Exhibit 99.1

 

Contact:		Investor Relations
		(502) 596-6569

KINDRED HEALTHCARE ANNOUNCES FIRST QUARTER 2015 RESULTS

 

 

Successfully Completed Gentiva Health Services and Centerre Healthcare Acquisitions

and Achieved Key First Quarter Integration and Synergy Realization Milestones

Core Diluted EPS from Continuing Operations of $0.34⁽¹⁾ in the First Quarter

GAAP Loss Per Share from Continuing Operations of $1.80 in the First Quarter Includes:

• $1.19 Per Share to Establish a Loss Contingency Reserve for Previously Disclosed RehabCare Matter

• $0.97 Per Share Related to Transaction, Integration, Financing, Severance and Other Restructuring Costs

 

 

Establishes 2015 Core EPS Guidance of $1.20 to $1.40 Per Diluted Share

and Adjusted Core EPS Guidance of $1.70 to $1.90 Per Diluted Share

LOUISVILLE, Ky. (May 6, 2015) – Kindred Healthcare, Inc. (“Kindred” or the “Company”) (NYSE:KND) today announced its operating results for the first quarter ended March 31, 2015.

Benjamin A. Breier, President and Chief Executive Officer of the Company commented, “After our efforts to transform the Company over the last several years, I am pleased with the strides we made in the first quarter to strengthen our business and solidify Kindred’s position as a national leader in post-acute care. Our strong results and growth would not have been possible without the dedication of our 103,000 teammates and their commitment to improving the lives of more than one million patients each year.”

Mr. Breier further commented, “In the first quarter, we achieved our integration and synergy objectives for the acquired organizations and their operating results exceeded expectations. These strategic additions significantly improved the growth, margin and cash flow profile of the Company.”

All financial and statistical information included in this press release reflects the continuing operations of the Company’s businesses for all periods presented unless otherwise indicated. The acquisitions of Gentiva Health Services, Inc. (“Gentiva”) and Centerre Healthcare Corporation (“Centerre”) have been included in the operating results presented since the date of acquisition. Prior period segment information has been recast to conform with the current presentation, including the transfer of five inpatient rehabilitation hospitals from the Hospital Division to the Hospital Rehabilitation Services business segment.

First Quarter Consolidated Highlights⁽¹⁾:

 

•

Core diluted EPS from continuing operations of $0.34 and adjusted core diluted EPS from continuing operations of $0.43 based upon 82.4 million weighted average diluted shares as compared to core diluted EPS of $0.35 and adjusted core diluted EPS of $0.46 a year ago based upon 52.7 million weighted average diluted shares

 

•

Consolidated revenues increased 32% to $1.68 billion and earnings before interest, income taxes, depreciation, amortization, rent and certain charges (“core EBITDAR”) increased 29% to $234 million, each as compared to the same period last year primarily due to the acquisitions of Gentiva on February 2, 2015 and Centerre on January 1, 2015

 

•

Core operating cash flows were $38 million compared to $14 million a year ago; core free cash flows were $17 million compared to a core free cash flow deficit of $8 million in the first quarter of 2014

 

•

The Kindred Board of Directors declared regular quarterly cash dividend of $0.12 per share on the Company’s common stock payable on June 10, 2015

 

(1)	See reconciliation of core and adjusted results to generally accepted accounting principles (“GAAP”) results beginning on page 12.

 

– MORE –

680 South Fourth Street    Louisville, Kentucky 40202

502.596.7300        www.kindredhealthcare.com

---

Kindred Healthcare Announces First Quarter 2015 Results

Page 2

May 6, 2015

 

 

First Quarter Segment Highlights⁽¹⁾:

Kindred at Home (“KAH”) had a very strong start to the year, with the successful acquisition of Gentiva in February, which established KAH as the largest combined home health and hospice operator in the country. The home health segment of KAH experienced strong growth with combined Medicare admissions increasing 3.3% and revenues increasing 6.6%, both for the first quarter of 2015 over the prior year. The hospice segment of KAH is showing signs of stabilization and has begun a return to sequential admissions and census growth on a combined basis. In addition, Kindred achieved key first quarter integration milestones for the Gentiva acquisition and is on track to realize $35 million of contribution from synergies in 2015 and a synergy run rate at year end of at least $55 million.

Kindred’s Hospital Division (“HD”) revenue increased 2.1% over prior year driven by patient day growth of 3.3%, growth in revenue per admission of 2.7% offset by an admissions decline of 0.5%. Core EBITDAR contribution from HD was down 3.4% from prior year, to $135 million, driven primarily by shifts in payor mix and patient acuity. We continue to be pleased with the progress our long-term acute care (“LTAC”) hospital business is making as we transition through the Affordable Care Act roll-out and with preparations for the implementation of LTAC criteria, which will not impact the Company until late 2016.

Kindred’s Rehabilitation Division (“RHB”) had a solid start to the year with the successful acquisition of Centerre and its 11 freestanding inpatient rehabilitation hospitals (“IRFs”), all of which are joint ventured with prominent regional health systems. Strong performance in the quarter from RHB’s freestanding IRFs and contract hospital rehabilitation services business was offset, in part, by contract losses in the skilled nursing rehabilitation services segment.

Kindred’s Nursing Center Division (“NCD”) revenue and admissions grew 4.5% and 6.0%, respectively, over the prior year. Medicare average length of stay contracted 2.4% over the prior year, contributing to a core EBITDAR reduction of 1.6% to $37 million.

Mr. Breier commented, “Our patient-centered care management approach to provide the right care, in the right setting, at the right time - combined with the successful steps we have taken to expand our operations - are driving value creation for our patients, healthcare partners and shareholders. We recently issued our Annual Quality and Social Responsibility Report that highlights our clinical expertise, capabilities across the continuum and care innovations. These strengths support smooth transitions between care settings, produce positive clinical outcomes, and improve the patient experience.”

Mr. Breier continued, “Our solid start to 2015, together with the clarity and stability from the permanent “doc fix” and LTAC preliminary rulemaking in line with expectations, builds upon our excitement for the future and confidence that our strategy best positions us for long-term success.”

RehabCare Loss Contingency Reserve

The Company is engaged in active discussions with the United States Department of Justice in an effort to find a mutually acceptable resolution to the previously disclosed investigation of RehabCare Group, Inc., a therapy services company acquired by Kindred on June 1, 2011. Based on the progress of those settlement discussions beginning in mid-March and into the second quarter of 2015, the Company has accrued an estimated loss contingency reserve of $95 million in the first quarter of 2015. In the event the Company is able to reach a mutually agreeable settlement with the Department of Justice, the Company estimates that the financial component of such a settlement could range from $95 million to $125 million. The discussions are ongoing, and until concluded, there can be no certainty about the timing or likelihood of a definitive resolution, the scope of any potential restrictions that may be agreed upon in connection with a settlement or the cost of a final settlement.

 

(1)	See reconciliation of core and adjusted results to GAAP results beginning on page 12.

