Gentiva released their 2011 Q1 results today and hosted a conference call to discuss the results. Income from continuing operations was $13.5 million, or $0.44 per diluted share, which included pre-tax restructuring, acquisition and integration costs of $3.8 million or $0.07 per diluted share. Adjusted income from continuing operations was $15.7 million or $0.51 for the first quarter of 2011. Excluding the write-off of prepaid financing fees and the costs of terminating the Company's interest rate swap contracts noted above, adjusted income from continuing operations attributable to Gentiva shareholders would have been $0.59 for the first quarter of 2011, compared to $0.65 in the corresponding period of 2010. (GTIV press release)This sounds good, but the area that is disconcerting is the miss on the revenue. Total net revenues were $458.8 million, an increase of 54% compared to $297.1 million for the quarter ended April 4, 2010. Expectations were for $473.36M (Yahoo Finance)Net revenues included home health episodic revenues of $220.4 million, a decline of 4% compared to $228.5 million in the 2010 first quarter. Hospice revenues were $195.1 million in the first quarter of 2011, compared to $19.7 million in the 2010 first quarter. Hospice represented 43% of total net revenues in the first quarter of 2011, compared to 7% in the 2010 first quarter. (GTIV press release).One negative impact to revenues was a delay in processing caused by one of the Medicare intermediaries that pushed revenue recognition from Q1 to Q2 (it was recognized in April). (Conference call)Increase fuel costs related to mileage reimbursements negatively impacted the bottom line this quarter and will continue to impact the bottom line at -$0.02 per quarter at current rates. (Conference call)Refinancing debt will save $0.06 per quarter . (Conference Call)Admissions growth is increasing, but the death & discharge rate this quarter was higher than expected even accounting for Jan and Feb normally having the highest D&D rate. (conference call) It remains to be seen if this trend continues or is corrected.Reimbursement rates pressured margins and remain uncertain in the future. As per the conference call, GTIV and other industry leaders are "working with" CMS to meet the intent of the legislative requirements without overtaxing the hone health care providers. (conference call)GTIV's revised sales and corresponding incentive plans are paying off according to GTIV, but no concrete evidence of this was provided. That doesn't necessarily mean that it isn't working; just that I have nothing to point to document the success.the face-to-face requirements for home health care/hospice (patient must see a doctor at some point) do not seem to be impacting GTIV. A majority of their patients are referred to them by a doctor thus meeting the face-to-face requirement. The issue seems to be more the documentation of the face-to-face meeting which seems like it can be resolved, although it is likely to be a pain in the butt for the GTIV. The doctors do not always feel it is their obligation since they will not be monitoring GTIV's patients. (conference call)GTIV maintained their guidance for FY11 at $2.70 to $2.80 per share.It seems that the potential for upside surprises in the coming quarters is pretty good. I believe that the drop in oil today will help--I think that oil prices will remain around $100 per barrel which should keep the mileage reimbursement costs in check. Add in the refinancing savings and the upside looks pretty good. The downside risks are reimbursement rates and the death and discharge rate. Seeing where these are at next quarter ought to give us a better feel for GTIV's prospects.I am long GTIV.
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