8-K

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): September 25, 2008

GENTIVA HEALTH SERVICES, INC.

(Exact name of registrant as specified in its charter)

Delaware	1-15669	36-4335801
(State or other jurisdiction of incorporation)	(Commission File No.)	(IRS Employer Identification No.)

3 Huntington Quadrangle, Suite 200S, Melville, New York	11747-4627
(Address of principal executive offices)	(Zip Code)
(631) 501-7000
(Registrant's telephone number, including area code)
Not applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17

CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17

CFR 240.13e-4(c))

Section 2 – Financial Information

Item 2.01. Completion of Acquisition or Disposition of Assets.

On September 25, 2008, Gentiva Health Services, Inc. (the “Company”) completed its previously announced sale of a majority interest in the Company’s CareCentrix ancillary care benefit management business, which is operated through Gentiva CareCentrix, Inc. (“CareCentrix”) and Gentiva Health Services IPA, Inc. (“IPA”).

Pursuant to a Stock Purchase Agreement by and among the Company, Gentiva Health Services Holding Corp., a wholly-owned subsidiary of the Company (“Gentiva Holding”), and CCX Holdings LLC, a wholly-owned subsidiary of Water Street Healthcare Partners II, L.P. (“Buyer”), a restructuring involving CareCentrix and IPA took place prior to the sale. Pursuant to the restructuring, (i) Gentiva Holding contributed all of its rights, title and interests in and to all of the outstanding capital stock of IPA to CareCentrix, (ii) CareCentrix redeemed a portion of its outstanding shares of capital stock for two promissory notes issued to Gentiva Holding, namely (A) a redemption note in the principal amount of $38 million and (B) a seller note in the principal amount of $25 million, and (iii) Gentiva Holding contributed all of its remaining shares of capital stock of CareCentrix to CareCentrix Holdings Inc., a wholly-owned subsidiary of Gentiva Holding (“Holdco”), in exchange for shares of common and preferred stock of Holdco.

Subsequent to the restructuring, on September 25, 2008, Gentiva Holding sold 69% of the outstanding capital stock of Holdco to Buyer for $46 million in cash. The principal amount of the redemption note also was paid in full to Gentiva Holding on that date.

Section 8 – Other Events

Section 8.01. Other Events.

On September 25, 2008, the Company issued a press release related to the completion of the transaction described in Item 2.01 above. A copy of the press release is attached hereto as Exhibit 99.1 and incorporated by reference herein.

Section 9 – Financial Statements and Exhibits

Item 9.01.	Financial Statements and Exhibits.
(b)	Pro forma financial information.
	The unaudited pro forma consolidated balance sheet of the Company as of June 29, 2008 and the unaudited pro forma consolidated statements of income of the Company for the fiscal year ended December 30, 2007 and for the six months ended June 29, 2008 that give effect to the disposition of 69% of the capital stock of CareCentrix Holdings Inc. are filed as Exhibit 99.2 and incorporated herein by this reference.

2

(d)	Exhibits.
99.1	Press Release, dated September 25, 2008.
99.2	The unaudited pro forma consolidated balance sheet of the Company as of June 29, 2008 and the unaudited pro forma consolidated statements of income of the Company for the fiscal year ended December 30, 2007 and for the six months ended June 29, 2008 that give effect to the disposition of 69% of the capital stock of CareCentrix Holdings Inc.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

GENTIVA HEALTH SERVICES, INC.
(Registrant)

/s/ John R. Potapchuk

John R. Potapchuk
Executive Vice President, Chief Financial Officer and Treasurer

Date:  October 1, 2008

3

EXHIBIT INDEX

Exhibit Number Description

99.1 Press Release, dated September 25, 2008.

99.2 The unaudited pro forma consolidated balance sheet of the Company as of June 29, 2008 and the unaudited pro forma consolidated statements of income of the Company for the fiscal year ended December 30, 2007 and for the six months ended June 29, 2008 that give effect to the disposition of 69% of the capital stock of CareCentrix Holdings Inc.

