ODSY Odyssey Healthcare (MM)

Odyssey HealthCare, Inc. (NASDAQ: ODSY), one of the largest providers of hospice care in the United States, today announced financial results for the three and six months ended June 30, 2010.

On May 24, 2010, Odyssey HealthCare and Gentiva Health Services, Inc. (NASDAQ: GTIV) announced that they had entered into a definitive merger agreement whereby Gentiva will acquire Odyssey in an all cash merger transaction for a price per share of Odyssey common stock of $27.00 in cash, without interest. The transaction is expected to close during the month of August, subject to the satisfaction of standard closing conditions, including approval by Odyssey’s stockholders at a special meeting to be held on August 9, 2010.

For the second quarter of 2010, net patient service revenue from continuing operations increased 3.5% to $176.2 million, compared with $170.3 million for the second quarter of 2009. The Company’s net income attributable to Odyssey stockholders for the second quarter of 2010 was $14.0 million, or $0.41 per diluted share, as compared with $8.5 million, or $0.26 per diluted share, for the second quarter of 2009. The Company’s EBITDA from continuing operations for the second quarter of 2010 was $26.3 million, compared with $17.4 million for the second quarter of 2009.

For the six months ended June 30, 2010, net patient service revenue from continuing operations was $347.7 million, compared with $337.8 million for the same six-month period in 2009. The Company’s net income attributable to Odyssey stockholders for the six months ended June 30, 2010, was $27.4 million, or $0.80 per diluted share, as compared with $17.2 million, or $0.52 per diluted share, for the same period of 2009. The Company’s EBITDA from continuing operations for the first six months of 2010 was $51.4 million as compared with $34.5 million for the first six months of 2009.

Conference Call

Due to the aforementioned pending merger, Odyssey will not be hosting a conference call this quarter.

Based in Dallas, Texas, Odyssey is one of the largest providers of hospice care in the country in terms of both average daily patient census and number of locations. Odyssey seeks to improve the quality of life of terminally ill patients and their families by providing care directed at managing pain and other discomforting symptoms and by addressing the psychosocial and spiritual needs of patients and their families.

Earnings before interest, taxes, depreciation and amortization (“EBITDA”) is a non-GAAP financial measure included in this press release and is reconciled to the comparable GAAP financial measure in the tables attached to this press release.

Additional Information

Odyssey HealthCare, Inc. (the “Company”) filed a definitive proxy statement with the Securities and Exchange Commission (the “SEC”) on July 9, 2010 and intends to file other relevant materials in connection with the acquisition in due course. The definitive proxy statement has been sent or given to the stockholders of the Company. Before making any voting or investment decision with respect to the acquisition, investors and stockholders of the Company are urged to read the proxy statement and the other relevant materials because they contain important information about the acquisition. The proxy statement and other relevant materials, and any other documents filed by the Company with the SEC, may be obtained free of charge from the Company by directing a request to the Company’s Investor Relations Department at toll free phone number 888-922-9711, email address InvestorRelations@odsyhealth.com or through the Company Web site www.odsyhealth.com under “Investor Relations — InfoRequest.”

Participants in the Solicitation

The Company and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the Company’s stockholders in connection with the merger. Information about the Company’s directors and executive officers is set forth in the Company’s proxy statement on Schedule 14A filed with the SEC on April 5, 2010 and the Company’s Annual Report on Form 10-K filed on March 10, 2010. Additional information regarding the interests of participants in the solicitation of proxies in connection with the merger is included in the Company’s proxy statement.

Forward-looking Statements

Certain statements contained in this press release are forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements are based on management’s current expectations and are subject to known and unknown risks, uncertainties and assumptions which may cause the forward-looking events and circumstances discussed in this press release to differ materially from those anticipated or implied by the forward-looking statements. The Company faces additional risks, uncertainties and assumptions associated with the Agreement and Plan of Merger, dated as of May 23, 2010, among the Company, Gentiva Health Services, Inc. and GTO Acquisition Corp. (attached as Exhibit 2.1 to the Company’s Current Report on Form 8-K as filed with the Securities and Exchange Commission on May 24, 2010). Such risks, uncertainties and assumptions include, but are not limited to, the ability to obtain regulatory approval for the transaction; the expected timing of the completion of the transaction; management plans regarding the transaction; the inability to complete the transaction due to the failure to satisfy the conditions required to complete the transaction; the risk that the businesses of the Company and Gentiva will not be integrated successfully, or will take longer than anticipated; the risk that expected cost savings from the transaction will not be achieved or unexpected costs will be incurred; any statements of the plan, strategies and objectives of management for future operations; the risk that disruptions from the transaction will harm relationships with employees, referral sources, patients and suppliers; and the outcome of litigation and regulatory proceedings to which we may be a party. Many of these factors are beyond the ability of the Company to control or predict. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements, which reflect management’s views only as of the date hereof. The Company undertakes no obligation to revise or update any of the forward-looking statements or publicly announce any updates or revisions to any of the forward-looking statements contained in this press release to reflect any change in the Company’s expectations with regard thereto or any change in events, conditions, circumstances or assumptions underlying such statements.

