EXHIBIT 99.1

 

Contact:

Todd Flowers

Investor Relations

(502) 596-6569

KINDRED HEALTHCARE REPORTS FIRST QUARTER 2016 RESULTS

 

 

Consolidated Revenues of $1.84 billion, Core EBITDAR of $247 million⁽¹⁾, Core Diluted EPS from Continuing Operations of $0.25⁽¹⁾ and Adjusted Core Diluted EPS from Continuing Operations of $0.35⁽¹⁾ in the First Quarter

GAAP Diluted EPS from Continuing Operations of $0.15 and EBITDAR of $233 million⁽¹⁾ in the First Quarter Includes Costs of $14 million Related to Litigation, Transaction, Integration, Research and Development, Impairment and Other Restructuring Costs

Solid Start to Year with Core Financial Results Above Mid-Point of Guidance

 

 

Company Reaffirms Full Year Outlook for 2016

LOUISVILLE, Ky. (May 4, 2016) – Kindred Healthcare, Inc. (“Kindred” or the “Company”) (NYSE:KND) today announced its operating results for the first quarter ended March 31, 2016.

Benjamin A. Breier, President and Chief Executive Officer of the Company, commented, “We are off to a strong start in 2016 with first quarter results at the high end of our expectations. Our performance underscores the value of our diversified portfolio as well as our focus on driving quality outcomes in all of our businesses, particularly as we prepare our Hospital Division to transition to reimbursement under long-term acute care (“LTAC”) patient criteria later this year. The Hospital Division delivered a solid quarter with seasonal volume increases, stable operating results compared to the prior year and significant improvement from the operating trends experienced in the second half of 2015. In addition, we continued to drive growth and momentum in Kindred at Home (“KAH”) and Kindred Hospital Rehabilitation Services (“KHRS”), with strong sequential and year-over-year volume growth and operating performance in these businesses. Solid execution remains our top priority across the Company as we drive effective patient-centered care solutions and adapt to change.”

Mr. Breier continued, “Kindred is the nation’s largest provider of integrated care for people with post-acute and chronic care needs. More important than our size and clinical expertise, we are working to seamlessly connect our service lines to coordinate care and break down traditional silos of care, in advance of the growing demand for value-based care and payment. We are putting the key resources in place to ensure patients receive the right care for the right duration with targeted clinical interventions to support shorter lengths of stay and ongoing wellness. We recently issued our 2015 Quality, Innovation and Social Responsibility Report that highlights our clinical expertise, capabilities across the continuum of post-acute services and care innovations. These strengths support smooth transitions between care settings, produce positive clinical outcomes, and improve the patient experience. As always, I thank Kindred’s 102,000 teammates for the exceptional care and hope that they provide to more than one million patients each year.”

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.

First Quarter Consolidated Highlights⁽¹⁾:

 

•

Consolidated revenues were $1.84 billion, a 9.7% year-over-year increase, and core earnings before interest, income taxes, depreciation, amortization, rent and certain charges (“core EBITDAR”) increased 5.4% to $247 million compared to the same period in 2015. A significant driver of the growth was the acquisition of Gentiva Health Services, Inc. (“Gentiva”) on February 2, 2015.

 

•

Core diluted earnings per share (“EPS”) from continuing operations was $0.25 and adjusted core diluted EPS from continuing operations was $0.35 based upon 87.2 million weighted average diluted shares. In the same period a year ago, core diluted EPS was $0.34 and adjusted core diluted EPS was $0.43 based upon 82.4 million weighted average diluted shares.

 

 

(1)	See reconciliation of core results to generally accepted accounting principles (“GAAP”) results beginning on page 12, including a reconciliation of core EBITDAR and EBITDAR to the most comparable GAAP measure, income from continuing operations, which was $25.8 million for the first quarter of 2016.

 

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680 South Fourth Street     Louisville, Kentucky 40202

502.596.7300     www.kindredhealthcare.com

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Kindred Healthcare Reports First Quarter 2016 Results

Page 2

May 4, 2016

 

 

 

First Quarter Consolidated Highlights⁽¹⁾: (Continued)

 

•

Core operating cash flow was approximately breakeven(2) compared to core operating cash flows of $38 million(2) for the same period a year ago. Core free cash flow was a deficit of $35 million(3) compared to core free cash flows of $6 million(3) in the same period a year ago. These quarterly cash flow comparisons were negatively impacted by approximately $93 million of cash flow timing differences related to the Company’s acquisition of Gentiva in February 2015.

 

•

GAAP consolidated operating results:

 

		Three months ended March 31,
		2016				2015
		(In thousands, except per share amounts)
Diluted earnings (loss) per common share from continuing operations		$	0.15			$	(1.80	)
Income (loss) from continuing operations			25,837				(134,588	)
Operating cash flows			(133,062	)			(139,602	)

 

•

The Kindred Board of Directors declared a cash dividend of $0.12 per share on the Company’s common stock payable on June 10, 2016 to shareholders of record as of the close of business on May 18, 2016.

Stephen D. Farber, Executive Vice President and Chief Financial Officer of Kindred, noted, “Operating cash flows for the first quarter, which are typically lower than the other quarters of the year, were in line with our expectations and are on track for the year. We continue to expect to generate roughly $300 million per year in core operating cash flows⁽²⁾ and approximately half of that amount in core free cash flows⁽³⁾.”

First Quarter Segment Highlights⁽¹⁾⁽⁴⁾:

Kindred’s Hospital Division first quarter revenues increased 0.4% over the prior year period to $643 million, with an increase in same-hospital admissions of 1.2% and an increase in same-hospital revenues per patient day of 2.0% compared to the same period last year. As compared to the fourth quarter of 2015, same-hospital admissions increased 9.2%. Core EBITDAR for the first quarter increased 0.5% to $135.5 million from $134.8 million a year ago, and increased 15.1% from $117.7 million in the fourth quarter of 2015.

KAH first quarter revenues and core EBITDAR increased to $606 million and $91 million, respectively, as compared to the prior year period. The home health business achieved strong growth in the first quarter with episodic admissions increasing 2.1% and revenues increasing 6.2% to $364 million, both over the prior year period on a combined basis. These results were achieved despite a 10% net reduction in home health branches since the beginning of 2015, primarily from branch consolidations. Average home health revenue per branch grew 14.8% during the last twelve months compared to a year ago. The hospice business generated $176 million of revenues in the first quarter with average daily census growth of 1.7% compared to the same period a year ago and average daily census growth of 1.0% from the fourth quarter of 2015, notwithstanding an 8.3% net reduction in hospice branches since the beginning of 2015, primarily from branch consolidations. Average hospice revenue per branch grew 8.2% during the last twelve months compared to a year ago.

Kindred Rehabilitation Services Division revenues declined 8.4% to $370 million and core EBITDAR declined 2.0% to $59.9 million compared to the first quarter last year. Strong performance in the first quarter from KHRS freestanding inpatient rehabilitation hospitals (“IRFs”) was offset by the impact of previously reported contract losses in RehabCare that occurred primarily in the first half of 2015. The KHRS segment achieved strong revenue growth of 9.4% and core EBITDAR growth of 7.4% compared to the same period a year ago, with IRF same-hospital discharges growing 5.5% during the quarter. RehabCare revenues declined 19% to $204 million from a year ago. Core EBITDAR and operating margins stabilized in the first quarter with results that improved slightly from the fourth quarter of 2015 despite the late fourth quarter cancellation of a customer contract with 24 sites of service in connection with litigation to collect past due amounts.