 

- MORE -

---

Kindred Healthcare Announces First Quarter 2015 Results

Page 3

May 6, 2015

 

 

2015 Outlook

Kindred today established guidance for its estimated 2015 financial results ⁽¹⁾ including:

 

•

2015 annual revenues of approximately $7.2 billion

 

•

Core EBITDAR of approximately $1.0 billion to $1.05 billion (2)

 

•

Core earnings of $1.20 to $1.40 per diluted share (3)

 

•

Adjusted core earnings of $1.70 to $1.90 per diluted share(3)(4)

For the second quarter of 2015, the Company expects core diluted earnings per share from continuing operations to approximate $0.27 to $0.37 and adjusted core diluted earnings per share from continuing operations to approximate $0.39 to $0.49.

Stephen D. Farber, Executive Vice President and Chief Financial Officer, commented, “We are encouraged by the strong performance and integration progress of our Gentiva and Centerre acquisitions, and our solid consolidated operating results. We are establishing guidance for the year at levels that represent significant growth, and we are on track to meet our synergy goal to realize $35 million of synergy contribution in 2015. Our cash flow and growth profile will continue to support a strong balance sheet and allow us to delever while continuing to invest in our businesses and return significant capital to shareholders through our quarterly cash dividends.”

The guidance excludes transaction costs, pre-closing financing costs and post-closing integration costs associated with the acquisitions of Gentiva and Centerre, the effect of reimbursement changes, debt refinancing costs, severance, retirement, retention and restructuring costs, litigation and related contingency expense, other transaction costs, any further acquisitions or divestitures, any impairment charges, any further issuances of common stock or any repurchases of common stock.

Quarterly Cash Dividend

The Company announced that its Board of Directors has approved the payment of the regular quarterly cash dividend of $0.12 per share of common stock to be paid on June 10, 2015 to shareholders of record as of the close of business on May 20, 2015.

Conference Call

As previously announced, investors and the general public may access a live webcast of the first quarter 2015 conference call through a link on the Company’s website at http://investors.kindredhealthcare.com. The conference call will be held on May 7 at 10:00 a.m. (Eastern Time).

A telephone replay of the conference call will become available at approximately 1:00 p.m. on May 7 by dialing (719) 457-0820, access code: 1193715. The replay will be available through May 15.

 

(1)	Guidance includes Gentiva for eleven months and Centerre for the full year.

(2)	Includes $35 million from Gentiva synergies expected to be realized in the year.

(3)

The earnings per share estimate is based upon an estimated weighted average annual diluted share count for 2015 of 86 million shares. The estimated annual diluted share count of 2015 includes approximately 3.4 million shares of common stock issued in late February to holders of 78,010 tangible equity units that elected early conversion settlements.

(4)	Adjusted core earnings per diluted share is calculated by excluding non-cash expenses, net of the income tax benefit, related to amortization of intangible assets, stock-based compensation and deferred financing costs, from core income from continuing operations.

 

- MORE -

---

Kindred Healthcare Announces First Quarter 2015 Results

Page 4

May 6, 2015

 

 

Forward-Looking Statements and Non-GAAP Reconciliations

See page 11 for important disclosures regarding our forward-looking statements and the non-GAAP financial reconciliations that follow.

About Kindred Healthcare

Kindred Healthcare, Inc., a top-85 private employer in the United States, is a FORTUNE 500 healthcare services company based in Louisville, Kentucky with annual revenues of approximately $7.2 billion⁽¹⁾. At March 31, 2015, Kindred through its subsidiaries had approximately 102,600 employees providing healthcare services in 2,787 locations in 47 states, including 97 transitional care hospitals, 16 inpatient rehabilitation hospitals, 90 nursing centers, 21 sub-acute units, 664 Kindred at Home home health, hospice and non-medical home care sites of service, 100 inpatient rehabilitation units (hospital-based) and a contract rehabilitation services business, RehabCare, which served 1,799 non-affiliated sites of service. Ranked as one of Fortune magazine’s Most Admired Healthcare Companies for six years, Kindred’s mission is to promote healing, provide hope, preserve dignity and produce value for each patient, resident, family member, customer, employee and shareholder we serve. For more information, go to www.kindredhealthcare.com. You can also follow us on Twitter and Facebook.

 

(1)	Revenues were computed by combining the twelve months ended December 31, 2014 data for Kindred, Gentiva and Centerre.

 

- MORE -

---

Kindred Healthcare Announces First Quarter 2015 Results

Page 5

May 6, 2015

 

 

KINDRED HEALTHCARE, INC.

Condensed Consolidated Statement of Operations

(Unaudited)

(In thousands, except per share amounts)

 

		Three months ended March 31,
		2015				2014
Revenues		$	1,675,967			$	1,272,610
Salaries, wages and benefits			847,093				618,694
Supplies			93,271				72,965
Rent			92,140				78,530
Other operating expenses			197,727				169,530
General and administrative expenses			406,102				231,272
Other income			(480	)			(212	)
Litigation contingency expense			95,000				—
Impairment charges			6,726				—
Depreciation and amortization			38,935				39,092
Interest expense			62,518				25,799
Investment income			(741	)			(182	)
			1,838,291				1,235,488
Income (loss) from continuing operations before income taxes			(162,324	)			37,122
Provision (benefit) for income taxes			(27,736	)			14,195
Income (loss) from continuing operations			(134,588	)			22,927
Discontinued operations, net of income taxes:
Loss from operations			(3,424	)			(7,442	)
Loss on divestiture of operations			—				(3,006	)
Loss from discontinued operations			(3,424	)			(10,448	)
Net income (loss)			(138,012	)			12,479
(Earnings) loss attributable to noncontrolling interests:
Continuing operations			(8,847	)			(4,529	)
Discontinued operations			29				70
			(8,818	)			(4,459	)
Income (loss) attributable to Kindred		$	(146,830	)		$	8,020
Amounts attributable to Kindred stockholders:
Income (loss) from continuing operations		$	(143,435	)		$	18,398
Loss from discontinued operations			(3,395	)			(10,378	)
Net income (loss)		$	(146,830	)		$	8,020
Earnings (loss) per common share:
Basic:
Income (loss) from continuing operations		$	(1.80	)		$	0.34
Discontinued operations:
Loss from operations			(0.04	)			(0.13	)
Loss on divestiture of operations			—				(0.06	)
Loss from discontinued operations			(0.04	)			(0.19	)
Net income (loss)		$	(1.84	)		$	0.15
Diluted:
Income (loss) from continuing operations		$	(1.80	)		$	0.34
Discontinued operations:
Loss from operations			(0.04	)			(0.13	)
Loss on divestiture of operations			—				(0.06	)
Loss from discontinued operations			(0.04	)			(0.19	)
Net income (loss)		$	(1.84	)		$	0.15
Shares used in computing earnings (loss) per common share:
Basic			79,575				52,641
Diluted			79,575				52,711
Cash dividends declared and paid per common share		$	0.12			$	0.12

 

- MORE -

---

Kindred Healthcare Announces First Quarter 2015 Results

Page 6

May 6, 2015

 

 

KINDRED HEALTHCARE, INC.

