                                  -------               -------

    FINANCING ACTIVITIES:
    Proceeds from issuance of common stock                                                          3,980                 7,901
    Windfall tax benefits associated with equity-based compensation                                    88                   192
    Repayment of long-term debt                                                                   (52,943)              (63,438)
    Repurchase of common stock                                                                     (4,974)                    -
    Debt issuance costs                                                                            (4,125)              (15,460)
    Repayment of capital lease obligations                                                           (135)                 (267)
    Other                                                                                            (825)                 (673)
                                                                                                     ----                  ----
    Net cash used in financing activities                                                         (58,934)              (71,745)
                                                                                                  -------               -------

    Net change in cash and cash equivalents                                                        42,140                60,160
    Cash and cash equivalents at beginning of year                                                164,912               104,752
                                                                                                  -------               -------
    Cash and cash equivalents at end of year                                                                $207,052             $164,912
                                                                                                            ========             ========

    SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

    Interest paid                                                                                            $78,783              $78,639
    Income taxes paid                                                                                         $4,375              $38,067

                                                                                                          Fiscal Year
                                                                                                         -----------
    A reconciliation of Free cash flow to Net cash provided by operating activities follows:         2012       2011
                                                                                                     ----       ----
                        Net cash provided by operating activities                                           $125,968               $5,141
                        Less: Purchase of fixed assets                                            (11,779)              (19,231)
                        Free cash flow                                                                      $114,189             $(14,090)
                                                                                                      ===
            (in 000's)
    Supplemental Information                                                                                                                                                                                                                         4th Quarter                                          Fiscal Year
    ------------------------                                                                                                                                                                                                                         -----------                                          -----------
                                                                                                                                                                                                                                                       2012        2011                              2012         2011
                                                                                                                                                                                                                                                       ----        ----                              ----         ----
    Segment Information (2)
                             Net revenues
                             Home Health                                                                                                                                                                                                                       $237,698                          $248,944                                         $948,019                  $1,012,566
                             Hospice                                                                                                                                                                                                                187,319     200,265                           764,785      786,212
                                                                                                                                                                                                                                                    -------     -------                           -------      -------
                             Total net revenues                                                                                                                                                                                                                $425,017                          $449,209                                       $1,712,804                  $1,798,778
                             ==================                                                                                                                                                                                                                ========                                                                         ==========

                             Operating contribution (6)
                             Home Health                                                                                                                                                                                                                        $30,918                           $20,767                                         $125,445                    $126,194
                             Hospice                                                                                                                                                                                                                 30,707      35,422                           133,133      139,723
                                                                                                                                                                                                                                                     ------      ------                           -------      -------
                             Total operating contribution                                                                                                                                                                                            61,625      56,189                           258,578      265,917

                             Corporate administrative expenses                                                                                                                                                                                      (17,580)    (23,381)                          (83,700)    (115,861)
                             Goodwill, intangibles and other long-lived asset impairment (8)                                                                                                                                                              -           -                           (19,132)    (643,305)
                             Dividend income (9)                                                                                                                                                                                                          -           -                                 -        8,590
                             Depreciation and amortization                                                                                                                                                                                           (5,206)     (7,606)                          (26,581)     (30,140)
                             Gain on sale of businesses (5)                                                                                                                                                                                           2,567       1,061                             8,014        1,061
                             Interest expense and other, net (7)                                                                                                                                                                                    (22,896)    (20,268)                          (89,947)     (88,610)
                             ------------------                                                                                                                                                                                                     -------                                       -------
                             Income (loss) from continuing operations before income taxes and equity in net                                                                                                                                                     $18,510                            $5,995                                          $47,232                   $(602,348)
                             earnings of CareCentrix
                             ====================

                                                                                                                                                                                          Home Health operating contribution margin %                 13.0%        8.3%                             13.2%        12.5%
                                                                                                                                                                                              Hospice operating contribution margin %                 16.4%       17.7%                             17.4%        17.8%

                                                                                                                                                                                                                                                 4th Quarter                                       Fiscal Year
                                                                                                                                                                                                                                                 -----------                                       -----------
                             Net Revenues by Major Payer Source:                                                                                                                                                                                       2012        2011                              2012         2011
                             ------------------                                                                                                                                                                                                        ----                                          ----
                             Medicare
                             Home Health                                                                                                                                                                                                                       $187,291                          $197,574                                         $749,042                    $799,240
                             Hospice                                                                                                                                                                                                                176,524     186,047                           715,514      729,032
                                                                                                                                                                                                                                                    -------     -------                           -------      -------
                             Total Medicare                                                                                                                                                                                                         363,815     383,621                         1,464,556    1,528,272
                             Medicaid and local government                                                                                                                                                                                           17,551      19,943                            74,424       83,103
                             Commercial insurance and other:
                             Paid at episodic rates                                                                                                                                                                                                  22,472      19,568                            85,200       77,638
                             Other                                                                                                                                                                                                                   21,179      26,077                            88,624      109,765
                                                                                                                                                                                                                                                     ------      ------                            ------      -------
                             Total commercial insurance and other                                                                                                                                                                                    43,651      45,645                           173,824      187,403
                             Total net revenues                                                                                                                                                                                                                $425,017                          $449,209                                       $1,712,804                  $1,798,778
                                                                                                                                                                                                                                                               ========                          ========                                       ==========                  ==========

