FOR IMMEDIATE RELEASE

Gentiva^® Announces Second Quarter and Six-Month 2006 Results

Melville, N.Y., August 2, 2006 -- Gentiva Health Services, Inc. (NASDAQ: GTIV), the nation's largest provider of comprehensive home health and related services, today reported financial results for the second quarter and six months ended July 2, 2006, including results generated by The Healthfield Group, Inc., which was acquired by Gentiva on February 28, 2006.

The Company reported the following results for the second quarter of 2006:

•  Net revenues were $284.1 million, up 29% compared to $220.1 million reported for the second quarter of 2005.

•  Net income was $5.5 million, or $0.20 per diluted share. For the prior year period, net income was $8.7 million, or $0.35 per diluted share, including an income tax benefit of $4.2 million, or $0.17 per diluted share, related to a favorable resolution of tax audit issues for fiscal 1997 through 2000.

•  Earnings before interest, taxes, depreciation and amortization (EBITDA) was $20.0 million versus $8.8 million for the second quarter of 2005. (See Supplemental Information for a reconciliation between EBITDA and “Net Income – As Reported.”)

•  EBITDA and net income per diluted share for the 2006 second quarter included: (i) a charge of $1.1 million, or $0.04 per diluted share, due to the adoption of new accounting rules for equity-based compensation and its impact on the Company's effective tax rate; and (ii) restructuring and integration costs of $0.7 million, or $0.01 per diluted share.

•  Net income per diluted share, excluding the special tax benefit, restructuring and integration costs and the mandated changes in accounting for equity-based compensation, was $0.25 for the second quarter of 2006 versus $0.18 for the second quarter of 2005. (See Supplemental Information for a reconciliation between “Net Income per diluted share – As Adjusted” and “Net Income per diluted share – As Reported.”)

Gentiva reported the following results for the six months ended July 2, 2006 :

•  Net revenues were $527.3 million, up 23% compared to $427.2 million reported for the prior year period.

•  Net income was $10.0 million, or $0.37 per diluted share. For the comparable period of 2005, net income was $12.8 million, or $0.51 per diluted share, including the $4.2 million tax benefit mentioned above.

•  EBITDA was $32.5 million versus $17.0 million for the first six months of 2005. (See Supplemental Information for a reconciliation between EBITDA and “Net Income – As Reported.”)

•  EBITDA and net income per diluted share for the first six months of 2006 included incremental operating income of $1.9 million, or $0.04 per diluted share, relating to the settlement of Gentiva's appeal with the U.S. Provider Reimbursement Review Board (PRRB) on the reopening of the Company's 1999 Medicare cost reports; a charge of $1.8 million, or $0.06 per diluted share, due to the adoption of new accounting rules for equity-based compensation; and restructuring and integration costs of $2.7 million, or $0.06 per diluted share.

Gentiva reported cash items and short-term investments of $69.3 million as of July 2, 2006 versus $71.6 million as of April 2, 2006 . During the second quarter, the Company generated operating cash flow of over $19 million and made prepayments of $10 million on its term loan, resulting in a long-term debt balance of $360.0 million at July 2, 2006.

“Gentiva's second quarter was highlighted by significant progress on the Healthfield integration and the restructuring of CareCentrix,” said Chairman and CEO Ron Malone. “During this period, we generated positive results -- including higher operating margins and the strong cash flow necessary for the pursuit of our strategic goals – as we also sharply increased our share of Medicare business with the addition of Healthfield.”

Segment Results

Home Healthcare Services – Second quarter 2006 net revenues were $192.7 million, up 41% from $136.3 million in the prior year period. Operating contribution was $24.9 million, an increase of 110% from $11.9 million in the second quarter of 2005, and operating margins rose in this segment for the seventh consecutive quarter. The improvement in 2006 was due primarily to Healthfield's contribution to the Company's performance and continued Medicare revenue growth over the prior year period.

First half 2006 net revenues were $357.4 million, up 33% from $268.2 million in the prior year period. Operating contribution was $45.1 million for the six-month period, an increase of 94% from $23.2 million in the first half of 2005.

CareCentrix – Second quarter 2006 net revenues were $64.5 million, an anticipated decline of 26% from $87.1 million reported in the prior year period due to previously disclosed changes in certain commercial relationships. Operating contribution was $7.5 million, an increase of 4% from $7.2 million in the second quarter of 2005, while operating margins for this segment rose as a result of increased operating efficiencies and improved utilization management.

First half 2006 net revenues were $134.6 million, a 19% decline from the $166.0 million reported in the prior year period. Operating contribution for the six-month period was $12.7 million, a decrease of 9% from $14.0 million in the first half of 2005.

