Kindred Healthcare Reports Fourth Quarter 2016 Results

Consolidated Revenues of $1.75 Billion, GAAP Loss from Continuing Operations of $6 Million(1), GAAP Diluted Loss Per Share from Continuing Operations of $0.23(1) and EBITDAR of $190 Million(2) in the Fourth Quarter

Core EBITDAR of $215 Million(3) and Core Diluted EPS from Continuing Operations of $0.08(3) in the Fourth Quarter

Consolidated Revenues of $7.2 Billion, GAAP Loss from Continuing Operations of $618 Million, GAAP Diluted Loss Per Share from Continuing Operations of $7.73 and EBITDAR of $540 Million(3) for the Year

Core EBITDAR of $950 Million(3) and Core Diluted EPS from Continuing Operations of $0.76(3) for the Year

GAAP Operating Cash Flows of $147 Million in the Fourth Quarter;
Core Operating Cash Flows of $143 Million(3) in the Fourth Quarter

GAAP Operating Cash Flows of $185 Million for the Year;
Core Operating Cash Flows of $299 Million(3) for the Year

Core Free Cash Flows of $104 Million(3) in the Fourth Quarter;
Core Free Cash Flows of $157 Million(3) for the Year

Company Establishes Outlook for 2017 and 2018

LOUISVILLE, Ky.--()--Kindred Healthcare, Inc. (“Kindred” or the “Company”) (NYSE:KND) today announced its operating results for the fourth quarter ended December 31, 2016.

Benjamin A. Breier, President and Chief Executive Officer of the Company, commented, “We are pleased to report fourth quarter and full year 2016 operating results in line with our expectations. We made significant progress growing our home health, hospice and inpatient rehabilitation businesses, and stabilized our nursing center and RehabCare volumes. We are further encouraged by the performance of our Hospital Division in its first full quarter under long-term acute care (“LTAC”) patient criteria. Our solid volume and cash flow performance, coupled with enterprise-wide cost realignment initiatives, position us to continue building on our success as the post-acute provider of choice among patients, families, healthcare systems and payors.”

Mr. Breier continued, “We continue to advance our strategic initiative to divest our skilled nursing center business, and are pleased with the level of interest in the portfolio. We hope to complete this accretive transaction by year end, and use the anticipated net cash proceeds of $100 million to $300 million to repay debt. Similar to our strategic move into the home health, hospice and community care space, our exit from the nursing center business will contribute to the ongoing transformation of Kindred’s growth, cash flow and earnings profile.”

Mr. Breier added, “We were especially pleased with the volume growth and stable revenue in our Hospital Division in its first full quarter under LTAC patient criteria, both of which were better than we expected. Despite the roughly $30 million revenue impact in the quarter from LTAC patient criteria, we maintained revenues essentially flat year-over-year and grew volumes 2.5% on a same-hospital basis. This solid performance on the topline did not translate directly into EBITDAR growth due in part to increases in labor costs. Nevertheless, our early performance gives us confidence in our multi-pronged LTAC criteria mitigation strategy, and our ability to mitigate at least half of the run-rate impact of criteria by the end of 2017.”

__________

(1) Results reflect after-tax costs of $27 million or $0.31 per diluted share related primarily to restructuring costs, a deferred tax valuation allowance and impairment charges.
(2) Results reflect pre-tax costs of $26 million related primarily to restructuring costs and impairment charges.
(3) See reconciliation of generally accepted accounting principles (“GAAP”) results to non-GAAP results beginning on page 15. As used herein, “EBITDAR” means earnings before interest, income taxes, depreciation, amortization and rent.
 

Mr. Breier continued, “Since September 1, 2016, all of the Company’s ongoing LTAC hospitals are under the new patient criteria model. With one full quarter under this new model now completed, we remain confident that we are successfully managing this transition. For the fourth quarter of 2016, approximately 89% of Kindred’s ongoing Hospital Division revenues came from compliant patients, which includes all patients except Medicare site-neutral patients, up from approximately 87% in the month of September. The remaining approximately 11% of revenues were from Medicare site-neutral patients.”

