EXHIBIT 99.1

 

 

Contact:

Todd Flowers

Investor Relations

(502) 596-6569

KINDRED HEALTHCARE REPORTS SECOND QUARTER 2016 RESULTS AT

HIGH END OF GUIDANCE RANGE

Company Reaffirms Full Year Outlook for 2016

 

 

Consolidated Revenues of $1.84 billion, GAAP Income from Continuing Operations of $34 million, GAAP Diluted EPS from Continuing Operations of $0.23 and EBITDAR of $251 million⁽¹⁾ in the Second Quarter Include

Net Costs of $18 million Related to Impairments, Litigation, Transaction, Integration, Research and Development, Debt Amendment, Other Restructuring Costs, and Gain on Facility Swap

Core EBITDAR of $268 million⁽¹⁾ and Core Diluted EPS from Continuing Operations of $0.38⁽¹⁾

in the Second Quarter

Second Quarter GAAP Operating Cash Flows of $135 million; Core Operating Cash Flows of $126 million⁽¹⁾

LOUISVILLE, Ky. (August 4, 2016) – Kindred Healthcare, Inc. (“Kindred” or the “Company”) (NYSE:KND) today announced its operating results for the second quarter ended June 30, 2016.

Benjamin A. Breier, President and Chief Executive Officer of the Company, commented, “We are pleased to report a solid second quarter with results at the high end of our expectations. Notably, our Kindred at Home (“KAH”) and Kindred Hospital Rehabilitation Services (“KHRS”) businesses both achieved strong sequential and year-over-year volume growth and operating performance. Our Hospital Division increased same-facility admissions and same-facility patient days and delivered stable second quarter results in line with our expectations. We are pleased that the Hospital Division’s performance has continued its significant improvement from the operating trends experienced in the second half of 2015. Solid execution remains our top priority across the Company as we drive effective patient-centered care solutions and adapt to a changing regulatory and operating environment. As always, I thank Kindred’s 102,000 teammates for the exceptional care, hope and dignity that they provide to more than one million patients we see at Kindred 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.

Second Quarter Consolidated Highlights⁽¹⁾:

 

•

Consolidated revenues were $1.84 billion, a 0.5% year-over-year increase, while GAAP income from continuing operations increased 2% to $34.4 million from $33.7 million in the same period in 2015. Core EBITDAR increased 2.3% to $267.9 million compared to $261.8 million in the same period in 2015. The increase in GAAP income from continuing operations and core EBITDAR are both due primarily to revenue growth and operating margin improvement in the KAH and KHRS businesses.

 

•

GAAP operating cash flows increased to $135.1 million compared to $100.4 million for the same period a year ago. Core operating cash flows were $126.4 million compared to core operating cash flows of $97.7 million for the same period a year ago. Core free cash flows were $83.5 million compared to core free cash flows of $63.1 million in the same period a year ago.

 

(1)	See reconciliation of generally accepted accounting principles (“GAAP”) results to non-GAAP results beginning on page 12. As used herein, “EBITDAR” means earnings before interest, income taxes, depreciation, amortization and rent.

 

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680 South Fourth Street                    Louisville, Kentucky 40202

502.596.7300                    www.kindredhealthcare.com

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Kindred Healthcare Reports Second Quarter 2016 Results

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August 4, 2016

 

 

 

Second Quarter Consolidated Highlights⁽¹⁾: (Continued)

 

•

GAAP diluted earnings per share (“EPS”) from continuing operations was $0.23 and core diluted EPS from continuing operations was $0.38 based upon 87.5 million weighted average diluted shares. In the same period a year ago, the Company reported GAAP diluted EPS of $0.25, while core diluted EPS was $0.39 based upon 86.4 million weighted average diluted shares. GAAP diluted EPS in the second quarter of 2016 includes $17.7 million ($13.2 million net of income taxes of $3.5 million and noncontrolling interests of $1.0 million) or $0.15 per diluted share of charges related to property and intangible asset impairments, litigation, transaction, integration, research and development, debt amendment, and other restructuring costs, and a gain on facility swap. GAAP diluted EPS in the second quarter of 2015 includes $13.4 million ($12.1 million net of income taxes of $1.3 million) or $0.14 per diluted share of charges related to transaction, integration, litigation, and other restructuring costs.

 

•

The Kindred Board of Directors declared a cash dividend of $0.12 per share on the Company’s common stock payable on September 2, 2016 to shareholders of record as of the close of business on August 18, 2016.

Second Quarter Segment Highlights⁽¹⁾⁽²⁾:

KAH second quarter revenues increased 3% over the prior year period to $624.2 million with home health episodic admissions growing 3.5% and hospice average daily census growing 4% compared to the same period last year. Segment EBITDAR (GAAP) for KAH increased 8.6% to $107.0 million as compared to $98.6 million in the prior year period and core EBITDAR increased 6.3% to $107.2 million compared to $100.8 million a year ago. These results were achieved despite a 10% net reduction in home health branches and an 8.3% net reduction in hospice branches since the beginning of 2015, primarily from branch consolidations. Average home health revenue per branch grew 12.6% and average hospice revenue per branch grew 6.1% during the last twelve months compared to a year ago.

Kindred’s Hospital Division second quarter revenues increased 1.0% over the prior year period to $633.7 million, as a result of a 1% increase in revenues per patient day compared to the same period last year. Same-hospital admissions were up 0.3% during the quarter and same-hospital patient days were up 1.4%. Segment EBITDAR (GAAP) in the Hospital Division for the second quarter decreased 3.3% to $126.6 million from $131.0 million a year ago and core EBITDAR for the second quarter decreased 4.3% to $125.9 million from $131.5 million a year ago as operating expenses per patient day increased 2% in the second quarter compared to a year ago.

Kindred Rehabilitation Services Division second quarter revenues declined 6.0% to $365.9 million, while both segment EBITDAR (GAAP) and core EBITDAR increased 7.6% to $63.7 million compared to $59.2 million in the same period last year. Strong performance in the second 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 11.3%, and both segment EBITDAR (GAAP) and core EBITDAR grew 13.3% compared to the same period a year ago, with IRF same-hospital discharges growing 4.1% during the quarter. RehabCare revenues declined 17.2% to $196.1 million from a year ago, while segment EBITDAR (GAAP), core EBITDAR and operating margins continued to stabilize in the second quarter. RehabCare second quarter segment and core EBITDAR increased to $13.3 million from $12.0 million and operating margins increased to 6.8% from 5.9%, both compared to the first quarter of 2016.

Kindred’s Nursing Center Division second quarter revenues declined 0.5% to $272.4 million compared to the same period last year. Segment EBITDAR (GAAP) decreased 25.6% to $29.7 million and core EBITDAR decreased 16.8% to $33.7 million, each the result of a 1.2% decline in average daily census, start-up losses of $1 million at two newly opened transitional care centers, higher contract labor costs, and for segment EBITDAR (GAAP), $4.0 million of facility closure and restructuring costs.

 

 

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

(2)	See same-hospital and full segment data on pages 8 through 11.

 

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Kindred Healthcare Reports Second Quarter 2016 Results

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August 4, 2016

 

 

 

2016 Outlook

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.

The Company’s outlook does not reflect the potential impact of the previously announced definitive agreement to sell 12 long-term acute care (“LTAC”) hospitals to Curahealth, LLC (“Curahealth”). The Company will make the appropriate adjustments following the closing of the transaction.

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

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(1)

Following the Securities and Exchange Commission’s recently updated Compliance and Disclosure Interpretations on the use of non-GAAP financial measures, the Company has discontinued reporting adjusted core diluted EPS from continuing operations.

For the third quarter of 2016, the Company expects core EBITDAR to approximate $220 million to $235 million and core diluted EPS from continuing operations to approximate $0.02 to $0.12.

