Acquisitions and Dispositions

Acquisitions

Odyssey Healthcare of Augusta, LLC

Effective April 29, 2011, the Company purchased the outstanding member units representing the noncontrolling interest in Odyssey Healthcare of Augusta, LLC ("Augusta") for approximately $0.3 million. As a result of the transaction, the Company owns 100 percent of the outstanding member units of Augusta.

Odyssey HealthCare, Inc.

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 Company's business mix. Total consideration for the acquisition was $1.087 billion consisting of payments of approximately (i) $963.9 million for Odyssey's equity interest, (ii) $108.8 million to repay Odyssey's existing long-term debt and accrued interest and (iii) $14.3 million of transaction costs incurred by Odyssey.

The financial results of Odyssey are included in the Company's consolidated financial statements from the acquisition date. The following unaudited pro forma financial information presents the combined results of operations of the Company and Odyssey as if the acquisition had been effective at January 4, 2010, the beginning of the first quarter of 2010. The pro forma results presented below for the three months and six months ended July 4, 2010 combine the results of the Company for such periods and the historical results of Odyssey from January 1, 2010 through June 30, 2010 (in thousands, except per share amounts):


	For the Three Months Ended July 4, 2010		For the Six Months Ended July 4, 2010
Net revenues	$	473,326	$	941,953
Net income attributable to Gentiva shareholders	$	18,534	$	29,700
Earnings per common share:
Basic		0.62		1.00
Diluted		0.61		0.97
Weighted average shares outstanding:
Basic		29,770		29,715
Diluted		30,618		30,568

The pro forma results above reflect adjustments for (i) interest on debt incurred calculated using the Company's weighted average interest rate of 7.9 percent, (ii) income tax provision using an effective tax rate of 39.9 percent, (iii) amortization of incremental identifiable intangible assets and (iv) acquisition and integration costs incurred. The information presented above is for illustrative purposes only and is not necessarily indicative of results that would have been achieved if the acquisition had occurred as of the beginning of the Company's 2010 reporting period.

Other Acquisitions

Effective May 15, 2010, the Company completed its acquisition of the assets and business of United Health Care Group, Inc. with six branches throughout the state of Louisiana. Total consideration of $6.0 million, excluding transaction costs and subject to post-closing adjustments, was paid at the time of closing from the Company's existing cash reserves. The acquisition significantly broadened the Company's market position in the state of Louisiana. The purchase price was allocated to goodwill ($2.3 million), identifiable intangible assets, primarily certificates of need ($3.6 million) and other assets ($0.1 million).

Effective March 5, 2010, the Company completed its acquisition of the assets and business of Heart to Heart Hospice of Starkville, LLC, a provider of hospice services with two offices in Starkville and Tupelo, Mississippi. Total consideration of $2.5 million, excluding transaction costs and subject to post-closing adjustments, was paid at the time of closing from the Company's existing cash reserves. The acquisition expanded the Company's coverage area to 44 counties in north, central and southern Mississippi. The purchase price was allocated to goodwill ($2.2 million), identifiable intangible assets ($0.2 million) and other assets ($0.1 million).

The financial results of the acquired operations are included in the Company's consolidated financial statements from the acquisition date. The purchase price for both acquisitions was allocated to the underlying assets acquired and liabilities assumed based on their estimated fair values at the date of the acquisition. The excess of the purchase price over the fair value of the net identifiable tangible and intangible assets acquired is recorded as goodwill. The Company has determined the estimated fair values based on discounted cash flows and management's valuation of the intangible assets acquired.

Dispositions

HME and IV Businesses Disposition

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 six 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 Company's consolidated statement of income. Transaction costs of $0.7 million consisted primarily of professional fees and expenses. During the fourth quarter of 2010, the Company received $1.0 million in settlement of the escrow fund associated with cash collections and recorded a $2.2 million charge in discontinued operations, net of tax. During the first six months of 2011, the Company received $0.1 million of the escrow fund for settlement of post closing liabilities and recorded a charge of $0.3 million, in selling, general and administrative expenses in the Company's consolidated statements of income.

HME and IV net revenues and operating results for the periods presented were as follows (in thousands):


	Second Quarter 2010			First Six Months 2010
Net revenues	$	—		$	3,956

Loss before income taxes	$	(2,171	)	$	(5,498	)
Gain on sale of business		—			66
Income tax benefit		867			3,147

Discontinued operations, net of tax	$	(1,304	)	$	(2,285	)

Other Asset Disposition

Effective January 30, 2010, the Company sold assets associated with a home health branch operation in Iowa for cash consideration of approximately $0.3 million and recognized a gain of approximately $0.1 million recorded in gain on sale of assets, net in the Company's consolidated statement of income for the six months ended July 4, 2010.