Gentiva Health Services, Inc. (GTIV) reported fourth-quarter 2013 adjusted loss of 14 cents per share, lagging the Zacks Consensus Estimate of earnings of 30 cents. The figure was also below the year-ago quarter’s earnings of 31 cents per share.
Declining volumes in hospitals and physician offices, along with regulatory pressures on the Hospice industry, mainly led to the deterioration.
Including cost savings, restructuring, legal settlement, acquisition and integration costs, goodwill, intangibles and other long-lived asset impairment, impact of closed locations and write-off of prepaid debt issuance costs, Gentiva posted net loss of $11.46 per share, compared with a net income of 28 cents per share in the fourth quarter of 2012.
Gentiva’s net revenue increased 14% year over year to $486.1 million. However, the number missed the Zacks Consensus Estimate of $499 million. The year-over-year improvement was largely driven by strong Community Care revenues from the Harden acquisition and an increase in home health episodic revenues.
The Home Health segment’s revenues increased 9.3% year over year to $260 million. Growth in Medicare admission was largely responsible for the increase. Despite a soft reimbursement environment and low utilization in the healthcare space, results in this segment were consistent with the last few quarters.
Meanwhile, the Hospice segment’s revenues declined 3% year over year to $180.8 million. This segment has been struggling with lower volumes. Industry headwinds like the new regulatory requirements and negative publicity in the hospice benefit segment are affecting the growth rate of this segment.
In sync with company expectations, the Community Care segment posted revenues of $46 million in the quarter. This unit is expected to increase the referral base for Home Health and Hospice to the dual eligibles and thus contribute positively to the overall company growth going ahead.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) attributable to continuing operations decreased 51.1% year over year to $21.6 million.
Full-Year Highlights
For full-year 2013, Gentiva reported adjusted earnings of 42 cents per share, which missed the Zacks Consensus Estimate of 90 cents and declined from the year-ago earnings of $1.23 per share. Results also compared unfavorably with the company guided range of 90 cents to $1.00 per share.
Including cost savings, restructuring, legal settlement, acquisition and integration costs, goodwill, intangibles and other long-lived asset impairment, impact of closed locations and write-off of prepaid debt issuance costs, Gentiva posted net loss of $18.75 per share, compared with a net income of 87 cents per share in 2012.
For full-year 2013, Gentiva’s net revenue increased 1% year over year to $1.73 billion and was within the company’s guided range. The year-over-year improvement was driven by gains from the Harden acquisition and an increase in home health episodic revenues.
Financial Update
As of Dec 31, 2013, cash and cash equivalents of Gentiva was $87 million, down from $207.1 million as of Dec 31, 2012. As of Dec 31, 2013, long-term debt of the company was $1.1 billion, as against $910.2 billion as of Dec 31, 2012.
Net cash from operating activities amounted to $37.1 million in 2013, lower than $125.9 million in 2012. For full-year 2013, free cash flow declined to $18 million from $114.2 million in 2012.
As of Dec 31, 2013, Gentiva had total assets of $1.3 billion and shareholder equity of ($300.2) million, as compared with $1.51 billion and $234.7 million, respectively, as of Dec 31, 2012.
2014 Outlook
Gentiva’s expects net revenue for 2014 to remain within $1.9–$2.1 billion. The company expects adjusted income attributable to shareholders between 85 cents and $1.15 per share. The Zacks Consensus Estimate is consistent with the upper end of the guidance at $1.15. The 2014 outlook takes into account the full-year effect of the Harden acquisition and the CMS issued 2014 Medicare home health and hospice reimbursement rates.
Our Take
Gentiva incurred loss in the fourth quarter that was mainly attributable to the challenging healthcare environment and soft volumes in the Hospice segment. However, the cost reduction initiatives implemented in the Hospice segment, the synergies from the rollout of One Gentiva and the Harden acquisition, and growth at the Community Care division position Gentiva well to meet its 2014 expectations.
The One Gentiva rollout during the quarter impacted nearly 90% of the company’s employees before the Harden acquisition. This led to a restructuring plan, wherein 46 locations were closed post which the company now consists of five regions. Each region now takes care of all three lines of business, offering comprehensive services to the company's clients.
During the quarter, the company consolidated 31 overlapping locations which is expected to boost profitability going forward. Further, the acquisition of Harden looks promising for Gentiva and is expected to drive growth going forward.
Others
AmSurg Corp.’s (AMSG) fourth-quarter 2013 earnings per share (EPS) from continuing operations climbed 22% year over year to 60 cents, marking the company’s third consecutive quarter of double-digit growth. The EPS figure also steered ahead of the Zacks Consensus Estimate of 57 cents.
DaVita HealthCare Partners Inc. (DVA) reported fourth-quarter 2013 net operating earnings of 99 cents per share, beating the Zacks Consensus Estimate by a penny.
Select Medical Holdings Corporation (SEM) reported fourth-quarter 2013 net operating earnings of 21 cents a share, beating the Zacks Consensus Estimate of 20 cents.
Zacks Rank
Gentiva carries a Zacks Rank #4 (Sell).
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