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

Mr. Breier commented, “We continue our efforts to grow our home health, hospice and inpatient rehabilitation businesses through organic growth, acquisitions and new joint venture arrangements and we remain enthusiastic about the growth opportunities in these businesses. We also remain focused on our preparations for LTAC patient criteria and related mitigation initiatives, including the ongoing optimization of our LTAC hospital portfolio. Our previously announced transaction with Curahealth and our facility swap transaction with Select Medical Holdings Corporation (NYSE:SEM) reflect our commitment to this strategy. We believe our diversified portfolio of assets, coordinated over an episode of care, with the key enablers we have developed, continue to put Kindred in a unique position to become the Post-Acute Benefits Management leader in the many markets we now serve.”

Stephen D. Farber, Executive Vice President and Chief Financial Officer of Kindred, added, “We are very pleased with our strong second quarter cash flow performance that was in line with our expectations, and coupled with our recent financing, enabled us to end the quarter with excellent liquidity, with approximately $59 million drawn on our $900 million asset-based revolving credit facility. We continue to expect to generate roughly $300 million per year in core operating cash flows and approximately half of that amount in core free cash flows.”

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 September 2, 2016 to shareholders of record as of the close of business on August 18, 2016.

 

 

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

 

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Kindred Healthcare Reports Second Quarter 2016 Results

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August 4, 2016

 

 

 

Conference Call

As previously announced, investors and the general public may access a live webcast of the second quarter 2016 conference call through a link on the Company’s website at http://investors.kindredhealthcare.com. The conference call will be held on August 5 at 10:00 a.m. (Eastern Time).

A telephone replay of the conference call will become available at approximately 1:00 p.m. on August 5 by dialing (719) 457-0820, access code: 3224094. The replay will be available through August 14.

Forward-Looking Statements and Non-GAAP Reconciliations

See page 12 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 June 30, 2016, Kindred through its subsidiaries had approximately 101,800 employees providing healthcare services in 2,684 locations in 46 states, including 97 transitional care hospitals, 19 inpatient rehabilitation hospitals, 92 nursing centers, 19 sub-acute units, 617 Kindred at Home home health, hospice and non-medical home care sites of service, 105 inpatient rehabilitation units (hospital-based) and contract rehabilitation service businesses which served 1,735 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 June 30, 2016.

 

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Kindred Healthcare Reports Second Quarter 2016 Results

Page 5

August 4, 2016

 

 

 

KINDRED HEALTHCARE, INC.

Condensed Consolidated Statement of Operations

(Unaudited)

(In thousands, except per share amounts)

 

		Three months ended								Six months ended
		June 30,								June 30,
		2016				2015				2016				2015
Revenues		$	1,842,070			$	1,833,475			$	3,680,041			$	3,509,442
Salaries, wages and benefits			928,954				935,687				1,855,168				1,782,780
Supplies			99,410				98,237				198,826				191,508
Rent			100,555				96,402				198,323				188,542
Other operating expenses			217,850				212,117				432,551				409,844
General and administrative expenses			338,672				334,805				694,199				740,907
Other income			(511	)			(569	)			(1,463	)			(1,049	)
Litigation contingency expense			930				3,925				2,840				98,925
Impairment charges			6,131				—				13,919				6,726
Depreciation and amortization			40,257				38,625				80,938				77,560
Interest expense			58,056				57,170				115,555				119,688
Investment income			(497	)			(1,030	)			(751	)			(1,771	)
			1,789,807				1,775,369				3,590,105				3,613,660
Income (loss) from continuing operations before income taxes			52,263				58,106				89,936				(104,218	)
Provision (benefit) for income taxes			17,882				24,396				29,718				(3,340	)
Income (loss) from continuing operations			34,381				33,710				60,218				(100,878	)
Discontinued operations, net of income taxes:
Income (loss) from operations			3,016				(589	)			2,434				(4,013	)
Gain (loss) on divestiture of operations			(83	)			983				179				983
Income (loss) from discontinued operations			2,933				394				2,613				(3,030	)
Net income (loss)			37,314				34,104				62,831				(103,908	)
(Earnings) loss attributable to noncontrolling interests:
Continuing operations			(13,522	)			(11,735	)			(26,036	)			(20,582	)
Discontinued operations			(3	)			2				(5	)			31
			(13,525	)			(11,733	)			(26,041	)			(20,551	)
Income (loss) attributable to Kindred		$	23,789			$	22,371			$	36,790			$	(124,459	)
Amounts attributable to Kindred stockholders:
Income (loss) from continuing operations		$	20,859			$	21,975			$	34,182			$	(121,460	)
Income (loss) from discontinued operations			2,930				396				2,608				(2,999	)
Net income (loss)		$	23,789			$	22,371			$	36,790			$	(124,459	)
Earnings (loss) per common share:
Basic:
Income (loss) from continuing operations		$	0.24			$	0.25			$	0.39			$	(1.47	)
Discontinued operations:
Income (loss) from operations			0.03				(0.01	)			0.03				(0.05	)
Gain (loss) on divestiture of operations			—				0.01				—				0.01
Income (loss) from discontinued operations			0.03				—				0.03				(0.04	)
Net income (loss)		$	0.27			$	0.25			$	0.42			$	(1.51	)
Diluted:
Income (loss) from continuing operations		$	0.23			$	0.25			$	0.38			$	(1.47	)
Discontinued operations:
Income (loss) from operations			0.03				(0.01	)			0.03				(0.05	)
Gain (loss) on divestiture of operations			—				0.01				—				0.01
Income (loss) from discontinued operations			0.03				—				0.03				(0.04	)
Net income (loss)		$	0.26			$	0.25			$	0.41			$	(1.51	)
Shares used in computing earnings (loss) per common share:
Basic			86,836				86,045				86,713				82,828
Diluted			87,500				86,402				87,374				82,828
Cash dividends declared and paid per common share		$	0.12			$	0.12			$	0.24			$	0.24

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Kindred Healthcare Reports Second Quarter 2016 Results

Page 6

August 4, 2016

 

 

 

KINDRED HEALTHCARE, INC.

Condensed Consolidated Balance Sheet

(Unaudited)

(In thousands, except per share amounts)

 

		June 30,				December 31,
		2016				2015
ASSETS
Current assets:
Cash and cash equivalents		$	100,056			$	98,758
Insurance subsidiary investments			96,330				106,638
Accounts receivable less allowance for loss			1,264,540				1,194,868
Inventories			28,178				27,791
Income taxes			11,223				11,790
Other			70,384				61,054
			1,570,711				1,500,899
Property and equipment			2,165,547				2,162,398
Accumulated depreciation			(1,226,072	)			(1,190,402	)
			939,475				971,996
Goodwill			2,690,202				2,669,810
Intangible assets less accumulated amortization			781,203				755,655
Assets held for sale			4,459				613
Insurance subsidiary investments			199,075				204,498
Deferred tax assets			81,324				104,130
Acquisition deposit			—				18,489
Other			281,073				242,169	(a)
Total assets		$	6,547,522			$	6,468,259
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	196,952			$	187,061
Salaries, wages and other compensation			419,251				404,925
Due to third party payors			33,136				36,251
Professional liability risks			60,367				64,099
Other accrued liabilities			271,972				394,246
Long-term debt due within one year			27,793				24,630
			1,009,471				1,111,212
Long-term debt			3,218,679				3,086,348	(a)
Professional liability risks			277,844				263,273
Deferred credits and other liabilities			312,001				301,379
Equity:
Stockholders’ equity:
Common stock, $0.25 par value; authorized 175,000 shares; issued 85,266 shares - June 30, 2016 and 83,792 shares - December 31, 2015			21,317				20,948
Capital in excess of par value			1,724,018				1,737,747
Accumulated other comprehensive loss			(4,892	)			(2,632	)
Accumulated deficit			(219,514	)			(256,209	)
			1,520,929				1,499,854
Noncontrolling interests			208,598				206,193
Total equity			1,729,527				1,706,047
Total liabilities and equity		$	6,547,522			$	6,468,259

 

(a)

The balance sheet at December 31, 2015 includes a correction made during the second quarter ended June 30, 2016 to present capitalized lender fees of $47.0 million as an offset to long-term debt rather than the previous reporting of these amounts as other long-term assets. This presentation is in accordance with GAAP and is consistent with the presentation at June 30, 2016.