                                                                                                                                                                                                                                                 4th Quarter                                       Fiscal Year
                                                                                                                                                                                                                                                 -----------                                       -----------
    A reconciliation of Adjusted EBITDA to Net income attributable to Gentiva shareholders follows:                                                                                                                                                    2012        2011                              2012         2011
                                                                                                                                                                                                                                                       ----        ----                              ----         ----
                             Adjusted EBITDA (3)                                                                                                                                                                                                                $44,246                           $47,090                                         $180,548                    $199,194
                             Goodwill, intangibles and other long-lived asset impairment (8)                                                                                                                                                              -           -                           (19,132)    (643,305)
                             Dividend income (9)                                                                                                                                                                                                          -           -                                 -        8,590
                             Gain on sale of businesses (5)                                                                                                                                                                                           2,567       1,061                             8,014        1,061
                             Restructuring, legal settlement and acquisition and integration costs (6)                                                                                                                                                 (201)    (14,282)                           (5,670)     (49,138)
                                                                                                                                                                                                                                                       ----     -------                            ------      -------
                             EBITDA (6)                                                                                                                                                                                                              46,612      33,869                           163,760     (483,598)
                             Depreciation and amortization                                                                                                                                                                                           (5,206)     (7,606)                          (26,581)     (30,140)
                             Interest expense and other, net (7)                                                                                                                                                                                    (22,896)    (20,268)                          (89,947)     (88,610)
                                                                                                                                                                                                                                                    -------     -------                           -------      -------
                             Income (loss) from continuing operations before income taxes and equity in net                                                                                                                                          18,510       5,995                            47,232     (602,348)
                             earnings of CareCentrix
                             Income tax (expense) benefit (10)                                                                                                                                                                                       (6,373)     (1,239)                          (17,251)      75,768
                             Equity in net earnings of CareCentrix                                                                                                                                                                                   (3,307)     (1,201)                           (2,301)      68,381
                                                                                                                                                                                                                                                     ------      ------                            ------       ------
                             Income (loss) from continuing operations                                                                                                                                                                                 8,830       3,555                            27,680     (458,199)
                             Discontinued operations, net of tax (4)                                                                                                                                                                                      -       1,219                                 -        8,315
                                                                                                                                                                                                                                                        ---       -----                               ---        -----
                             Net income (loss)                                                                                                                                                                                                        8,830       4,774                            27,680     (449,884)
                             Less: Net income attributable to noncontrolling interests                                                                                                                                                                 (260)       (189)                             (884)        (641)
                                                                                                                                                                                                                                                       ----        ----                              ----         ----
                             Net income (loss) attributable to Gentiva shareholders                                                                                                                                                                              $8,570                            $4,585                                          $26,796                   $(450,525)
                                                                                                                                                                                                                                                                 ======                            ======                                          =======                   =========
    A reconciliation of Adjusted income from continuing operations attributable to Gentiva                                       4th Quarter                 Fiscal Year
    shareholders to Income from continuing operations follows (all items presented are net of tax): (3)
                                                                                                                        ---
        2012                                                                                                     2011                          2012  2011
        ----                                                                                                     ----                          ----  ----
                 Adjusted income from continuing operations attributable to Gentiva shareholders                                             $9,686                  $11,259            $37,679   $49,212
                 Goodwill, intangibles and other long-lived asset impairment (8)                                            -                  (635)                 (11,352) (547,753)
                 Gain on sale of CareCentrix included in equity in net earnings of CareCentrix                        (3,307)                (1,201)                  (2,301)   67,127
                 Dividend income (9)                                                                                        -                     -                        -     5,435
                 Gain on sale of businesses (5)                                                                         1,516                   631                    4,765       631
                 Cost savings, restructuring, legal settlement and acquisition and integration costs (6)                 (139)               (8,378)                  (3,385)  (29,679)
                 Tax valuation allowance on OIG legal settlement                                                          814                 1,690                    1,390    (3,813)
                                                                                                                          ---                 -----                    -----    ------
                 Income (loss) from continuing operations attributable to Gentiva shareholders                          8,570                 3,366                   26,796  (458,840)
                 Add back: Net income attributable to noncontrolling interests                                            260                   189                      884       641
                 Income (loss) from continuing operations                                                                                    $8,830                   $3,555            $27,680 $(458,199)
                                                                                                                                             ======                   ======            ======= =========