 

 

(1)	See reconciliation of core results to GAAP results beginning on page 12, including a reconciliation of core EBITDAR and EBITDAR to the most comparable GAAP measure, income from continuing operations, which was $25.8 million for the first quarter of 2016.

(2)	Core operating cash flows, similar to the GAAP presentation, include net changes in working capital and exclude routine capital expenditures and distributions to noncontrolling interests.

(3)	Core free cash flows include net changes in working capital, routine capital expenditures and distributions to noncontrolling interests.

(4)	See same-hospital and full segment data on pages 8 through 10.

 

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Kindred Healthcare Reports First Quarter 2016 Results

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May 4, 2016

 

 

 

First Quarter Segment Highlights⁽¹⁾: (Continued)

Kindred’s Nursing Center Division revenues declined 0.8% to $272 million compared to the first quarter last year. Core EBITDAR was $30 million, down from $37 million a year ago, primarily due to a 2.8% decline in average daily census, start-up losses of $1.5 million at two newly opened transitional care centers and higher contract labor costs.

 

As reported segment results:		Three months ended March 31,
		2016				2015
		(In thousands)
Operating income:
Hospital division		$	134,571			$	134,111
Kindred at Home:
Home health			66,941				45,696
Hospice			24,525				16,479
			91,466				62,175
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services			47,870				44,564
RehabCare			11,987				15,708
			59,857				60,272
Nursing center division			30,100				36,963

2016 Outlook

Kindred today reaffirmed its outlook for 2016. Kindred expects:

 

•

Annual revenues of approximately $7.250 billion, with a range of $7.2 billion to $7.3 billion

 

•

Core EBITDAR of approximately $990 million, with a range of $970 million to $1.010 billion

 

•

Core diluted EPS from continuing operations of approximately $0.90, with a range of $0.80 to $1.00(2)

 

•

Adjusted core diluted EPS from continuing operations of approximately $1.25, with a range of $1.15 to $1.35(2)(3)

For the second quarter of 2016, the Company expects core EBITDAR to approximate $260 million to $275 million, core diluted EPS from continuing operations to approximate $0.30 to $0.40 and adjusted core diluted EPS from continuing operations to approximate $0.40 to $0.50.

Additionally, Kindred reaffirmed its preliminary outlook for 2017 core EBITDAR of at least $1 billion.

Mr. Breier commented, “Our focus for 2016 continues to be on readiness for LTAC patient criteria and on driving growth and development across our faster growing home health, hospice, and inpatient rehabilitation businesses. We are also focused on optimizing our LTAC hospital portfolio as a key element of our LTAC mitigation strategy and our previously announced transactions with Curahealth, LLC (“Curahealth”) and Select Medical Holdings Corporation are important steps to advance these efforts.”

The Company’s outlook does not reflect the potential impact of the previously announced definitive agreement to sell 12 LTAC hospitals to Curahealth. The Company will make the appropriate adjustments to its outlook once there is more clarity around the timing of the transaction closing.

The Company’s outlook also excludes transaction costs, the effect of any reimbursement changes, debt refinancing costs, severance, retirement, retention, consulting and restructuring costs, litigation and related contingency expense, integration costs, business interruption settlements, research and development, any further acquisitions or divestitures, any impairment charges, any further issuances of common stock or any repurchases of common stock.

 

 

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

(2)	The EPS estimate is based upon an estimated weighted average annual diluted share count for 2016 of 88 million shares.

(3)

Adjusted core diluted EPS 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. The estimated non-cash expenses for 2016 total approximately $53 million ($32 million net of income taxes) or approximately $0.35 per diluted share.

 

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Kindred Healthcare Reports First Quarter 2016 Results

Page 4

May 4, 2016

 

 

 

All forward-looking non-GAAP financial measures contained in this section “2016 Outlook” are provided only on a non-GAAP basis. This is due to the inherent difficulty of forecasting the timing or amount of items that would be included in the most directly comparable forward-looking GAAP financial measures. As a result, reconciliation of the forward-looking non-GAAP financial measures to GAAP financial measures is not available without unreasonable effort and the Company is unable to address the probable significance of the unavailable information.

Cash Dividend

The Company announced that its Board of Directors has approved the payment of a cash dividend of $0.12 per share of common stock to be paid on June 10, 2016 to shareholders of record as of the close of business on May 18, 2016.

Conference Call

As previously announced, investors and the general public may access a live webcast of the first quarter 2016 conference call through a link on the Company’s website at http://investors.kindredhealthcare.com. The conference call will be held on May 5 at 9:00 a.m. (Eastern Time).

A telephone replay of the conference call will become available at approximately 12:00 p.m. on May 5 by dialing (719) 457-0820, access code: 2174744. The replay will be available through May 14.

Forward-Looking Statements and Non-GAAP Reconciliations

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

About Kindred Healthcare

Kindred Healthcare, Inc., a top-90 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, 2016, Kindred through its subsidiaries had approximately 102,000 employees providing healthcare services in 2,700 locations in 46 states, including 95 transitional care hospitals, 19 inpatient rehabilitation hospitals, 92 nursing centers, 20 sub-acute units, 618 Kindred at Home home health, hospice and non-medical home care sites of service, 104 inpatient rehabilitation units (hospital-based) and a contract rehabilitation services business, RehabCare, which served 1,752 non-affiliated sites of service. Ranked as one of Fortune magazine’s Most Admired Healthcare Companies for seven 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 based upon Kindred consolidated revenues for the twelve months ended March 31, 2016.

 

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Kindred Healthcare Reports First Quarter 2016 Results

Page 5

May 4, 2016

 

 

KINDRED HEALTHCARE, INC.

Condensed Consolidated Statement of Operations

(Unaudited)

(In thousands, except per share amounts)

 

		Three months ended
		March 31,
		2016				2015
Revenues		$	1,837,971			$	1,675,967
Salaries, wages and benefits			926,214				847,093
Supplies			99,416				93,271
Rent			97,768				92,140
Other operating expenses			214,701				197,727
General and administrative expenses			355,527				406,102
Other income			(952	)			(480	)
Litigation contingency expense			1,910				95,000
Impairment charges			7,788				6,726
Depreciation and amortization			40,681				38,935
Interest expense			57,499				62,518
Investment income			(254	)			(741	)
			1,800,298				1,838,291
Income (loss) from continuing operations before income taxes			37,673				(162,324	)
Provision (benefit) for income taxes			11,836				(27,736	)
Income (loss) from continuing operations			25,837				(134,588	)
Discontinued operations, net of income taxes:
Loss from operations			(582	)			(3,424	)
Gain on divestiture of operations			262				—
Loss from discontinued operations			(320	)			(3,424	)
Net income (loss)			25,517				(138,012	)
(Earnings) loss attributable to noncontrolling interests:
Continuing operations			(12,514	)			(8,847	)
Discontinued operations			(2	)			29
			(12,516	)			(8,818	)
Income (loss) attributable to Kindred		$	13,001			$	(146,830	)
Amounts attributable to Kindred stockholders:
Income (loss) from continuing operations		$	13,323			$	(143,435	)
Loss from discontinued operations			(322	)			(3,395	)
Net income (loss)		$	13,001			$	(146,830	)
Earnings (loss) per common share:
Basic:
Income (loss) from continuing operations		$	0.15			$	(1.80	)
Discontinued operations:
Loss from operations			—				(0.04	)
Gain on divestiture of operations			—				—
Loss from discontinued operations			—				(0.04	)
Net income (loss)		$	0.15			$	(1.84	)
Diluted:
Income (loss) from continuing operations		$	0.15			$	(1.80	)
Discontinued operations:
Loss from operations			—				(0.04	)
Gain on divestiture of operations			—				—
Loss from discontinued operations			—				(0.04	)
Net income (loss)		$	0.15			$	(1.84	)
Shares used in computing earnings (loss) per common share:
Basic			86,590				79,575
Diluted			87,249				79,575
Cash dividends declared and paid per common share		$	0.12			$	0.12

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Kindred Healthcare Reports First Quarter 2016 Results

Page 6

May 4, 2016

 

 

KINDRED HEALTHCARE, INC.

