2014

Almost Family Reports Third Quarter 2012 Results SEC Staff closes investigation with no actions; Court dismisses shareholder suit

LOUISVILLE, Ky., Nov. 6, 2012 /PRNewswire/ -- Almost Family, Inc. (Nasdaq: AFAM), a leading regional provider of home health nursing and personal care services, announced today its financial results for the three and nine month periods ended September 30, 2012.

Highlights:

  • Net service revenues of $85 million for the quarter
  • Net income was $4.1 million, or $0.44 per diluted share
  • Diluted EPS includes $0.02 for transaction related costs, excluding which diluted EPS would have been $0.46
  • Visiting Nurse segment net revenues were $66 million, on 2% admission growth overall, including 5% in Florida
  • Personal Care segment net revenues grew to $19 million from a combination of the Cambridge acquisition and 5% organic volume growth
  • Investors encouraged to consider possible implications of Hurricane Sandy on fourth quarter results

Comments on Results
William Yarmuth, Chief Executive Officer, commented on the results: "Our results for the third quarter reflect the impact of normal seasonality in our VN segment along with an apparent slowing in health care utilization nationwide.  While external market conditions continue to be somewhat challenging, we are continuing to focus on improving the organic growth of our business.  We have been extremely pleased with the success of our operators in tightly managing the efficiencies of their business units delivering meaningful year over year cost savings in the VN segment."

With regard to the U.S. Securities and Exchange Commission (SEC) development described in more detail below, Yarmuth added:  "We continue to be very proud of our track record of sound compliance and the absence of any findings of wrongdoing at Almost Family by any of the investigatory bodies that began probing us and others in the industry in mid-2010.  I am extremely proud of the way our management team, and most importantly our caregivers, have refused to allow any of this to detract from our Senior Advocacy mission of providing the highest quality care to our patients."

Third Quarter Financial Results
Almost Family reported third quarter results that included the impact of the 2012 Medicare reimbursement rate cut in the Visiting Nurse (VN) segment.  The Medicare rate cuts reduced revenue and operating income by $2.7 million and earnings per diluted share by $0.17, while a change in certain Medicare Advantage plans paying on a per visit versus episodic basis reduced revenue by $0.8 million and earnings per diluted share by $0.03.  While total VN admissions increased approximately 2% and traditional Medicare episodic admissions increased approximately 1%, total Medicare episodic admissions declined 2.5% primarily as a result of certain Medicare Advantage plans switching from episodic to per visit payment models. 

The Company's earnings were favorably impacted by efforts to improve its operating efficiencies and the inclusion in the quarter of a full three months of the Cambridge Home Health Care Holdings, Inc. (Cambridge) acquisition, which closed in early August of 2011.  Improvements in operating efficiencies, principally in the VN segment, improved earnings per diluted share by $0.17.

Net service revenues for the third quarter were $85.1 million, a 1% decrease from $86.2 million reported in the third quarter of 2011, primarily as a result of the VN segment's Medicare rate cut, partially offset by the Cambridge acquisition.

Net income for the third quarter of 2012 was $4.1 million, or $0.44 per diluted share, down from third quarter of 2011 net income of $4.8 million, or $0.52 per diluted share.

The effective tax rate of 39.5% in the third quarter of 2012 was consistent with the 39.4% for the third quarter of 2011.

SEC and Legal Developments
Since our last quarterly report the Company has received two favorable determinations with respect to previously disclosed regulatory inquiries and litigation.  On November 2, 2012, the Company and those affected executive officers and members of its board of directors were all notified by the SEC Staff that it has concluded its investigation and does not intend to recommend enforcement action to the Commission.  Separately, on October 2, 2012 the judge in certain shareholder derivative actions in Kentucky state court granted the Company's motion for dismissal.  Although the plaintiffs have appealed that ruling, the Company intends to vigorously defend the appeal of the ruling.