Condensed Consolidated Balance Sheet

(Unaudited)

(In thousands, except per share amounts)

 

		March 31, 2015				December 31, 2014
ASSETS
Current assets:
Cash and cash equivalents		$	96,525			$	164,188
Insurance subsidiary investments			110,700				99,951
Accounts receivable less allowance for loss			1,255,450				944,219
Inventories			27,151				25,702
Deferred tax assets			93,449				82,391
Income taxes			17,805				8,575
Interest deposit on senior unsecured notes held in escrow			—				23,438
Other			72,788				41,598
			1,673,868				1,390,062
Property and equipment			2,061,373				1,978,153
Accumulated depreciation			(1,107,611	)			(1,076,049	)
			953,762				902,104
Goodwill			2,633,661				997,597
Intangible assets less accumulated amortization			809,597				400,700
Assets held for sale			2,432				3,475
Insurance subsidiary investments			183,122				166,045
Deferred tax assets			10,509				11,174
Proceeds from senior unsecured notes held in escrow			—				1,350,000
Acquisition deposit			—				195,000
Other			314,380				236,807
Total assets		$	6,581,331			$	5,652,964
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	195,397			$	175,725
Salaries, wages and other compensation			451,564				358,857
Due to third party payors			48,044				43,957
Professional liability risks			66,752				64,137
Other accrued liabilities			340,846				189,980
Long-term debt due within one year			33,240				24,607
			1,135,843				857,263
Long-term debt			3,242,780				2,852,531
Professional liability risks			260,781				243,614
Deferred credits and other liabilities			293,271				213,584
Equity:
Stockholders’ equity:
Common stock, $0.25 par value; authorized 175,000 shares; issued 83,424 shares - March 31, 2015 and 69,977 shares - December 31, 2014			20,856				17,494
Capital in excess of par value			1,748,599				1,586,692
Accumulated other comprehensive loss			(3,607	)			(2,551	)
Accumulated deficit			(308,616	)			(159,768	)
			1,457,232				1,441,867
Noncontrolling interests			191,424				44,105
Total equity			1,648,656				1,485,972
Total liabilities and equity		$	6,581,331			$	5,652,964

 

- MORE -

---

Kindred Healthcare Announces First Quarter 2015 Results

Page 7

May 6, 2015

 

 

KINDRED HEALTHCARE, INC.

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(In thousands)

 

		Three months ended March 31,
		2015				2014
Cash flows from operating activities:
Net income (loss)		$	(138,012	)		$	12,479
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization			39,077				41,304
Amortization of stock-based compensation costs			5,824				2,585
Amortization of deferred financing costs			3,062				2,397
Payment of capitalized lender fees related to debt issuance			(28,012	)			—
Provision for doubtful accounts			8,292				8,760
Deferred income taxes			(25,580	)			3,975
Impairment charges			6,726				444
Loss on divestiture of discontinued operations			—				3,006
Other			1,997				2,044
Change in operating assets and liabilities:
Accounts receivable			(31,656	)			(71,829	)
Inventories and other assets			53,022				(6,218	)
Accounts payable			465				(13,452	)
Income taxes			(5,768	)			29,413
Due to third party payors			(15,419	)			(2,013	)
Other accrued liabilities			(13,620	)			(28,649	)
Net cash used in operating activities			(139,602	)			(15,754	)
Cash flows from investing activities:
Routine capital expenditures			(20,769	)			(21,677	)
Development capital expenditures			(5,788	)			(751	)
Acquisitions, net of cash acquired			(659,071	)			(22,715	)
Acquisition deposit			195,000				—
Sale of assets			948				5,034
Proceeds from senior unsecured notes offering held in escrow			1,350,000				—
Interest in escrow for senior unsecured notes			23,438				—
Purchase of insurance subsidiary investments			(25,918	)			(10,114	)
Sale of insurance subsidiary investments			22,029				8,762
Net change in insurance subsidiary cash and cash equivalents			(558	)			(6,599	)
Change in other investments			24				640
Other			5				(551	)
Net cash provided by (used in) investing activities			879,340				(47,971	)
Cash flows from financing activities:
Proceeds from borrowings under revolving credit			807,450				508,700
Repayment of borrowings under revolving credit			(610,050	)			(425,800	)
Proceeds from issuance of term loan, net of discount			199,000				—
Repayment of Gentiva debt			(1,177,363	)			—
Repayment of term loan			—				(1,969	)
Repayment of other long-term debt			(441	)			(90	)
Payment of deferred financing costs			(2,538	)			(270	)
Issuance of common stock in connection with employee benefit plans			66				3,804
Payment of costs associated with issuance of common stock and tangible equity units			(915	)			—
Payment of dividend for mandatory redeemable preferred stock			(2,778	)			—
Dividends paid			(9,975	)			(6,514	)
Distributions to noncontrolling interests			(11,019	)			(2,933	)
Other			1,162				1,873
Net cash provided by (used in) financing activities			(807,401	)			76,801
Change in cash and cash equivalents			(67,663	)			13,076
Cash and cash equivalents at beginning of period			164,188				35,972
Cash and cash equivalents at end of period		$	96,525			$	49,048

 

- MORE -

---

Kindred Healthcare Announces First Quarter 2015 Results

Page 8

May 6, 2015

 

 

KINDRED HEALTHCARE, INC.

Condensed Business Segment Data ^(a)

(Unaudited)

(In thousands)

 

