Gentiva Health Services Inc. Reports Operating Results (10-Q)
Gentiva Health Services Inc. has a market cap of $882.5 million; its shares were traded at around $29.75 with a P/E ratio of 12.4 and P/S ratio of 0.8. GTIV is in the portfolios of Chuck Royce of Royce& Associates, Kenneth Fisher of Fisher Asset Management, LLC.
Highlight of Business Operations: Effective February 1, 2010, the Company completed the sale of its HME and IV businesses to a subsidiary of Lincare Holdings, Inc., pursuant to an asset purchase agreement, for total consideration of approximately $16.4 million, consisting of (i) cash proceeds of approximately $8.5 million, (ii) approximately $2.5 million associated with operating and capital lease buyout obligations, (iii) an escrow fund of $5.0 million, which was recorded at estimated fair value of $3.2 million, to be received by the Company based on achieving a cumulative cash collections target for claims for services provided for a period of one year from the date of closing and (iv) an escrow fund of approximately $0.4 million for reimbursement of certain post closing liabilities. During the first quarter of 2010, the Company recorded a $0.1 million pre-tax gain, net of transaction costs in discontinued operations, net of tax, in the Companys consolidated statement of income.
In Hospice, Medicare revenues were $18.2 million in the first quarter of 2010 as compared to $16.3 million in the corresponding period of 2009. Medicaid revenues were $0.7 million and $0.6 million for the first quarter of 2010 and 2009, respectively. Commercial Insurance and Other revenues in the first quarter of both 2010 and 2009 were $0.7 million.
Selling, general and administrative expenses increased 16.5 percent or $19.7 million to $139.2 million for the quarter ended April 4, 2010, as compared to $119.5 million for the quarter ended March 29, 2009. If special charges as noted below relating to legal settlements and restructuring and integration costs of $15.5 million in the first quarter of 2010 and $0.9 million in the first quarter of 2009 were excluded, the increase in selling, general and administrative expenses would have been 4.3 percent or $5.1 million for the quarter ended April 4, 2010 as compared to the quarter ended March 29, 2009.
The increase of $19.7 million for the first quarter of 2010 as compared to the corresponding period of 2009 was primarily attributable to (i) the costs for legal settlements of a three year old commercial contractual dispute involving the Companys former subsidiary CareCentrix and incremental reserves associated with an agreement in principle, subject to final approvals, to resolve the government investigation that began in 2003 relating to the Companys cost reports for the 1998 to 2000 periods ($15.1 million), (ii) Home Health segment field operating and selling costs, exclusive of acquisitions, to support higher revenue volume in the 2010 period as compared to the 2009 period ($2.5 and $1.4 million, respectively), (iii) incremental costs in the 2010 period associated with acquired operations in Home Health ($1.4 million, including
$1.3 million of operating costs and $0.1 million of selling expense), (iv) Hospice field operating and selling expenses to support higher revenue volume including acquired revenue ($0.2 million), (v) corporate administrative expenses, excluding restructuring and integration costs, as noted below ($1.0 million) and (vi) depreciation and amortization ($0.3 million). These increases in costs were partially offset by decreases in (i) costs associated with home health care branches sold in 2009 ($1.3 million), (ii) restructuring and integration costs ($0.5 million, representing the difference between $0.4 million in the first quarter of 2010 and $0.9 million in the first quarter of 2009), (iii) equity-based compensation expense ($0.3 million) and (iv) reduction in provision for doubtful accounts ($0.1 million).
For the first quarter of fiscal 2010 and 2009, net interest expense and other was approximately $1.1 million and $2.4 million, respectively, consisting primarily of interest expense and other of $1.8 million and $3.2 million, respectively, associated with borrowings and fees under the credit agreement and outstanding letters of credit and amortization of debt issuance costs, partially offset by interest income of $0.7 million and $0.8 million, respectively, earned on investments and existing cash balances. Interest expense and other for the three months ended March 29, 2009 also included $0.4 million of realized loss on the Companys auction rate securities. The decrease in interest expense and other between the first quarters of 2010 and 2009 related primarily to (i) lower Eurodollar rates in the 2010 period and (ii) lower outstanding term loan borrowings in the 2010 period, offset somewhat by the realized loss noted above.
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