Condensed Consolidated Balance Sheet

(Unaudited)

(In thousands, except per share amounts)

 

		March 31,				December 31,
		2016				2015
ASSETS
Current assets:
Cash and cash equivalents		$	105,082			$	98,758
Insurance subsidiary investments			108,872				106,638
Accounts receivable less allowance for loss			1,260,505				1,194,868
Inventories			28,056				27,791
Income taxes			11,283				11,790
Other			65,993				61,054
			1,579,791				1,500,899
Property and equipment			2,181,989				2,162,398
Accumulated depreciation			(1,222,782	)			(1,190,402	)
			959,207				971,996
Goodwill			2,683,352				2,669,810
Intangible assets less accumulated amortization			773,237				755,655
Assets held for sale			298				613
Insurance subsidiary investments			194,778				204,498
Deferred tax assets			100,313				104,130
Acquisition deposit			—				18,489
Other			320,328				289,133
Total assets		$	6,611,304			$	6,515,223
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	176,663			$	187,061
Salaries, wages and other compensation			424,058				404,925
Due to third party payors			32,785				36,251
Professional liability risks			65,418				64,099
Other accrued liabilities			242,162				394,246
Long-term debt due within one year			25,380				24,630
			966,466				1,111,212
Long-term debt			3,358,297				3,133,312
Professional liability risks			271,974				263,273
Deferred credits and other liabilities			305,819				301,379
Equity:
Stockholders’ equity:
Common stock, $0.25 par value; authorized 175,000 shares; issued 85,171 shares - March 31, 2016 and 83,792 shares - December 31, 2015			21,293				20,948
Capital in excess of par value			1,728,784				1,737,747
Accumulated other comprehensive loss			(5,454	)			(2,632	)
Accumulated deficit			(243,279	)			(256,209	)
			1,501,344				1,499,854
Noncontrolling interests			207,404				206,193
Total equity			1,708,748				1,706,047
Total liabilities and equity		$	6,611,304			$	6,515,223

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Kindred Healthcare Reports First Quarter 2016 Results

Page 7

May 4, 2016

 

 

KINDRED HEALTHCARE, INC.

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(In thousands)

 

		Three months ended
		March 31,
		2016				2015
Cash flows from operating activities:
Net income (loss)		$	25,517			$	(138,012	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization			40,783				39,077
Amortization of stock-based compensation costs			4,404				5,824
Amortization of deferred financing costs			3,567				3,062
Payment of capitalized lender fees related to debt issuance			—				(28,012	)
Provision for doubtful accounts			11,725				8,292
Deferred income taxes			11,496				(25,580	)
Impairment charges			7,788				6,726
Gain on divestiture of discontinued operations			(262	)			—
Other			303				1,997
Change in operating assets and liabilities:
Accounts receivable			(87,892	)			(31,656	)
Inventories and other assets			(5,232	)			53,022
Accounts payable			(10,621	)			465
Income taxes			73				(5,768	)
Due to third party payors			(4,843	)			(15,419	)
Other accrued liabilities			(129,868	)			(13,620	)
Net cash used in operating activities			(133,062	)			(139,602	)
Cash flows from investing activities:
Routine capital expenditures			(18,106	)			(20,769	)
Development capital expenditures			(10,019	)			(5,788	)
Acquisitions, net of cash acquired			(26,339	)			(659,071	)
Acquisition deposits			18,489				195,000
Sale of assets			1,081				948
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			(32,841	)			(25,918	)
Sale of insurance subsidiary investments			30,890				22,029
Net change in insurance subsidiary cash and cash equivalents			9,958				(558	)
Net change in other investments			(33,981	)			24
Other			(1,919	)			5
Net cash provided by (used in) investing activities			(62,787	)			879,340
Cash flows from financing activities:
Proceeds from borrowings under revolving credit			533,700				807,450
Repayment of borrowings under revolving credit			(303,100	)			(610,050	)
Proceeds from issuance of term loan, net of discount			—				199,000
Proceeds from other long-term debt			750				—
Repayment of Gentiva debt			—				(1,177,363	)
Repayment of term loan			(3,003	)			—
Repayment of other long-term debt			(280	)			(441	)
Payment of deferred financing costs			(151	)			(2,538	)
Issuance of common stock in connection with employee benefit plans			—				66
Payment of costs associated with issuance of common stock and tangible equity units			—				(915	)
Payment of dividend for mandatory redeemable preferred stock			(2,801	)			(2,778	)
Dividends paid			(10,068	)			(9,975	)
Contributions made by noncontrolling interests			4,368				—
Distributions to noncontrolling interests			(16,315	)			(11,019	)
Purchase of noncontrolling interests			(1,000	)			—
Other			73				1,162
Net cash provided by (used in) financing activities			202,173				(807,401	)
Change in cash and cash equivalents			6,324				(67,663	)
Cash and cash equivalents at beginning of period			98,758				164,188
Cash and cash equivalents at end of period		$	105,082			$	96,525

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Kindred Healthcare Reports First Quarter 2016 Results

Page 8

May 4, 2016

 

 

KINDRED HEALTHCARE, INC.

Condensed Consolidated and Business Segment Data ^(a)

(Unaudited)

(In thousands, except per share amounts)

 

