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Gentiva Health Services Inc. Reports Operating Results (10-Q)

November 12, 2010 | About:

Gentiva Health Services Inc. (GTIV) filed Quarterly Report for the period ended 2010-10-03.

Gentiva Health Services Inc. has a market cap of $765.5 million; its shares were traded at around $25.68 with a P/E ratio of 10 and P/S ratio of 0.7. Gentiva Health Services Inc. had an annual average earning growth of 17.5% over the past 5 years.GTIV is in the portfolios of RS Investment Management, Kenneth Fisher of Fisher Asset Management, LLC, Jim Simons of Renaissance Technologies LLC, Chuck Royce of Royce& Associates.

Highlight of Business Operations:

Effective August 17, 2010, the Company completed the acquisition of 100 percent of the equity interest of Odyssey HealthCare, Inc. (Odyssey), one of the largest providers of hospice care in the United States, operating approximately 100 Medicare-certified providers serving terminally ill patients and their families in 30 states. In connection with the acquisition, the Company entered into a new $875 million Credit Agreement and issued $325 million of senior unsecured subordinated notes. See Note 4 Acquisitions and Dispositions and Note 11 Long-Term Debt to the Companys consolidated financial statements for additional information about the acquisition and related financing.

Effective August 17, 2010, the Company completed the acquisition of 100 percent of the equity interest of Odyssey, a leading provider of hospice care, operating approximately 100 Medicare-certified providers in 30 states. The Company completed the acquisition of Odyssey to expand the geographic coverage of its hospice services and to further diversify the Companys business mix. Total consideration for the acquisition was $1.087 billion consisting of payments of approximately (i) $963.9 million for Odysseys equity interest, (ii) $108.8 million to repay Odysseys existing long-term debt and accrued interest and (iii) $14.3 million of transaction costs incurred by Odyssey, of which $10.8 million has been paid as of October 3, 2010.

The Company funded the purchase price using (i) $729.9 million of borrowings under new senior secured term loan facilities, (ii) $316.8 million of proceeds from the issuance of senior unsecured notes, and (iii) existing cash balances of $36.8 million. The Company incurred transaction costs of approximately $23.5 million which is reflected as selling, general and administrative expenses in the Companys consolidated statements of income. The Company has begun integration of Odyssey operations and back office functions. In connection with these integration activities the Company expects to achieve operating cost synergies of approximately $25 million on an annualized run rate by the fourth quarter of 2011. Odysseys annualized revenues at June 30, 2010 approximated $700 million.

For the first nine months of 2009, total cash consideration paid for acquired businesses amounted to $10.3 million, excluding transaction costs and subject to post-closing adjustments. The acquisitions completed during the 2009 period extended the Companys operations primarily into geographic areas not previously serviced by the Company within states requiring a Certificate of Need (CON) to perform home health services. The aggregate purchase price was allocated to identifiable intangible assets ($7.1 million), goodwill ($3.1 million) and other assets ($0.1 million). The name of the acquired home health agency, the acquisition date and the geographic service area is summarized below:

Effective February 1, 2010, the Company completed the sale of its HME and IV businesses to a subsidiary of Lincare Holdings, Inc., pursuant to an asset purchase agreement, for total consideration of approximately $16.4 million, consisting of (i) cash proceeds of approximately $8.5 million, (ii) approximately $2.5 million associated with operating and capital lease buyout obligations, (iii) an escrow fund of $5.0 million, which was recorded at estimated fair value of $3.2 million, to be received by the Company based on achieving a cumulative cash collections target for claims for services provided for a period of one year from the date of closing and (iv) an escrow fund of approximately $0.4 million for reimbursement of certain post closing liabilities. During the first nine months of 2010, the Company recorded a $0.1 million pre-tax gain, net of transaction costs in discontinued operations, net of tax, in the Companys consolidated statement of income.

During the first nine months of 2009, the Company sold assets associated with certain branch offices that specialized primarily in pediatric home health care services for total consideration of $6.5 million. The sales related to seven offices in five cities and included the adult home care services in the affected offices. The Company received $5.9 million in cash at the close of the sale and $0.6 million as the final payment in September 2009. The sales, after deducting related costs, resulted in a net gain before income taxes of $5.7 million. This gain is included in gain on sale of assets, net in the Companys consolidated statement of income and consolidated statement of cash flows for the nine months ended September 27, 2009.

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