Mr. Breier said, “We are proud of our success to-date in implementing our strategic vision to create innovative post-acute solutions and deliver effective care coordination across the entire patient episode within a value-based healthcare system. Our strategy to pursue innovative solutions was recently confirmed when Kindred was named to Fortune magazine’s list of the World’s Most Admired Companies for the eighth time. Kindred ranked third among Health Care: Medical Facilities companies for innovation, recognizing Kindred’s network management and post-acute benefits management capabilities.”

Mr. Breier concluded, “We believe that a full complement of interrelated solutions is the best way to deliver a positive patient experience. In response to the evolving environment, one of Kindred’s solutions includes building strong relationships with other healthcare partners and providers to align patient care across care settings. For example, Kindred recently announced a clinical collaboration with Genesis HealthCare (NYSE:GEN) to complement our existing platform of post-acute services with unaffiliated nursing centers. We are setting the foundation for a stronger Kindred as we drive effective patient-centered solutions and proactively adapt to the changing healthcare marketplace.”

All financial and statistical information included in this earnings release reflects the continuing operations of the Company’s businesses for all periods presented unless otherwise indicated.

Fourth Quarter and Year Consolidated Results(1):

Fourth Quarter

  • Consolidated revenues were $1.75 billion, a 2.0% year-over-year decrease, while the GAAP loss from continuing operations was $6.4 million compared to income of $56.0 million in the same period in 2015. The decrease in consolidated revenues was primarily attributable to both the impact of the first full quarter of LTAC patient criteria and the sale or closure of 15 LTAC hospitals on or before October 1, 2016. The decrease in GAAP income from continuing operations was due to an increase in income taxes attributable to a non-cash deferred tax valuation allowance of $22 million in the fourth quarter of 2016 and a reduction in income tax benefits of $47 million associated with the settlement of a significant litigation contingency in the fourth quarter of 2015, LTAC patient criteria, skilled nursing Medicare census declines and an increase in labor costs. Core EBITDAR declined 13.1% to $215.3 million compared to $247.8 million in the same period in 2015, primarily due to LTAC patient criteria, skilled nursing Medicare census declines and an increase in labor costs.
  • GAAP operating cash flows were $146.9 million compared to $70.2 million for the same period a year ago. Core operating cash flows were $142.4 million compared to $53.9 million for the same period a year ago. Core free cash flows were $104.4 million compared to $2.0 million in the same period a year ago. The increase in GAAP operating cash flows, core operating cash flows and core free cash flows in the fourth quarter of 2016 was primarily attributable to reductions in net working capital and, for core free cash flows, lower routine capital expenditures.
  • GAAP diluted loss per share from continuing operations was $0.23 as compared to GAAP diluted earnings per share (“EPS”) from continuing operations of $0.50 a year ago. The decrease in GAAP diluted EPS from continuing operations was primarily attributable to an increase in certain charges in the fourth quarter of 2016, including a non-cash deferred tax valuation allowance, a reduction in income tax benefits associated with the settlement of a significant litigation contingency in the fourth quarter of 2015, LTAC patient criteria and an increase in labor costs. Core diluted EPS from continuing operations was $0.08 as compared to $0.33 a year ago. The decline in core diluted EPS was primarily attributable to LTAC patient criteria, declines in skilled nursing Medicare census and an increase in labor costs.

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(1) See reconciliation of GAAP results to non-GAAP results beginning on page 15.
 