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Kindred Healthcare Reports Second Quarter 2016 Results

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August 4, 2016

 

 

 

KINDRED HEALTHCARE, INC.

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(In thousands)

 

		Three months ended								Six months ended
		June 30,								June 30,
		2016				2015				2016				2015
Cash flows from operating activities:
Net income (loss)		$	37,314			$	34,104			$	62,831			$	(103,908	)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation expense			34,435				31,313				68,392				63,458
Amortization of intangible assets			5,957				7,536				12,783				14,468
Amortization of stock-based compensation costs			5,639				6,746				10,043				12,570
Amortization of deferred financing costs			3,708				3,539				7,275				6,601
Payment of capitalized lender fees related to debt issuance			(7,333	)			—				(7,333	)			(28,012	)
Provision for doubtful accounts			9,221				10,511				20,946				18,803
Deferred income taxes			17,802				21,130				29,298				(4,450	)
Impairment charges			6,131				—				13,919				6,726
(Gain) loss on divestiture of discontinued operations			83				(983	)			(179	)			(983	)
Other			656				4,975				959				6,972
Change in operating assets and liabilities:
Accounts receivable			(13,229	)			(7,733	)			(101,121	)			(39,389	)
Inventories and other assets			(10,161	)			(17,608	)			(15,393	)			35,414
Accounts payable			23,077				(12,900	)			12,456				(12,435	)
Income taxes			707				1,923				780				(3,845	)
Due to third party payors			351				(3,554	)			(4,492	)			(18,973	)
Other accrued liabilities			20,670				21,380				(109,198	)			7,760
Net cash provided by (used in) operating activities			135,028				100,379				1,966				(39,223	)
Cash flows from investing activities:
Routine capital expenditures			(28,724	)			(24,500	)			(46,830	)			(45,269	)
Development capital expenditures			(8,707	)			(518	)			(18,726	)			(6,306	)
Acquisitions, net of cash acquired			(1,372	)			(2,684	)			(27,711	)			(661,755	)
Acquisition deposits			—				—				18,489				195,000
Sale of assets			142				2,229				1,223				3,177
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			(20,154	)			(16,911	)			(52,995	)			(42,829	)
Sale of insurance subsidiary investments			15,713				12,764				46,603				34,793
Net change in insurance subsidiary cash and cash equivalents			13,201				(5,205	)			23,159				(5,763	)
Net change in other investments			583				175				(33,398	)			199
Other			792				(798	)			(1,127	)			(793	)
Net cash provided by (used in) investing activities			(28,526	)			(35,448	)			(91,313	)			843,892
Cash flows from financing activities:
Proceeds from borrowings under revolving credit			244,300				347,700				778,000				1,155,150
Repayment of borrowings under revolving credit			(524,600	)			(360,100	)			(827,700	)			(970,150	)
Proceeds from issuance of term loan, net of discount			198,100				—				198,100				199,000
Proceeds from other long-term debt			—				—				750				—
Repayment of Gentiva debt			—				—				—				(1,177,363	)
Repayment of term loan			(3,508	)			(6,005	)			(6,511	)			(6,005	)
Repayment of other long-term debt			(270	)			(459	)			(550	)			(900	)
Payment of deferred financing costs			(141	)			(445	)			(292	)			(2,983	)
Issuance of common stock in connection with employee benefit plans			—				139				—				205
Payment of costs associated with issuance of common stock and tangible equity units			—				—				—				(915	)
Payment of dividend for mandatory redeemable preferred stock			(2,853	)			(2,654	)			(5,654	)			(5,432	)
Dividends paid			(10,225	)			(10,027	)			(20,293	)			(20,002	)
Contributions made by noncontrolling interests			1,900				—				6,268				—
Distributions to noncontrolling interests			(14,231	)			(10,119	)			(30,546	)			(21,138	)
Purchase of noncontrolling interests			—				—				(1,000	)			—
Other			—				50				73				1,212
Net cash provided by (used in) financing activities			(111,528	)			(41,920	)			90,645				(849,321	)
Change in cash and cash equivalents			(5,026	)			23,011				1,298				(44,652	)
Cash and cash equivalents at beginning of period			105,082				96,525				98,758				164,188
Cash and cash equivalents at end of period		$	100,056			$	119,536			$	100,056			$	119,536

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Kindred Healthcare Reports Second Quarter 2016 Results

Page 8

August 4, 2016

 

 

 

KINDRED HEALTHCARE, INC.

Condensed Consolidated and Business Segment Data

(Unaudited)

(In thousands, except per share amounts)

 

																										Second quarter
		2015 Quarters																2016 Quarters								% change v. prior year
		First				Second				Third				Fourth				First				Second
Condensed consolidated income statement data:
GAAP presentation:
Revenues		$	1,675,967			$	1,833,475			$	1,764,516			$	1,780,949			$	1,837,971			$	1,842,070				0.5
Operating expenses			1,645,439				1,584,202				1,567,381				1,583,096				1,604,604				1,591,436				0.5
Rent			92,140				96,402				96,244				97,823				97,768				100,555				4.3
Depreciation and amortization			38,935				38,625				39,329				40,362				40,681				40,257				4.2
Interest, net			61,777				56,140				56,008				55,664				57,245				57,559				2.5
Income (loss) from continuing operations before income taxes			(162,324	)			58,106				5,554				4,004				37,673				52,263				(10.1	)
Provision (benefit) for income taxes			(27,736	)			24,396				12,523				(51,980	)			11,836				17,882				(26.7	)
Income (loss) from continuing operations			(134,588	)			33,710				(6,969	)			55,984				25,837				34,381				2.0
Noncontrolling interests			(8,847	)			(11,735	)			(9,900	)			(12,082	)			(12,514	)			(13,522	)			15.2
Net income (loss) attributable to Kindred		$	(143,435	)		$	21,975			$	(16,869	)		$	43,902			$	13,323			$	20,859				(5.1	)
Diluted EPS		$	(1.80	)		$	0.25			$	(0.20	)		$	0.50			$	0.15			$	0.23				(8.0	)
Diluted shares			79,575				86,402				86,184				87,232				87,249				87,500				1.3
Core presentation (a):
EBITDAR		$	234,211			$	261,800			$	236,477			$	247,839			$	246,834			$	267,895				2.3
Rent			91,199				95,528				95,436				96,934				97,517				100,093				4.8
Interest, net			44,346				56,140				56,008				55,664				57,245				57,559				2.5
Provision for income taxes			22,466				25,721				15,298				13,758				16,546				21,417				(16.7	)
Net income attributable to Kindred			28,418				34,051				20,506				29,039				22,331				34,031				(0.1	)
Core diluted EPS		$	0.34			$	0.39			$	0.23			$	0.33			$	0.25			$	0.38				(2.6	)
Diluted shares			82,422				86,402				86,892				87,232				87,249				87,500				1.3
Revenues by segment:
Hospital division		$	640,483			$	627,206			$	579,497			$	593,593			$	643,299			$	633,695				1.0
Kindred at Home:
Home health			300,867				427,820				424,054				425,759				430,035				438,556				2.5
Hospice			119,057				178,005				181,140				178,325				176,426				185,641				4.3
			419,924				605,825				605,194				604,084				606,461				624,197				3.0
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services			151,564				152,544				149,435				155,579				165,774				169,815				11.3
RehabCare			252,595				236,791				219,518				206,582				204,248				196,075				(17.2	)
			404,159				389,335				368,953				362,161				370,022				365,890				(6.0	)
Nursing center division			274,308				273,870				270,510				273,387				272,227				272,395				(0.5	)
			1,738,874				1,896,236				1,824,154				1,833,225				1,892,009				1,896,177				—
Eliminations			(62,907	)			(62,761	)			(59,638	)			(52,276	)			(54,038	)			(54,107	)			(13.8	)
		$	1,675,967			$	1,833,475			$	1,764,516			$	1,780,949			$	1,837,971			$	1,842,070				0.5

 

(a)	See reconciliation of GAAP results to non-GAAP results beginning on page 12.