Other Related Services – Second quarter 2006 net revenues for this segment, which includes hospice, respiratory therapy, durable medical equipment, infusion services and consulting, were $30.4 million compared to $1.3 million in the prior year period due primarily to businesses related to the Healthfield acquisition. Operating contribution was $5.3 million compared to $0.2 million in the second quarter of 2005.

First half 2006 net revenues were $42.0 million compared to $2.6 million in the prior year period. Operating contribution was $7.5 million compared to $0.5 million in the first half of 2005.

2006 Information

Gentiva also reaffirmed its 2006 financial outlook with respect to diluted earnings per share in a range between $0.84 and $0.90 and EBITDA in a range between $75 million and $80 million. The diluted earnings per share outlook includes an expense of between $0.11 and $0.14 per diluted share relating to the impact of equity compensation expense resulting from new accounting rules and excludes the impact of restructuring charges and Healthfield integration costs. The Company also noted that, based on current trends, it anticipates net revenues for the full year 2006 toward the lower end of its previously announced range of $1.12 billion to $1.16 billion.

Non-GAAP Financial Measures

The info rmation provided in the following tables includes certain non-GAAP financial measures as defined under Securities and Exchange Commission (SEC) rules. In accordance with SEC rules, the Company has provided, in the supplemental info rmation and the footnotes to the tables, a reconciliation of those measures to the most directly comparable GAAP measures.

Conference Call and Web Cast Details

The Company will comment further on its second quarter 2006 results during its conference call and live web cast to be held Thursday, August 3, 2006, at 10:00 a.m. Eastern Time. To participate in the call from the United States, Canada or an international location, dial (973) 935-8599 and reference call #7611428. The web cast is an audio only, one-way event. Web cast listeners who wish to ask questions must participate in the conference call. Log onto http://www.gentiva.com/investors/FinancialEvents.asp to hear the web cast. This press release is accessible at http://www.gentiva.com/investors/PressReleases.asp, and a transcript of the conference call is expected to be available on the site within 36 hours after the call.

About Gentiva Health Services, Inc.
Gentiva Health Services, Inc. is the nation's largest provider of comprehensive home health and related services. Gentiva serves patients through more than 500 direct service delivery units within over 400 locations in 35 states, and through CareCentrix^®, which manages home healthcare services for major managed care organizations throughout the United States and delivers them in all 50 states through a network of more than 3,000 third-party provider locations, as well as Gentiva locations. The Company is a single source for skilled nursing; physical, occupational, speech and neurorehabilitation services; hospice services; social work; nutrition; disease management education; help with daily living activities; durable medical and respiratory equipment; infusion therapy services; and other therapies and services. Gentiva's revenues are generated from federal and state government programs, commercial insurance and individual consumers. For more information, visit Gentiva's web site, www.gentiva.com, and its investor relations section at http://www.gentiva.com/investors.

(tables and notes follow)

    (in 000's, except per share data)      2nd Quarter          Six Months
                                         2006      2005      2006      2005
    Statements of Income
      Net revenues                     $284,061  $220,135  $527,301  $427,242
      Cost of services sold (excluding
       depreciation)                    162,106   138,628   305,399   265,857
      Gross profit                      121,955    81,507   221,902   161,385
      Selling, general and
       administrative expenses         (101,922)  (72,658) (189,397) (144,417)
      Depreciation and amortization      (4,025)   (1,911)   (6,998)   (3,647)
      Operating income                   16,008     6,938    25,507    13,321
      Interest expense                   (7,166)     (268)   (9,974)     (536)
      Interest income                       765       682     1,657     1,413
      Income before income taxes          9,607     7,352    17,190    14,198
      Income tax (expense) benefit       (4,064)    1,298    (7,240)   (1,423)
      Net income                         $5,543    $8,650    $9,950   $12,775

     Earnings per Share
      Net income:
         Basic                            $0.21     $0.37     $0.39     $0.55
         Diluted                          $0.20     $0.35     $0.37     $0.51

      Average shares outstanding:
         Basic                           26,926    23,271    25,721    23,358
         Diluted                         27,851    24,935    26,669    24,981


    Condensed Balance Sheets
     ASSETS                                     Jul 2, 2006       Jan 1, 2006
      Cash, cash equivalents and
       restricted cash                             $33,592           $38,617
      Short-term investments                        35,750            49,750
      Net receivables                              170,204           139,635
      Deferred tax assets                           24,993            15,974
      Prepaid expenses and other current assets     14,106             7,816
           Total current assets                    278,645           251,792

      Fixed assets, net                             43,468            24,969
      Deferred tax assets, net                           -            18,099
      Intangible assets, net                       201,025             5,831
      Goodwill                                     280,092             6,763
      Other assets                                  24,907            19,111
          Total assets                            $828,137          $326,565