   

ODYSSEY HEALTHCARE, INC. AND SUBSIDIARIESUNAUDITED SELECTED OPERATING DATA

  Three Months Ended

June 30,

Six Months Ended

June 30,

2010   2009 2010   2009 Continuing Operations:(1) Admissions 12,469 12,531 25,213 25,233 Discharges 12,245 12,159 24,937 24,884 Average daily census 12,588 12,268 12,456 12,227 Discharge average length of stay 80.4 78.8 83.5 81.0 Gross revenue per patient day $ 158.78 $ 155.56 $ 159.00 $ 156.78 Medicare cap as % of gross revenue 0.9 % (0.6 %) 0.8 % 0.1 % Net revenue per patient day $ 153.84 $ 152.54 $ 154.23 $ 152.65 Operating expense per patient day $ 132.38 $ 138.59 $ 133.01 $ 138.42 Adjusted operating expense per patient day(2) $ 130.89 $ 136.98 $ 131.45 $ 137.07 Bad debt expense as % of net revenue 0.5 % 1.5 % 0.7 % 1.4 %   Same-Facility:(3) Admissions 12,446 12,531 25,156 25,233 Average daily census 12,538 12,268 12,404 12,227 Average length of stay 80.2 78.8 83.4 81.0  

(1)

Continuing operations excludes the operations of hospices that the Company classifies as discontinued operations.

(2)

Adjusted operating expense per patient day for the three months ended June 30, 2010, excludes depreciation and amortization expenses of $1.46 and $0.03 per patient day of care, respectively. Adjusted operating expense per patient day for the three months ended June 30, 2009, excludes depreciation and amortization expenses of $1.55 and $0.06 per patient day of care, respectively. Adjusted operating expense per patient day for the six months ended June 30, 2010, excludes depreciation and amortization expenses of $1.52 and $0.04 per patient day of care, respectively. Adjusted operating expense per patient day for the six months ended June 30, 2009, excludes depreciation and amortization expenses of $1.29 and $0.06 per patient day of care, respectively.

(3)

Same-facility information includes Odyssey hospice programs that have been in operation for the entire period of each period presented and Medicare certified for at least 12 months.

     

ODYSSEY HEALTHCARE, INC. AND SUBSIDIARIESUNAUDITED CONSOLIDATED STATEMENTS OF INCOME(in thousands, except per share amounts)

  Three Months Ended

June 30,

Six Months Ended

June 30,

2010   2009 2010   2009 Net patient service revenue $ 176,227 $ 170,295 $ 347,723 $ 337,827 Operating expenses: Direct hospice care 98,032 99,444 194,433 197,899 General and administrative – hospice care 31,913 34,131 64,607 67,931 General and administrative – support center 19,110 16,841 34,911 32,646 Provision for uncollectible accounts 877 2,506 2,410 4,869 Depreciation 1,673 1,731 3,418 2,860 Amortization   38     70     96     141   Income from continuing operations before other income (expense) 24,584 15,572 47,848 31,481   Other income (expense): Interest income 103 121 170 287 Interest expense   (1,434 )   (1,606 )   (2,872 )   (3,491 )   (1,331 )   (1,485 )   (2,702 )   (3,204 ) Income from continuing operations before provision for income taxes 23,253 14,087 45,146 28,277 Provision for income taxes   8,975     5,065     17,090     10,347   Income from continuing operations 14,278 9,022 28,056 17,930

Loss from discontinued operations, net of income taxes

  (71 )   (422 )   (197 )   (475 ) Net income 14,207 8,600 27,859 17,455 Less: Net income attributable to noncontrolling interests   229     81     482     217   Net income attributable to Odyssey stockholders $ 13,978   $ 8,519   $ 27,377   $ 17,238     Income (loss) per common share: Basic: Continuing operations attributable to Odyssey stockholders $ 0.42 $ 0.27 $ 0.82 $ 0.54 Discontinued operations attributable to Odyssey stockholders   –     (0.01 )   –     (0.02 ) Net income attributable to Odyssey stockholders $ 0.42   $ 0.26   $ 0.82   $ 0.52   Diluted: Continuing operations attributable to Odyssey stockholders $ 0.41 $ 0.27 $ 0.81 $ 0.54 Discontinued operations attributable to Odyssey stockholders   –     (0.01 )   (0.01 )   (0.02 ) Net income attributable to Odyssey stockholders $ 0.41   $ 0.26   $ 0.80   $ 0.52     Weighted average shares outstanding: Basic 33,624 32,905 33,485 32,853 Diluted 34,465 33,059 34,114 33,020   Amounts attributable to Odyssey stockholders:

Income from continuing operations, net of income taxes

$ 14,049 $ 8,941 $ 27,574 $ 17,713

Loss from discontinued operations, net of income taxes

  (71 )   (422 )   (197 )   (475 )