Year

  • Consolidated revenues were $7.22 billion, a 2.3% year-over-year increase, while the GAAP loss from continuing operations was $617.5 million compared to a loss of $51.9 million in the same period in 2015. The increase in consolidated revenues was primarily attributable to the acquisition of Gentiva Health Services, Inc. (“Gentiva”) on February 2, 2015 and an increase in same-store volumes in both the Kindred at Home and Kindred Hospital Rehabilitation Services business segments. The increase in GAAP loss from continuing operations was primarily attributable to certain charges, net of income taxes, of $740.7 million related to impairments, deferred tax valuation allowance, restructuring, litigation, transaction, debt amendment, business interruption settlements, and research and development costs. GAAP loss from continuing operations for 2015 included certain charges, net of income taxes, of $206.4 million related to impairments, restructuring, litigation, transaction and severance costs. Core EBITDAR declined 3.1% to $950.1 million compared to $980.3 million in the same period in 2015, primarily due to LTAC patient criteria, a decline in skilled nursing Medicare census and an increase in labor costs.
  • GAAP operating cash flows were $185.0 million for 2016 compared to $163.3 million for the same period a year ago. The increase in GAAP operating cash flows was attributable to a decline in certain transaction and refinancing payments in 2016. Core operating cash flows were $298.8 million for 2016 compared to $318.1 million for the same period a year ago. Core free cash flows for 2016 were $156.8 million compared to $153.7 million in the same period a year ago. The decrease in core operating cash flows in 2016 was primarily attributable to an increase in net working capital and lower earnings. The increase in core free cash flows for 2016 was attributable to lower routine capital expenditures.
  • GAAP diluted loss per share from continuing operations was $7.73 for 2016 as compared to $1.12 a year ago. The increase in GAAP diluted loss per share was primarily attributable to an increase in certain charges in 2016, as noted above. Core diluted EPS from continuing operations was $0.76 as compared to $1.28 a year ago. The decline in core diluted EPS was primarily attributable to LTAC patient criteria, declines in skilled nursing Medicare census, increase in labor costs and a 4.4% increase in aggregate rent, depreciation, amortization, and net interest expense.

Fourth Quarter Segment Results(1)(2):

Our Kindred at Home Division, which comprises the Company’s home health, hospice, community care and home-based primary care businesses, recorded fourth quarter revenues that increased 4.3% over the prior year period to $630.2 million with home health episodes growing 2.6% and hospice average daily census growing 5.1% compared to the same period last year. Segment EBITDAR decreased 8.8% to $90.3 million as compared to $99.0 million and core EBITDAR decreased 10.3% to $88.9 million compared to $99.0 million, compared to the prior year period, both primarily due to an increase in labor costs and lower revenue rates. On a same-store basis, home health episodes grew 3.9% and hospice admissions grew 4.4% over the prior year period.

Kindred’s Hospital Division fourth quarter revenues declined to $530.7 million from the prior year period due to its full entrance into LTAC patient criteria and the impact of the sale or closure of 15 LTAC hospitals since the comparable period. These declines were offset partially by a 2.5% increase in same-hospital admissions and a 4.3% increase in same-hospital commercial revenue rates. Segment EBITDAR in the Hospital Division for the fourth quarter declined to $91.9 million from $116.5 million a year ago, and core EBITDAR for the fourth quarter declined to $91.3 million from $117.7 million a year ago, both due primarily to LTAC patient criteria, divestitures and an increase in labor costs. For the fourth quarter 2016, segment EBITDAR and core EBITDAR also reflect an unbudgeted EBITDAR decline compared to expectations of $2.9 million related to the operations of the LTAC hospitals acquired in a facility swap transaction in the second quarter of 2016. For the year, segment EBITDAR and core EBITDAR reflect unbudgeted declines of $5.9 million related to the LTAC hospitals acquired in the facility swap transaction and $3.9 million related to costs associated with the three closed LTAC hospitals in the third quarter of 2016.

Kindred Rehabilitation Services (“KRS”) Division, which comprises the Company’s hospital-based rehabilitation segment, recorded fourth quarter revenues that declined 0.2% from the prior year period to $361.5 million. Segment EBITDAR for KRS increased 25.4% to $54.9 million as compared to $43.8 million in the prior year period and core EBITDAR decreased 3.6% to $54.9 million compared to $57.0 million a year ago. Segment EBITDAR in the prior period was negatively impacted by $12.9 million of customer contract litigation in the fourth quarter of 2015. Strong performance in the fourth quarter from Kindred Hospital Rehabilitation Services (“KHRS”) inpatient rehabilitation facilities (“IRFs”) was offset by the continuing impact of customer census declines and fewer sites of service operated in RehabCare. The KHRS segment achieved strong revenue growth of 9.3% to $170.0 million, and segment EBITDAR and core EBITDAR grew to $49.3 million each, an increase of 9.9% and 9.3%, respectively, compared to the same period a year ago, as a result of the development of new IRFs and a 4.6% increase in same-IRF discharges. For the year, segment EBITDAR and core EBITDAR results for KHRS included start-up losses of $2.8 million related to the development of new IRFs. RehabCare revenues declined 7.3% to $191.5 million compared to the fourth quarter last year. RehabCare fourth quarter segment EBITDAR increased to $5.6 million as compared to a loss of $1.1 million in the prior year period due to the previously mentioned customer contract litigation in the fourth quarter of 2015 and core EBITDAR decreased to $5.6 million compared to $11.9 million, in the prior year period primarily as a result of year-end training and implementation costs related to RehabCare’s corporate integrity agreement and customer census declines.