		2014 Quarters																First Quarter 2015				First quarter % change v. prior year
		First				Second				Third				Fourth
Consolidated income statement data:
Revenues		$	1,272,610			$	1,261,397			$	1,228,918			$	1,264,674			$	1,675,967				31.7
Core EBITDAR		$	181,044			$	175,865			$	157,218			$	170,088			$	234,211				29.4
Rent			78,530				77,452				77,643				79,167				91,199				16.1
Core EBITDA			102,514				98,413				79,575				90,921				143,012				39.5
Depreciation and amortization			39,092				39,172				38,748				38,558				38,935				(0.4	)
Interest, net			25,617				21,438				22,171				21,857				44,346				73.1
Income from continuing operations before income taxes			37,805				37,803				18,656				30,506				59,731				58.0
Provision for income taxes			14,445				13,612				6,168				8,471				22,466				55.5
Income from continuing operations			23,360				24,191				12,488				22,035				37,265				59.5
Noncontrolling interests			(4,529	)			(4,828	)			(4,372	)			(5,143	)			(8,847	)			95.3
Net income attributable to Kindred		$	18,831			$	19,363			$	8,116			$	16,892			$	28,418				50.9
Core EPS		$	0.35			$	0.35			$	0.13			$	0.26			$	0.34				(2.9	)
Adjusted Core EPS		$	0.46			$	0.50			$	0.20			$	0.38			$	0.43				(6.5	)
Diluted shares			52,711				53,792				62,902				63,163				82,422				56.4
Revenues by segment:
Hospital division		$	627,245			$	612,517			$	591,121			$	619,185			$	640,483				2.1
Kindred at Home:
Home health			74,791				75,502				74,026				74,588				300,867				302.3
Hospice			12,913				12,484				12,160				12,538				119,057				822.0
			87,704				87,986				86,186				87,126				419,924				378.8
Rehabilitation division:
Hospital rehabilitation services			93,177				94,963				93,139				92,922				151,564				62.7
Skilled nursing rehabilitation services			253,943				253,694				246,732				252,667				252,595				(0.5	)
			347,120				348,657				339,871				345,589				404,159				16.4
Nursing center division			262,590				264,437				263,897				271,625				274,308				4.5
			1,324,659				1,313,597				1,281,075				1,323,525				1,738,874				31.3
Eliminations			(52,049	)			(52,200	)			(52,157	)			(58,851	)			(62,907	)			20.9
		$	1,272,610			$	1,261,397			$	1,228,918			$	1,264,674			$	1,675,967				31.7
Core EBITDAR by segment:
Hospital division		$	139,505			$	131,990			$	117,604			$	134,791			$	134,786				(3.4	)
Kindred at Home:
Home health			2,845				5,769				5,961				7,398				46,798				1,544.9
Hospice			1,852				2,139				1,149				524				16,996				817.7
			4,697				7,908				7,110				7,922				63,794				1,258.2
Rehabilitation division:
Hospital rehabilitation services			25,710				25,742				24,887				23,884				44,564				73.3
Skilled nursing rehabilitation services			18,016				19,863				17,080				16,029				16,493				(8.5	)
			43,726				45,605				41,967				39,913				61,057				39.6
Nursing center division			37,572				38,614				35,920				38,810				36,963				(1.6	)
Support center			(44,456	)			(48,252	)			(45,383	)			(51,348	)			(62,389	)			40.3
		$	181,044			$	175,865			$	157,218			$	170,088			$	234,211				29.4
Core EBITDAR margin by segment:
Hospital division			22.2				21.5				19.9				21.8				21.0				(5.4	)
Kindred at Home:
Home health			3.8				7.6				8.1				9.9				15.6				310.5
Hospice			14.3				17.1				9.4				4.2				14.3				—
Kindred at Home			5.4				9.0				8.2				9.1				15.2				181.5
Rehabilitation division:
Hospital rehabilitation services			27.6				27.1				26.7				25.7				29.4				6.5
Skilled nursing rehabilitation services			7.1				7.8				6.9				6.3				6.5				(8.5	)
Rehabilitation division			12.6				13.1				12.3				11.5				15.1				19.8
Nursing center division			14.3				14.6				13.6				14.3				13.5				(5.6	)
Consolidated			14.2				13.9				12.8				13.4				14.0				(1.4	)

 

(a)	See reconciliation of core and adjusted results to GAAP results beginning on page 12.

 

 

- MORE -

---

Kindred Healthcare Announces First Quarter 2015 Results

Page 9

May 6, 2015

 

 

KINDRED HEALTHCARE, INC.

Condensed Business Segment Data (Continued)

(Unaudited)

 

		2014 Quarters																First Quarter				First quarter % change v.
		First				Second				Third				Fourth				2015				prior year
Hospital division:
End of period data:
Number of transitional care hospitals			97				97				97				97				97
Number of licensed beds			7,145				7,145				7,145				7,147				7,147
Revenue mix %:
Medicare			59.8				58.2				57.0				57.0				56.8
Medicaid			6.6				6.8				6.9				6.0				5.5
Medicare Advantage			11.4				11.2				10.5				10.5				11.9
Medicaid Managed			2.4				3.0				3.8				4.5				4.7
Commercial insurance and other			19.8				20.8				21.8				22.0				21.1
Admissions:
Medicare			9,038				8,555				8,460				8,525				8,775				(2.9	)
Medicaid			819				896				805				750				610				(25.5	)
Medicare Advantage			1,435				1,389				1,250				1,359				1,555				8.4
Medicaid Managed			317				381				511				572				643				102.8
Commercial insurance and other			1,914				1,885				1,703				1,696				1,868				(2.4	)
			13,523				13,106				12,729				12,902				13,451				(0.5	)
Patient days:
Medicare			230,350				220,035				213,170				220,548				228,483				(0.8	)
Medicaid			32,712				32,619				30,480				30,454				28,663				(12.4	)
Medicare Advantage			44,025				43,027				39,938				41,260				48,448				10.0
Medicaid Managed			10,733				13,191				16,556				20,000				22,013				105.1
Commercial insurance and other			59,567				59,293				57,486				59,295				62,241				4.5
			377,387				368,165				357,630				371,557				389,848				3.3
Average length of stay:
Medicare			25.5				25.7				25.2				25.9				26.0				2.0
Medicaid			39.9				36.4				37.9				40.6				47.0				17.8
Medicare Advantage			30.7				31.0				32.0				30.4				31.2				1.6
Medicaid Managed			33.9				34.6				32.4				35.0				34.2				0.9
Commercial insurance and other			31.1				31.5				33.8				35.0				33.3				7.1
Weighted average			27.9				28.1				28.1				28.8				29.0				3.9
Revenues per admission:
Medicare		$	41,492			$	41,670			$	39,828			$	41,425			$	41,483				—
Medicaid			50,894				46,106				50,344				49,760				57,594				13.2
Medicare Advantage			49,666				49,352				49,814				47,756				48,908				(1.5	)
Medicaid Managed			47,803				48,814				44,321				48,691				46,740				(2.2	)
Commercial insurance and other			64,858				67,679				75,591				80,167				72,395				11.6
Weighted average			46,384				46,736				46,439				47,991				47,616				2.7
Revenues per patient day:
Medicare		$	1,628			$	1,620			$	1,581			$	1,601			$	1,593				(2.1	)
Medicaid			1,274				1,266				1,330				1,225				1,226				(3.8	)
Medicare Advantage			1,619				1,593				1,559				1,573				1,570				(3.0	)
Medicaid Managed			1,412				1,410				1,368				1,393				1,365				(3.3	)
Commercial insurance and other			2,084				2,152				2,239				2,293				2,173				4.3
Weighted average			1,662				1,664				1,653				1,666				1,643				(1.1	)
Medicare case mix index (discharged patients only)			1.173				1.182				1.157				1.139				1.166				(0.6	)
Average daily census			4,193				4,046				3,887				4,039				4,332				3.3
Occupancy %			67.3				64.6				62.1				64.5				69.2				2.8

 

- MORE -

---

Kindred Healthcare Announces First Quarter 2015 Results

Page 10

May 6, 2015

 

 

KINDRED HEALTHCARE, INC.