4

EX-99

EXHIBIT 99.1

Press Release

Financial and Investor Contact:

John R. Potapchuk

631-501-7035

john.potapchuk@gentiva.com

Media Contact:

Jennifer Gery-Egan

Brainerd Communicators

212-986-6667

gery@braincomm.com

FOR IMMEDIATE RELEASE

GENTIVA HEALTH SERVICES COMPLETES SALE

OF MAJORITY STAKE IN CARECENTRIX^® UNIT

MELVILLE, NY, September 25, 2008 -- Gentiva Health Services, Inc. (NASDAQ: GTIV), the nation's leading provider of comprehensive home health services, today announced the completion of the sale of 69% of its CareCentrix unit to Water Street Healthcare Partners, a leading private equity firm focused exclusively on the health care industry, in a transaction valued at approximately $147 million. CareCentrix was started by Gentiva in 1996 and is today a leading national provider of ancillary care benefit management services for major managed care organizations.

According to the definitive agreement announced on August 21, 2008, Gentiva received $84 million in cash and a $25 million interest-bearing seller note upon the closing of the transaction. In addition, Gentiva will retain 31% of the capital stock in CareCentrix having an ascribed value of $26 million.

Of the $84 million in cash proceeds, $26 million will be retained by Gentiva and be available to fund future acquisitions. The remaining cash proceeds will be used to repay term loan debt and reduce the Company's leverage ratio.

About CareCentrix

CareCentrix is a leading national provider of ancillary care benefit management services for major managed care organizations. The unit delivers home nursing, infusion, home medical equipment and additional ancillary services to more than 10 million members of managed care organizations nationwide through a network of over 4,000 credentialed homecare provider locations. CareCentrix employs approximately 400 associates nationally. The company is based in Melville, NY, with significant regional operations in Hartford, CT, Tampa, FL and Phoenix, AZ.

3 Huntington Quadrangle, Suite 200S, Melville, NY 11747-4627

2

About Water Street Healthcare Partners

Water Street Healthcare Partners is a leading private equity firm focused exclusively on health care. With more than $1 billion of capital under management, Water Street is one of the most active investors in the health care industry. The firm has a strong track record of building market-leadership companies across key growth sectors in health care. It has partnered with some of the world’s leading health care companies on its investments, including: Johnson & Johnson, Medtronic and Smith & Nephew. Water Street’s team is comprised of industry executives and private equity professionals with decades of experience investing in and operating global health care businesses. The firm is headquartered in Chicago. For more information about Water Street, visit www.wshp.com.

About Gentiva Health Services, Inc.

Gentiva Health Services, Inc. is the nation's leading provider of comprehensive home health services, delivering innovative, high quality care to patients across the United States.  Gentiva 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; respiratory therapy and home medical equipment; infusion therapy services; and other therapies and services. The Company’s revenues are generated from federal and state government programs, commercial insurance and individual consumers. For more information, visit Gentiva's web site, http://www.gentiva.com, and its investor relations section at http://investors.gentiva.com.  GTIV-G

Forward-Looking Statement

Certain statements contained in this news release, including, without limitation, statements containing the words “believes,” “anticipates,” “intends,” “expects,” “assumes,” “trends” and similar expressions, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon the Company’s current plans, expectations and projections about future events. However, such statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors include, among others, the following: economic and business conditions; demographic changes; changes in, or failure to comply with, existing governmental regulations; legislative proposals for healthcare reform; changes in Medicare and Medicaid reimbursement levels, including changes to the Medicare home health Prospective Payment System effective January 1, 2008; effects of competition in the markets in which the Company operates; liability and other claims asserted against the Company; ability to attract and retain qualified personnel; availability and terms of capital; loss of significant contracts or reduction in revenues associated with major payer sources; ability of customers to pay for services; business disruption due to natural disasters or terrorist acts; ability to successfully integrate the operations of acquisitions the Company may make and achieve expected synergies and operational efficiencies within expected time-frames; effect on liquidity of the Company’s debt service requirements; a material shift in utilization within capitated agreements; and changes in estimates and judgments associated with critical accounting policies and estimates. For a detailed discussion of certain of these and other factors that could cause actual results to differ from those contained in this news release, please refer to the Company's various filings with the Securities and Exchange Commission (SEC), including the "Risk Factors" section contained in the Company's annual report on Form 10-K for the year ended December 30, 2007.