     LIABILITIES AND SHAREHOLDERS' EQUITY
      Accounts payable                             $13,131           $13,870
      Payroll and related taxes                     23,119             9,777
      Deferred revenue                              23,691             7,455
      Medicare liabilities                          10,499             7,220
      Cost of claims incurred but not reported      17,502            25,276
      Obligations under insurance programs          34,495            32,883
      Other accrued expenses                        39,433            25,985
           Total current liabilities               161,870           122,466

      Long-term debt                               360,000                 -
      Deferred tax liabilities, net                 27,086                 -
      Other liabilities                             21,203            21,945
      Shareholders' equity                         257,978           182,154
           Total liabilities and
            shareholders' equity                  $828,137          $326,565

      Common shares outstanding                     27,123            23,035

     Note: Cash, cash equivalents and restricted cash includes restricted cash
           of $22.2 million and $22.0 million, at July 2, 2006 and January 1,
           2006, respectively.



    (in 000's)
                                                           Six Months
    Condensed Statements of Cash Flows               2006              2005
     OPERATING ACTIVITIES:
     Net income                                     $9,950           $12,775
     Adjustments to reconcile net income
      to net cash provided by operating activities
      Depreciation and amortization                  6,998             3,647
      Provision for doubtful accounts                3,806             3,154
      Reversal of tax audit reserves                     -            (4,200)
      Employee equity-based compensation expense     1,750                 -
      Windfall tax benefits associated with
       equity-based compensation                    (1,387)                -
      Deferred income taxes                          6,713             3,237
     Changes in assets and liabilities:
      Accounts receivable                           14,994           (13,576)
      Prepaid expenses and other current assets     (3,489)           (1,677)
      Current liabilities                           (5,341)          (13,564)
     Other, net                                        300                33
     Net cash provided by (used in) operating
      activities                                    34,294           (10,171)

     INVESTING ACTIVITIES:
     Purchase of fixed assets                       (9,247)           (3,294)
     Acquisition of businesses                    (210,036)          (12,040)
     Purchases of short-term investments
      available-for-sale                          (109,795)         (106,900)
     Maturities of short-term investments
      available-for-sale                           123,795           131,250
     Maturities of short-term investments                -            10,000
     Net cash (used in) provided by investing
      activities                                  (205,283)           19,016

     FINANCING ACTIVITIES:
     Proceeds from issuance of common stock          8,438             3,791
     Windfall tax benefits associated with
      equity-based compensation                      1,387                 -
     Proceeds from issuance of debt                370,000                 -
     Healthfield debt repayments                  (195,305)                -
     Other debt repayments                         (10,000)                -
     Changes in book overdrafts                     (1,395)            4,586
     Debt issuance costs                            (6,930)                -
     Repurchases of common stock                         -           (12,325)
     Repayment of capital lease obligations           (231)             (176)
     Net cash provided by (used in) financing
      activities                                   165,964            (4,124)

     Net change in cash, cash equivalents and
      restricted cash                               (5,025)            4,721
     Cash, cash equivalents and restricted cash
      at beginning of period                        38,617            31,924
     Cash, cash equivalents and restricted cash
      at end of period                             $33,592           $36,645


    SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES:

During the six months ended July 2, 2006, the Company issued 3,194,137
shares of common stock in connection with the acquisition of The Healthfield
Group, Inc. on February 28, 2006.



    (in 000's, except per share data)

     Supplemental Information             2nd Quarter          Six Months
                                         2006      2005      2006      2005
    Segment Information
     Net revenues (1)
      Home Healthcare Services (2)     $192,659  $136,332  $357,448  $268,158
      CareCentrix                        64,530    87,069   134,582   166,003
      Other Related Services             30,403     1,335    42,023     2,592
      Intersegment revenues              (3,531)   (4,601)   (6,752)   (9,511)
     Total net revenues                $284,061  $220,135  $527,301  $427,242


     Operating contribution (1)
      Home Healthcare Services          $24,906   $11,880   $45,081   $23,220
      CareCentrix                         7,487     7,165    12,685    14,007
      Other Related Services (8)          5,273       231     7,506       497
     Total operating contribution        37,666    19,276    65,272    37,724
     Corporate expenses (8)             (17,633)  (10,427)  (32,767)  (20,756)
     Depreciation and amortization       (4,025)   (1,911)   (6,998)   (3,647)
     Interest (expense) income, net      (6,401)      414    (8,317)      877
     Income before income taxes          $9,607    $7,352   $17,190   $14,198


                                          2nd Quarter          Six Months
                                         2006      2005      2006      2005
     Net Revenues by Major Payer
      Source:
      Medicare (2)                     $132,846   $65,290  $231,811  $127,051
      Medicaid and local government      46,018    37,785    86,907    74,429
      Commercial insurance and other    105,197   117,060   208,583   225,762
           Total net revenues          $284,061  $220,135  $527,301  $427,242


