FOR IMMEDIATE RELEASE

Gentiva^® Announces Fourth Quarter and Fiscal 2005 Results, and Provides Updated Information on 2006 following Healthfield Acquisition

Melville, N.Y., March 1, 2006 -- Gentiva Health Services, Inc. (NASDAQ: GTIV), the nation's largest provider of comprehensive home health services, today reported its fourth quarter and fiscal 2005 results and announced updated information on 2006 following yesterday's closing of the acquisition of The Healthfield Group, Inc., a leading provider of home healthcare, hospice and related services with approximately 130 locations primarily in eight southeastern states.

“Our 2005 focus on principal strategies for revenue diversification has created a new Gentiva with an array of opportunities for future growth following the Healthfield acquisition,” said Gentiva Chairman and CEO Ron Malone. “We believe our patients, customers, employees and shareholders will all benefit as we now work to transform the Company and extend our leadership in home healthcare.”    

Gentiva's performance for the fourth quarter ended January 1, 2006 versus the fourth quarter ended January 2, 2005 included:

• Net revenues of $222.0 million compared to $225.5 million reported for the fourth quarter of 2004, including special Medicare items.
• Net Income – As Reported of $6.3 million, or $0.26 per diluted share, versus $6.9 million, or $0.27 per diluted share, for the fourth quarter of 2004.
• Net Income – As Adjusted of $4.7 million, or $0.19 per diluted share, versus $4.8 million, or $0.19 per diluted share, for the fourth quarter of 2004. (See Supplemental Information for a reconciliation between “Net Income – As Reported” and “Net Income – As Adjusted.”)

All comparisons between 2005 and 2004 results are affected by the fact that the 2005 fourth quarter and fiscal year comprised activity covering 13 weeks and 52 weeks, respectively, while the prior year periods covered 14 weeks and 53 weeks, respectively.

Net revenues for the fourth quarter of 2005 included approximately $3.6 million received from a total expected settlement of approximately $5.5 million relating to the Company's appeal filed with the U.S. Provider Reimbursement Review Board (PRRB) on the reopening of Gentiva's 1999 Medicare cost reports. In addition, income before income taxes for the fourth quarter of fiscal 2005 reflected $0.9 million in charges primarily associated with the restructuring of CareCentrix^® operations in response to upcoming changes in the nature of services provided to CIGNA Healthcare members. The fourth quarter 2004 results reflected receipt of a Medicare special item of $0.3 million as well as a lower effective tax rate due to the recognition of certain state net operating loss carryforwards.

Payer Group Results

Fourth quarter 2005 Medicare revenues rose to $71.5 million, or 20.4%, over the $59.4 million reported in the fourth quarter of 2004, including the special items. The Medicare increase was driven by growth in admissions to Gentiva's specialty programs, improvements in revenue per admission compared with the prior year period, and the impact of the Heritage Home Care Services acquisition, which closed in May 2005, offset somewhat by the lingering effects of Hurricane Wilma in southeast Florida .

Revenues from Medicaid and Local Government sources were $37.7 million in the fourth quarter of 2005, a 2.1% decrease from the $38.5 million reported in the prior year period.

Commercial Insurance and Other revenues for the fourth quarter of 2005 were $112.9 million, an 11.6% decrease from the $127.6 million reported in the prior year period. The results reflected changes in various commercial relationships in CareCentrix, as well as the impact of exiting certain unprofitable business as the Company pursues more favorable commercial pricing in home healthcare. Fourth quarter 2005 revenues derived from CIGNA Healthcare, which are included in Commercial Insurance and Other revenues, were approximately $65.2 million, a decrease of $3.3 million, or 4.9%, from the prior year period.

Segment Results

Fourth quarter 2005 results were driven by continued improvement in Gentiva's Home Healthcare Services segment, with operating contribution, including special items, reaching $17.7 million as compared to $10.7 million in the fourth quarter of 2004. Gentiva also benefited from lower corporate expenses, which were $11.3 million in the 2005 fourth quarter as compared to $13.9 million in the prior year period, including a $1.4 million writedown of capitalized software. These improvements were offset by a decline in the CareCentrix segment's operating contribution, which was $5.7 million in the 2005 fourth quarter and $13.0 million in the prior year period.