# # #

EX-99

Exhibit 99.2

Gentiva Health Services, Inc. and Subsidiaries

Unaudited Pro Forma Consolidated Financial Data

On September 25, 2008, the Company completed the sale of 69% of its equity interest in the Company’s CareCentrix unit, a leading national provider of ancillary care benefit management services for major managed care organizations, to an affiliate of Water Street Healthcare Partners, a leading private equity firm focused exclusively on the health care industry, in a transaction valued at approximately $147 million.  In a restructuring that preceded the sale and in the sale of its equity interest, Gentiva received approximately $84 million in cash and a $25 million interest bearing seller note and retained 31% of the capital stock of the holding company of CareCentrix, having an ascribed value of approximately $26 million. In addition, the total value of the transaction also included an aggregate of $12 million representing the funding by the Water Street Healthcare Partners affiliate of additional capital into the CareCentrix business on the closing date and the payment of certain transaction related costs.

Of the $84 million in cash proceeds received by Gentiva, $58 million was used to repay a portion of the Company’s term loan on the closing date and approximately $2.5 million will be used to pay certain transaction costs and credit facility amendment fees.

Pro Forma Results for the Six Months Ended June 29, 2008

The following unaudited pro forma financial information presents (i) the financial condition of the Company at June 29, 2008, as if the sale had occurred on June 29, 2008, the Company’s most recent balance sheet date, and (ii) the results of operations of the Company as if the sale had occurred at December 31, 2007, the beginning of fiscal year 2008.The information presented below is for illustrative purposes only and is not necessarily indicative of results that would have been achieved if the disposition had occurred as of the beginning of the Company’s 2008 fiscal year.

GENTIVA PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET JUNE 29, 2008 (In thousands) (Unaudited)
			Historical Gentiva	Less: CareCentrix (1)	Pro Forma Adjustments		Gentiva Pro Forma
ASSETS
Current Assets:
	Cash, cash equivalents and restricted cash		$     22,079	$            303	$        23,533	(a)	$         45,309
	Accounts receivable, gross		223,011	58,176	-		164,835
	Less:Allowance for doubtful accounts		(10,467)	(2,634)	-		(7,833)
	Net accounts receivable		233,478	55,542	-		177,936
	Deferred tax assets		11,306	-	-		11,306
	Prepaid expenses and other current assets		14,455	725	-		13,730
		Total current assets	281,318	56,570	23,533		248,281
Note receivable from affiliate			-	-	25,000	(b)	25,000
Investment in affiliate			-	-	26,000	(c)	26,000
Long-term investments			12,641	-	-		12,641
Fixed assets, net			66,181	2,705	(1,189)	(d)	62,287
Intangible assets, net			240,158	-	-		240,158
Goodwill			316,069	-	-		316,069
Other assets			26,008	-	-		26,008
		Total assets	$   942,375	$        59,275	$        73,344		$        956,444
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
	Accounts payable		$     22,207	$        14,062	$                -		$            8,145
	Payroll and related taxes		19,094	417	-		18,677
	Deferred revenue		33,624	-	-		33,624
	Medicare liabilities		8,782	-	-		8,782
	Cost of claims incurred but not reported		22,089	22,089	-		-
	Obligations under insurance programs		38,805	1,242	-		37,563
	Other accrued expenses		34,138	5,159	-		28,979
	Due to Gentiva		-	16,306	16,306	(e)	-
		Total current liabilites	178,739	59,275	16,306		135,770
Long-term debt			331,000	-	(58,000)	(f)	273,000
Deferred tax liabilities, net			57,152	-	-		57,152
Other liabilities			22,109	-	-		22,109
Shareholders' equity			353,375	-	115,038	(g)	468,413
		Total liabilities and shareholders' equity	$   942,375	$        59,275	$        73,344		$        956,444