As previously disclosed, an April 2010 newspaper article reporting on home health care delivery practices in the industry and at the Company triggered inquiries to the Company from the U.S. Senate Finance Committee (SFC), followed by the SEC.  These were in turn followed by shareholder litigation making various claims related to the newspaper article against the Company, its board of directors and certain of its officers.  As also previously disclosed, in its October 2011 report, the SFC found no wrongdoing with regard to Almost Family and, on February 10, 2012, the judge in certain shareholder actions in Federal court granted the Company's motion for dismissal. 

Refer to the Company's filings on Forms 10-K for 2011 and 10-Q for 2012 for a more complete background of the matters described in this section. 

Possible Impact of Hurricane Sandy
Approximately 25% of our VN segment operations are located in the northeastern U.S. (New Jersey, Connecticut and Massachusetts), areas impacted by Hurricane Sandy which struck in late October 2012.  While we are currently unable to predict to the extent, if any, it is reasonable to expect that this significant weather event may have a detrimental impact on our operating results for the quarter and thus the year ending December 31, 2012.

Third Quarter Segment Results
VN segment third quarter results include the unfavorable impact of the Medicare rate cuts as well as the change of certain Medicare Advantage payors to per visit reimbursement.  As a result, VN segment third quarter net service revenues declined 6% to $65.9 million, from $69.9 million in the third quarter of 2011, while operating income before corporate expenses for the third quarter of 2012 declined to $8.9 million from $10.2 million reported for the third quarter of 2011.  Total admissions grew 2%, substantially all organic.  Organic VN admission growth in Florida was 5%.

Primarily as a result of our Cambridge acquisition, Personal Care (PC) segment net service revenues grew 18% or $2.9 million in the third quarter of 2012 to $19.2 million from $16.3 million in the third quarter of 2011, while operating income before unallocated corporate expenses increased 5%, or $0.1 million to $2.8 million in the third quarter of 2012. 

Nine Month Period Ended September 30, 2012
Almost Family reported nine month results that included: i) the favorable impact of a full nine months of operations from our Cambridge acquisition, which closed in early August of 2011, ii) the unfavorable impact of the 2012 Medicare reimbursement rate cut and the shift of certain Medicare Advantage payors to per visit reimbursement in the VN segment, iii) the unfavorable impact of higher than normal health insurance and workers compensation costs which lowered EPS by $0.09 and iv) the unfavorable impact of higher bad debt provision which lowered EPS by $0.04.  The Medicare rate cuts reduced revenue and operating income by $8.4 million and earnings per diluted share by $0.55.

Net income for the nine month period of 2012 was $13.6 million, or $1.46 per diluted share, down from the nine month period of 2011 net income of $15.5 million, or $1.66 per diluted share.  Fees and expenses related to governmental inquiries did not impact the 2012 nine month period, while lowering the 2011 nine month period EPS by approximately $0.07.  Deal costs lowered year to date 2012 and 2011 EPS by approximately $0.03.

Nine Month Period Segment Results
Net service revenues in the VN segment for the nine month period declined to $204.2 million, a 4.5% decrease from $213.8 million in the nine month period of 2011, after the effect of the previously mentioned Medicare rate cut and lower Medicare volumes.  Total admissions grew 3%, of which 2% was organic. 

Operating income before corporate expenses in the VN segment for the nine month period of 2012 was $30.7 million, a $4.3 million decrease from $35.0 million reported for the nine month period of 2011, primarily as a result of the impact of the Medicare rate cut and a $0.9 million increase in bad debt provision, both of which were partially offset by a focused effort to reduce labor costs relative to patients served.

Primarily as a result of our Cambridge acquisition, net service revenues in the PC segment for the nine month period of 2012 grew 57% or $21.0 million to $57.8 million from $36.7 million in the nine month period of 2011.  As a result, operating income before unallocated corporate expenses in the PC segment increased 40% to $7.6 million from $5.4 million in the nine month period of 2011. 