Condensed Business Segment Data (Continued)

(Unaudited)

 

		2014 Quarters																First Quarter				First quarter % change v.
		First				Second				Third				Fourth				2015				prior year
Kindred at Home (data combined to include Kindred and Gentiva for each historical period):
Home Health:
Sites of service (at end of period)			447				440				439				427				415
Revenue mix %:
Medicare			81.8				81.5				80.7				80.7				80.9
Medicaid			2.7				2.6				2.4				2.2				2.1
Commercial and other			9.1				9.0				8.9				6.7				7.3
Commercial paid at episodic rates			6.4				6.9				8.0				10.4				9.7
Episodic revenues ($ 000s)		$	281,226			$	294,208			$	292,675			$	305,668			$	308,317				9.6
Total episodic admissions			65,077				63,676				65,049				65,183				69,936				7.5
Medicare episodic admissions			59,248				58,140				57,921				57,372				61,186				3.3
Total episodes			103,758				103,689				105,906				106,708				110,980				7.0
Episodes per admission			1.59				1.63				1.63				1.64				1.59				—
Revenue per episode		$	2,710			$	2,837			$	2,764			$	2,865			$	2,778				2.5
Hospice:
Sites of service (at end of period)			216				200				199				193				190
Admissions			13,807				12,751				12,088				12,151				13,164				(4.7	)
Average length of stay			103				106				103				103				95				(7.8	)
Patient days			1,252,787				1,251,301				1,236,792				1,215,209				1,150,841				(8.1	)
Revenue per patient day		$	150			$	148			$	149			$	154			$	151				0.7
Average daily census			13,920				13,751				13,443				13,209				12,787				(8.1	)
Rehabilitation division:
Hospital rehabilitation services:
Freestanding IRFs:
End of period data:
Number of IRFs			5				5				5				5				16
Number of licensed beds			215				215				215				215				829
Discharges (a)			1,053				1,121				1,004				1,046				3,806				261.4
Occupancy % (a)			71.6				71.6				68.5				69.6				73.2				2.2
Average length of stay (a)			13.2				12.5				13.5				13.2				13.7				3.8
Revenue per discharge (a)		$	18,246			$	17,519			$	18,259			$	17,039			$	19,517				7.0
Contract services:
Sites of service (at end of period):
Inpatient rehabilitation units			105				104				102				100				100
LTAC hospitals			121				118				117				117				120
Sub-acute units			10				9				10				10				8
Outpatient units			143				143				139				138				138
			379				374				368				365				366
Revenue per site		$	195,157			$	201,400			$	203,284			$	205,749			$	211,151				8.2
Skilled nursing rehabilitation services:
Sites of service (at end of period)			1,851				1,863				1,896				1,935				1,829
Revenue per site		$	137,193			$	136,175			$	130,133			$	130,576			$	138,106				0.7
Nursing center division:
End of period data:
Number of nursing centers			89				89				90				90				90
Number of licensed beds			11,503				11,491				11,575				11,535				11,535
Admissions (b)			9,789				9,621				9,746				9,616				10,376				6.0
Medicare average length of stay (b)			29.6				29.8				29.9				29.0				28.9				(2.4	)
Patient days (b)			861,340				858,772				865,415				871,976				861,278				—
Revenues per patient day (b)		$	305			$	308			$	305			$	312			$	319				4.6
Average daily census (b)			9,570				9,437				9,407				9,478				9,570				—
Occupancy % (b)			81.7				80.7				80.1				80.5				81.3				(0.5	)

 

(a)	Excludes non-consolidating IRF.

(b)	Excludes managed facilities.

 

- MORE -

---

Kindred Healthcare Announces First Quarter 2015 Results

Page 11

May 6, 2015

 

 

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, but are not limited to, statements regarding the Company’s acquisitions of Gentiva and Centerre (including the benefits, results and effects of such acquisitions), all statements regarding the Company’s expected future financial position, results of operations, cash flows, dividends, financing plans, business strategy, budgets, capital expenditures, competitive positions, growth opportunities, plans and objectives of management, and statements containing the words such as “anticipate,” “approximate,” “believe,” “plan,” “estimate,” “expect,” “project,” “could,” “would,” “should,” “will,” “intend,” “may,” “potential,” “upside,” and other similar expressions. Statements in this press release concerning the Company’s business outlook or future economic performance, anticipated profitability, revenues, expenses, dividends or other financial items, and product or services line growth, together with other statements that are not historical facts, are forward-looking statements that are estimates reflecting the best judgment of the Company based upon currently available information.

Such forward-looking statements are inherently uncertain, and stockholders and other potential investors must recognize that actual results may differ materially from the Company’s expectations as a result of a variety of factors, including, without limitation, those discussed below. Such forward-looking statements are based upon management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which the Company is unable to predict or control, that may cause the Company’s actual results, performance or plans to differ materially from any future results, performance or plans expressed or implied by such forward-looking statements. These statements involve risks, uncertainties and other factors discussed below and detailed from time to time in the Company’s filings with the Securities and Exchange Commission.

Risks and uncertainties related to the Company’s acquisitions of Gentiva and Centerre include, but are not limited to, uncertainties as to whether the acquisitions will have the accretive effect on the Company’s earnings or cash flows that it expects, the inability to obtain, or delays in obtaining, cost savings and synergies from the acquisitions, costs and difficulties related to the integration of Gentiva’s and Centerre’s businesses and operations with the Company’s businesses and operations, unexpected costs, liabilities, charges or expenses resulting from the acquisitions, adverse effects on the Company’s stock price resulting from the acquisitions, the inability to retain key personnel, and potential adverse reactions, changes to business relationships or competitive responses resulting from the acquisitions.

In addition to the factors set forth above, other factors that may affect the Company’s plans, results or stock price are set forth in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K.

Many of these factors are beyond the Company’s control. The Company cautions investors that any forward-looking statements made by the Company are not guarantees of future performance. The Company disclaims any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments.

 

- MORE -

---

Kindred Healthcare Announces First Quarter 2015 Results

Page 12

May 6, 2015

 

 

Non-GAAP Measurements

In addition to the results provided in accordance with GAAP, the Company has provided information in this release to compute certain non-GAAP measurements for the three months ended March 31, 2015 and 2014 before certain charges or on a core and adjusted core basis. The use of these non-GAAP measures are not intended to replace the presentation of the Company’s financial results in accordance with GAAP. The Company believes that the presentation of core operating results provides additional information to investors to facilitate the comparison between periods by excluding certain charges that are not representative of its ongoing operations due to the materiality and nature of the charges. The Company believes the presentation of adjusted core operating results, which excludes non-cash expenses related to amortization of intangible assets, stock-based compensation and deferred financing costs from core operating results, is a useful performance measure used by some investors, equity analysts and others to make informed investment decisions and for comparability to other companies that use similar measures. The Company’s earnings release also includes financial measures referred to as operating income, or EBITDAR or core EBITDAR, and earnings before interest, income taxes, depreciation and amortization (“EBITDA”). The Company’s management uses core EBITDAR or core EBITDA as meaningful measures of operational performance in addition to other measures. The Company uses core EBITDAR or core EBITDA to assess the relative performance of its operating divisions as well as the employees that operate these businesses. In addition, the Company believes these measurements are important because securities analysts and investors use these measurements to compare the Company’s performance to other companies in the healthcare industry. The Company believes that income (loss) from continuing operations is the most comparable GAAP measure. Readers of the Company’s financial information should consider income (loss) from continuing operations as an important measure of the Company’s financial performance because it provides the most complete measure of its performance. Operating results presented on a core and adjusted core basis and core EBITDAR or core EBITDA should be considered in addition to, not as a substitute for, or superior to, financial measures based upon GAAP as an indicator of operating performance. Reconciliations of the non-GAAP measurements to the GAAP measurements are included in the following pages of this press release.