---

Kindred Healthcare Reports Second Quarter 2016 Results

Page 9

August 4, 2016

 

 

 

KINDRED HEALTHCARE, INC.

Condensed Consolidated and Business Segment Data (Continued)

(Unaudited)

(In thousands, except statistics)

 

																										Second quarter
		2015 Quarters																2016 Quarters								% change v.
		First				Second				Third				Fourth				First				Second				prior year
Segment EBITDAR (GAAP):
Hospital division		$	134,111			$	130,967			$	95,983			$	116,454			$	134,571			$	126,589				(3.3	)
Kindred at Home:
Home health			45,696				72,329				65,584				67,032				66,941				75,790				4.8
Hospice			16,479				26,238				33,707				28,668				24,525				31,225				19.0
			62,175				98,567				99,291				95,700				91,466				107,015				8.6
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services			44,564				44,531				42,141				44,891				47,870				50,469				13.3
RehabCare			15,708				14,681				14,544				(1,118	)			11,987				13,269				(9.6	)
			60,272				59,212				56,685				43,773				59,857				63,738				7.6
Nursing center division			36,963				39,877				35,923				36,601				30,100				29,652				(25.6	)
Core EBITDAR by segment (a):
Hospital division		$	134,786			$	131,532			$	97,128			$	117,675			$	135,495			$	125,932				(4.3	)
Kindred at Home:
Home health			46,798				72,917				68,155				68,826				65,803				75,859				4.0
Hospice			16,996				27,887				34,025				30,212				24,866				31,329				12.3
			63,794				100,804				102,180				99,038				90,669				107,188				6.3
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services			44,564				44,531				42,141				45,098				47,870				50,469				13.3
RehabCare			16,493				14,681				14,544				11,858				11,987				13,269				(9.6	)
			61,057				59,212				56,685				56,956				59,857				63,738				7.6
Nursing center division			36,963				40,461				35,923				36,601				30,100				33,662				(16.8	)
Support center			(62,389	)			(70,209	)			(55,439	)			(62,431	)			(69,287	)			(62,625	)			10.8
		$	234,211			$	261,800			$	236,477			$	247,839			$	246,834			$	267,895				2.3
EBITDAR margin by segment:
Hospital division			20.9				20.9				16.6				19.6				20.9				20.0				(0.9	)
Kindred at Home:
Home health			15.2				16.9				15.5				15.7				15.6				17.3				0.4
Hospice			13.8				14.7				18.6				16.1				13.9				16.8				2.1
Kindred at Home			14.8				16.3				16.4				15.8				15.1				17.1				0.8
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services			29.4				29.2				28.2				28.9				28.9				29.7				0.5
RehabCare			6.2				6.2				6.6				(0.5	)			5.9				6.8				0.6
Kindred Rehabilitation Services			14.9				15.2				15.4				12.1				16.2				17.4				2.2
Nursing center division			13.5				14.6				13.3				13.4				11.1				10.9				(3.7	)
Core EBITDAR margin by segment:
Hospital division			21.0				21.0				16.8				19.8				21.1				19.9				(1.1	)
Kindred at Home:
Home health			15.6				17.0				16.1				16.2				15.3				17.3				0.3
Hospice			14.3				15.7				18.8				16.9				14.1				16.9				1.2
Kindred at Home			15.2				16.6				16.9				16.4				15.0				17.2				0.6
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services			29.4				29.2				28.2				29.0				28.9				29.7				0.5
RehabCare			6.5				6.2				6.6				5.7				5.9				6.8				0.6
Kindred Rehabilitation Services			15.1				15.2				15.4				15.7				16.2				17.4				2.2
Nursing center division			13.5				14.8				13.3				13.4				11.1				12.4				(2.4	)
Consolidated			14.0				14.3				13.4				13.9				13.4				14.5				0.2

 

(a)	See reconciliation of GAAP results to non-GAAP results beginning on page 12.

---

Kindred Healthcare Reports Second Quarter 2016 Results

Page 10

August 4, 2016

 

 

 

KINDRED HEALTHCARE, INC.

Condensed Business Segment Data (Continued)

(Unaudited)

 

 

		2015 Quarters																2016 Quarters								Second quarter % change v.
		First				Second				Third				Fourth				First				Second				prior year
Hospital division:
End of period data:
Number of transitional care hospitals			97				96				95				95				95				97
Number of licensed beds			7,147				7,124				7,094				7,094				7,089				7,067
Revenue mix %:
Medicare			56.8				55.2				57.1				57.3				57.8				55.5
Medicaid			5.5				5.3				5.3				5.1				4.2				4.2
Medicare Advantage			11.9				11.6				10.8				11.1				11.5				12.0
Medicaid Managed			4.7				5.6				6.1				6.2				5.6				6.3
Commercial insurance and other			21.1				22.3				20.7				20.3				20.9				22.0
Admissions:
Medicare			8,775				8,267				7,976				8,169				8,919				8,253				(0.2	)
Medicaid			610				610				556				520				463				386				(36.7	)
Medicare Advantage			1,555				1,352				1,212				1,304				1,453				1,382				2.2
Medicaid Managed			643				675				646				612				733				768				13.8
Commercial insurance and other			1,868				1,815				1,763				1,701				1,871				1,807				(0.4	)
			13,451				12,719				12,153				12,306				13,439				12,596				(1.0	)
Patient days:
Medicare			228,483				218,577				210,870				210,409				229,004				219,013				0.2
Medicaid			28,663				25,213				23,167				21,795				21,134				19,409				(23.0	)
Medicare Advantage			48,448				44,740				39,585				41,079				45,760				47,697				6.6
Medicaid Managed			22,013				24,833				24,412				24,802				25,341				27,267				9.8
Commercial insurance and other			62,241				62,922				58,631				57,321				62,769				63,009				0.1
			389,848				376,285				356,665				355,406				384,008				376,395				—
Average length of stay:
Medicare			26.0				26.4				26.4				25.8				25.7				26.5				0.4
Medicaid			47.0				41.3				41.7				41.9				45.6				50.3				21.8
Medicare Advantage			31.2				33.1				32.7				31.5				31.5				34.5				4.2
Medicaid Managed			34.2				36.8				37.8				40.5				34.6				35.5				(3.5	)
Commercial insurance and other			33.3				34.7				33.3				33.7				33.5				34.9				0.6
Weighted average			29.0				29.6				29.3				28.9				28.6				29.9				1.0
Revenues per admission:
Medicare		$	41,483			$	41,892			$	41,451			$	41,656			$	41,717			$	42,579				1.6
Medicaid			57,594				54,795				55,415				57,724				57,928				69,797				27.4
Medicare Advantage			48,908				53,578				51,495				50,680				51,080				55,105				2.9
Medicaid Managed			46,740				51,950				54,976				60,263				49,287				51,696				(0.5	)
Commercial insurance and other			72,395				77,110				68,151				70,735				71,651				77,193				0.1
Weighted average			47,616				49,312				47,683				48,236				47,868				50,309				2.0
Revenues per patient day:
Medicare		$	1,593			$	1,584			$	1,568			$	1,617			$	1,625			$	1,605				1.3
Medicaid			1,226				1,326				1,330				1,377				1,269				1,388				4.7
Medicare Advantage			1,570				1,619				1,577				1,609				1,622				1,597				(1.4	)
Medicaid Managed			1,365				1,412				1,455				1,487				1,426				1,456				3.1
Commercial insurance and other			2,173				2,224				2,049				2,099				2,136				2,214				(0.4	)
Weighted average			1,643				1,667				1,625				1,670				1,675				1,684				1.0
Medicare case mix index (discharged patients only)			1.166				1.163				1.150				1.164				1.163				1.179				1.4
Average daily census			4,332				4,135				3,877				3,863				4,220				4,136				—
Occupancy %			69.2				66.1				62.2				62.2				68.0				67.5				2.1
Same-hospital data:
Revenues ($ 000s) (a)		$	634,975			$	605,410			$	562,658			$	579,396			$	643,413			$	619,427				2.3
Admissions:
Medicare			8,652				8,031				7,769				8,039				8,919				8,083				0.6
Medicaid			602				557				519				466				463				371				(33.4	)
Medicare Advantage			1,546				1,299				1,179				1,255				1,453				1,339				3.1
Medicaid Managed			640				640				619				590				733				761				18.9
Commercial insurance and other			1,840				1,746				1,713				1,653				1,871				1,751				0.3
			13,280				12,273				11,799				12,003				13,439				12,305				0.3
Patient days:
Medicare			225,992				212,221				205,802				207,010				229,004				214,629				1.1
Medicaid			28,458				22,999				21,502				20,001				21,134				18,340				(20.3	)
Medicare Advantage			48,276				42,863				37,863				39,656				45,760				46,522				8.5
Medicaid Managed			21,933				23,722				23,329				24,136				25,341				26,795				13.0
Commercial insurance and other			61,715				60,559				57,199				55,701				62,769				60,984				0.7
			386,374				362,364				345,695				346,504				384,008				367,270				1.4
Total average length of stay			29.1				29.5				29.3				28.9				28.6				29.8				1.0
Total revenues per patient day		$	1,643			$	1,671			$	1,628			$	1,672			$	1,676			$	1,687				1.0