		2015 Quarters																Year				First Quarter 2016				First quarter % change v. prior year
		First				Second				Third				Fourth
Consolidated income statement data:
Revenues		$	1,675,967			$	1,833,475			$	1,764,516			$	1,780,949			$	7,054,907			$	1,837,971				9.7
Core EBITDAR		$	234,211			$	261,800			$	236,477			$	247,839			$	980,327			$	246,834				5.4
Rent			91,199				95,528				95,436				96,934				379,097				97,517				6.9
Core EBITDA			143,012				166,272				141,041				150,905				601,230				149,317				4.4
Depreciation and amortization			38,935				38,625				39,329				40,362				157,251				40,681				4.5
Interest, net			44,346				56,140				56,008				55,664				212,158				57,245				29.1
Income from continuing operations before income taxes			59,731				71,507				45,704				54,879				231,821				51,391				(14.0	)
Provision for income taxes			22,466				25,721				15,298				13,758				77,243				16,546				(26.4	)
Income from continuing operations			37,265				45,786				30,406				41,121				154,578				34,845				(6.5	)
Noncontrolling interests			(8,847	)			(11,735	)			(9,900	)			(12,082	)			(42,564	)			(12,514	)			41.4
Net income attributable to Kindred		$	28,418			$	34,051			$	20,506			$	29,039			$	112,014			$	22,331				(21.4	)
Core diluted EPS		$	0.34			$	0.39			$	0.23			$	0.33			$	1.28			$	0.25				(26.5	)
Adjusted core diluted EPS		$	0.43			$	0.51			$	0.33			$	0.44			$	1.70			$	0.35				(18.6	)
Diluted shares			82,422				86,402				86,892				87,232				86,098				87,249				5.9
Revenues by segment:
Hospital division		$	640,483			$	627,206			$	579,497			$	593,593			$	2,440,779			$	643,299				0.4
Kindred at Home:
Home health			300,867				427,820				424,054				425,759				1,578,500				430,035				42.9
Hospice			119,057				178,005				181,140				178,325				656,527				176,426				48.2
			419,924				605,825				605,194				604,084				2,235,027				606,461				44.4
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services			151,564				152,544				149,435				155,579				609,122				165,774				9.4
RehabCare			252,595				236,791				219,518				206,582				915,486				204,248				(19.1	)
			404,159				389,335				368,953				362,161				1,524,608				370,022				(8.4	)
Nursing center division			274,308				273,870				270,510				273,387				1,092,075				272,227				(0.8	)
			1,738,874				1,896,236				1,824,154				1,833,225				7,292,489				1,892,009				8.8
Eliminations			(62,907	)			(62,761	)			(59,638	)			(52,276	)			(237,582	)			(54,038	)			(14.1	)
		$	1,675,967			$	1,833,475			$	1,764,516			$	1,780,949			$	7,054,907			$	1,837,971				9.7
Core EBITDAR by segment:
Hospital division		$	134,786			$	131,532			$	97,128			$	117,675			$	481,121			$	135,495				0.5
Kindred at Home:
Home health			46,798				72,917				68,155				68,826				256,696				65,803				40.6
Hospice			16,996				27,887				34,025				30,212				109,120				24,866				46.3
			63,794				100,804				102,180				99,038				365,816				90,669				42.1
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services			44,564				44,531				42,141				45,098				176,334				47,870				7.4
RehabCare			16,493				14,681				14,544				11,858				57,576				11,987				(27.3	)
			61,057				59,212				56,685				56,956				233,910				59,857				(2.0	)
Nursing center division			36,963				40,461				35,923				36,601				149,948				30,100				(18.6	)
Support center			(62,389	)			(70,209	)			(55,439	)			(62,431	)			(250,468	)			(69,287	)			11.1
		$	234,211			$	261,800			$	236,477			$	247,839			$	980,327			$	246,834				5.4
Core EBITDAR margin by segment:
Hospital division			21.0				21.0				16.8				19.8				19.7				21.1				0.1
Kindred at Home:
Home health			15.6				17.0				16.1				16.2				16.3				15.3				(0.3	)
Hospice			14.3				15.7				18.8				16.9				16.6				14.1				(0.2	)
Kindred at Home			15.2				16.6				16.9				16.4				16.4				15.0				(0.2	)
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services			29.4				29.2				28.2				29.0				28.9				28.9				(0.5	)
RehabCare			6.5				6.2				6.6				5.7				6.3				5.9				(0.6	)
Kindred Rehabilitation Services			15.1				15.2				15.4				15.7				15.3				16.2				1.1
Nursing center division			13.5				14.8				13.3				13.4				13.7				11.1				(2.4	)
Consolidated			14.0				14.3				13.4				13.9				13.9				13.4				(0.6	)

 

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

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Kindred Healthcare Reports First Quarter 2016 Results

Page 9

May 4, 2016

 

 

KINDRED HEALTHCARE, INC.

Condensed Business Segment Data (Continued)

(Unaudited)

(In thousands, except statistics)

 

		2015 Quarters																Year				First Quarter 2016				First quarter % change v. prior year
		First				Second				Third				Fourth
Hospital division:
End of period data:
Number of transitional care hospitals			97				96				95				95								95
Number of licensed beds			7,147				7,124				7,094				7,094								7,089
Revenue mix %:
Medicare			56.8				55.2				57.1				57.3				56.6				57.8
Medicaid			5.5				5.3				5.3				5.1				5.3				4.2
Medicare Advantage			11.9				11.6				10.8				11.1				11.4				11.5
Medicaid Managed			4.7				5.6				6.1				6.2				5.6				5.6
Commercial insurance and other			21.1				22.3				20.7				20.3				21.1				20.9
Admissions:
Medicare			8,775				8,267				7,976				8,169				33,187				8,919				1.6
Medicaid			610				610				556				520				2,296				463				(24.1	)
Medicare Advantage			1,555				1,352				1,212				1,304				5,423				1,453				(6.6	)
Medicaid Managed			643				675				646				612				2,576				733				14.0
Commercial insurance and other			1,868				1,815				1,763				1,701				7,147				1,871				0.2
			13,451				12,719				12,153				12,306				50,629				13,439				(0.1	)
Patient days:
Medicare			228,483				218,577				210,870				210,409				868,339				229,004				0.2
Medicaid			28,663				25,213				23,167				21,795				98,838				21,134				(26.3	)
Medicare Advantage			48,448				44,740				39,585				41,079				173,852				45,760				(5.5	)
Medicaid Managed			22,013				24,833				24,412				24,802				96,060				25,341				15.1
Commercial insurance and other			62,241				62,922				58,631				57,321				241,115				62,769				0.8
			389,848				376,285				356,665				355,406				1,478,204				384,008				(1.5	)
Average length of stay:
Medicare			26.0				26.4				26.4				25.8				26.2				25.7				(1.2	)
Medicaid			47.0				41.3				41.7				41.9				43.0				45.6				(3.0	)
Medicare Advantage			31.2				33.1				32.7				31.5				32.1				31.5				1.0
Medicaid Managed			34.2				36.8				37.8				40.5				37.3				34.6				1.2
Commercial insurance and other			33.3				34.7				33.3				33.7				33.7				33.5				0.6
Weighted average			29.0				29.6				29.3				28.9				29.2				28.6				(1.4	)
Revenues per admission:
Medicare		$	41,483			$	41,892			$	41,451			$	41,656			$	41,620			$	41,717				0.6
Medicaid			57,594				54,795				55,415				57,724				56,352				57,928				0.6
Medicare Advantage			48,908				53,578				51,495				50,680				51,077				51,080				4.4
Medicaid Managed			46,740				51,950				54,976				60,263				53,383				49,287				5.4
Commercial insurance and other			72,395				77,110				68,151				70,735				72,150				71,651				(1.0	)
Weighted average			47,616				49,312				47,683				48,236				48,209				47,868				0.5
Revenues per patient day:
Medicare		$	1,593			$	1,584			$	1,568			$	1,617			$	1,591			$	1,625				2.0
Medicaid			1,226				1,326				1,330				1,377				1,309				1,269				3.5
Medicare Advantage			1,570				1,619				1,577				1,609				1,593				1,622				3.3
Medicaid Managed			1,365				1,412				1,455				1,487				1,432				1,426				4.5
Commercial insurance and other			2,173				2,224				2,049				2,099				2,139				2,136				(1.7	)
Weighted average			1,643				1,667				1,625				1,670				1,651				1,675				1.9
Medicare case mix index (discharged patients only)			1.166				1.163				1.150				1.164				1.162				1.163				(0.3	)
Average daily census			4,332				4,135				3,877				3,863				4,050				4,220				(2.6	)
Occupancy %			69.2				66.1				62.2				62.2				64.9				68.0				(1.7	)
Same-hospital data:
Revenues (a)		$	634,975			$	622,018			$	577,337			$	594,091			$	2,428,421			$	643,413				1.3
Admissions:
Medicare			8,652				8,172				7,932				8,169				32,925				8,919				3.1
Medicaid			602				608				556				520				2,286				463				(23.1	)
Medicare Advantage			1,546				1,348				1,212				1,304				5,410				1,453				(6.0	)
Medicaid Managed			640				670				644				612				2,566				733				14.5
Commercial insurance and other			1,840				1,797				1,762				1,701				7,100				1,871				1.7
			13,280				12,595				12,106				12,306				50,287				13,439				1.2
Patient days:
Medicare			225,992				216,230				209,662				210,466				862,350				229,004				1.3
Medicaid			28,458				25,060				23,141				21,795				98,454				21,134				(25.7	)
Medicare Advantage			48,276				44,548				39,585				41,079				173,488				45,760				(5.2	)
Medicaid Managed			21,933				24,673				24,280				24,783				95,669				25,341				15.5
Commercial insurance and other			61,715				62,462				58,625				57,325				240,127				62,769				1.7
			386,374				372,973				355,293				355,448				1,470,088				384,008				(0.6	)
Total average length of stay			29.1				29.6				29.3				28.9				29.2				28.6				(1.7	)
Total revenues per patient day		$	1,643			$	1,668			$	1,625			$	1,671			$	1,652			$	1,676				2.0