Also in this press release, the Company provides the financial measures of operating cash flows and free cash flows excluding certain items, which the Company refers to as core operating cash flows and core free cash flows. The Company recognizes that operating cash flows and free cash flows excluding certain items are non-GAAP measurements and are not intended to replace the presentation of the Company’s cash flows in accordance with GAAP. The Company believes that these non-GAAP measurements provide important information to investors for comparability to other companies that use similar measures. In addition, management uses operating cash flows and free cash flows excluding certain items in making decisions related to acquisitions, development capital expenditures, dividends, long-term debt repayments and other uses. The Company believes net cash flows provided by operating activities is the most comparable GAAP measure. Readers of the Company’s financial information should consider net cash flows provided by operating activities as an important measure of the Company’s financial performance because it provides the most complete measure of its performance. Operating cash flows and free cash flows excluding certain items should be considered in addition to, not as a substitute for, or superior to, financial measures based upon GAAP as an indicator of operating performance. Reconciliations of net cash flows provided by operating activities to operating cash flows and free cash flows excluding certain items are included in this press release.

 

- MORE -

---

Kindred Healthcare Announces First Quarter 2015 Results

Page 13

May 6, 2015

 

 

KINDRED HEALTHCARE, INC.

Reconciliation of Non-GAAP Measurements to GAAP Results

(Unaudited)

(In thousands, except per share amounts and statistics)

In addition to the results provided in accordance with GAAP, the Company has provided information in this release to compute certain non-GAAP measurements for the three months ended March 31, 2015 and 2014 before certain charges or on a core basis. The charges that were excluded from core operating results are denoted in the tables below.

The income tax benefit associated with the excluded charges was calculated using an effective income tax rate of 22.6% and 36.6% for the three months ended March 31, 2015 and 2014, respectively. The difference in the effective income tax rate for the three months ended March 31, 2015 compared to the same prior year period is attributable to the composition of charges that are non-deductible for income tax purposes, including the litigation contingency expense.

The use of these non-GAAP measures are not intended to replace the presentation of the Company’s financial results in accordance with GAAP. The Company believes that the presentation of core operating results provides additional information to investors to facilitate the comparison between periods by excluding certain charges for the three months ended March 31, 2015 and 2014 that are not representative of its ongoing operations due to the materiality and the nature of the charges. The Company’s core operating results also represent a key performance measure for the purpose of evaluating performance internally. The Company believes the presentation of adjusted core operating results, which excludes non-cash expenses related to amortization of intangible assets, stock-based compensation and deferred financing costs from core operating results, is a performance measure used by some investors, equity analysts and others to make informed investment decisions and for comparability to other companies that use similar measures.

 

		Three months ended March 31,
		2015				2014
Detail of charges:
Litigation contingency expense		($	95,000	)		$	—
Retirement and severance costs			(4,961	)			(339	)
Home health and hospice closings			(1,619	)			—
Development project cancellation and other restructuring costs			(1,027	)			—
Gentiva transaction and integration costs:
Professional and consulting fees			(32,134	)			—
Severance and retention			(54,464	)			—
Lease termination (charged to rent expense)			(589	)			—
Pre-closing financing charges (charged to general and administrative expenses)			(6,005	)			—
Pre-closing financing charges (charged to interest expense)			(17,431	)			—
Trade name impairment charges			(6,726	)			—
Other transaction costs			(2,099	)			(344	)
			(222,055	)			(683	)
Income tax benefit			50,202				250
Charges net of income taxes			(171,853	)			(433	)
Allocation to participating unvested restricted stockholders			—				13
Available to common stockholders		($	171,853	)		($	420	)
Weighted average diluted shares outstanding			79,575				52,711
Diluted loss per common share related to charges		($	2.16	)		($	0.01	)
Reconciliation of income from continuing operations before charges:
Amounts attributable to Kindred stockholders:
Income from continuing operations before charges		$	28,418			$	18,831
Charges net of income taxes			(171,853	)			(433	)
Reported income (loss) from continuing operations		($	143,435	)		$	18,398
Reconciliation of diluted earnings per common share from continuing operations before charges:
Diluted earnings per common share before charges (a)		$	0.34			$	0.35
Charges net of income taxes			(2.16	)			(0.01	)
Other			0.02				—
Reported diluted earnings (loss) per common share from continuing operations		($	1.80	)		$	0.34
Weighted average diluted shares used to compute earnings per common share from continuing operations before charges			82,422				52,711
Reconciliation of effective income tax rate before charges:
Effective income tax rate before charges			37.6	%			38.2	%
Impact of charges on effective income tax rate			-20.5	%			—
Reported effective income tax rate			17.1	%			38.2	%

 

(a)

For purposes of computing diluted earnings per common share before charges, income from continuing operations before charges was reduced by $0.5 million and $0.6 million for the three months ended March 31, 2015 and 2014, respectively, for the allocation of income to participating unvested restricted stockholders.

 

- MORE -

---

Kindred Healthcare Announces First Quarter 2015 Results

Page 14

May 6, 2015

 

 

KINDRED HEALTHCARE, INC.

Reconciliation of Non-GAAP Measurements to GAAP Results (Continued)

(Unaudited)

(In thousands, except per share amounts and statistics)

 

A reconciliation of adjusted core earnings follows:

 

		2014 Quarters																First Quarter 2015
		First				Second				Third				Fourth
Reconciliation of adjusted core earnings:
Income from continuing operations before charges (as calculated and reconciled to GAAP measurement on the following pages)		$	18,831			$	19,363			$	8,116			$	16,892			$	28,418
Add back non-cash expenses:
Amortization of intangible assets			5,560				5,513				5,378				5,215				6,932
Amortization of stock-based compensation costs			2,585				5,924				748				5,073				3,141
Amortization of deferred financing costs			2,397				1,950				1,982				2,044				3,062
			10,542				13,387				8,108				12,332				13,135
Income tax benefit related to non-cash expenses			4,148				5,268				3,190				4,853				5,169
Non-cash expenses, net of income taxes			6,394				8,119				4,918				7,479				7,966
Adjusted core earnings		$	25,225			$	27,482			$	13,034			$	24,371			$	36,384
Reconciliation of diluted adjusted core earnings from continuing operations:
Diluted income per common share before charges (as calculated on the following pages)		$	0.35			$	0.35			$	0.13			$	0.26			$	0.34
Non-cash expenses, net of income taxes			0.11				0.15				0.07				0.12				0.09
Diluted adjusted core earnings per common share from continuing operations		$	0.46			$	0.50			$	0.20			$	0.38			$	0.43
Weighted average diluted shares used to compute adjusted core earnings per common share			52,711				53,792				62,902				63,163				82,422

A reconciliation of combined Kindred and Gentiva home health revenues (excluding community care) for each historical period follows:

 

		2014 Quarters																First Quarter				First quarter % change v.
		First				Second				Third				Fourth				2015				prior year
Kindred		$	67,266			$	67,830			$	65,954			$	66,491			$	254,965
Gentiva			253,895				267,018				266,340				275,342				87,520
		$	321,161			$	334,848			$	332,294			$	341,833			$	342,485				6.6

 

- MORE -

---

Kindred Healthcare Announces First Quarter 2015 Results

Page 15

May 6, 2015

 

 

KINDRED HEALTHCARE, INC.