GENTIVA PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE SIX MONTHS ENDED JUNE 29, 2008 (In thousands, except per share amounts) (Unaudited)
	Historical Gentiva	Less: CareCentrix (1)		Pro Forma Adjustments		Gentiva Pro Forma
Net revenues	$      669,947	$      157,171		$             1,767	(h)	$        514,543
Cost of services and goods sold	(379,078)	(128,226)		(1,767)	(h)	(252,619)
Selling, general and administrative expenses	(235,562)	(19,896)	(i)	425	(j)	(215,241)
Depreciation and amortization	(10,753)	(240)		-		(10,513)
Operating income	44,554	8,809		425		36,170
Interest expense	(11,685)	-		1,827	(k)	(9,858)
Interest income	940	-		1,250	(l)	2,190
Income before income taxes	33,809	8,809		3,502		28,502
Income tax expense	(14,062)	(3,541)	(m)	(1,408)	(m)	(11,929)
Income before equity in net earnings of affiliate	19,747	5,268		2,094		16,573
Equity in net earnings of affiliate	-	-		971	(n)	971
Net income	$       19,747	$         5,268		$            3,065		$          17,544
Net income per common share:
Basic	$0.70					$0.62
Diluted	$0.68					$0.60
Weighted average shares outstanding:
Basic	28,389					28,389
Diluted	29,147					29,147

(1) Information is derived from the unaudited results of operations for the six months ended June 29, 2008.

NOTES TO GENTIVA UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTHS ENDED JUNE 29, 2008

(a) Adjustment to reflect $84.0 million of cash proceeds from the restructuring and sale of the Company’s 69% equity interest in CareCentrix less $58.0 million of payment on the term loan and approximately $2.5 million of expenses and fees.

(b) Adjustment to reflect the receipt of a $25.0 million, 10% note receivable due upon the occurrence of certain events, but in no event later than March 25, 2014 from CareCentrix.

(c) Adjustment to reflect Gentiva’s 31% equity interest in the holding company for CareCentrix.

(d) Adjustment to reflect the write-down of $1,189 related to developed software for a CareCentrix application that will not be utilized following the transaction.

(e) Adjustment to reflect the elimination of the due to Gentiva for the sale of the net assets in CareCentrix.

(f) Adjustment to reflect the prepayment of $58.0 million on the Company’s term loan from the proceeds of the restructuring and sale in connection with the First Amendment to the Company’s Credit Agreement dated August 20, 2008.

(g) Adjustment to reflect the gain on the sale of CareCentrix. There is no income tax liability recorded since the transaction results in a capital loss for federal income tax purposes.

(h) Adjustment to reflect intercompany transactions between Gentiva home care branches and CareCentrix that were previously eliminated in reporting Historical Gentiva results.

(i) Includes $3,800 of fees to be paid by CareCentrix to Gentiva in connection with a Transition Services Agreement between the Company and CareCentrix.

(j) Adjustment to reflect Gentiva’s management fee from CareCentrix ($200) and the elimination of Gentiva’s equity-based compensation expense associated with CareCentrix associates ($225).

(k) Adjustment to reflect $1,827 of reduced interest expense as a result of the prepayment of $58.0 million on the Company’s term loan at a weighted average interest rate of 6.3%.

(l) Adjustment of $1,250 to reflect interest income on the $25.0 million note receivable from CareCentrix that bears interest at an annual rate of 10%.

 

2

(m) Adjustment to reflect a combined federal and state statutory tax rate of 40.2% on the CareCentrix results and the pro forma adjustments.