 

(a)	See reconciliation of same-hospital revenues to reported revenues for the Hospital Division on page 14.

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Kindred Healthcare Reports First Quarter 2016 Results

Page 10

May 4, 2016

 

 

KINDRED HEALTHCARE, INC.

Condensed Business Segment Data (Continued)

(Unaudited)

(In thousands, except statistics)

 

		2015 Quarters																Year				First Quarter 2016				First quarter % change v. prior year
		First				Second				Third				Fourth
Kindred at Home (data combined to include Kindred and Gentiva for each historical period):
Home Health:
Sites of service (at end of period)			415				411				388				373								384
Revenue mix %:
Medicare			80.9				80.4				80.0				80.0				80.3				79.8
Medicaid			2.1				2.1				2.1				2.1				2.1				2.1
Commercial and other			7.3				7.9				8.2				8.5				8.1				8.4
Commercial paid at episodic rates			9.7				9.6				9.7				9.4				9.5				9.7
Episodic revenues ($000s)		$	308,317			$	324,027			$	319,820			$	320,698			$	1,272,862			$	325,821				5.7
Total episodic admissions			69,936				67,808				66,753				66,157				270,654				71,426				2.1
Medicare episodic admissions			61,186				59,394				58,479				57,804				236,863				62,011				1.3
Total episodes			110,980				109,599				108,519				108,300				437,398				113,887				2.6
Episodes per admission			1.59				1.62				1.63				1.64				1.62				1.59				—
Revenue per episode		$	2,778			$	2,956			$	2,947			$	2,961			$	2,910			$	2,861				3.0
Hospice:
Sites of service (at end of period)			190				185				181				175								177
Admissions			13,164				12,574				12,091				12,129				49,958				13,234				0.5
Average length of stay			95				93				101				100				97				92				(3.2	)
Patient days			1,150,841				1,190,604				1,211,291				1,185,330				4,738,066				1,183,908				2.9
Revenue per patient day		$	151			$	150			$	150			$	150			$	150			$	149				(1.3	)
Average daily census			12,787				13,084				13,166				12,884				12,981				13,010				1.7
Community Care and other revenues (included in Home Health business segment)		$	65,530			$	67,647			$	67,338			$	67,684			$	268,199			$	66,305				1.2
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services:
Freestanding IRFs:
End of period data:
Number of IRFs			16				16				18				18								19
Number of licensed beds			829				829				919				919								969
Discharges (a)			3,806				3,927				3,941				4,317				15,991				4,448				16.9
Same-hospital discharges (a)			3,806				3,927				3,842				4,040				15,615				4,016				5.5
Occupancy % (a)			73.2				71.5				68.7				68.0				70.2				70.6				(3.6	)
Average length of stay (a)			13.7				13.1				13.2				12.7				13.2				13.2				(3.6	)
Revenue per discharge (a)		$	19,517			$	19,325			$	18,992			$	18,640			$	19,104			$	19,731				1.1
Contract services:
Sites of service (at end of period):
Inpatient rehabilitation units			100				99				101				100								104
LTAC hospitals			120				120				119				119								119
Sub-acute units			8				8				7				7								7
Outpatient units			138				139				135				130								139
			366				366				362				356								369
Revenue per site		$	211,151			$	209,436			$	206,041			$	210,978			$	837,606			$	211,417				0.1
RehabCare:
Sites of service (at end of period)			1,829				1,789				1,821				1,798								1,767
Revenue per site		$	138,106			$	132,359			$	120,548			$	114,896			$	505,909			$	115,590				(16.3	)
Nursing center division:
End of period data:
Number of nursing centers			90				90				90				90								92
Number of licensed beds			11,535				11,535				11,535				11,535								11,815
Admissions (b)			10,376				9,831				9,558				9,237				39,002				9,815				(5.4	)
Medicare average length of stay (b)			28.9				28.9				28.5				28.4				28.7				28.2				(2.4	)
Patient days (b)			861,278				852,691				851,332				845,924				3,411,225				846,578				(1.7	)
Revenues per patient day (b)		$	319			$	321			$	318			$	323			$	320			$	322				0.9
Average daily census (b)			9,570				9,370				9,254				9,195				9,346				9,303				(2.8	)
Occupancy % (b)			81.3				79.6				78.6				78.1				79.4				77.3				(4.9	)

 

(a)	Excludes non-consolidating IRF.

(b)	Excludes managed facilities.

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Kindred Healthcare Reports First Quarter 2016 Results

Page 11

May 4, 2016

 

 

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, 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, government investigations, regulatory matters, 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, product or services line growth, and expected outcome of government investigations and other regulatory matters, 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. 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 detailed from time to time in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K with the Securities and Exchange Commission.

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.

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Kindred Healthcare Reports First Quarter 2016 Results

Page 12

May 4, 2016

 

 

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, 2016 and 2015 before certain charges or on a core and adjusted core basis, and on a same-hospital 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 believes the presentation of same-hospital revenues, which excludes the results from two hospitals that closed during 2015, provides investors, equity analysts and others with useful information regarding the performance of the Company’s hospital operations that are comparable for the periods presented. The Company believes that reported hospital segment revenues is the most comparable GAAP measure. Readers of the Company’s financial information should consider reported hospital segment revenues as an important measure of the Company’s Hospital Division financial performance because it provides the most complete measure of its revenues. The Company’s earnings release also includes financial measures referred to as operating income, or EBITDAR or core EBITDAR, and core earnings before interest, income taxes, depreciation and amortization (“core 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, as well as a same-hospital basis, 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 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 for comparability to other companies that use similar measures. In addition, management uses core operating cash flows and core free cash flows 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. Core operating cash flows and core free cash flows 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 core operating cash flows and core free cash flows are included in this press release.

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Kindred Healthcare Reports First Quarter 2016 Results

Page 13

May 4, 2016

 

 

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, 2016 and 2015 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 34.3% and 22.6% for the three months ended March 31, 2016 and 2015, respectively. The difference in the effective income tax rate for both periods compared to the same prior year periods is attributable to the composition of charges that are non-deductible for income tax purposes, including the litigation contingency expense.