                 Adjusted income from continuing operations attributable to Gentiva shareholders per                                          $0.31                    $0.37              $1.23     $1.60
                 diluted share
                 Goodwill, intangibles and other long-lived asset impairment (8)                                            -                 (0.02)                   (0.37)   (18.06)
                 Gain on sale of CareCentrix included in equity in net earnings of CareCentrix                          (0.11)                (0.04)                   (0.08)     2.21
                 Dividend income (9)                                                                                        -                     -                        -      0.18
                 Gain on sale of businesses (5)                                                                          0.05                  0.02                     0.16      0.02
                 Cost savings, restructuring, legal settlement and acquisition and integration costs (6)                    -                 (0.27)                   (0.11)    (0.98)
                 Tax valuation allowance on OIG legal settlement                                                         0.03                  0.05                     0.04     (0.12)
                 Impact of exclusion of dilutive shares due to the anti-dilutive effect of the shares                       -                     -                        -      0.02
                                                                                                                          ---                   ---                      ---      ----
                 Income (loss) from continuing operations attributable to Gentiva shareholders per diluted share         0.28                  0.11                     0.87    (15.13)
                 Add back: Net income attributable to noncontrolling interests                                           0.01                  0.01                     0.03      0.02
                 Income (loss) from continuing operations per diluted share                                                                   $0.29                    $0.12              $0.90   $(15.11)
                                                                                                                                              =====                    =====              =====   =======

                 Operating Metrics                                                                                             4th Quarter                Fiscal Year
                                                                                                                               -----------                -----------
                 Home Health                                                                                             2012                  2011                     2012      2011
                                                                                                                         ----                  ----                     ----      ----
                 Episodic admissions                                                                                   49,300                48,900                  198,000   199,600
                 Total episodes                                                                                        71,900                71,200                  287,800   287,600
                 Episodes per admission                                                                                  1.46                  1.46                     1.45      1.44
                 Revenue per episode                                                                                                         $2,920                   $3,050             $2,900    $3,050

                 Hospice
                 Admissions                                                                                            12,600                13,000                   51,500    55,100
                 Average daily census                                                                                  13,200                14,100                   13,600    14,000
                 Patient days (in thousands)                                                                            1,213                 1,288                    4,959     5,092
                 Revenue per patient day                                                                                                       $155                     $155               $154      $154
                 Length of stay at discharge (in days)                                                                    105                    94                       96        89
                 Services by patient type:
                      Routine                                                                                              98%                   98%                      98%       97%
                      General Inpatient & Other                                                                             2%                    2%                       2%        3%

Notes:

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

<blockquote>

a. During the fourth quarter of 2011, the Company closed 34 locations (25 home health and 9 hospice) and sold 9 home health branches as a result of a comprehensive review of its branch structure, support infrastructure and other significant expenditures in response to the challenging Medicare reimbursement rate environment. During the year 2012, the Company completed the sale of eight home health and four hospice branches in Louisiana and closed four additional home health branches as part of this initiative.

The Company also completed several other acquisitions and dispositions during the year 2012.

As a result of this activity, the Company’s revenues for the fourth quarter and full year 2012 were negatively impacted by approximately $9 million and $70 million, respectively, as compared to the fourth quarter and full year 2011.

b. The full year 2012 included 366 days of activity as compared to 365 days for the year 2011 due to 29 days in February 2012 versus 28 days in February 2011.

</blockquote>

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, and interest expense and other (net), but include revenues and all other costs directly attributable to the specific segment.

3. Adjusted EBITDA, a non-GAAP financial measure, is defined as income from continuing operations before interest expense and other (net of interest income), income taxes, depreciation and amortization and excluding (i) charges relating to cost savings and other restructuring, legal settlements, and acquisition and integration activities, (ii) gain on sale of businesses, (iii) dividend income, and (iv) goodwill, intangibles 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 EBITDA presented in the Supplemental Information relates to the Company’s continuing operations.

Adjusted income from continuing operations attributable to Gentiva shareholders is defined as income from continuing operations attributable to Gentiva shareholders, excluding (i) tax reserves relating to the OIG settlement, (ii) charges relating to cost savings and other restructuring, legal settlements, and acquisition and integration activities, (iii) gain on sale of businesses, (iv) dividend income, (v) gain on sale of CareCentrix included in equity in net earnings of CareCentrix, net of tax, and (vi) goodwill, intangibles and other long-lived asset impairment.