Fiscal 2005 Results

Gentiva reported the following companywide results for fiscal 2005:

• Net revenues were $868.8 million versus $845.8 million reported for the year ended January 2, 2005 , including special items.
• Net Income – As Reported was $23.4 million, or $0.94 per diluted share, versus $26.5 million, or $1.00 per diluted share for fiscal 2004.
• Net Income – As Adjusted was $17.5 million, or $0.70 per diluted share, versus $18.2 million, or $0.69 per diluted share, for the prior year period. (See Supplemental Information for a reconciliation between “Net Income – As Reported” and “Net Income – As Adjusted.”)

The As Adjusted fiscal year results exclude the fourth quarter 2005 special items mentioned above, as well as other items described in the Supplemental Information and accompanying footnotes.

In fiscal 2005, Gentiva's net cash provided by operating activities was $19.9 million versus $34.9 million in the prior year period. Gentiva reported cash items and short-term investments of $88.4 million as of January 1, 2006 versus $113.0 million as of January 2, 2005 . During the fourth quarter of fiscal 2005, the Company purchased 502,900 shares of Gentiva common stock at a total cost of $7.6 million, or $15.10 per share. For the year ended January 1, 2006 , the Company purchased 1,325,000 shares at a total cost of $21.1 million.

2006 Information

Gentiva has also provided updated information for 2006 to include the effect of: 1) the Healthfield acquisition, which closed on February 28, 2006; 2) 2006 Medicare reimbursement rates approved by Congress for home health, which included a freeze in non-rural rates and an increase in rural reimbursement; and 3) new accounting rules for equity-based compensation, which became effective for the Company at the beginning of 2006. The Company anticipates net revenues in a range of $1.12 billion to $1.16 billion, and earnings before interest, taxes, depreciation and amortization (EBITDA) in a range between $75 million and $80 million. The EBITDA outlook reflects a charge of approximately $5 million relating to the value of stock options. (See Supplemental Information for a reconciliation between EBITDA and net income.) The 2006 information excludes the impact of any restructuring charges resulting from the Healthfield acquisition.

Gentiva does not plan to update its 2006 earnings per share information. Management believes that EBITDA may be a more useful measure of operating performance this year, particularly as the Company evaluates recent changes in its capital structure and the valuation of identifiable intangible assets resulting from the Healthfield acquisition. Gentiva plans to offer additional commentary on tomorrow's conference call and live web cast.

Non-GAAP Financial Measures

The information 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 information 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 fourth quarter and fiscal 2005 results during its conference call and live web cast to be held Thursday, March 2, 2006, at 10:00 a.m. Eastern Standard Time. To participate in the call from the United States , Canada or an international location, dial (973) 935-8599 and reference call #7044852. 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 services. Gentiva serves patients through more than 500 direct service delivery units within over 400 locations in 36 states, and through CareCentrix^®, which manages home healthcare services for many major managed care organizations throughout the United States and delivers them in all 50 states through a network of more than 2,500 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 commercial insurance, federal and state government programs 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)
                                           4th Quarter         Fiscal Year
                                         2005      2004      2005      2004
    Statements of Income              (13 weeks)(14 weeks)(52 weeks)(53 weeks)
      Net revenues                     $222,042  $225,541  $868,843  $845,764
      Cost of services sold             137,692   138,743   542,093   521,835
      Gross profit                       84,350    86,798   326,750   323,929
      Selling, general and
       administrative expenses          (72,252)  (76,937) (288,695) (278,342)
      Depreciation and amortization      (2,153)   (1,824)   (8,091)   (7,329)
      Operating income                    9,945     8,037    29,964    38,258
      Gain on sale of Canadian
       investment                             -         -         -       946
      Interest income, net                  616       439     1,878       977
      Income before income taxes         10,561     8,476    31,842    40,181
      Income tax expense                 (4,222)   (1,582)   (8,477)  (13,693)
      Net income                         $6,339    $6,894   $23,365   $26,488