Conference Call
A conference call to review the results will begin at 11:00 a.m. ET on November 6, 2012, and will be hosted by William Yarmuth, Chief Executive Officer, and Steve Guenthner, President and Principal Financial Officer. To participate in the conference call, please dial 1-877-407-4018 (USA) or 1-201-689-8471 (International).  In addition, a dial-up replay of the conference call will be available beginning November 6, 2012 at 2:00 p.m. ET and ending on November 30, 2012. The replay telephone number is 1-877-870-5176 (USA) or 1-858-384-5517 (International). Passcode 403361.  A live Web cast of the call will also be available from the Investor Relations section of the corporate Web site at http://www.almostfamily.com. A Web cast replay can be accessed on the corporate Web site beginning November 6, 2012 at approximately 2:00 p.m. ET and will remain available until November 30, 2012.

 ALMOST FAMILY, INC. AND SUBSIDIARIES 

 CONSOLIDATED STATEMENTS OF INCOME 

 (UNAUDITED) 

 (In thousands, except per share data) 










 Three Months Ended September 30, 


 Nine months Ended September 30, 


2012


2011


2012


2011

 Net service revenues 

$ 85,128


$ 86,207


$ 261,970


$ 250,521

 Cost of service revenues (excluding
      depreciation & amortization) 

44,518


43,345


135,573


121,940

 Gross margin 

40,610


42,862


126,397


128,581

 General and administrative expenses: 








 Salaries and benefits 

23,769


24,832


73,648


72,783

 Other 

10,049


9,993


30,409


29,831

 Total general and administrative
     expenses 

33,818


34,825


104,057


102,614

 Operating income 

6,792


8,037


22,340


25,967

 Interest expense, net 

(17)


(41)


(87)


(140)

 Income before income taxes 

6,775


7,996


22,253


25,827

 Income tax expense 

(2,676)


(3,154)


(8,674)


(10,331)

 Net income 

$   4,099


$   4,842


$   13,579


$   15,496









 Per share amounts-basic: 








 Average shares outstanding 

9,256


9,296


9,262


9,271

 Net income 

$     0.44


$     0.52


$       1.47


$       1.67









 Per share amounts-diluted: 








 Average shares outstanding 

9,315


9,346


9,329


9,359

 Net income 

$     0.44


$     0.52


$       1.46


$       1.66









 ALMOST FAMILY, INC. AND SUBSIDIARIES 

 CONSOLIDATED BALANCE SHEETS 

 (In thousands) 



September 30, 2012



 ASSETS 

(UNAUDITED)


December 31, 2011

 CURRENT ASSETS: 




 Cash and cash equivalents  

$                      42,716


$                     33,693

 Accounts receivable - net 

48,135


45,166

 Prepaid expenses and other current assets 

6,607


6,437

 Deferred tax assets 

7,373


7,470

 TOTAL CURRENT ASSETS 

104,831


92,766





 PROPERTY AND EQUIPMENT - NET 

5,043


5,229

 GOODWILL 

133,416


132,653

 OTHER INTANGIBLE ASSETS 

19,987


19,709

 OTHER ASSETS 

419


465


$                    263,696


$                   250,822





 LIABILITIES AND STOCKHOLDERS' EQUITY 




 CURRENT LIABILITIES: 




 Accounts payable 

$                        6,096


$                       6,489

 Accrued other liabilities 

20,686


21,129

 Current portion - capital leases and notes payable 

500


1,200

 TOTAL CURRENT LIABILITIES 

27,282


28,818





 LONG-TERM LIABILITIES: 




 Notes payable 

625


1,125

 Deferred tax liabilities 

16,096


13,631

 Other liabilities 

613


951

 TOTAL LONG-TERM LIABILITIES 

17,334


15,707

 TOTAL LIABILITIES 

44,616


44,525





 STOCKHOLDERS' EQUITY: 




 Preferred stock, par value $0.05; authorized 




 2,000 shares; none issued or outstanding 

-


-

 Common stock, par value $0.10; authorized 




 25,000; 9,420 and 9,381 




 issued and outstanding 

942


938

 Treasury stock, at cost, 89 and 13 shares 

(2,283)


(431)

