Gentiva’s income from continuing operations excludes net restructuring, legal settlement and merger and acquisition costs of $2.5 million or $0.08 per share in the reported quarter and $0.6 million or $0.02 per share of restructuring and merger and acquisition costs in the prior year quarter. The results also exclude after-tax losses on discontinuing operations of $1.3 million or $0.04 per share and $0.3 million or $0.01 per share in the reported and prior year quarters, respectively.
Including these one-time costs, Gentiva reported a net income of $18.9 million or $0.62 per share as opposed to $17.1 million or $0.58 per share.
Behind the Headlines
Total net revenues for the quarter climbed 4.0% year over year to $297.1 million as against $284.8 million in the prior year quarter. Revenues from the Home Health Episodic segment increased 7% year over year to $228.7 million in the reported quarter. Revenues in the Hospice segment came in at $20.9 million, which reflected a year-over-year increase of approximately 14%.
Gentiva witnessed selling, general and administrative expenses of $125.5 million in the reported quarter from $120.5 million in the year-ago quarter. Gentiva’s gross profit for the reported quarter climbed 7.4% year over year to $161.9 million.
Adjusted earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) attributable to continuing operations increased 23.4% to $43.2 million from $35.0 million in the prior year quarter. Adjusted EBITDA as a percentage of net revenues improved to 14.5% as against 12.3% in the prior-year period. Adjusted EBITDA excludes net charges associated with restructuring, legal settlements and merger and acquisition activities.
Gentiva exited the quarter ending July 4 with cash and cash equivalents of approximately $191.1 million and outstanding debt under its credit agreement of $232.0 million. Cash and cash equivalents of Gentiva were $152.4 million and outstanding debt under its credit agreement were $232.0 million at the end of January 3, 2010.
As of July 4, 2010, Gentiva had total assets of $1.1 billion and shareholders’ equity of $604.8 million.
Outlook for Fiscal 2010
On July 20, Gentiva released its preliminary results and reiterated its fiscal 2010 outlook for adjusted income from continuing operations and reduced the revenue guidance for fiscal 2010.
Gentiva continues to expect adjusted income from continuing operations in the range of $2.67-$2.75 per share for fiscal 2010, excluding the costs of restructuring, legal settlements and merger and acquisition activities, the results of discontinued operations and the impact of pending and future acquisitions.
However, Gentiva has slashed its full-year revenue guidance due to slower-than-anticipated growth in home health episodic volumes and the expected seasonality in third quarter volumes. Gentiva now provides a revenue outlook in the range of $1.20 billion-$1.23 billion, down from $1.23 billion-$1.26 billion, projected previously.
Gentiva, however, expects to further revise its fiscal 2010 outlook after the completion of the Odyssey Healthcare Inc. (ODSY) acquisition expected during the third quarter of 2010.
Following the acquisition, the combined firm is projected to earn about $1.8 billion in annual revenues, dramatically up from $1.15 billion earned by Gentiva alone in 2009.
Further, management expects 60% of revenues to come from home healthcare and the remainder from hospice care. Going forward, Gentiva anticipates the impact of the deal to be accretive to operating earnings within the first year, although certain one-time charges are also projected.
Gentiva also acquired the assets of United Home Care Group, a Medicare certified home health services business in May to expand its presence in Louisiana.
However, this deal is projected to have a neutral impact on Gentiva’s earnings in 2010 but beyond 2010, it is expected to be accretive to earnings.
Our Take
The health care providing industry is consolidating through a flood of mergers and acquisitions (M&A) of home health and hospice providers. Gentiva has acquired United Home and we now expect more M&A activities in this space, particularly after the reimbursement rate cuts that are being introduced under healthcare reforms.
Gentiva’s diversified product portfolio is impressive and its history of generating significant leverage on acquisitions and modestly strong fundamentals inspire our optimism about the stock.
The quantitative Zacks #3 Rank for Gentiva denotes a short-term Hold rating, indicating no clear directional pressure on the shares over the near term.
Zacks Investment Research© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
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