Kindred’s Nursing Center Division fourth quarter revenues declined 0.1% to $273.1 million compared to the same period last year. Segment EBITDAR and core EBITDAR in the fourth quarter each declined 8.0% to $33.7 million from $36.6 million a year ago, as a result of declining Medicare census, patient mix deterioration and higher labor costs.

__________

(1) See reconciliation of GAAP results to non-GAAP results beginning on page 15.
(2) See same-hospital and full segment data on pages 10 through 14.
 

2017 Outlook(3)

All forward-looking non-GAAP financial measures used to provide “2017 Outlook” and “2018 Outlook” (collectively “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 assess the probable significance of the unavailable information.

The Company’s Outlook excludes costs related to significant transactions, material litigation, the effect of any reimbursement changes, debt refinancing or amendment costs, restructuring costs, any further acquisitions or divestitures, any impairment charges, deferred tax asset valuation allowances, and any further issuances or repurchases of common stock.

For the 2017 Outlook, Kindred expects:

  • Annual revenues of $7.2 billion, with a range of $7.1 billion to $7.3 billion.
  • Core EBITDAR of $930 million, with a range of $910 million to $950 million.
  • Core diluted EPS from continuing operations of $0.55, with a range of $0.40 to $0.70 per share(4).

As previously discussed, the Company is in the process of divesting its skilled nursing facility business. For purposes of consistency with our year-end reporting, the 2017 Outlook assumes the Company’s skilled nursing facility business is operated for the entire year. For accounting purposes, this business may qualify as a discontinued operation prior to the completion of the divestiture. At the time the skilled nursing facility business qualifies as a discontinued operation, the Company will be required to recast its historical operating results from continuing operations to exclude the business for all periods presented. We also will update our 2017 Outlook in our quarterly reporting during the quarter in which the recasting occurs.

The Company is not providing a quarterly outlook for 2017 due to uncertainty related to the timing of both the divestiture of its skilled nursing facility business and when this business may qualify as a discontinued operation. However, the Company does expect the first quarter of 2017 to generate substantially similar results as the fourth quarter of 2016, with improving results as the range of initiatives discussed above gain traction over the course of the year.

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(3) See Forward-Looking Statements beginning on page 15.
(4) The EPS estimate is based upon an estimated weighted average annual diluted share count for 2017 of 88.5 million shares.
 

2018 Outlook(1)

Kindred’s planned divestiture of its skilled nursing facilities will significantly impact the Company’s reported results, reducing revenues and expenses, and is expected to increase profitability. To assist investors, Kindred is providing the following outlook for 2018:

  • Annual revenues of approximately $6.3 billion.
  • Core EBITDAR of approximately $840 million.
  • Core diluted EPS from continuing operations of approximately $0.80(2).

Please note that all of these items represent midpoint estimates that the Company expects to update over time, and these estimates assume that Kindred completes its skilled nursing facilities exit prior to the start of 2018.

Fourth Quarter Dividend and Change in Dividend Policy

The Kindred Board of Directors declared a cash dividend of $0.12 per share on the Company’s common stock payable on March 31, 2017 to shareholders of record as of the close of business on March 13, 2017. The Kindred Board of Directors has determined that trading levels of the Company’s common stock do not sufficiently reflect the value of the Company’s quarterly cash dividend. Following the payment of the quarterly cash dividend mentioned above, the Kindred Board of Directors has determined to discontinue the Company’s quarterly cash dividend on its common stock and redirect the funds to repay debt and invest in growth.