    Earnings per Share
     Net income:
      Basic                               $0.28     $0.29     $1.00     $1.07
      Diluted                             $0.26     $0.27     $0.94     $1.00

     Average shares outstanding:
      Basic                              23,021    23,865    23,267    24,724
      Diluted                            24,401    25,487    24,927    26,365



    Condensed Balance Sheets
     ASSETS                          Jan 1, 2006  Jan 2, 2005
      Cash and cash equivalents         $16,603    $9,910
      Restricted cash                    22,014    22,014
      Short-term investments             49,750    81,100
      Net receivables                   139,635   132,002
      Deferred tax assets                18,507    23,861
      Prepaid expenses and
       other current assets               7,816     6,057
           Total current assets         254,325   274,944

      Fixed assets, net                  24,969    19,687
      Deferred tax assets, net           15,566    21,233
      Goodwill                            6,976     1,325
      Other assets                       24,729    14,909
          Total assets                 $326,565  $332,098

     LIABILITIES AND
      SHAREHOLDERS' EQUITY
      Accounts payable                  $13,870   $25,896
      Payroll and related taxes           9,777     9,356
      Medicare liabilities                7,220     9,949
      Cost of claims incurred
       but not reported                  25,276    27,361
      Obligations under insurance
       programs                          32,883    34,660
      Other accrued expenses             33,440    31,117
           Total current liabilities    122,466   138,339

      Other liabilities                  21,945    21,819
      Shareholders' equity              182,154   171,940
           Total liabilities and
            shareholders' equity       $326,565  $332,098

      Common shares outstanding          23,035    23,722



                                                           Fiscal Year
    Condensed Statements of Cash Flows               2005              2004
     OPERATING ACTIVITIES:                        (52 weeks)        (53 weeks)
     Net income                                    $23,365           $26,488
     Adjustments to reconcile net income
      to net cash
      provided by operating activities
      Depreciation and amortization                  8,091             7,329
      Provision for doubtful accounts                6,172             6,722
      Gain on sale of Canadian investment                -              (946)
      Loss on disposal / writedown of
       fixed assets                                      -             1,361
      Reversal of tax audit reserves                (4,200)                -
      Deferred income taxes                         11,021             9,114
     Changes in assets and liabilities:
      Accounts receivable                          (13,805)           (5,726)
      Prepaid expenses and other current
       assets                                       (1,759)               25
      Current liabilities                           (9,473)          (10,372)
     Other, net                                        450               858
     Net cash provided by operating
      activities                                    19,862            34,853

     INVESTING ACTIVITIES:
     Purchase of fixed assets                      (11,622)          (12,593)
     Proceeds from sale of assets                        -             4,123
     Acquisition of business                       (12,077)                -
     Purchases of short-term investments
      available-for-sale                          (173,050)         (145,950)
     Maturities of short-term investments
      available-for-sale                           194,400            84,850
     Purchases of short-term investments
      held to maturity                                   -           (10,000)
     Maturities of short-term investments
      held to maturity                              10,000            10,000
     Deposits into restricted cash                       -              (264)
     Net cash provided by (used in)
      investing activities                           7,651           (69,834)

     FINANCING ACTIVITIES:
     Proceeds from issuance of common
      stock                                          7,955             6,675
     Changes in book overdrafts                     (7,253)            1,223
     Repurchases of common stock                   (21,106)          (38,402)
     Repayment of capital lease
      obligations                                     (416)             (293)
     Net cash used in financing
      activities                                   (20,820)          (30,797)

     Net change in cash and cash
      equivalents                                    6,693           (65,778)
     Cash and cash equivalents at
      beginning of period                            9,910            75,688
     Cash and cash equivalents at end of
      period                                       $16,603            $9,910