Net income

$ 13,978   $ 8,519   $ 27,377   $ 17,238      

ODYSSEY HEALTHCARE, INC. AND SUBSIDIARIESUNAUDITED CONSOLIDATED BALANCE SHEETS(in thousands, except share amounts)

  June 30,

2010

Dec. 31,

2009

ASSETS Current assets: Cash and cash equivalents $ 164,501 $ 128,632

Accounts receivable from patient services, net of allowance for uncollectible accounts of $11,903 and $12,462 at June 30, 2010, and December 31, 2009, respectively

102,984 110,593 Income taxes receivable 4,023 352 Deferred tax assets 10,219 10,235 Prepaid expenses and other current assets   5,770     6,017   Total current assets 287,497 255,829 Property and equipment, net of accumulated depreciation 19,064 20,700 Deferred loan costs, net 2,669 3,033 Long-term investments – 12,425 Intangibles, net of accumulated amortization 19,155 19,251 Goodwill   192,390     191,766   Total assets $ 520,775   $ 503,004     LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 3,586 $ 4,016 Accrued compensation 27,675 31,729 Accrued nursing home costs 17,347 18,144 Accrued Medicare cap contractual adjustments 13,690 18,798 Income taxes payable – 1,504 Other accrued expenses 44,681 42,683 Current maturities of long-term debt   33,340     38,675   Total current liabilities 140,319 155,549 Long-term debt, less current maturities 77,128 76,527 Deferred tax liability 15,261 15,171 Other liabilities 2,687 4,597 Commitments and contingencies – – Equity: Odyssey stockholders’ equity: Common stock, $0.001 par value: 75,000,000 shares authorized, 39,032,364 and 38,549,833 shares issued at June 30, 2010, and December 31, 2009, respectively 39 39 Additional paid-in capital 131,849 125,716 Retained earnings 221,808 194,431 Accumulated other comprehensive loss, net of income taxes (763 ) (1,481 )

Treasury stock, at cost, 5,347,072 shares held at June 30, 2010 and December 31, 2009

  (69,954 )   (69,954 ) Total Odyssey stockholders’ equity 282,979 248,751 Noncontrolling interests   2,401     2,409   Total equity   285,380     251,160   Total liabilities and equity $ 520,775   $ 503,004    

ODYSSEY HEALTHCARE, INC. AND SUBSIDIARIESUNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)

  Six Months Ended

June 30,

2010   2009 Operating Activities: Net income attributable to Odyssey stockholders $ 27,377 $ 17,238 Adjustments to reconcile net income to net cash provided by operating activities and discontinued operations: Loss from discontinued operations, net of income taxes 197 475 Net income attributable to noncontrolling interests 482 217 Loss on disposal of property and equipment 3 – Depreciation and amortization 3,514 3,001 Amortization of deferred loan costs 364 364 Share-based compensation expense 3,357 2,455 Deferred income taxes (321 ) 3,624 Provision for uncollectible accounts 2,410 4,869 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable from patient services 5,193 (3,414 ) Prepaid expenses and other current assets (3,590 ) 692 Accounts payable, accrued nursing home costs, accrued Medicare cap contractual adjustments and other accrued expenses   (13,421 )   (7,991 ) Net cash provided by operating activities and discontinued operations   25,565     21,530     Investing Activities: Cash paid for acquisitions, net of cash acquired (566 ) (205 ) Sales of auction rate securities 13,000 – Purchases of property and equipment, net   (1,804 )   (3,351 ) Net cash provided by (used in) investing activities   10,630     (3,556 )   Financing Activities: Proceeds from exercise of stock options 2,460 43 Cash paid for partnership distributions (490 ) (148 ) Tax benefit (expense) from share-based compensation 2,438 (8 ) Payments on credit facility   (4,734 )   (3,197 ) Net cash used in financing activities   (326 )   (3,310 )   Net increase in cash and cash equivalents 35,869 14,664 Cash and cash equivalents, beginning of period   128,632     56,043   Cash and cash equivalents, end of period $ 164,501   $ 70,707      

ODYSSEY HEALTHCARE, INC. AND SUBSIDIARIESUNAUDITED EBITDA RECONCILIATION(in thousands)

 

This press release includes the non-GAAP financial measure of EBITDA. The following table reconciles this non-GAAP financial measure to net income attributable to Odyssey stockholders, which Odyssey believes is the most comparable GAAP financial measure:

 

Three Months EndedJune 30,

Six Months EndedJune 30,

2010   2009 2010   2009 Net income attributable to Odyssey stockholders $ 13,978 $ 8,519 $ 27,377 $ 17,238 Add:

Net income attributable to noncontrolling interests

229 81 482 217

Loss from discontinued operations, net of income taxes

71 422 197 475 Provision for income taxes 8,975 5,065 17,090 10,347 Interest expense 1,434 1,606 2,872 3,491 Interest income (103 ) (121 ) (170 ) (287 ) Depreciation 1,673 1,731 3,418 2,860 Amortization   38     70     96     141   EBITDA $ 26,295   $ 17,373   $ 51,362   $ 34,482