(n) Adjustment to reflect Gentiva’s 31% equity in CareCentrix’s earnings for the six months ended June 29, 2008.

Calculation of equity in net earnings of affiliate:
	CareCentrix income before income taxes		$	8,809
	Less:  Interest on seller note @ 10%			(1,250)
		Interest on senior debt @ 8%		(1,520)
		Management fees		(800)
	Adjusted income before income taxes			5,239
		Income tax expense @ 40.2%		(2,106)
	Adjusted net income			3,133
	Equity in net earnings of affiliate @ 31%		$	971

Pro Forma Results for the Fiscal Year ended December 30, 2007

The following unaudited pro forma financial information presents the results of operations of the Company as if the sale had occurred at January 1, 2007, the beginning of fiscal 2007.The information presented below is for illustrative purposes only and is not necessarily indicative of results that would have been achieved if the disposition had occurred as of the beginning of the Company’s 2007 fiscal year.

GENTIVA PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 30, 2007 (In thousands, except per share amounts) (Unaudited)
	Historical Gentiva	Less: CareCentrix (1)		Pro Forma Adjustments		Gentiva Pro Forma
Net revenues	$   1,229,297	$      290,786		$         5,115	(a)	$       943,626
Cost of services and goods sold	(700,299)	(231,537)		(5,115)	(a)	(473,877)
Selling, general and administrative expenses	(429,321)	(37,779)	(b)	850	(c)	(390,692)
Depreciation and amortization	(20,014)	(494)		-		(19,520)
Operating income	79,663	20,976		850		59,537
Interest expense	(27,285)	-		4,408	(d)	(22,877)
Interest income	3,204	-		2,500	(e)	5,704
Income before income taxes	55,582	20,976		7,758		42,364
Income tax expense	(22,754)	(8,432)	(f)	(3,119)	(f)	(17,440)
Income before equity in net earnings of affiliate	32,828	12,544		4,639		24,924
Equity in net earnings of affiliate	-	-		2,565	(g)	2,565
Net income	$        32,828	$        12,544		$         7,204		$        27,489
Net income per common share:
Basic	$           1.18					$           0.99
Diluted	$           1.15					$           0.96
Weighted average shares outstanding:
Basic	27,798					27,798
Diluted	28,599					28,599
(1) Information is derived from the unaudited results of operations for the year ended December 30, 2007.

NOTES TO GENTIVA UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 30, 2007

(a) Adjustment to reflect intercompany transactions between Gentiva home care branches and CareCentrix that were previously eliminated in reporting Historical Gentiva results.

(b) Includes $7,600 of fees to be paid by CareCentrix to Gentiva in connection with a Transition Services Agreement between the Company and CareCentrix.

 

3

(c) Adjustment to reflect Gentiva’s management fee from CareCentrix ($400) and the elimination of Gentiva’s equity-based compensation expense associated with CareCentrix associates ($450).

(d)Adjustment to reflect $4,408 of reduced interest expense as a result of the prepayment of $58.0 million on the Company’s term loan at a weighted average interest rate of 7.6%.

(e) Adjustment of $2,500 to reflect interest income on the $25.0 million note receivable from CareCentrix that bears interest at an annual rate of 10%.

(f) Adjustment to reflect a combined federal and state statutory tax rate of 40.2% on the CareCentrix results and the pro forma adjustments.

(g) Adjustment to reflect Gentiva’s 31% equity in CareCentrix’s earnings for the fiscal year ended December 30, 2007.

Calculation of equity in net earnings of affiliate:
	CareCentrix income before income taxes		$	20,976
	Less:  Interest on seller note @ 10%			(2,500)
		Interest on senior debt @ 8%		(3,040)
		Management fees		(1,600)
	Adjusted income before income taxes			13,836
		Income tax expense @ 40.2%		(5,526)
	Adjusted net income			8,274
	Equity in net earnings of affiliate @ 31%		$	2,565

 

4