 

(a)	See reconciliation of same-hospital revenues to reported revenues for the Hospital Division on page 15.

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Kindred Healthcare Reports Second Quarter 2016 Results

Page 11

August 4, 2016

 

 

 

KINDRED HEALTHCARE, INC.

Condensed Business Segment Data (Continued)

(Unaudited)

 

		2015 Quarters																2016 Quarters								Second quarter % change v.
		First				Second				Third				Fourth				First				Second				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)			415				411				388				373				384				384
Revenue mix %:
Medicare			80.9				80.4				80.0				80.0				79.8				79.3
Medicaid			2.1				2.1				2.1				2.1				2.1				2.1
Commercial and other			7.3				7.9				8.2				8.5				8.4				8.2
Commercial paid at episodic rates			9.7				9.6				9.7				9.4				9.7				10.4
Episodic revenues ($ 000s)		$	308,317			$	324,027			$	319,820			$	320,698			$	325,821			$	332,193				2.5
Total episodic admissions			69,936				67,808				66,753				66,157				71,426				70,212				3.5
Medicare episodic admissions			61,186				59,394				58,479				57,804				62,011				60,730				2.2
Total episodes			110,980				109,599				108,519				108,300				113,887				113,278				3.4
Episodes per admission			1.59				1.62				1.63				1.64				1.59				1.61				(0.6	)
Revenue per episode		$	2,778			$	2,956			$	2,947			$	2,961			$	2,861			$	2,933				(0.8	)
Hospice:
Sites of service (at end of period)			190				185				181				175				177				177
Admissions			13,164				12,574				12,091				12,129				13,234				13,149				4.6
Average length of stay			95				93				101				100				92				91				(2.2	)
Patient days			1,150,841				1,190,604				1,211,291				1,185,330				1,183,908				1,238,584				4.0
Revenue per patient day		$	151			$	150			$	150			$	150			$	149			$	150				—
Average daily census			12,787				13,084				13,166				12,884				13,010				13,611				4.0
Community Care and other revenues (included in Home Health business segment) ($ 000s)		$	65,530			$	67,647			$	67,338			$	67,684			$	66,305			$	68,229				0.9
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services:
Freestanding IRFs:
End of period data:
Number of IRFs			16				16				18				18				19				19
Number of licensed beds			829				829				919				919				969				969
Discharges (a)			3,806				3,927				3,941				4,317				4,448				4,646				18.3
Same-hospital discharges (a)			3,806				3,927				3,842				4,040				4,016				4,089				4.1
Occupancy % (a)			73.2				71.5				68.7				68.0				70.6				70.6				(1.3	)
Average length of stay (a)			13.7				13.1				13.2				12.7				13.2				12.9				(1.5	)
Revenue per discharge (a)		$	19,517			$	19,325			$	18,992			$	18,640			$	19,731			$	19,318				—
Contract services:
Sites of service (at end of period):
Inpatient rehabilitation units			100				99				101				100				104				105
LTAC hospitals			120				120				119				119				119				121
Sub-acute units			8				8				7				7				7				7
Outpatient units			138				139				135				130				139				138
			366				366				362				356				369				371
Revenue per site		$	211,151			$	209,436			$	206,041			$	210,978			$	211,417			$	215,798				3.0
RehabCare:
Sites of service (at end of period)			1,829				1,789				1,821				1,798				1,767				1,759
Revenue per site		$	138,106			$	132,359			$	120,548			$	114,896			$	115,590			$	111,470				(15.8	)
Nursing center division:
End of period data:
Number of nursing centers			90				90				90				90				92				92
Number of licensed beds			11,535				11,535				11,535				11,535				11,815				11,815
Admissions (b)			10,376				9,831				9,558				9,237				9,815				9,480				(3.6	)
Medicare average length of stay (b)			28.9				28.9				28.5				28.4				28.2				28.4				(1.7	)
Patient days (b)			861,278				852,691				851,332				845,924				846,578				842,681				(1.2	)
Revenues per patient day (b)		$	319			$	321			$	318			$	323			$	322			$	323				0.6
Average daily census (b)			9,570				9,370				9,254				9,195				9,303				9,260				(1.2	)
Occupancy % (b)			81.3				79.6				78.6				78.1				77.3				76.7				(3.6	)

 

(a)	Excludes non-consolidating IRF.

(b)	Excludes managed facilities.

---

Kindred Healthcare Reports Second Quarter 2016 Results

Page 12

August 4, 2016

 

 

 

Forward-Looking Statements

This earnings 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 earnings 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 filed 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.

Non-GAAP Measurements

In addition to the results provided in accordance with GAAP, the Company has provided information in this earnings release to compute certain non-GAAP measures. The use of these non-GAAP measures are not intended to replace the presentation of the Company’s financial results in accordance with GAAP. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in the following pages of this earnings release.

EBITDAR: The Company defines EBITDAR as earnings before interest, income taxes, depreciation, amortization and rent, and believes that the presentation of EBITDAR is useful to the investors because creditors, securities analysts and investors use EBITDAR as a measure of earnings used to compare the performance of companies in the healthcare industry before consideration of the capital structure of fixed assets and financing costs, which can vary significantly among companies.

For each of the Company’s segments, EBITDAR is a measure of performance used by the Company’s chief operating decision makers in accordance with “Accounting Standard Codification 280—Segment Reporting.” In this context, the Company defines segment EBITDAR as earnings before interest, income taxes, depreciation, amortization and rent, excluding litigation contingency expense, impairment charges, transaction costs and the allocation of support center overhead.

