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 six months ended June 30, 2014.
Second Quarter Highlights:
- Record net service revenues of approximately $125 million
- Net income attributable to Almost Family, Inc. of $4.0 million, or $0.42 per diluted share
- Diluted EPS from continuing operations of $0.43, including $0.08 of acquisition related expenses, excluding which diluted EPS would have been $0.51
- Results include Imperium-related operating results, which reduced diluted EPS from continuing operations for the quarter by $0.03, without which diluted EPS would have been $0.54
- Record Visiting Nurse segment net revenues of $99.4 million and record Personal Care segment revenues of $25.5 million
- Acquired operations added $0.19 to diluted EPS from continuing operations for the quarter with SunCrest contributing $0.17 and Indiana Home Care contributing $0.02
- Efficiency gains in the balance of the business improved diluted EPS by $0.13, prior to the effects of Medicare rate cuts which reduced diluted EPS by $0.05.
Comments on Second Quarter 2014 Results
William Yarmuth, Chief Executive Officer, commented on the news: "We are extremely pleased with the performance of our business in this quarter, highlighted by the progress we are making in the integration of the SunCrest operations. Our results for the quarter show the highly accretive effect acquisitions can have on our financial performance. I want to take this opportunity to thank all our employees for their hard work, their devotion to their patients and their commitment to our Company during these times of transition. As we proceed with our integration work through the balance of 2014, we will return our attention to acquisition and development opportunities to continue the growth and expansion of our business."
Steve Guenthner, President, added: "As we stated previously, the Medicare rebasing adjustments are forcing us to address every opportunity to control costs without compromising the quality of care we provide our patients. While more opportunities remain to achieve savings, we are particularly pleased that we have been able to move the needle in a very positive direction through much tighter adherence to our agency-level labor staffing standards. Additionally, we are making nice progress in Florida where we are well on our way to working through many of our previously discussed integration opportunities.
Regarding proposed Medicare regulations for 2015 recently published by CMS, Guenthner commented: "We are pleased to see the overall positive tone of the proposed language including in particular the recision of the physician face-to-face narrative requirement that has proven so troublesome for the industry. Although there are more improvements that could be made, these are some of the most positively written proposed regulations we have seen since the implementation of the home health prospective payment system in 2000. We hope this indicates an inflection point in our regulators' views on the value of our services and the contributions home health can make in addressing our national elder care issues."
Yarmuth added: "We are heartened by the greatly improved tone of the CMS proposed regulations. In addition, we are encouraged by recent comments issued by MedPac which highlight the increasingly important role home health services will play in the delivery of cost-effective care to our elderly, in particular when ACO's are involved. We welcome this progress and will continue our Company's efforts to work collaboratively with these policy-makers to lower costs, extend the life of the Medicare Trust Funds and improve the lives of America's seniors enabling them to stay in their own homes as long as possible."
Yarmuth concluded: "Internally, our next challenge is to hold the line on our efficiency gains while turning our attention back to driving organic volume growth in our VN segment like we have been able to deliver in our PC segment. We are confident that as time goes by, the quality of our services and the compassionate care of our nearly 12,000 employees will continue to differentiate us in the marketplace."
Second Quarter Financial Results
Almost Family reported second quarter results that included a full quarter of operating results for the following acquisitions, as compared to our results for the second quarter of 2013:
- The December 6, 2013 acquisition of SunCrest added $35.1 million to revenue ($30.8 million VN and $4.3 million PC) and $0.17 to diluted EPS from continuing operations.
- Improved cost controls, in particular tighter adherence to our agency-level labor staffing standards improved the efficiency of our care delivery allowing us to lower labor costs on very similar volumes improving diluted EPS by $0.13 as compared to the same quarter of last year.
- The July 19, 2013 acquisition of Indiana Home Care Network added $2.6 million of revenue to the VN segment and $0.02 to diluted EPS from continuing operations. Indiana Home Care results will be included with same-store results starting with the third quarter of 2014.
- The October 4, 2013 acquisition of our 61% interest in Imperium lowered diluted EPS from continuing operations by $0.03. Operating costs of $0.4 million associated with Imperium are included in our corporate expenses. Imperium did not generate material revenue in the period.
- One-time transaction costs, severance, wind-down, lease abandonment and transition costs related to the SunCrest transaction approximated $1.2 million ($0.08 per diluted share) in the quarter ended June 30, 2014.
Excluding acquired revenue, Medicare rate cuts, from 2014's rebasing, reduced revenue and operating income, by $0.8 million and diluted EPS from continuing operations by $0.05. VN segment Medicare admissions decreased organically by 0.9%, primarily in our Florida operations where we have overlap with SunCrest operations. Our PC segment hours of service and revenues grew organically by 1.5% and 4.1%, respectively and grew through acquisition by 13.8% and 20.9%, respectively.
Our effective tax rate for the second quarter of 2014 was 39.2% compared to 41.8% for the second quarter of 2013.
The Company reminds investors that the quarter ended June historically has higher patient volumes than the other quarters due to seasonality including in the State of Florida where the Company generates nearly 40% of its Visiting Nurse segment revenues.
Six Month Period Financial Results
Almost Family reported six month results that included a full six months of operating results for the following acquisitions, as compared to our results for the six month period of 2013:
- The December 6, 2013 acquisition of SunCrest added $68.8 million to revenue ($60.7 million VN and $8.1 million PC) and $0.32 to diluted EPS from continuing operations.
- Approximately $4.3 million ($0.28 per diluted share) of transition costs, primarily SunCrest, were incurred in the six months ended June 30, 2014.
- The July 19, 2013 acquisition of Indiana Home Care Network added $5.1 million of revenue to the VN segment and $0.04 to diluted EPS from continuing operations
- The October 4, 2013 acquisition of our 61% interest in Imperium lowered diluted EPS from continuing operations by $0.04. Operating costs of $0.7 million associated with Imperium are included in our corporate expenses. Imperium did not generate material revenue in the period.
Medicare rate cuts in our VN segment, from 2014's rebasing cuts and sequestration for episodes ending after March 31, 2013, reduced revenue and operating income by $2.4 million and diluted EPS from continuing operations by $0.15. VN segment Medicare admissions decreased organically by 3.5%, primarily in our Florida operations where we have overlap with SunCrest operations. Our PC segment hours of service and revenues grew by 3.3% organically and 13.5% through acquisition.
Our effective tax rate for the six month period of 2014 was 39.7% compared to 39.2% for the six month period of 2013. The higher year to date 2014 income tax rate from continuing operations was primarily due to a benefit recognized in the first quarter of 2013 resulting from the January 2, 2013 retroactive extension of the Work Opportunity Tax Credit (WOTC). The WOTC has not yet been extended for 2014.
2015 Medicare Proposed Rule
On July 1, 2014, CMS issued the proposed rule for 2015. The proposed rule included the maximum rebasing cut in Medicare reimbursement rates (3.5% rate reduction in each of the years 2014-2017) allowable by the Patient Protection and Affordable Care Act (the ACA), which was signed into law in March 2010. The rebasing cuts are in addition to other legislated cuts for that same period by the ACA. The 2015 proposed rule is currently open for comment. The final rule is expected to be released in late October 2014.
In the first quarter of 2014, the Company's VN segment exited a market in the Northeast through the closure of a branch location. In conjunction with the SunCrest acquisition, the Company acquired some operations which had been discontinued prior to acquisition. During the quarter ended June 30, 2013, the Company completed the sale of two Alabama locations, which operated in the VN segment. The operations and any related gain on sale for these operations were reclassified from continuing operations into discontinued operations for all periods presented.