Reconciliation of Non-GAAP Measurements to GAAP Results (Continued)

(Unaudited)

(In thousands)

 

		Three months ended March 31, 2015
						Charges
		Before charges				Retirement and severance				Home health and hospice closings				Development project cancellation and other				Litigation contingency				Impairment charges				Gentiva pre-closing financing costs				Gentiva transaction and integration				Other transaction				Total				As reported
Income (loss) from continuing operations:
Operating income (loss) (EBITDAR):
Hospital division		$	134,786			$	—			$	—			$	(675	)		$	—			$	—			$	—			$	—			$	—			$	(675	)		$	134,111
Kindred at Home:
Home health			46,798				—				(1,102	)			—				—				—				—				—				—				(1,102	)			45,696
Hospice			16,996				—				(517	)			—				—				—				—				—				—				(517	)			16,479
			63,794				—				(1,619	)			—				—				—				—				—				—				(1,619	)			62,175
Rehabilitation division:
Hospital rehabilitation services			44,564				—				—				—				—				—				—				—				—				—				44,564
Skilled nursing rehabilitation services			16,493				(785	)			—				—				—				—				—				—				—				(785	)			15,708
			61,057				(785	)			—				—				—				—				—				—				—				(785	)			60,272
Nursing center division			36,963				—				—				—				—				—				—				—				—				—				36,963
Support center			(62,389	)			(4,176	)			—				—				—				—				—				—				—				(4,176	)			(66,565	)
Litigation contingency expense			—				—				—				—				(95,000	)			—				—				—				—				(95,000	)			(95,000	)
Transaction costs			—				—				—				—				—				—				(6,005	)			(86,598	)			(2,099	)			(94,702	)			(94,702	)
Impairment charges			—				—				—				—				—				(6,726	)			—				—				—				(6,726	)			(6,726	)
Operating income (EBITDAR)			234,211				(4,961	)			(1,619	)			(675	)			(95,000	)			(6,726	)			(6,005	)			(86,598	)			(2,099	)			(203,683	)			30,528
Rent			(91,199	)			—				—				(352	)			—				—				—				(589	)			—				(941	)			(92,140	)
EBITDA			143,012				(4,961	)			(1,619	)			(1,027	)			(95,000	)			(6,726	)			(6,005	)			(87,187	)			(2,099	)			(204,624	)			(61,612	)
Depreciation and amortization			(38,935	)			—				—				—				—				—				—				—				—				—				(38,935	)
Interest, net			(44,346	)			—				—				—				—				—				(17,431	)			—				—				(17,431	)			(61,777	)
Income (loss) from continuing operations before income taxes			59,731				(4,961	)			(1,619	)			(1,027	)			(95,000	)			(6,726	)			(23,436	)			(87,187	)			(2,099	)			(222,055	)			(162,324	)
Provision (benefit) for income taxes			22,466				(2,133	)			(696	)			(442	)			—				(2,891	)			(10,075	)			(33,063	)			(902	)			(50,202	)			(27,736	)
			37,265			$	(2,828	)		$	(923	)		$	(585	)		$	(95,000	)		$	(3,835	)		$	(13,361	)		$	(54,124	)		$	(1,197	)		$	(171,853	)			(134,588	)
Noncontrolling interests			(8,847	)																																							(8,847	)
Net income attributable to Kindred		$	28,418																																							$	(143,435	)
Diluted earnings (loss) per common share		$	0.34																																							$	(1.80	)
Diluted shares used in computing earnings (loss) per common share			82,422																																								79,575

 

		Three months ended March 31, 2014
						Charges
		Before charges				Transaction costs				As reported
Income from continuing operations:
Operating income (loss) (EBITDAR):
Hospital division		$	139,505			$	—			$	139,505
Kindred at Home:
Home health			2,845				—				2,845
Hospice			1,852				—				1,852
			4,697				—				4,697
Rehabilitation division:
Hospital rehabilitation services			25,710				—				25,710
Skilled nursing rehabilitation services			18,016				—				18,016
			43,726				—				43,726
Nursing center division			37,572				—				37,572
Support center			(44,456	)			—				(44,456	)
Transaction costs			—				(683	)			(683	)
Operating income (EBITDAR)			181,044				(683	)			180,361
Rent			(78,530	)			—				(78,530	)
EBITDA			102,514				(683	)			101,831
Depreciation and amortization			(39,092	)			—				(39,092	)
Interest, net			(25,617	)			—				(25,617	)
Income from continuing operations before income taxes			37,805				(683	)			37,122
Provision for income taxes			14,445				(250	)			14,195
			23,360			$	(433	)			22,927
Noncontrolling interests			(4,529	)							(4,529	)
Net income attributable to Kindred		$	18,831							$	18,398
Diluted earnings per common share		$	0.35							$	0.34
Diluted shares used in computing earnings per common share			52,711								52,711

 

- MORE -

---

Kindred Healthcare Announces First Quarter 2015 Results

Page 16

May 6, 2015

 

 

KINDRED HEALTHCARE, INC.

Reconciliation of Non-GAAP Measurements to GAAP Results (Continued)

(Unaudited)

(In thousands)

 

		Three months ended December 31, 2014
						Charges
		Before charges				Severance and other restructuring				LTAC criteria consulting				Gentiva pre-closing financing				Transaction				Total				As reported
Income (loss) from continuing operations:
Operating income (loss) (EBITDAR):
Hospital division		$	134,791			$	(318	)		$	—			$	—			$	—			$	(318	)		$	134,473
Kindred at Home:
Home health			7,398				(828	)			—				—				—				(828	)			6,570
Hospice			524				(106	)			—				—				—				(106	)			418
			7,922				(934	)			—				—				—				(934	)			6,988
Rehabilitation division:
Hospital rehabilitation services			23,884				—				—				—				—				—				23,884
Skilled nursing rehabilitation services			16,029				—				—				—				—				—				16,029
			39,913				—				—				—				—				—				39,913
Nursing center division			38,810				(500	)			—				—				—				(500	)			38,310
Support center			(51,348	)			(10,193	)			(2,460	)			—				—				(12,653	)			(64,001	)
Transaction costs			—				—				—				—				(8,690	)			(8,690	)			(8,690	)
Operating income (EBITDAR)			170,088				(11,945	)			(2,460	)			—				(8,690	)			(23,095	)			146,993
Rent			(79,167	)			—				—				—				—				—				(79,167	)
EBITDA			90,921				(11,945	)			(2,460	)			—				(8,690	)			(23,095	)			67,826
Depreciation and amortization			(38,558	)			—				—				—				—				—				(38,558	)
Interest, net			(21,857	)			—				—				(17,041	)			—				(17,041	)			(38,898	)
Income (loss) from continuing operations before income taxes			30,506				(11,945	)			(2,460	)			(17,041	)			(8,690	)			(40,136	)			(9,630	)
Provision (benefit) for income taxes			8,471				(4,251	)			(875	)			(5,975	)			(2,197	)			(13,298	)			(4,827	)
			22,035			$	(7,694	)		$	(1,585	)		$	(11,066	)		$	(6,493	)		$	(26,838	)			(4,803	)
Noncontrolling interests			(5,143	)																							(5,143	)
Net income attributable to Kindred		$	16,892																							$	(9,946	)
Diluted earnings (loss) per common share		$	0.26																							$	(0.15	)
Diluted shares used in computing earnings (loss) per common share			63,163																								65,135