 Additional paid-in capital 

101,730


100,678

 Retained earnings 

118,691


105,112

 TOTAL STOCKHOLDERS' EQUITY 

219,080


206,297


$                    263,696


$                   250,822





 ALMOST FAMILY, INC. AND SUBSIDIARIES 

 CONSOLIDATED STATEMENTS OF CASH FLOWS 

 (UNAUDITED) 

 (In thousands) 


 Nine Months Ended September 30, 


2012


2011

 Cash flows from operating activities: 




 Net income  

$  13,579


$  15,496

 Adjustments to reconcile income to net cash provided by operating activities: 




 Depreciation and amortization 

1,911


2,170

 Provision for uncollectible accounts 

2,022


1,394

 Stock-based compensation 

1,128


1,040

 Deferred income taxes 

2,817


2,464


21,457


22,564

 Change in certain net assets and liabilities, net of the effects of acquisitions: 




 Decrease (increase) in:  




 Accounts receivable 

(5,589)


(810)

 Prepaid expenses and other current assets 

(457)


250

 Other assets 

45


60

 Decrease in: 




 Accounts payable and accrued expenses 

(1,241)


(2,718)

 Net cash provided by operating activities 

14,215


19,346





 Cash flows from investing activities: 




 Capital expenditures 

(1,530)


(1,860)

 Acquisitions, net of cash acquired 

(538)


(35,689)

 Net cash used in investing activities 

(2,068)


(37,549)





 Cash flows from financing activities: 




 Proceeds from exercise of stock options 

70


292

 Purchase of common stock in connection with share awards 

(1,852)


(440)

 Tax impact of share awards 

(142)


1,614

 Principal payments on capital leases and notes payable 

(1,200)


(1,595)

 Net cash used in financing activities 

(3,124)


(129)





 Net change in cash and cash equivalents 

9,023


(18,332)

 Cash and cash equivalents at beginning of period 

33,693


47,943

 Cash and cash equivalents at end of period 

$  42,716


$  29,611





 Summary of non-cash investing and financing activities: 




 Settlement of Directors Deferred Compensation Plan 

$          -


$       501

 Acquisitions funded by notes payable 

$          -


$    1,000





 ALMOST FAMILY, INC. AND SUBSIDIARIES 

 RESULTS OF OPERATIONS 

 (UNAUDITED) 

 (In thousands) 



 Three Months Ended September 30, 


2012


2011


 Change 


 Amount 

 % Rev 


 Amount 

 % Rev 


 Amount 

%

Net service revenues:









 Visiting Nurse 

$  65,880

77.4%


$  69,897

81.1%


$   (4,017)

-5.7%

 Personal Care 

19,248

22.6%


16,310

18.9%


2,938

18.0%


85,128

100.0%


86,207

100.0%


(1,079)

-1.3%

Operating income before corporate expenses:









 Visiting Nurse 

8,906

13.5%


10,192

14.6%


(1,286)

-12.6%

 Personal Care 

2,822

14.7%


2,687

16.5%


135

5.0%


11,728

13.8%


12,879

14.9%


(1,151)

-8.9%

Corporate expenses

4,936

5.8%


4,842

5.6%


94

1.9%

Operating income

6,792

8.0%


8,037

9.3%


(1,245)

-15.5%

Interest expense, net

(17)

0.0%


(41)

0.0%


24

-58.5%

Income tax expense

(2,676)

-3.1%


(3,154)

-3.7%


478

-15.2%

Net income

$    4,099

4.8%


$    4,842

5.6%


$      (743)

-15.3%










EBITDA

$    7,825

9.2%


$    9,042

10.5%


$   (1,217)

-13.5%










 ALMOST FAMILY, INC. AND SUBSIDIARIES 

 RESULTS OF OPERATIONS 

 (UNAUDITED) 

 (In thousands) 



 Nine Months Ended September 30, 


2012


2011


 Change 


 Amount 

 % Rev 


 Amount 

 % Rev 


 Amount 

%

Net service revenues:









 Visiting Nurse 

$ 204,198

77.9%


$ 213,794

85.3%


$   (9,596)