Core Operating Results: The Company calculates core operating results, including core net income attributable to Kindred, core EBITDAR and core diluted EPS, by excluding charges related to transaction, integration, severance, retirement, retention, impairments, business interruption settlements, research and development, restructuring, debt amendment costs, gain on facility swap and litigation. 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’s management uses core net income attributable to Kindred, core EBITDAR and core diluted EPS as meaningful measures of operational performance, and for the attainment of internal incentive compensation goals, in addition to other measures. The Company uses these measures to assess the relative performance and attainment of internal incentive compensation goals of its operating divisions, as well as the employees that operate these businesses. In addition, the Company believes these measures are important, because securities analysts and investors use these measures to compare the Company’s performance to other companies in the healthcare industry.

---

Kindred Healthcare Reports Second Quarter 2016 Results

Page 13

August 4, 2016

 

 

 

Non-GAAP Measurements (Continued)

Same-Hospital Revenues: The same-hospital revenues are calculated by excluding from the Company’s Hospital Division revenues the results from five hospitals acquired in 2016, three hospitals sold in 2016 and two hospitals that closed during 2015. The Company believes the presentation of same-hospital revenues 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.

For EBITDAR, core net income attributable to Kindred, and core EBITDAR, the Company believes that income (loss) from continuing operations is the most comparable GAAP measure. For core diluted EPS, the Company believes that GAAP diluted earnings (loss) per share from continuing operations is the most comparable GAAP measure. Readers of the Company’s financial information should consider income (loss) from continuing operations and diluted earnings (loss) per share from continuing operations as important measures of the Company’s financial performance, because they provide the most complete measures of its performance. For same-hospital revenues, 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 performance. Operating results presented on a core basis, 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.

Also in this earnings 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, respectively.

Core Operating Cash Flows: The Company defines core operating cash flows as operating cash flows excluding payments related to transaction, severance, retirement, retention, business interruption settlements, restructuring, debt refinancing costs, and fees and litigation, net of income tax benefits. The Company believes that core operating cash flows provide important information to investors for comparability to other companies that use similar measures. Management uses core operating cash flows to evaluate consolidated operating performance and in making decisions related to acquisitions, development capital expenditures, dividends, long-term debt repayments and other uses.

Core Free Cash Flows: The Company defines core free cash flows as operating cash flows excluding payments related to transaction, severance, retirement, retention, business interruption settlements, restructuring, debt refinancing costs, and fees and litigation, net of income tax benefits but including routine capital expenditures and distributions to noncontrolling interests. The Company believes that core free cash flows provide important information to investors for comparability to other companies that use similar measures. Management uses core free cash flows in making decisions related to acquisitions, development capital expenditures, dividends, long-term debt repayments and other uses.

The Company recognizes that core operating cash flows and core free cash flows are non-GAAP measures and are not intended to replace the presentation of the Company’s cash flows in accordance with GAAP. For core operating cash flows and core free cash flows, 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 because it provides the most complete measure of cash provided by operating activities. 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 the Company’s cash flows provided by operating activities.

---

Kindred Healthcare Reports Second Quarter 2016 Results

Page 14

August 4, 2016

 

 

 

KINDRED HEALTHCARE, INC.

Reconciliation of GAAP Results to Non-GAAP Measurements

(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 earnings release to compute certain non-GAAP measurements for the three months and six months ended June 30, 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 19.9% and 9.9% for the three months ended June 30, 2016 and 2015, respectively, and 26.2% and 21.9% for the six months ended June 30, 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 impairment charges and litigation contingency expense.

 

		Three months ended								Six months ended
		June 30,								June 30,
		2016				2015				2016				2015
Reconciliation of income from continuing operations before charges:
As reported:
Income (loss) from continuing operations attributable to Kindred		$	20,859			$	21,975			$	34,182			($	121,460	)
Diluted earnings (loss) per common share from continuing operations		$	0.23			$	0.25			$	0.38			($	1.47	)
Weighted average diluted shares outstanding			87,500				86,402				87,374				82,828
Detail of charges:
Litigation contingency expense		($	930	)		($	3,925	)		($	2,840	)		($	98,925	)
Retirement and severance costs			(2,016	)			—				(3,598	)			(4,961	)
Facility/branch closings/consolidations			(2,784	)			(3,386	)			(3,125	)			(5,680	)
Impairment charges			(6,131	)			—				(13,919	)			—
Business interruption settlements			171				—				1,309				—
Research and development			(3,076	)			—				(3,939	)			—
Gain on facility swap			1,103				—				1,103				—
Debt amendment fees not capitalized			(1,103	)			—				(1,103	)			—
Gentiva transaction and integration costs:
Professional and consulting fees			(1,319	)			(1,931	)			(2,367	)			(34,065	)
Severance and retention			(355	)			(2,411	)			(910	)			(56,875	)
Lease termination (charged to rent expense)			—				(203	)			—				(792	)
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)			(462	)			(671	)			(713	)			(1,023	)
Other transaction costs			(821	)			(874	)			(1,339	)			(2,973	)
			(17,723	)			(13,401	)			(31,441	)			(235,456	)
Income tax benefit			3,535				1,325				8,245				51,527
Charges net of income taxes			(14,188	)			(12,076	)			(23,196	)			(183,929	)
Noncontrolling interest adjustment related to impairment charges			1,016				—				1,016				—
			(13,172	)			(12,076	)			(22,180	)			(183,929	)
Allocation to participating unvested restricted stockholders			313				211				428				—
Available to common stockholders		($	12,859	)		($	11,865	)		($	21,752	)		($	183,929	)
Diluted loss per common share related to charges		($	0.15	)		($	0.14	)		($	0.25	)		($	2.22	)
Weighted average diluted shares outstanding			87,500				86,402				87,374				82,828
Core:
Income from continuing operations before charges		$	34,031			$	34,051			$	56,362			$	62,469
Diluted earnings per common share from continuing operations before charges (a)		$	0.38			$	0.39			$	0.63			$	0.73
Weighted average diluted shares outstanding used to compute earnings per common share from continuing operations before charges			87,500				86,402				87,374				84,560
Reconciliation of effective income tax rate before charges:
Effective income tax rate before charges			30.6	%			36.0	%			31.3	%			36.7	%
Impact of charges on effective income tax rate			3.6	%			6.0	%			1.7	%			-33.5	%
Reported effective income tax rate			34.2	%			42.0	%			33.0	%			3.2	%

 

(a)

For purposes of computing diluted earnings per common share before charges, income from continuing operations before charges was reduced by $0.8 million and $0.6 million for the three months ended June 30, 2016 and 2015, respectively, and by $1.1 million for both the six months ended June 30, 2016 and 2015, for the allocation of income to participating unvested restricted stockholders.

---

Kindred Healthcare Reports Second Quarter 2016 Results

Page 15

August 4, 2016

 

 

 

KINDRED HEALTHCARE, INC.

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

(Unaudited)

(In thousands)

 

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

 

																										Second quarter
		2015 Quarters																2016 Quarters								% change v.
		First				Second				Third				Fourth				First				Second				prior year
Kindred		$	254,965			$	360,173			$	356,716			$	358,075			$	363,730			$	370,327
Gentiva			87,520				—				—				—				—				—
		$	342,485			$	360,173			$	356,716			$	358,075			$	363,730			$	370,327				2.8

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

 

																										Second quarter
		2015 Quarters																2016 Quarters								% change v.
		First				Second				Third				Fourth				First				Second				prior year
Reported revenues		$	640,483			$	627,206			$	579,497			$	593,593			$	643,299			$	633,695				1.0
Hospitals acquired and sold during 2016 (a)			—				(16,608	)			(14,679	)			(14,695	)			—				(14,346	)
Hospitals closed during 2015 (b)			(5,508	)			(5,188	)			(2,160	)			498				114				78
Same-hospital revenues		$	634,975			$	605,410			$	562,658			$	579,396			$	643,413			$	619,427				2.3

 

(a)	Five hospitals acquired and three hospitals sold during the second quarter of 2016.

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

---

Kindred Healthcare Reports Second Quarter 2016 Results

Page 16

August 4, 2016

 

 

 

KINDRED HEALTHCARE, INC.