Cash Flow

Stephen D. Farber, Executive Vice President and Chief Financial Officer of Kindred, noted, “We remain focused on cash flows and were very pleased with our strong cash flow in 2016, and liquidity position at end of year, with only $62.5 million drawn on the Company’s $900 million revolving line of credit. Our fourth quarter GAAP operating cash flows, core operating cash flows and core free cash flows were each up considerably over the third quarter and over the same quarter last year. We were pleased that many of the transient working capital items identified in the third quarter were remedied this quarter, contributing to the fourth quarter’s strong cash flow results. For 2017, we expect modestly muted cash flow performance compared to 2016, based on our 2017 Outlook and adjusted for costs related to our skilled nursing facilities exit and our cost realignment initiatives. For the 2018 Outlook, we expect Kindred’s cash flow results to return to historical levels of roughly $300 million per year in core operating cash flows and approximately half of that amount in core free cash flows with potential upside from this expectation, as capital expenditures and NCI will be reduced meaningfully following our exit from our skilled nursing facility business.”

Mr. Farber continued, “In addition to our operating and free cash flows, we expect additional cash flow for the next several years from harvesting the Company’s net operating loss carryforwards (“NOLs”) to offset federal tax liability, and expect our cash taxes to be less than 10% of our federal book taxes. We ended 2016 with $464 million of federal NOLs, and expect additional NOLs to be generated by our skilled nursing facilities exit. In addition, please note that 2017 is the last year of dividend payments of $12 million per year on the mandatory redeemable preferred stock the Company issued in 2014 as part of the acquisition of Gentiva.”

Mr. Farber concluded, “We expect the combination of significant operational and free cash flows, nominal cash taxes, $100 million to $300 million of expected net cash proceeds from the skilled nursing facility exit, approximately $90 million of associated reduction of annual rent expense, $30 million of associated reduction of annual capital expenditures, $18 million of associated reduction of cash noncontrolling interest disbursements, and the elimination of $54 million of annual common stock and mandatory redeemable preferred stock dividends to drive significant deleveraging and growth for Kindred.”

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(1) See Forward-Looking Statements beginning on page 15.
(2) The EPS estimate is based upon an estimated weighted average annual diluted share count for 2018 of 90.0 million shares.
 

Conference Call

As previously announced, investors and the general public may access a live webcast of the fourth quarter 2016 conference call through a link on the Company’s website at http://investors.kindredhealthcare.com. The conference call will be held on February 28 at 9:00 a.m. (Eastern Time).

A telephone replay of the conference call will become available at approximately 12:00 p.m. on February 28 by dialing (719) 457-0820, access code: 9155505. The replay will be available through March 10.

Forward-Looking Statements and Non-GAAP Reconciliations

See page 15 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. At December 31, 2016, Kindred through its subsidiaries had approximately 100,100 employees providing healthcare services in 2,654 locations in 46 states, including 82 LTAC hospitals, 19 inpatient rehabilitation hospitals, 91 nursing centers, 17 sub-acute units, 635 Kindred at Home home health, hospice and non-medical home care sites of service, 102 inpatient rehabilitation units (hospital-based) and contract rehabilitation service businesses which served 1,708 non-affiliated sites of service. Ranked as one of Fortune magazine’s Most Admired Healthcare Companies for eight 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.

                   
KINDRED HEALTHCARE, INC.
Condensed Consolidated Statement of Operations
(In thousands, except per share amounts)
 
Three months ended Year ended
December 31, December 31,
2016 2015 2016 2015
 
Revenues $ 1,745,951   $ 1,780,949   $ 7,219,519   $ 7,054,907  
 
Salaries, wages and benefits 945,611 909,171 3,758,423 3,614,091
Supplies 89,772 96,295 384,098 384,354
Rent 94,509 96,934 390,534 379,889
Other operating expenses 195,765 208,315 845,680 825,996
General and administrative expenses 304,869 341,052 1,303,428 1,385,038
Other income (991 ) (1,317 ) (2,900 ) (3,016 )
Litigation contingency expense - 8,261 2,840 138,648
Impairment charges 4,351 18,031 342,559 24,757
Restructuring charges 18,952 4,177 107,175 12,970
Depreciation and amortization 38,082 40,362 159,402 157,251
Interest expense 59,230 56,267 234,647 232,395
Investment income   (601 )   (603 )   (3,162 )   (2,806 )
  1,749,549     1,776,945     7,522,724     7,149,567  
Income (loss) from continuing operations before income taxes (3,598 ) 4,004 (303,205 ) (94,660 )
Provision (benefit) for income taxes   2,860     (51,980 )   314,330     (42,797 )
Income (loss) from continuing operations (6,458 ) 55,984 (617,535 ) (51,863 )
Discontinued operations, net of income taxes:
Income (loss) from operations 4,194 1,509 6,616 (235 )
Gain on divestiture of operations   116     261     295     1,244  
Income from discontinued operations   4,310     1,770     6,911     1,009  
Net income (loss) (2,148 ) 57,754 (610,624 ) (50,854 )
(Earnings) loss attributable to noncontrolling interests:
Continuing operations (13,261 ) (12,082 ) (53,602 ) (42,564 )
Discontinued operations   2     2     (4 )   34  
  (13,259 )   (12,080 )   (53,606 )   (42,530 )
Income (loss) attributable to Kindred $ (15,407 ) $ 45,674   $ (664,230 ) $ (93,384 )
 