-4.5%

 Personal Care 

57,772

22.1%


36,727

14.7%


21,045

57.3%


261,970

100.0%


250,521

100.0%


11,449

4.6%

Operating income before corporate expenses:









 Visiting Nurse 

30,698

15.0%


35,004

16.4%


(4,306)

-12.3%

 Personal Care 

7,583

13.1%


5,418

14.8%


2,165

40.0%


38,281

14.6%


40,422

16.1%


(2,141)

-5.3%

Corporate expenses

15,941

6.1%


14,455

5.8%


1,486

10.3%

Operating income

22,340

8.5%


25,967

10.4%


(3,627)

-14.0%

Interest expense, net

(87)

0.0%


(140)

-0.1%


53

-37.9%

Income tax expense

(8,674)

-3.3%


(10,331)

-4.1%


1,657

-16.0%

Net income

$   13,579

5.2%


$   15,496

6.2%


$   (1,917)

-12.4%










EBITDA

$   25,379

9.7%


$   29,177

11.6%


$   (3,798)

-13.0%










ALMOST FAMILY, INC. AND SUBSIDIARIES

VISITING NURSE SEGMENT OPERATING METRICS











Three Months Ended September 30,


2012


2011


Change


Amount

% Rev


Amount

% Rev


Amount

%

Average number of locations

107



100



7

7.0%










All payors:









Patients months

53,215



52,927



288

0.5%

Admissions

15,285



15,047



238

1.6%

Billable visits

432,110



448,377



(16,267)

-3.6%










Medicare Statistics (1):









Revenue (in thousands)

$    59,713

90.6%


$ 64,508

92.3%


$ (4,795)

-7.4%

Billable visits

375,412



400,111



(24,699)

-6.2%

Admissions

13,316



13,662



(346)

-2.5%

Recertifications

7,952



8,143



(191)

-2.3%

Episodes completed

20,677



21,176



(499)

-2.4%










Revenue per completed episode

$      2,865



$   3,008



$    (143)

-4.8%

Visits per episode

17.7



18.3



(0.6)

-3.3%










(1)  Episodic data which includes Medicare Advantage plans that pay episodically




















PERSONAL CARE OPERATING METRICS











Three Months Ended September 30,


2012



2011



Change


Amount



Amount



Amount

%

Average number of locations

60



48



12

25.0%










Admissions

1,055



904



151

16.7%

Patient months of care

17,684



14,917



2,767

18.5%

Patient days of care

263,703



215,359



48,344

22.4%

Billable hours

1,053,652



904,213



149,439

16.5%

Revenue per billable hour

$      18.27



$   18.04



$     0.23

1.3%










ALMOST FAMILY, INC. AND SUBSIDIARIES

VISITING NURSE SEGMENT OPERATING METRICS











Nine Months Ended September 30,


2012


2011


Change


Amount

% Rev


Amount

% Rev


Amount

%

Average number of locations

109



95



14

14.7%










All payors:









Patients months

163,313



161,017



2,296

1.4%

Admissions

47,381



46,187



1,194

2.6%

Billable visits

1,325,488



1,361,384



(35,896)

-2.6%










Medicare Statistics (1):









Revenue (in thousands)

$  185,933

91.1%


$  197,567

92.4%


$  (11,634)

-5.9%

Billable visits

1,160,603



1,215,570



(54,967)

-4.5%

Admissions

41,715



42,037



(322)

-0.8%

Recertifications

23,875



24,328



(453)

-1.9%

Episodes completed

65,136



65,630



(494)

-0.8%










Revenue per completed episode

$      2,841



$      3,000



$       (159)

-5.3%

Visits per episode

17.5



18.1



(0.6)

-3.3%










(1)  Episodic data which includes Medicare Advantage plans that pay episodically




















PERSONAL CARE OPERATING METRICS











Nine Months Ended September 30,


2012



2011



Change


Amount



Amount



Amount

%

Average number of locations

60



31



29

93.5%










Admissions

3,256



2,243



1,013

45.2%

Patient months of care

52,020



36,711



15,309

41.7%

Patient days of care

748,675



499,270



249,405

50.0%

Billable hours

3,193,973



2,027,307



1,166,666

57.5%

Revenue per billable hour

$      18.09



$      18.12



$      (0.03)

-0.2%



















Non-GAAP Financial Measure
The information provided in some of the tables in this release includes certain non-GAAP financial measures as defined under SEC rules.  In accordance with SEC rules, the Company has provided, in the supplemental information and the footnotes to the tables, a reconciliation of those measures to the most directly comparable GAAP measures.