                                          4th Quarter         Fiscal Year
                                         2005      2004      2005      2004
     Supplemental Information         (13 weeks)(14 weeks)(52 weeks)(53 weeks)
     Net Revenues by Major Payer
      Source:
      Medicare (1)                      $71,449   $59,365  $265,830  $228,114
      Medicaid and local government      37,717    38,528   149,756   154,388
      Commercial insurance and other    112,876   127,648   453,257   463,262
           Total net revenues          $222,042  $225,541  $868,843  $845,764

    Segment Information
     Net revenues
      Home Healthcare Services         $142,638  $134,054  $552,516  $523,017
      CareCentrix                        82,438    96,841   333,010   343,541
      Intersegment revenues              (3,034)   (5,354)  (16,683)  (20,794)
     Total net revenues                $222,042  $225,541  $868,843  $845,764

     Operating contribution (2)
      Home Healthcare Services          $17,741   $10,740   $54,531   $56,069
      CareCentrix                         5,685    12,977    26,006    36,783
     Total operating contribution        23,426    23,717    80,537    92,852
     Corporate expenses                 (11,328)  (13,856)  (42,482)  (47,265)
     Gain on sale of Canadian
      investment                            -         -         -         946
     Depreciation and amortization       (2,153)   (1,824)   (8,091)   (7,329)
     Interest income, net                   616       439     1,878       977
     Income before income taxes         $10,561    $8,476   $31,842   $40,181

    A reconciliation of net income
     between As Reported and As
     Adjusted amounts,
    and the related diluted earnings
     per share, follow (3):

      Net income - As Reported           $6,339    $6,894   $23,365   $26,488
      Income tax expense - As Reported
       (4)                                4,222     1,582     8,477    13,693
      Income before income taxes - As
       Reported                          10,561     8,476    31,842    40,181
      Less: Gain on sale of Canadian
       investment (5)                       -         -         -        (946)
      Less: Medicare cost report
       settlement (1)                    (3,603)     (278)   (3,603)  (10,365)
      Add: Revenue adjustment for
       estimated Medicare repayment
       (1)                                  -         -         -       1,000
      Add: Restructuring and other
       costs (6)                            911       -         911       -
      Income before income taxes - As
       Adjusted                           7,869     8,198    29,150    29,870
      Less: income tax expense - At
       normalized rate (4)               (3,147)   (3,371)  (11,602)  (11,649)
      Net income - As Adjusted           $4,722    $4,827   $17,548   $18,221

      Diluted Earnings per Share
      Net income - As Reported            $0.26     $0.27     $0.94     $1.00
      Net income - As Adjusted            $0.19     $0.19     $0.70     $0.69



    A Reconciliation of Projected 2006
     EBITDA to Net Income (7)
      (in millions)                    Low Range  High Range

      EBITDA before equity-based
       compensation expense (8)           $80.0     $85.0
      Equity-based compensation expense    (5.0)     (5.0)
      EBITDA (8)                           75.0      80.0
      Depreciation and amortization (9)   (22.0)    (22.0)
      Interest expense, net (10)          (20.0)    (20.0)
      Income before income taxes           33.0      38.0
      Income taxes                        (12.5)    (14.5)
      Net Income                          $20.5     $23.5



    Notes:

    (1)  Fourth quarter 2005 results included approximately $3.6 million
         recorded and received in partial settlement of the Company's appeal
         filed with the U.S. Provider Reimbursement Review Board ("PRRB")
         related to the reopening of all of its 1999 cost reports.  Fourth
         quarter 2004 results included approximately $0.3 million received in
         settlement of the Company's appeal filed with the PRRB related to the
         reopening of all of its 1998 and 1997 cost reports.  Fiscal 2004
         results included $10.4 million received in settlement of the
         Company's appeal to the PRRB regarding the 1998 and 1997 cost
         reports, net of a $1 million revenue adjustment to reflect an
         estimated repayment to Medicare in connection with services rendered
         to certain patients since the inception of the Prospective Payment
         Reimbursement System in October 2000.  The Centers for Medicare &
         Medicaid Services determined that homecare providers should have
         received lower reimbursements for certain services rendered to
         beneficiaries discharged from inpatient hospitals within fourteen
         days immediately preceding admission to home healthcare.