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

(Unaudited)

(In thousands, except per share amounts)

 

		Three months ended June 30, 2016
						Charges
										Facility/																												Gentiva
						Retirement				branch				Business																								transaction												Before
		As				and				closings/				interruption				Gain on				Litigation				Impairment				Research and				Debt				and				Other								charges
		reported				severance				consolidations				settlements				facility swap				contingency				charges				development				amendment				integration				transaction				Total				(“core”)
Income from continuing operations:
Segment EBITDAR:
Hospital division		$	126,589			$	446			$	—			$	—			$	(1,103	)		$	—			$	—			$	—			$	—			$	—			$	—			$	(657	)		$	125,932
Kindred at Home:
Home health			75,790				—				240				(171	)			—				—				—				—				—				—				—				69				75,859
Hospice			31,225				—				104				—				—				—				—				—				—				—				—				104				31,329
			107,015				—				344				(171	)			—				—				—				—				—				—				—				173				107,188
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services			50,469				—				—				—				—				—				—				—				—				—				—				—				50,469
RehabCare			13,269				—				—				—				—				—				—				—				—				—				—				—				13,269
			63,738				—				—				—				—				—				—				—				—				—				—				—				63,738
Nursing center division			29,652				1,570				2,440				—				—				—				—				—				—				—				—				4,010				33,662
Support center			(66,804	)			—				—				—				—				—				—				3,076				1,103				—				—				4,179				(62,625	)
Litigation contingency expense			(930	)			—				—				—				—				930				—				—				—				—				—				930				—
Impairment charges			(6,131	)			—				—				—				—				—				6,131				—				—				—				—				6,131				—
Transaction costs			(2,495	)			—				—				—				—				—				—				—				—				1,674				821				2,495				—
EBITDAR			250,634				2,016				2,784				(171	)			(1,103	)			930				6,131				3,076				1,103				1,674				821				17,261				267,895
Rent			(100,555	)			—				462				—				—				—				—				—				—				—				—				462				(100,093	)
Depreciation and amortization			(40,257	)			—				—				—				—				—				—				—				—				—				—				—				(40,257	)
Interest, net			(57,559	)			—				—				—				—				—				—				—				—				—				—				—				(57,559	)
Income from continuing operations before income taxes			52,263				2,016				3,246				(171	)			(1,103	)			930				6,131				3,076				1,103				1,674				821				17,723				69,986
Provision for income taxes			17,882				1,448				2,331				(123	)			(8,010	)			(1,307	)			4,403				2,209				792				1,202				590				3,535				21,417
			34,381				568				915				(48	)			6,907				2,237				1,728				867				311				472				231				14,188				48,569
Noncontrolling interests			(13,522	)			—				—				—				—				—				(1,016	)			—				—				—				—				(1,016	)			(14,538	)
Income attributable to Kindred		$	20,859			$	568			$	915			$	(48	)		$	6,907			$	2,237			$	712			$	867			$	311			$	472			$	231			$	13,172			$	34,031
Diluted earnings per common share		$	0.23																																															$	0.38
Diluted shares used in computing earnings per common share			87,500																																																87,500

 

		Three months ended June 30, 2015
						Charges
														Gentiva
						Facility/								transaction												Before
		As				branch				Litigation				and				Other								charges
		reported				closings				contingency				integration				transaction				Total				(“core”)
Income from continuing operations:
Segment EBITDAR:
Hospital division		$	130,967			$	565			$	—			$	—			$	—			$	565			$	131,532
Kindred at Home:
Home health			72,329				588				—				—				—				588				72,917
Hospice			26,238				1,649				—				—				—				1,649				27,887
			98,567				2,237				—				—				—				2,237				100,804
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services			44,531				—				—				—				—				—				44,531
RehabCare			14,681				—				—				—				—				—				14,681
			59,212				—				—				—				—				—				59,212
Nursing center division			39,877				584				—				—				—				584				40,461
Support center			(70,209	)			—				—				—				—				—				(70,209	)
Litigation contingency expense			(3,925	)			—				3,925				—				—				3,925				—
Transaction costs			(5,216	)			—				—				4,342				874				5,216				—
EBITDAR			249,273				3,386				3,925				4,342				874				12,527				261,800
Rent			(96,402	)			671				—				203				—				874				(95,528	)
Depreciation and amortization			(38,625	)			—				—				—				—				—				(38,625	)
Interest, net			(56,140	)			—				—				—				—				—				(56,140	)
Income from continuing operations before income taxes			58,106				4,057				3,925				4,545				874				13,401				71,507
Provision for income taxes			24,396				430				416				386				93				1,325				25,721
			33,710			$	3,627			$	3,509			$	4,159			$	781			$	12,076				45,786
Noncontrolling interests			(11,735	)																							(11,735	)
Income attributable to Kindred		$	21,975																							$	34,051
Diluted earnings per common share		$	0.25																							$	0.39
Diluted shares used in computing earnings per common share			86,402																								86,402

 

---

Kindred Healthcare Reports Second Quarter 2016 Results

Page 17

August 4, 2016

 

 

 

KINDRED HEALTHCARE, INC.

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

(Unaudited)

(In thousands, except per share amounts)

 

		Six months ended June 30, 2016
						Charges
										Facility/																												Gentiva
						Retirement				branch				Business																								transaction												Before
		As				and				closings/				interruption				Gain on				Litigation				Impairment				Research and				Debt				and				Other								charges
		reported				severance				consolidations				settlements				facility swap				contingency				charges				development				amendment				integration				transaction				Total				(“core”)
Income from continuing operations:
Segment EBITDAR:
Hospital division		$	261,160			$	1,370			$	—			$	—			$	(1,103	)		$	—			$	—			$	—			$	—			$	—			$	—			$	267			$	261,427
Kindred at Home:
Home health			142,731				—				240				(1,309	)			—				—				—				—				—				—				—				(1,069	)			141,662
Hospice			55,750				—				445				—				—				—				—				—				—				—				—				445				56,195
			198,481				—				685				(1,309	)			—				—				—				—				—				—				—				(624	)			197,857
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services			98,339				—				—				—				—				—				—				—				—				—				—				—				98,339
RehabCare			25,256				—				—				—				—				—				—				—				—				—				—				—				25,256
			123,595				—				—				—				—				—				—				—				—				—				—				—				123,595
Nursing center division			59,752				1,570				2,440				—				—				—				—				—				—				—				—				4,010				63,762
Support center			(137,612	)			658				—				—				—				—				—				3,939				1,103				—				—				5,700				(131,912	)
Litigation contingency expense			(2,840	)			—				—				—				—				2,840				—				—				—				—				—				2,840				—
Impairment charges			(13,919	)			—				—				—				—				—				13,919				—				—				—				—				13,919				—
Transaction costs			(4,616	)			—				—				—				—				—				—				—				—				3,277				1,339				4,616				—
EBITDAR			484,001				3,598				3,125				(1,309	)			(1,103	)			2,840				13,919				3,939				1,103				3,277				1,339				30,728				514,729
Rent			(198,323	)			—				713				—				—				—				—				—				—				—				—				713				(197,610	)
Depreciation and amortization			(80,938	)			—				—				—				—				—				—				—				—				—				—				—				(80,938	)
Interest, net			(114,804	)			—				—				—				—				—				—				—				—				—				—				—				(114,804	)
Income from continuing operations before income taxes			89,936				3,598				3,838				(1,309	)			(1,103	)			2,840				13,919				3,939				1,103				3,277				1,339				31,441				121,377
Provision for income taxes			29,718				1,591				1,698				(579	)			(4,934	)			40				6,157				1,742				488				1,450				592				8,245				37,963
			60,218				2,007				2,140				(730	)			3,831				2,800				7,762				2,197				615				1,827				747				23,196				83,414
Noncontrolling interests			(26,036	)			—				—				—				—				—				(1,016	)			—				—				—				—				(1,016	)			(27,052	)
Income attributable to Kindred		$	34,182			$	2,007			$	2,140			$	(730	)		$	3,831			$	2,800			$	6,746			$	2,197			$	615			$	1,827			$	747			$	22,180			$	56,362
Diluted earnings per common share		$	0.38																																															$	0.63
Diluted shares used in computing earnings per common share			87,374																																																87,374

