GTIV

Gentiva Health Services, Inc. (GTIV)

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Gentiva Health Services, Inc. (GTIV)

Q4 2012 Earnings Conference Call

February 7, 2013 09:00 ET

Executives

John Camperlengo - General Counsel

Tony Strange - Chairman and Chief Executive Officer

Eric Slusser - Chief Financial Officer

Analysts

Darren Lehrich - Deutsche Bank

Kevin Ellich - Piper Jaffray

Sheryl Skolnick - CRT Capital Group

Whit Mayo - Robert Baird

Ralph Giacobbe - Credit Suisse

Presentation

Operator

Good morning. My name is Christie, and I will be your conference operator today. At this time, I would like to welcome everyone to the Gentiva Health Services Fourth Quarter and Full Year 2012 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. (Operator Instructions) As a reminder, the conference call is being recorded today, February 7, 2013.

It is now my pleasure to turn the floor over to John Camperlengo, General Counsel. Sir, you may begin your conference.

John Camperlengo - General Counsel

Thank you, Christie, and good morning, everyone. And welcome to Gentiva’s fourth quarter and full year 2012 earnings conference call. Speaking on the call today are Tony Strange, our Chairman and CEO; and Eric Slusser, our CFO.

We hope that each of you had a chance to review the company’s earnings report, which was released this morning. All statements made during this call relating to future results and events are forward-looking statements that are based on our current expectations. Actual results could differ materially from those projected in forward-looking statements because of number of risk factors and uncertainties, which are discussed in our annual and quarterly SEC filings and in the cautionary statements contained in our press release and on our website.

Our call today will be consistent with the SEC’s Regulation FD. We encourage participants to ask their questions during the call since we have certain limitations on comments that could be made in individual inquiries. Today’s call also conforms to Regulation G regarding the reconciliation of GAAP and non-GAAP disclosures. As a result, we will not discuss non-GAAP financial measures on this call, except for those set forth in our press release. You may access a telephone replay of this call later today, through February 14.

A transcript of the call will be posted to our website and will be available for the next 12 months. Following today’s prepared remarks, we will open the call to questions. Please limit your initial comments to one question and one follow-up so we can accommodate as many callers as possible in the allotted time.

With that, I’ll turn the call over to Gentiva’s Chairman and CEO, Tony Strange.

Tony Strange - Chairman and Chief Executive Officer

Thank you, John and good morning everyone. Thank you for joining our fourth quarter 2012 earnings call. Overall, I am pleased as continued strong home health volume growth, good expense management, and very strong cash flows drove our results.

Our fourth quarter results capped the year in which we exceeded the earnings guidance that we established at the beginning of the year despite continued low levels of healthcare utilization across all sectors and very tough regulatory environment. Equally as important, we significantly increased our financial flexibility during the year by generating strong cash flows and amending our credit agreement. And despite the difficult operating environment, we continued to invest heavily in our clinical delivery model and our sales infrastructure to ensure that we are positioned for long-term success.

From an industry perspective, I am very pleased with how we came together this past year to promote the value of home health and hospice services in Washington. While this work is never done, we have come a long way these past few years in getting our messages understood and we enter 2013 with a solid plan to continue these efforts. Today, I am going to focus my comments on our fourth quarter and full year results, key activities in DC, and then I’ll wrap up with some thoughts on our priorities heading into 2013.

So, let’s jump right into our results. For the fourth quarter, revenues from continuing operations were $425 million and adjusted EBITDA from continuing operations was $44 million producing earnings of $0.32 per diluted share, which include a $0.01 impact from Hurricane Sandy. Our adjusted EBITDA margins were 10.4% for the quarter. Full year EPS from continuing operations was $1.27 per diluted share and adjusted EBITDA from continuing operations was $180 million or 10.5% of revenues.

Looking first at our Home Health division, revenues from continuing operations for the quarter were $238 million and EBITDA from continuing operations was $31 million or 13%. Margins were slightly impacted during the quarter by a higher benefit and labor expenses as well as the addition of 40 new sales FTEs as we ramp up for continued growth in 2013. Full year adjusted EBITDA from continuing operations was $131 million or 14% of net revenues.

During the quarter year-over-year episodic volumes and admissions grew 5% excluding the impact of closed or sold locations. This marks the sixth consecutive quarter of at least mid-single digit admission growth, as the sales investments that we’ve made over the last couple of years have produced solid and consistent results. For the full year admissions grew 5% and episodes grew 6% excluding the impact of the closed and sold locations. Given the softness in hospital and physician volumes that we have seen all year, I am very proud of these results. I am extremely pleased with the performance of our Home Health division overall. They have grown their business in a difficult time, they have done a great job with expense management and most importantly they have delivered consistent quality care to the patients that we serve.

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