EBITDA
Earnings before interest, income taxes, depreciation and amortization (EBITDA) is not a measure of financial performance under accounting principles generally accepted in the United States of America.  It should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating, investing or financing activities, or any other measure calculated in accordance with generally accepted accounting principles. The items excluded from EBITDA are significant components in understanding and evaluating financial performance and liquidity. Management routinely calculates and communicates EBITDA and believes that it is useful to investors because it is commonly used as an analytical indicator within our industry to evaluate performance, measure leverage capacity and debt service ability, and to estimate current or prospective enterprise value. EBITDA is also used in certain covenants contained in our credit agreement.

The following tables set forth a reconciliation of net income to EBITDA:

ALMOST FAMILY, INC. AND SUBSIDIARIES

RECONCILIATION OF EBITDA

(In thousands)







Three Months Ended September 30,


Nine Months Ended September 30,


2012


2011


2012


2011

Net income

$ 4,099


$ 4,842


$ 13,579


$ 15,496

Add back:








Interest expense

17


41


87


140

Income tax expense

2,676


3,154


8,674


10,331

Depreciation and amortization

651


695


1,911


2,170

Amortization of stock-based
    compensation

382


310


1,128


1,040

Earnings before interest, income taxes, depreciation and amortization (EBITDA)

$ 7,825


$ 9,042


$ 25,379


$ 29,177

















About Almost Family
Almost Family, Inc., founded in 1976, is a leading regional provider of home health nursing and personal care services in Florida, Ohio, Kentucky, Connecticut, New Jersey, Massachusetts, Missouri, Alabama, Illinois, Pennsylvania and Indiana (in order of revenue significance). Almost Family, Inc. and its subsidiaries operate a Medicare-certified segment and a personal care segment. Altogether, Almost Family operates over 160 branch locations in 11 U.S. states. 

Forward Looking Statements
All statements, other than statements of historical facts, included in this news release are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of forward-looking terminology such as "may," "will," "expect," "believe," "estimate," "project," "anticipate," "continue," or similar terms, variations of those terms or the negative of those terms. These forward-looking statements are based on the Company's current plans, expectations and projections about future events.

Because forward-looking statements involve risks and uncertainties, the Company's actual results could differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. The potential risks and uncertainties which could cause actual results to differ materially include: regulatory approvals or third party consents may not be obtained; the impact of further changes in healthcare reimbursement systems, including the ultimate outcome of potential changes to Medicare reimbursement for home health services and to Medicaid reimbursement due to state budget shortfalls; the ability of the Company to maintain its level of operating performance and achieve its cost control objectives; changes in our relationships with referral sources; the ability of the Company to integrate acquired operations including obtaining synergies, integration objectives and anticipated timelines; government regulation; health care reform; pricing pressures from Medicare, Medicaid and other third-party payers; changes in laws and interpretations of laws relating to the healthcare industry; and the Company's self-insurance risks.  For a more complete discussion regarding these and other factors which could affect the Company's financial performance, refer to the Company's various filings with the Securities and Exchange Commission, including its filing on Form 10-K for the year ended December 31, 2011, in particular information under the headings "Special Caution Regarding Forward-Looking Statements" and "Risk Factors." The Company undertakes no obligation to update or revise its forward-looking statements.

Almost Family, Inc.

Steve Guenthner

(502) 891-1000

The Ruth Group

Investor Relations

Nick Laudico/Zack Kubow

(646) 536-7030/7020

nlaudico@theruthgroup.com

zkubow@theruthgroup.com

SOURCE Almost Family, Inc.



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