 

		Six months ended June 30, 2015
						Charges
																						Gentiva				Gentiva
						Retirement				Facility/												pre-closing				transaction												Before
		As				and				branch				Litigation				Impairment				financing				and				Other								charges
		reported				severance				closings				contingency				charges				costs				integration				transaction				Total				(“core”)
Income (loss) from continuing operations:
Segment EBITDAR:
Hospital division		$	265,078			$	—			$	1,240			$	—			$	—			$	—			$	—			$	—			$	1,240			$	266,318
Kindred at Home:
Home health			118,025				—				1,690				—				—				—				—				—				1,690				119,715
Hospice			42,717				—				2,166				—				—				—				—				—				2,166				44,883
			160,742				—				3,856				—				—				—				—				—				3,856				164,598
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services			89,095				—				—				—				—				—				—				—				—				89,095
RehabCare			30,389				785				—				—				—				—				—				—				785				31,174
			119,484				785				—				—				—				—				—				—				785				120,269
Nursing center division			76,840				—				584				—				—				—				—				—				584				77,424
Support center			(136,774	)			4,176				—				—				—				—				—				—				4,176				(132,598	)
Litigation contingency expense			(98,925	)			—				—				98,925				—				—				—				—				98,925				—
Impairment charges			(6,726	)			—				—				—				6,726				—				—				—				6,726				—
Transaction costs			(99,918	)			—				—				—				—				6,005				90,940				2,973				99,918				—
EBITDAR			279,801				4,961				5,680				98,925				6,726				6,005				90,940				2,973				216,210				496,011
Rent			(188,542	)			—				1,023				—				—				—				792				—				1,815				(186,727	)
Depreciation and amortization			(77,560	)			—				—				—				—				—				—				—				—				(77,560	)
Interest, net			(117,917	)			—				—				—				—				17,431				—				—				17,431				(100,486	)
Income (loss) from continuing operations before income taxes			(104,218	)			4,961				6,703				98,925				6,726				23,436				91,732				2,973				235,456				131,238
Provision (benefit) for income taxes			(3,340	)			1,977				2,672				1,564				2,681				9,341				32,107				1,185				51,527				48,187
			(100,878	)		$	2,984			$	4,031			$	97,361			$	4,045			$	14,095			$	59,625			$	1,788			$	183,929				83,051
Noncontrolling interests			(20,582	)																																			(20,582	)
Income (loss) attributable to Kindred		$	(121,460	)																																		$	62,469
Diluted earnings (loss) per common share		$	(1.47	)																																		$	0.73
Diluted shares used in computing earnings (loss) per common share			82,828																																				84,560

---

Kindred Healthcare Reports Second Quarter 2016 Results

Page 18

August 4, 2016

 

 

 

KINDRED HEALTHCARE, INC.

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

(Unaudited)

(In thousands, except per share amounts)

 

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

 

		Three months ended March 31, 2015
						Charges
																						Gentiva				Gentiva
						Retirement				Facility/												pre-closing				transaction												Before
		As				and				branch				Litigation				Impairment				financing				and				Other								charges
		reported				severance				closings				contingency				charges				costs				integration				transaction				Total				(“core”)
Income (loss) from continuing operations:
Segment EBITDAR:
Hospital division		$	134,111			$	—			$	675			$	—			$	—			$	—			$	—			$	—			$	675			$	134,786
Kindred at Home:
Home health			45,696				—				1,102				—				—				—				—				—				1,102				46,798
Hospice			16,479				—				517				—				—				—				—				—				517				16,996
			62,175				—				1,619				—				—				—				—				—				1,619				63,794
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services			44,564				—				—				—				—				—				—				—				—				44,564
RehabCare			15,708				785				—				—				—				—				—				—				785				16,493
			60,272				785				—				—				—				—				—				—				785				61,057
Nursing center division			36,963				—				—				—				—				—				—				—				—				36,963
Support center			(66,565	)			4,176				—				—				—				—				—				—				4,176				(62,389	)
Litigation contingency expense			(95,000	)			—				—				95,000				—				—				—				—				95,000				—
Impairment charges			(6,726	)			—				—				—				6,726				—				—				—				6,726				—
Transaction costs			(94,702	)			—				—				—				—				6,005				86,598				2,099				94,702				—
EBITDAR			30,528				4,961				2,294				95,000				6,726				6,005				86,598				2,099				203,683				234,211
Rent			(92,140	)			—				352				—				—				—				589				—				941				(91,199	)
Depreciation and amortization			(38,935	)			—				—				—				—				—				—				—				—				(38,935	)
Interest, net			(61,777	)			—				—				—				—				17,431				—				—				17,431				(44,346	)
Income (loss) from continuing operations before income taxes			(162,324	)			4,961				2,646				95,000				6,726				23,436				87,187				2,099				222,055				59,731
Provision (benefit) for income taxes			(27,736	)			2,133				1,138				—				2,891				10,075				33,063				902				50,202				22,466
			(134,588	)		$	2,828			$	1,508			$	95,000			$	3,835			$	13,361			$	54,124			$	1,197			$	171,853				37,265
Noncontrolling interests			(8,847	)																																			(8,847	)
Income (loss) attributable to Kindred		$	(143,435	)																																		$	28,418
Diluted earnings (loss) per common share		$	(1.80	)																																		$	0.34
Diluted shares used in computing earnings (loss) per common share			79,575																																				82,422

---

Kindred Healthcare Reports Second Quarter 2016 Results

Page 19

August 4, 2016

 

 

 

KINDRED HEALTHCARE, INC.

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

(Unaudited)

(In thousands, except per share amounts)

 

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

 

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

---

Kindred Healthcare Reports Second Quarter 2016 Results

Page 20

August 4, 2016

 

 

 

KINDRED HEALTHCARE, INC.

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

(Unaudited)

(In thousands)

 

		Three months ended								Six months ended
		June 30,								June 30,
		2016				2015				2016				2015
Reconciliation of net cash flows provided by operating activities to free cash flows:
Net cash flows provided by (used in) operating activities		$	135,028			$	100,379			$	1,966			($	39,223	)
Adjustments to remove certain payments (including payments made for discontinued operations) included in net cash flows provided by (used in) operating activities:
Transaction, severance, retirement and retention			6,712				14,509				12,091				96,849
Business interruption settlements			(171	)			—				(1,309	)			—
Ventas, Inc. lease termination fee			3,500				—				3,500				40,000
Capitalized lender fees related to debt refinancing			7,333				—				7,333				28,012
Other debt refinancing costs (expensed)			626				—				626				27,001
Other lease termination fees			—				—				—				353
Litigation			2,030				16,575				130,449				16,575
			20,030				31,084				152,690				208,790
Net cash flows provided by operating activities excluding certain items before income tax benefit of certain payments			155,058				131,463				154,656				169,567
Benefit of reduced income tax payments resulting from certain payments			(28,626	)			(33,754	)			(28,626	)			(33,754	)
Net cash flows provided by operating activities excluding certain items (core operating cash flows)			126,432				97,709				126,030				135,813
Less routine capital expenditures			(28,724	)			(24,500	)			(46,830	)			(45,269	)
Less distributions to noncontrolling interests			(14,231	)			(10,119	)			(30,546	)			(21,138	)
Free cash flows excluding certain items (core free cash flows)		$	83,477			$	63,090			$	48,654			$	69,406