    (2)  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, but include revenues and all other
         costs directly attributable to the specific segment.

    (3)  Although "Net Income - As Adjusted" is a non-GAAP financial measure,
         management believes that the presentation of net income as calculated
         using a normalized tax rate, which excludes the nonrecurring tax
         benefits as described in Note 4, and excluding the PRRB settlements
         and the estimated Medicare repayments as described in Note 1, and the
         restructuring and other items referred to in Note 6, as well as the
         second quarter 2004 gain on the sale of Gentiva's investment in a
         Canadian homecare company as described in Note 5, is a useful adjunct
         to "Net Income - As Reported" under GAAP because it measures the
         Company's performance in a consistent manner between the results for
         the fourth quarters and fiscal years 2005 and 2004.  Management
         believes the favorable resolution of tax audit issues as described in
         Note 4 should be excluded from "Net Income - As Adjusted" as this is
         a nonrecurring item which relates to prior periods.  In addition, the
         PRRB settlement in the fourth quarter of fiscal 2005 and the PRRB
         settlements in fiscal 2004, reduced by the Medicare estimated
         repayment in fiscal 2004, should be excluded from "Net Income - As
         Adjusted" as these items relate to reimbursement activities for the
         periods described in Note 1. Furthermore, the restructuring and other
         items and gain on the sale of the Canadian investment should be
         excluded from "Net Income - As Adjusted," since these represent
         special or nonrecurring items. For these reasons, management believes
         that "Net Income - As Adjusted" is useful to investors. Investors
         should not view "Net Income - As Adjusted" as an alternative to the
         GAAP measure of net income.

    (4)  For fiscal 2005, the Company's income tax expense included a $4.2
         million income tax benefit resulting from a favorable resolution of
         tax audit issues relating to fiscal 1997 through 2000.  For the
         fourth quarter and fiscal year 2004, the Company's effective tax
         rates were approximately 18.7% and 34.1%, respectively, due primarily
         to the recognition of certain state net operating loss carryforwards.
         Management has excluded these unusual items and has incorporated a
         normalized tax rate in its presentation of "Net Income - As
         Adjusted."

    (5)  Income before income taxes for fiscal 2004 included a gain of
         $946,000 from the sale of Gentiva's 19.9% interest in a Canadian
         homecare company to whom Gentiva sold its Canadian operations in
         November 2000.

    (6)  Restructuring and other costs for the fourth quarter of fiscal 2005
         relates primarily to a restructuring plan for the CareCentrix
         operations, which provides for the closing and consolidation of two
         regional care centers in response to changes in the nature of
         services provided to CIGNA Healthcare members under a new contract
         which commenced in early 2006.  The Company expects to complete this
         restructuring during the second quarter of fiscal 2006.

    (7)  Projected 2006 EBITDA includes the operating results of The
         Healthfield Group, Inc. from March 1, 2006.

    (8)  EBITDA before equity-based compensation expense and EBITDA are non-
         GAAP financial measures. EBITDA is defined as income before interest
         expense (net of interest income), income taxes, depreciation and
         amortization.  Following the acquisition of Healthfield, management
         expects to review EBITDA before equity-based compensation expense and
         EBITDA to evaluate overall performance and compare current operating
         results with other companies in the health care 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 before equity-based compensation and
         EBITDA are not measures of financial performance under accounting
         principles generally accepted in the United States and are
         susceptible to varying calculations, they may not be comparable to
         similarly titled measures in other companies.

    (9)  Depreciation and amortization reflects an assumption that
         amortization of identifiable intangible assets acquired in connection
         with the Healthfield acquisition will approximate $10 million in
         2006.  Actual amortization of such intangible assets cannot be
         determined until the completion of a full valuation study of
         Healthfield's intangible assets later in 2006.

    (10) Interest expense, net includes interest expense on a $370 million
         term loan, fees associated with a $75 million revolving credit
         facility and amortization of debt financing costs, net of interest
         income.

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