 

		Three months ended
		March 31,
		2016				2015
Detail of charges:
Litigation contingency expense		($	1,910	)		($	95,000	)
Retirement and severance costs			(1,582	)			(4,961	)
Home health and hospice closings			(341	)			(1,619	)
Property and equipment impairment charges			(7,788	)			—
Business interruption settlements			1,138				—
Research and development			(863	)			—
Development project cancellation and other restructuring costs			—				(1,027	)
Gentiva transaction and integration costs:
Professional and consulting fees			(1,048	)			(32,134	)
Severance and retention			(555	)			(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	)
Lease termination (charged to rent expense)			(251	)			—
Other transaction costs			(518	)			(2,099	)
			(13,718	)			(222,055	)
Income tax benefit			4,710				50,202
Charges net of income taxes			(9,008	)			(171,853	)
Allocation to participating unvested restricted stockholders			133				—
Available to common stockholders		($	8,875	)		($	171,853	)
Weighted average diluted shares outstanding			87,249				79,575
Diluted earnings (loss) per common share related to charges		($	0.10	)		($	2.16	)
Reconciliation of income from continuing operations before charges:
Amounts attributable to Kindred stockholders:
Income from continuing operations before charges		$	22,331			$	28,418
Charges net of income taxes			(9,008	)			(171,853	)
Reported income (loss) from continuing operations		$	13,323			($	143,435	)
Reconciliation of core diluted EPS from continuing operations:
Diluted core EPS (a)		$	0.25			$	0.34
Charges net of income taxes			(0.10	)			(2.16	)
Other			—				0.02
Reported diluted earnings (loss) per common share from continuing operations		$	0.15			($	1.80	)
Weighted average diluted shares used to compute earnings per common share from continuing operations before charges			87,249				82,422
Reconciliation of effective income tax rate before charges:
Effective income tax rate before charges			32.2	%			37.6	%
Impact of charges on effective income tax rate			-0.8	%			-20.5	%
Reported effective income tax rate			31.4	%			17.1	%

 

(a)

For purposes of computing diluted earnings per common share before charges, income from continuing operations before charges was reduced by $0.3 million and $0.5 million for the three months ended March 31, 2016 and 2015, respectively, for the allocation of income to participating unvested restricted stockholders.

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Kindred Healthcare Reports First Quarter 2016 Results

Page 14

May 4, 2016

 

 

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:

 

																						First
		2015 Quarters																				Quarter
		First				Second				Third				Fourth				Year				2016
Reconciliation of adjusted core earnings:
Income from continuing operations before charges (as calculated and reconciled to GAAP measurement on the following pages)		$	28,418			$	34,051			$	20,506			$	29,039			$	112,014			$	22,331
Add back non-cash expenses:
Amortization of intangible assets			6,932				7,536				7,728				7,645				29,841				6,826
Amortization of stock-based compensation costs			3,141				6,687				3,194				4,778				17,800				3,746
Amortization of deferred financing costs			3,062				3,539				3,554				3,566				13,721				3,567
			13,135				17,762				14,476				15,989				61,362				14,139
Income tax benefit related to non-cash expenses			5,169				6,989				5,696				6,292				24,146				5,564
Non-cash expenses, net of income taxes			7,966				10,773				8,780				9,697				37,216				8,575
Adjusted core earnings		$	36,384			$	44,824			$	29,286			$	38,736			$	149,230			$	30,906
Reconciliation of diluted adjusted core earnings from continuing operations:
Diluted income per common share before charges (as calculated on the following pages)		$	0.34			$	0.39			$	0.23			$	0.33			$	1.28			$	0.25
Non-cash expenses, net of income taxes			0.09				0.12				0.10				0.11				0.42				0.10
Adjusted diluted core EPS from continuing operations		$	0.43			$	0.51			$	0.33			$	0.44			$	1.70			$	0.35
Weighted average diluted shares used to compute adjusted core EPS			82,422				86,402				86,892				87,232				86,098				87,249

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

 

																						First				First quarter
		2015 Quarters																				Quarter				% change v.
		First				Second				Third				Fourth				Year				2016				prior year
Kindred		$	254,965			$	360,173			$	356,716			$	358,075			$	1,329,929			$	363,730
Gentiva			87,520				—				—				—				87,520				—
		$	342,485			$	360,173			$	356,716			$	358,075			$	1,417,449			$	363,730				6.2

A reconciliation of same-hospital revenues to reported revenues for the Hospital Division for each historical period follows:

 

																						First				First quarter
		2015 Quarters																				Quarter				% change v.
		First				Second				Third				Fourth				Year				2016				prior year
Same-hospital revenues		$	634,975			$	622,018			$	577,337			$	594,091			$	2,428,421			$	643,413				1.3
Two hospitals that closed during 2015 (a)			5,508				5,188				2,160				(498	)			12,358				(114	)
Reported revenues		$	640,483			$	627,206			$	579,497			$	593,593			$	2,440,779			$	643,299				0.4

 

(a)	One hospital closed during the second quarter of 2015 and one hospital closed during the third quarter of 2015.

---

Kindred Healthcare Reports First Quarter 2016 Results

Page 15

May 4, 2016

 

 

KINDRED HEALTHCARE, INC.

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

(Unaudited)

(In thousands, except per share amounts)

 

		Three months ended March 31, 2016
						Charges
																														Gentiva
		Before				Retirement								Business																transaction
		charges				and				Hospice				interruption				Litigation				Impairment				Research and				and				Other								As
		(“core”)				severance				closings				settlements				contingency				charges				development				integration				transaction				Total				reported
Income from continuing operations:
Operating income (loss) (EBITDAR):
Hospital division		$	135,495			$	(924	)		$	—			$	—			$	—			$	—			$	—			$	—			$	—			$	(924	)		$	134,571
Kindred at Home:
Home health			65,803				—				—				1,138				—				—				—				—				—				1,138				66,941
Hospice			24,866				—				(341	)			—				—				—				—				—				—				(341	)			24,525
			90,669				—				(341	)			1,138				—				—				—				—				—				797				91,466
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services			47,870				—				—				—				—				—				—				—				—				—				47,870
RehabCare			11,987				—				—				—				—				—				—				—				—				—				11,987
			59,857				—				—				—				—				—				—				—				—				—				59,857
Nursing center division			30,100				—				—				—				—				—				—				—				—				—				30,100
Support center			(69,287	)			(658	)			—				—				—				—				(863	)			—				—				(1,521	)			(70,808	)
Litigation contingency expense			—				—				—				—				(1,910	)			—				—				—				—				(1,910	)			(1,910	)
Impairment charges			—				—				—				—				—				(7,788	)			—				—				—				(7,788	)			(7,788	)
Transaction costs			—				—				—				—				—				—				—				(1,603	)			(518	)			(2,121	)			(2,121	)
Operating income (EBITDAR)			246,834				(1,582	)			(341	)			1,138				(1,910	)			(7,788	)			(863	)			(1,603	)			(518	)			(13,467	)			233,367
Rent			(97,517	)			—				(251	)			—				—				—				—				—				—				(251	)			(97,768	)
EBITDA			149,317				(1,582	)			(592	)			1,138				(1,910	)			(7,788	)			(863	)			(1,603	)			(518	)			(13,718	)			135,599
Depreciation and amortization			(40,681	)			—				—				—				—				—				—				—				—				—				(40,681	)
Interest, net			(57,245	)			—				—				—				—				—				—				—				—				—				(57,245	)
Income from continuing operations before income taxes			51,391				(1,582	)			(592	)			1,138				(1,910	)			(7,788	)			(863	)			(1,603	)			(518	)			(13,718	)			37,673
Provision for income taxes			16,546				(543	)			(203	)			391				(656	)			(2,674	)			(296	)			(551	)			(178	)			(4,710	)			11,836
			34,845			$	(1,039	)		$	(389	)		$	747			$	(1,254	)		$	(5,114	)		$	(567	)		$	(1,052	)		$	(340	)		$	(9,008	)			25,837
Noncontrolling interests			(12,514	)																																							(12,514	)
Income (loss) attributable to Kindred		$	22,331																																							$	13,323
Diluted earnings (loss) per common share		$	0.25																																							$	0.15
Diluted shares used in computing earnings per common share			87,249																																								87,249