4. Discontinued operations in 2011 consisted of the financial results of the Company’s Rehab Without Walls and IDOA businesses and the HME and IV business. Net revenues and operating results associated with these operating units for the fourth quarter and full year 2011 were as follows (dollars in thousands):

                                    4th Quarter          Fiscal Year
                                    -----------          -----------
                                           2011                 2011
                                           ----                 ----
    Net revenues                                   $183               $22,819
                                                   ====               =======

    Operating income before income
     taxes                                        $(256)               $2,430
    Gain on sale of business              2,387               11,475
    Income tax expense                     (912)              (5,590)
    Discontinued operations, net of
     tax                                         $1,219                $8,315
                                                 ======                ======

5. During the fourth quarter of 2012, the Company completed the sale of its Phoenix area hospice operations to Banner Health, an Arizona non-profit corporation, pursuant to an asset purchase agreement for cash consideration of $3.5 million.

During the second quarter of 2012, the Company completed the sale of eight home health branches and four hospice branches in Louisiana, pursuant to an asset purchase agreement, for total consideration of approximately $6.4 million. The Company received proceeds of approximately $5.9 million and established a receivable of approximately $0.5 million.

Effective May 31, 2012, the Company completed the sale of its Gentiva consulting business to MP Healthcare Partners, LLC pursuant to an asset purchase agreement, for cash consideration of approximately $0.3 million.

In connection with the sales, the Company recorded a gain on sale of businesses of approximately $2.6 million and $8.0 million for the fourth quarter and full year 2012, respectively.

6. Operating contribution and EBITDA included charges relating to cost savings and other restructuring, legal settlements and acquisition and integration activities of $0.2 million and $5.7 million for the fourth quarter and full year 2012, respectively, and $14.3 million and $49.1 million for the fourth quarter and full year 2011, respectively.

For the fourth quarter and full year 2012, the Company recorded cost savings and other restructuring costs of $0.2 million and $1.7 million, respectively. For the full year 2012, the Company recorded legal settlement reserves of $5.0 million, associated with the tentative settlement of the Wilkie wage and hour lawsuit, partially offset by a reduction in cost savings and other restructuring costs of $1.0 million, primarily relating to favorable lease settlements associated with the Company’s branch closures.

For the fourth quarter and full year 2011, the Company recorded (i) cost savings and other restructuring costs of $12.7 million and $15.2 million, respectively, (ii) legal settlement reserves of $1.0 million and $26.0 million, respectively, associated with a government investigation assumed in the Odyssey acquisition, and (iii) acquisition and integration costs of $0.6 million and $7.9 million, respectively, primarily relating to the acquisition of Odyssey HealthCare, Inc.

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

                4th Quarter            Fiscal Year
                -----------            -----------
                            2012  2011                              2012  2011
                            ----  ----                              ----  ----
    Home Health                $     -              $7.4 $5.6  $7.7
    Hospice                  0.3   2.2                               0.4   3.7
    Corporate
     expenses               (0.1)  4.7                              (0.3) 37.7
    Total                         $0.2             $14.3 $5.7 $49.1
                                  ====             ===== ==== =====

7. Interest expense and other, net for the year 2012 included charges of approximately $0.5 million relating to the write-off of deferred debt issuance costs associated with the Company’s March 6, 2012 credit agreement amendment. Interest expense and other, net for the year 2011 included charges of approximately $3.8 million relating to the write-off of deferred debt issuance costs and costs of terminating the Company’s interest rate swaps in connection with the refinancing of the indebtedness outstanding under its credit agreement.

8. During the third quarter of 2012, the Company initiated an effort to re-brand all of its branch operations under the single Gentiva name. In connection with this re-branding effort, the Company recorded a $19.1 million non-cash write-off of existing trade name balances for the year 2012.

During the third quarter of 2011, the Company performed an impairment test of its goodwill, intangibles and other long-lived assets in response to changes in our business climate, including uncertainties around Medicare reimbursement as the federal government worked to reduce the federal deficit. The Company’s impairment test indicated that the fair value of certain identifiable intangible assets, as well as goodwill, was less than their carrying values. In addition, the Company finalized its review of alternatives to replacing various field operating systems. As such, the Company recorded non-cash impairment charges of approximately $643.3 million for 2011.

9. Dividend income for the year 2011 represents a 12% cumulative preferred dividend received in connection with the sale of the Company’s preferred investment in CareCentrix in 2011.

10. The Company’s effective tax rate for adjusted income from continuing operations was a tax provision of 38.4% and 39.8% for the fourth quarter and full year 2012, respectively, as compared to 40.5% and 39.7% for the fourth quarter and full year 2011, respectively.

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: 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; 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 natural disasters, pandemic outbreaks, or terrorist acts; 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, 2011.

    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.


Source: PR Newswire