Management and operational overview:
Gentiva’s recent divestitures of their infusion therapy and HME divisions to Lincare were a result of the company’s continued desire to realign its focus on Medicare home health and hospice. For the last 3 years, their primary strategic initiatives are same-store organic growth and growth through acquisition. Following these initiatives are strong HR (recruitment, retention, productivity), investing in training and education for their specialty programs, seeking operating leverage through found efficiency and finally, the implementation of new technology to support the previous initiatives. Gentiva is now testing LifeSmart, a new PDA based tablet/notebook technology, in 10% of their branches as part of a technology push. While the rollout of the technology will take some time to implement in their over 400 agencies, margin improvements should follow what was seen with AMED. Currently AMED’s EBITDA margin sits at 17.1% compared to GTIV’s 10.8%. Much of this can be contributed to the superior technology platform at AMED. The company added over 700 new caregivers in 2009. They also continued to convert many of their caregivers to full time pay-per-visit status, positively affecting capacity by rewarding appropriate productivity. Gentiva finished the year with 450 specialty programs, 118 of which launched in 2009. Medicare revenues derived through their specialty programs now accounts for 40% of overall home health Medicare revenue. Gentiva also believes these specialty programs have helped them on them on the recruit front.

Merger & Acquisition/Expansion Plans:
During the fourth quarter Gentiva reduced their leverage ratio to 1.7 times down from 2.2x in 2008. While reducing debt, they were able to build cash that was used to acquire 5 small companies in 09. The acquisitions added a 1% growth in episodic admissions. With immediate threats to reimbursement for 2010 diminishing, Gentiva expects the pace of consolidation to accelerate and the company is ready to use its balance sheet for targeted acquisitions in home health and hospice. CEO Tony Strange expects little volatility from valuations in 2010. Mr. Strange thinks future uncertainties have both a positive and negative effect on valuations, leaving multiples in a steady range. Until the reimbursement uncertainties are clear, larger deals will remain on the sidelines in 2009. Management is confident in seeing some larger acquisition opportunities in 2010, as most owners realize premium valuations are no longer available for the foreseeable future.

Financial Overview:
Net Revenues for the Q410 grew 16% and adjusted net income grew 54%. Gentiva attributed the growth to an 11% increase in episodic admissions. Revenue per episode was up 4.3% YoY and 1% QoQ at $3,190. Continuing operations revenues grew 14% YoY due to a 23% increase in episodic revenue growth rate. This was primarily due to the company’s continued effort to push out their specialty programs. The company experienced an 18% EBITDA growth YoY due to their pay-per-visit staffing conversion and continued leverage of operational efficiencies. Gross margins for Gentiva’s Home Health sector were 52.5% up from 52.2% for both YoY and QoQ, respectively.. DSO declined by three days to 54 days YoY/ Gentiva’s guidance for 2010 projected Capital Expenditures for 2010 between $15-$17M, much of the CapEx going to the rollout of their technology platform to the rest of their agencies.