 

		Three months ended March 31, 2015
						Charges
										Home health				Development												Gentiva				Gentiva
		Before				Retirement				and				project												pre-closing				transaction
		charges				and				hospice				cancellation				Litigation				Impairment				financing				and				Other								As
		(“core”)				severance				closings				and other				contingency				charges				costs				integration				transaction				Total				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
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services			44,564				—				—				—				—				—				—				—				—				—				44,564
RehabCare			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	)
Impairment charges			—				—				—				—				—				(6,726	)			—				—				—				(6,726	)			(6,726	)
Transaction costs			—				—				—				—				—				—				(6,005	)			(86,598	)			(2,099	)			(94,702	)			(94,702	)
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	)
Income (loss) 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

---

Kindred Healthcare Reports First Quarter 2016 Results

Page 16

May 4, 2016

 

 

KINDRED HEALTHCARE, INC.

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

(Unaudited)

(In thousands, except per share amounts)

 

		Three months ended June 30, 2015
						Charges
						Hospital				Development								Gentiva
		Before				and home				project								transaction
		charges				health/hospice				cancellation				Litigation				and				Other								As
		(“core”)				closings				and other				contingency				integration				transaction				Total				reported
Income from continuing operations:
Operating income (loss) (EBITDAR):
Hospital division		$	131,532			$	(565	)		$	—			$	—			$	—			$	—			$	(565	)		$	130,967
Kindred at Home:
Home health			72,917				(588	)			—				—				—				—				(588	)			72,329
Hospice			27,887				(1,649	)			—				—				—				—				(1,649	)			26,238
			100,804				(2,237	)			—				—				—				—				(2,237	)			98,567
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services			44,531				—				—				—				—				—				—				44,531
RehabCare			14,681				—				—				—				—				—				—				14,681
			59,212				—				—				—				—				—				—				59,212
Nursing center division			40,461				—				(584	)			—				—				—				(584	)			39,877
Support center			(70,209	)			—				—				—				—				—				—				(70,209	)
Litigation contingency expense			—				—				—				(3,925	)			—				—				(3,925	)			(3,925	)
Transaction costs			—				—				—				—				(4,342	)			(874	)			(5,216	)			(5,216	)
Operating income (EBITDAR)			261,800				(2,802	)			(584	)			(3,925	)			(4,342	)			(874	)			(12,527	)			249,273
Rent			(95,528	)			(671	)			—				—				(203	)			—				(874	)			(96,402	)
EBITDA			166,272				(3,473	)			(584	)			(3,925	)			(4,545	)			(874	)			(13,401	)			152,871
Depreciation and amortization			(38,625	)			—				—				—				—				—				—				(38,625	)
Interest, net			(56,140	)			—				—				—				—				—				—				(56,140	)
Income from continuing operations before income taxes			71,507				(3,473	)			(584	)			(3,925	)			(4,545	)			(874	)			(13,401	)			58,106
Provision for income taxes			25,721				(368	)			(62	)			(416	)			(386	)			(93	)			(1,325	)			24,396
			45,786			$	(3,105	)		$	(522	)		$	(3,509	)		$	(4,159	)		$	(781	)		$	(12,076	)			33,710
Noncontrolling interests			(11,735	)																											(11,735	)
Income attributable to Kindred		$	34,051																											$	21,975
Diluted earnings per common share		$	0.39																											$	0.25
Diluted shares used in computing earnings per common share			86,402																												86,402

 

		Three months ended September 30, 2015
						Charges
										Hospital								Gentiva
		Before				Retirement				and home								transaction
		charges				and				health/hospice				Litigation				and				Other								As
		(“core”)				severance				closings				contingency				integration				transaction				Total				reported
Income (loss) from continuing operations:
Operating income (loss) (EBITDAR):
Hospital division		$	97,128			$	(666	)		$	(479	)		$	—			$	—			$	—			$	(1,145	)		$	95,983
Kindred at Home:
Home health			68,155				—				(2,571	)			—				—				—				(2,571	)			65,584
Hospice			34,025				—				(318	)			—				—				—				(318	)			33,707
			102,180				—				(2,889	)			—				—				—				(2,889	)			99,291
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services			42,141				—				—				—				—				—				—				42,141
RehabCare			14,544				—				—				—				—				—				—				14,544
			56,685				—				—				—				—				—				—				56,685
Nursing center division			35,923				—				—				—				—				—				—				35,923
Support center			(55,439	)			—				—				—				—				—				—				(55,439	)
Litigation contingency expense			—				—				—				(31,462	)			—				—				(31,462	)			(31,462	)
Transaction costs			—				—				—				—				(3,069	)			(777	)			(3,846	)			(3,846	)
Operating income (EBITDAR)			236,477				(666	)			(3,368	)			(31,462	)			(3,069	)			(777	)			(39,342	)			197,135
Rent			(95,436	)			—				(808	)			—				—				—				(808	)			(96,244	)
EBITDA			141,041				(666	)			(4,176	)			(31,462	)			(3,069	)			(777	)			(40,150	)			100,891
Depreciation and amortization			(39,329	)			—				—				—				—				—				—				(39,329	)
Interest, net			(56,008	)			—				—				—				—				—				—				(56,008	)
Income from continuing operations before income taxes			45,704				(666	)			(4,176	)			(31,462	)			(3,069	)			(777	)			(40,150	)			5,554
Provision for income taxes			15,298				(196	)			(1,225	)			(429	)			(697	)			(228	)			(2,775	)			12,523
			30,406			$	(470	)		$	(2,951	)		$	(31,033	)		$	(2,372	)		$	(549	)		$	(37,375	)			(6,969	)
Noncontrolling interests			(9,900	)																											(9,900	)
Income (loss) attributable to Kindred		$	20,506																											$	(16,869	)
Diluted earnings (loss) per common share		$	0.23																											$	(0.20	)
Diluted shares used in computing earnings (loss) per common share			86,892																												86,184

---

Kindred Healthcare Reports First Quarter 2016 Results

Page 17

May 4, 2016

 

 

KINDRED HEALTHCARE, INC.