Amounts attributable to Kindred stockholders:
Income (loss) from continuing operations $ (19,719 ) $ 43,902 $ (671,137 ) $ (94,427 )
Income from discontinued operations   4,312     1,772     6,907     1,043  
Net income (loss) $ (15,407 ) $ 45,674   $ (664,230 ) $ (93,384 )
 
Earnings (loss) per common share:
Basic:
Income (loss) from continuing operations $ (0.23 ) $ 0.50 $ (7.73 ) $ (1.12 )
Discontinued operations:
Income (loss) from operations 0.05 0.02 0.08 -
Gain on divestiture of operations   -     -     -     0.01  
Income from discontinued operations   0.05     0.02     0.08     0.01  
Net income (loss) $ (0.18 ) $ 0.52   $ (7.65 ) $ (1.11 )
 
Diluted:
Income (loss) from continuing operations $ (0.23 ) $ 0.50 $ (7.73 ) $ (1.12 )
Discontinued operations:
Income (loss) from operations 0.05 0.02 0.08 -
Gain on divestiture of operations   -     -     -     0.01  
Income from discontinued operations   0.05     0.02     0.08     0.01  
Net income (loss) $ (0.18 ) $ 0.52   $ (7.65 ) $ (1.11 )
 
Shares used in computing earnings (loss) per common share:
Basic 86,904 86,336 86,800 84,558
Diluted 86,904 87,232 86,800 84,558
 
Cash dividends declared and paid per common share $ 0.12 $ 0.12 $ 0.48 $ 0.48
 
           
KINDRED HEALTHCARE, INC.
Condensed Consolidated Balance Sheet
(In thousands, except per share amounts)
 
December 31, December 31,
2016 2015
ASSETS
Current assets:
Cash and cash equivalents $ 137,061 $ 98,758
Insurance subsidiary investments 108,966 106,638
Accounts receivable less allowance for loss 1,172,078 1,194,868
Inventories 24,673 27,791
Income taxes 10,067 11,790
Other   63,693     61,054  
1,516,538 1,500,899
 
Property and equipment 2,026,430 2,162,398
Accumulated depreciation   (1,147,844 )   (1,190,402 )
878,586 971,996
 
Goodwill 2,427,074 2,669,810
Intangible assets less accumulated amortization 790,235 755,655
Insurance subsidiary investments 204,929 204,498
Deferred tax assets - 104,130
Acquisition deposit - 18,489
Other   295,362     242,782  
Total assets $ 6,112,724   $ 6,468,259  
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 203,925 $ 187,061
Salaries, wages and other compensation 397,486 404,925
Due to third party payors 41,320 36,251
Professional liability risks 65,284 64,099
Other accrued liabilities 269,736 394,246
Long-term debt due within one year   27,977     24,630  
1,005,728 1,111,212
 
Long-term debt 3,215,062 3,086,348
Professional liability risks 295,311 263,273
Deferred tax liabilities 201,808 -
Deferred credits and other liabilities 353,294 301,379
 
Equity:
Stockholders' equity:

Common stock, $0.25 par value; authorized 175,000 shares; issued 85,166 shares - December 31, 2016 and 83,792 shares - December 31, 2015

21,291 20,948
Capital in excess of par value 1,710,231 1,737,747
Accumulated other comprehensive income (loss) 1,573 (2,632 )
Accumulated deficit   (920,544 )   (256,209 )
812,551 1,499,854
Noncontrolling interests   228,970     206,193  
Total equity   1,041,521     1,706,047  
Total liabilities and equity $ 6,112,724   $ 6,468,259  
 