 

		Three months ended September 30, 2014
						Charges
		Before charges				Severance and other restructuring				Customer bankruptcy				Transaction				Total				As reported
Income from continuing operations:
Operating income (loss) (EBITDAR):
Hospital division		$	117,604			$	(617	)		$	—			$	—			$	(617	)		$	116,987
Kindred at Home:
Home health			5,961				(275	)			—				—				(275	)			5,686
Hospice			1,149				(46	)			—				—				(46	)			1,103
			7,110				(321	)			—				—				(321	)			6,789
Rehabilitation division:
Hospital rehabilitation services			24,887				—				(1,857	)			—				(1,857	)			23,030
Skilled nursing rehabilitation services			17,080				162				—				—				162				17,242
			41,967				162				(1,857	)			—				(1,695	)			40,272
Nursing center division			35,920				(483	)			—				—				(483	)			35,437
Support center			(45,383	)			(427	)			—				—				(427	)			(45,810	)
Transaction costs			—				—				—				(4,114	)			(4,114	)			(4,114	)
Operating income (EBITDAR)			157,218				(1,686	)			(1,857	)			(4,114	)			(7,657	)			149,561
Rent			(77,643	)			—				—				—				—				(77,643	)
EBITDA			79,575				(1,686	)			(1,857	)			(4,114	)			(7,657	)			71,918
Depreciation and amortization			(38,748	)			—				—				—				—				(38,748	)
Interest, net			(22,171	)			—				—				—				—				(22,171	)
Income (loss) from continuing operations before income taxes			18,656				(1,686	)			(1,857	)			(4,114	)			(7,657	)			10,999
Provision (benefit) for income taxes			6,168				(923	)			(1,017	)			(451	)			(2,391	)			3,777
			12,488			$	(763	)		$	(840	)		$	(3,663	)		$	(5,266	)			7,222
Noncontrolling interests			(4,372	)																			(4,372	)
Net income attributable to Kindred		$	8,116																			$	2,850
Diluted earnings per common share		$	0.13																			$	0.04
Diluted shares used in computing earnings per common share			62,902																				62,902

 

- MORE -

---

Kindred Healthcare Announces First Quarter 2015 Results

Page 17

May 6, 2015

 

 

KINDRED HEALTHCARE, INC.

Reconciliation of Non-GAAP Measurements to GAAP Results (Continued)

(Unaudited)

(In thousands)

 

		Three months ended June 30, 2014
						Charges
		Before charges				Severance and other restructuring				Litigation				Debt refinancing				Transaction				Total				As reported
Income (loss) from continuing operations:
Operating income (loss) (EBITDAR):
Hospital division		$	131,990			$	—			$	(4,600	)		$	—			$	—			$	(4,600	)		$	127,390
Kindred at Home:
Home health			5,769				(721	)			—				—				—				(721	)			5,048
Hospice			2,139				(122	)			—				—				—				(122	)			2,017
			7,908				(843	)			—				—				—				(843	)			7,065
Rehabilitation division:
Hospital rehabilitation services			25,742				(170	)			—				—				—				(170	)			25,572
Skilled nursing rehabilitation services			19,863				(176	)			—				—				—				(176	)			19,687
			45,605				(346	)			—				—				—				(346	)			45,259
Nursing center division			38,614				(3,205	)			—				—				—				(3,205	)			35,409
Support center			(48,252	)			(556	)			—				—				—				(556	)			(48,808	)
Transaction costs			—				—				—				—				(4,496	)			(4,496	)			(4,496	)
Operating income (EBITDAR)			175,865				(4,950	)			(4,600	)			—				(4,496	)			(14,046	)			161,819
Rent			(77,452	)			(247	)			—				—				—				(247	)			(77,699	)
EBITDA			98,413				(5,197	)			(4,600	)			—				(4,496	)			(14,293	)			84,120
Depreciation and amortization			(39,172	)			—				—				—				—				—				(39,172	)
Interest, net			(21,438	)			—				—				(56,643	)			—				(56,643	)			(78,081	)
Income (loss) from continuing operations before income taxes			37,803				(5,197	)			(4,600	)			(56,643	)			(4,496	)			(70,936	)			(33,133	)
Provision (benefit) for income taxes			13,612				(1,985	)			(1,757	)			(21,639	)			(914	)			(26,295	)			(12,683	)
			24,191			$	(3,212	)		$	(2,843	)		$	(35,004	)		$	(3,582	)		$	(44,641	)			(20,450	)
Noncontrolling interests			(4,828	)																							(4,828	)
Net income attributable to Kindred		$	19,363																							$	(25,278	)
Diluted earnings (loss) per common share		$	0.35																							$	(0.47	)
Diluted shares used in computing earnings (loss) per common share			53,792																								53,714

 

- MORE -

---

Kindred Healthcare Announces First Quarter 2015 Results

Page 18

May 6, 2015

 

 

KINDRED HEALTHCARE, INC.

Reconciliation of Non-GAAP Measurements to GAAP Results (Continued)

(Unaudited)

(In thousands)

 

The Company recognizes that operating cash flows and free cash flows excluding certain items, which the Company refers to as core operating cash flows and core free cash flows, are non-GAAP measurements and are not intended to replace the presentation of the Company’s cash flows in accordance with GAAP. The Company believes that these non-GAAP measurements provide important information to investors related to the amount of discretionary cash flows that are available for other investing and financing activities. In addition, management uses operating cash flows and free cash flows excluding certain items in making decisions related to acquisitions, development capital expenditures, dividends, long-term debt repayments and other uses.

 

		Three months ended March 31,
		2015				2014
Reconciliation of net cash flows used in operating activities to free cash flows:
Net cash flows used in operating activities		($	139,602	)		($	15,754	)
Adjustments to remove certain payments (including payments made for discontinued operations) included in net cash flows used in operating activities:
Transaction, severance, retirement and retention			82,340				4,187
Ventas, Inc. lease termination fee			40,000				—
Capitalized lender fees related to debt refinancing			28,012				—
Other debt refinancing costs (expensed)			27,001				—
Lease cancellation charges			353				—
Litigation			—				25,150
			177,706				29,337
Benefit of reduced income tax payments resulting from certain payments (a)			—				—
			177,706				29,337
Net cash flows provided by operating activities excluding certain items (core operating cash flows)			38,104				13,583
Less routine capital expenditures			(20,769	)			(21,677	)
Free cash flows excluding certain items (core free cash flows)		$	17,335			($	8,094	)

 

(a)	No tax deposits were due in first quarter of 2015 or 2014.

 

- END -