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

(Unaudited)

(In thousands, except per share amounts)

 

		Three months ended December 31, 2015
						Charges
										Hospital				RehabCare												Gentiva
		Before				Retirement				and home				customer												transaction
		charges				and				health/hospice				contract				Litigation				Impairment				and				Other								As
		(“core”)				severance				closings				litigation				contingency				charges				integration				transaction				Total				reported
Income from continuing operations:
Operating income (loss) (EBITDAR):
Hospital division		$	117,675			$	(1,221	)		$	—			$	—			$	—			$	—			$	—			$	—			$	(1,221	)		$	116,454
Kindred at Home:
Home health			68,826				—				(1,794	)			—				—				—				—				—				(1,794	)			67,032
Hospice			30,212				—				(1,544	)			—				—				—				—				—				(1,544	)			28,668
			99,038				—				(3,338	)			—				—				—				—				—				(3,338	)			95,700
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services			45,098				(207	)			—				—				—				—				—				—				(207	)			44,891
RehabCare			11,858				(112	)			—				(12,864	)			—				—				—				—				(12,976	)			(1,118	)
			56,956				(319	)			—				(12,864	)			—				—				—				—				(13,183	)			43,773
Nursing center division			36,601				—				—				—				—				—				—				—				—				36,601
Support center			(62,431	)			(585	)			—				—				—				—				—				—				(585	)			(63,016	)
Litigation contingency expense			—				—				—				—				(8,261	)							—				—				(8,261	)			(8,261	)
Impairment charges			—				—				—				—				—				(18,031	)			—				—				(18,031	)			(18,031	)
Transaction costs			—				—				—				—				—				—				(4,189	)			(1,178	)			(5,367	)			(5,367	)
Operating income (EBITDAR)			247,839				(2,125	)			(3,338	)			(12,864	)			(8,261	)			(18,031	)			(4,189	)			(1,178	)			(49,986	)			197,853
Rent			(96,934	)			—				(889	)			—				—				—				—				—				(889	)			(97,823	)
EBITDA			150,905				(2,125	)			(4,227	)			(12,864	)			(8,261	)			(18,031	)			(4,189	)			(1,178	)			(50,875	)			100,030
Depreciation and amortization			(40,362	)			—				—				—				—				—				—				—				—				(40,362	)
Interest, net			(55,664	)			—				—				—				—				—				—				—				—				(55,664	)
Income from continuing operations before income taxes			54,879				(2,125	)			(4,227	)			(12,864	)			(8,261	)			(18,031	)			(4,189	)			(1,178	)			(50,875	)			4,004
Provision (benefit) for income taxes			13,758				(836	)			(1,663	)			(5,062	)			(50,329	)			(6,205	)			(1,487	)			(156	)			(65,738	)			(51,980	)
			41,121			$	(1,289	)		$	(2,564	)		$	(7,802	)		$	42,068			$	(11,826	)		$	(2,702	)		$	(1,022	)		$	14,863				55,984
Noncontrolling interests			(12,082	)																																			(12,082	)
Income attributable to Kindred		$	29,039																																			$	43,902
Diluted earnings per common share		$	0.33																																			$	0.50
Diluted shares used in computing earnings per common share			87,232																																				87,232

 

		Year ended December 31, 2015
						Charges
										Hospital				Development				RehabCare												Gentiva				Gentiva
		Before				Retirement				and home				project				customer												pre-closing				transaction
		charges				and				health/hospice				cancellation				contract				Litigation				Impairment				financing				and				Other								As
		(“core”)				severance				closings				and other				litigation				contingency				charges				costs				integration				transaction				Total				reported
Income (loss) from continuing operations:
Operating income (loss) (EBITDAR):
Hospital division		$	481,121			$	(1,887	)		$	(1,044	)		$	(675	)		$	—			$	—			$	—			$	—			$	—			$	—			$	(3,606	)		$	477,515
Kindred at Home:
Home health			256,696				—				(6,055	)			—				—				—				—				—				—				—				(6,055	)			250,641
Hospice			109,120				—				(4,028	)			—				—				—				—				—				—				—				(4,028	)			105,092
			365,816				—				(10,083	)			—				—				—				—				—				—				—				(10,083	)			355,733
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services			176,334				(207	)			—				—				—				—				—				—				—				—				(207	)			176,127
RehabCare			57,576				(897	)			—				—				(12,864	)			—				—				—				—				—				(13,761	)			43,815
			233,910				(1,104	)			—				—				(12,864	)			—				—				—				—				—				(13,968	)			219,942
Nursing center division			149,948				—				—				(584	)			—				—				—				—				—				—				(584	)			149,364
Support center			(250,468	)			(4,761	)			—				—				—				—				—				—				—				—				(4,761	)			(255,229	)
Litigation contingency expense			—				—				—				—				—				(138,648	)			—				—				—				—				(138,648	)			(138,648	)
Impairment charges			—				—				—				—				—				—				(24,757	)			—				—				—				(24,757	)			(24,757	)
Transaction costs			—				—				—				—				—				—				—				(6,005	)			(98,198	)			(4,928	)			(109,131	)			(109,131	)
Operating income (EBITDAR)			980,327				(7,752	)			(11,127	)			(1,259	)			(12,864	)			(138,648	)			(24,757	)			(6,005	)			(98,198	)			(4,928	)			(305,538	)			674,789
Rent			(379,097	)			—				(2,368	)			(352	)			—				—				—				—				(792	)			—				(3,512	)			(382,609	)
EBITDA			601,230				(7,752	)			(13,495	)			(1,611	)			(12,864	)			(138,648	)			(24,757	)			(6,005	)			(98,990	)			(4,928	)			(309,050	)			292,180
Depreciation and amortization			(157,251	)			—				—				—				—				—				—				—				—				—				—				(157,251	)
Interest, net			(212,158	)			—				—				—				—				—				—				(17,431	)			—				—				(17,431	)			(229,589	)
Income (loss) from continuing operations before income taxes			231,821				(7,752	)			(13,495	)			(1,611	)			(12,864	)			(138,648	)			(24,757	)			(23,436	)			(98,990	)			(4,928	)			(326,481	)			(94,660	)
Provision for income taxes			77,243				(3,063	)			(5,333	)			(637	)			(5,084	)			(51,965	)			(8,890	)			(9,261	)			(34,266	)			(1,541	)			(120,040	)			(42,797	)
			154,578			$	(4,689	)		$	(8,162	)		$	(974	)		$	(7,780	)		$	(86,683	)		$	(15,867	)		$	(14,175	)		$	(64,724	)		$	(3,387	)		$	(206,441	)			(51,863	)
Noncontrolling interests			(42,564	)																																											(42,564	)
Income (loss) attributable to Kindred		$	112,014																																											$	(94,427	)
Diluted earnings (loss) per common share		$	1.28																																											$	(1.12	)
Diluted shares used in computing earnings (loss) per common share			86,098																																												84,558

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Kindred Healthcare Reports First Quarter 2016 Results

Page 18

May 4, 2016

 

 

KINDRED HEALTHCARE, INC.

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

(Unaudited)

(In thousands)

 

		Three months ended March 31,
		2016				2015
Reconciliation of net cash flows provided by operating activities to free cash flows:
Net cash flows used in operating activities		($	133,062	)		($	139,602	)
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			5,379				82,340
Business interruption settlements			(1,138	)			—
Ventas, Inc. lease termination fee			—				40,000
Capitalized lender fees related to debt refinancing			—				28,012
Other debt refinancing costs (expensed)			—				27,001
Other lease termination fees			—				353
Litigation			128,419				—
			132,660				177,706
Net cash flows provided by (used in) operating activities excluding certain items before income tax benefit of certain payments			(402	)			38,104
Benefit of reduced income tax payments resulting from certain payments (a)			—				—
Net cash flows provided by (used in) operating activities excluding certain items (core operating cash flows)			(402	)			38,104
Less routine capital expenditures			(18,106	)			(20,769	)
Less distributions to noncontrolling interests			(16,315	)			(11,019	)
Free cash flows excluding certain items (core free cash flows)		($	34,823	)		$	6,316

 

(a)	No tax deposits were due in first quarter of 2016 or 2015.

 

– END –