    A reconciliation of EBITDA to Net
     income - As Reported amounts
     follows: (3)                          2nd Quarter          Six Months
                                          2006      2005      2006      2005
      EBITDA (4)                        $20,033    $8,849   $32,505   $16,968
      Depreciation and amortization (5)  (4,025)   (1,911)   (6,998)   (3,647)
      Interest (expense) income, net (6) (6,401)      414    (8,317)      877
      Income before income taxes          9,607     7,352    17,190    14,198
      Income tax (expense) benefit       (4,064)    1,298    (7,240)   (1,423)
      Net income - As Reported           $5,543    $8,650    $9,950   $12,775


    A reconciliation of Net income per
     diluted share - As Adjusted and
     Net income per diluted share - As
     Reported follows:                      2nd Quarter          Six Months
                                           2006      2005      2006      2005
     Net income per diluted share:
      As Adjusted                         $0.25     $0.18     $0.45     $0.34
      Equity-based compensation (4A)      (0.04)        -     (0.06)        -
      Restructuring and integration
       costs (4B)                         (0.01)        -     (0.06)        -
      Medicare cost report settlement (4C)    -         -      0.04         -
      Resolution of tax audit issue (7)       -      0.17         -      0.17
      As Reported                         $0.20     $0.35     $0.37     $0.51


    Notes:

     (1) The Company's senior management evaluates performance and allocates
         resources based on operating contributions of the reportable
         segments, which exclude corporate expenses, depreciation,
         amortization, and interest income (expense), but include revenues and
         all other costs directly attributable to the specific segment.
         Results for the 2006 periods include the operating results of The
         Healthfield Group, Inc. for periods subsequent to its acquisition
         date of February 28, 2006.

     (2) Six-month 2006 results included approximately $1.9 million recorded
         and received from the total settlement received of $5.5 million
         relating to the Company's appeal filed with the U.S. Provider
         Reimbursement Review Board ("PRRB") on the reopening of all of its
         1999 cost reports.

     (3) EBITDA, a non-GAAP financial measure, is defined as income before
         interest expense (net of interest income), income taxes, depreciation
         and amortization.  Management uses EBITDA to evaluate overall
         performance and compare current operating results with other
         companies in the healthcare industry.  EBITDA should not be
         considered in isolation or as a substitute for net income, operating
         income or cash flow statement data determined in accordance with
         accounting principles generally accepted in the United States.
         Because EBITDA is not a measure of financial performance under
         accounting principles generally accepted in the United States and is
         susceptible to varying calculations, it may not be comparable to
         similarly titled measures in other companies.

     (4) Components of EBITDA included the following:
           (A) Equity-based compensation expense of approximately $1.1 million
               in the second quarter of 2006 and $1.8 million in the first six
               months of 2006 resulting from the adoption of Statement of
               Financial Accounting Standards No. 123 (Revised) "Share-Based
               Payment" as of January 2, 2006.
           (B) Restructuring and integration costs for the second quarter and
               first six months of 2006, which included charges of (i) $0.1
               million and $0.8 million, respectively, in connection with a
               restructuring plan associated with the Company's CareCentrix
               operations, and (ii) $0.6 million and $1.9 million,
               respectively, in connection with restructuring and integration
               activities relating to the Healthfield acquisition.
           (C) A special item relating to a Medicare cost report settlement of
               $1.9 million for the first six months of 2006 as further
               described in Note 2.
         Excluding the items described in Notes 4A, 4B and 4C above, EBITDA
         for the second quarter of 2006 and 2005 would have been $21.8 million
         and $8.8 million, respectively, and EBITDA for the first six months
         of 2006 and 2005 would have been $35.1 million and $17.0 million,
         respectively.

     (5) Depreciation and amortization reflects amortization of identifiable
         intangible assets of $0.8 million and $1.4 million, respectively, in
         the second quarter and first six months of 2006.

     (6) Interest expense, net, includes interest expense on a term loan, fees
         associated with a $75 million revolving credit facility and
         amortization of debt financing costs, net of interest income.

     (7) For the second quarter and first six months of 2005, the Company's
         income tax benefit (expense) included a $4.2 million income tax
         benefit resulting from a favorable resolution of tax audit issues
         relating to fiscal 1997 through 2000.  Management has excluded this
         nonrecurring item and has incorporated a normalized tax rate in its
         presentation of "Net Income per Diluted Share - As Adjusted."

     (8) Results for the first six months of 2006 reflect a first quarter
         expense reclassification of approximately $0.4 million from Corporate
         to Other Related Services to conform to the current quarter's
         presentation.

   

Forward-Looking Statement

Last Updated: Monday, December 18, 2006 10:56 AM