                       
KINDRED HEALTHCARE, INC.
Condensed Consolidated Statement of Cash Flows
(In thousands)
 
Three months ended Year ended
December 31, December 31,
2016 2015 2016 2015
Cash flows from operating activities:
Net income (loss) $ (2,148 ) $ 57,754 $ (610,624 ) $ (50,854 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation expense 32,660 33,208 135,966 128,533
Amortization of intangible assets 5,422 7,645 23,673 29,841
Amortization of stock-based compensation costs 3,367 4,872 16,425 20,636
Amortization of deferred financing costs 4,005 3,566 15,267 13,721
Payment of capitalized lender fees related to debt issuance - - (7,375 ) (28,012 )
Provision for doubtful accounts 9,849 22,643 40,804 52,460
Deferred income taxes 1,868 (45,738 ) 310,338 (46,632 )
Impairment charges 4,351 18,031 342,559 24,757
Gain on divestiture of discontinued operations (116 ) (261 ) (295 ) (1,244 )
Other 5,152 3,080 12,414 13,537
Change in operating assets and liabilities:
Accounts receivable 84,922 4,822 (59,031 ) (8,577 )
Inventories and other assets (20,704 ) 10,312 (24,226 ) 54,493
Accounts payable 1,764 2,408 26,215 (10,380 )
Income taxes 1,882 (6,254 ) 4,242 27,392
Due to third party payors (16,625 ) (26,917 ) 3,692 (30,882 )
Other accrued liabilities   31,265     (18,976 )   (45,082 )   (25,527 )
Net cash provided by operating activities   146,914     70,195     184,962     163,262  
 
Cash flows from investing activities:
Routine capital expenditures (27,349 ) (41,240 ) (96,052 ) (121,931 )
Development capital expenditures (7,713 ) (7,865 ) (34,825 ) (19,931 )
Acquisitions, net of cash acquired (1,800 ) - (78,840 ) (673,547 )
Acquisition deposits - (18,489 ) 18,489 176,511
Sale of assets 21,025 1,674 25,987 8,735
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 (22,318 ) (26,036 ) (97,740 ) (85,222 )
Sale of insurance subsidiary investments 17,010 24,295 95,488 75,075
Net change in insurance subsidiary cash and cash equivalents (7,602 ) (3,875 ) 877 (12,271 )
Proceeds from note receivable - - - 25,000
Net change in other investments 577 (4,995 ) (32,770 ) (4,620 )
Other   1,022     592     (255 )   10,972  
Net cash provided by (used in) investing activities   (27,148 )   (75,939 )   (199,641 )   752,209  
 
Cash flows from financing activities:
Proceeds from borrowings under revolving credit 376,100 325,600 1,643,300 1,740,450
Repayment of borrowings under revolving credit (473,600 ) (312,000 ) (1,689,400 ) (1,631,850 )
Proceeds from issuance of term loan, net of discount - - 198,100 199,000
Proceeds from other long-term debt - - 750 -
Repayment of Gentiva debt - - - (1,177,363 )
Repayment of term loan (3,508 ) (3,002 ) (13,527 ) (12,010 )
Repayment of other long-term debt (278 ) (5,352 ) (1,104 ) (6,752 )
Payment of deferred financing costs (180 ) (162 ) (522 ) (3,446 )
Issuance of common stock in connection with employee benefit plans - - - 534

Payment of costs associated with issuance of common stock and tangible equity units

-

-

-

(915

)

Payment of dividend for mandatory redeemable preferred stock (2,956 ) (2,752 ) (11,514 ) (10,887 )
Dividends paid (10,221 ) (10,052 ) (40,738 ) (40,119 )
Contributions made by noncontrolling interests 3,253 660 14,514 2,152
Distributions to noncontrolling interests (10,745 ) (10,635 ) (45,985 ) (42,458 )
Purchase of noncontrolling interests - - (1,000 ) -
Other   -     1,306     108     2,763  
Net cash provided by (used in) financing activities   (122,135 )   (16,389 )   52,982     (980,901 )
Change in cash and cash equivalents (2,369 ) (22,133 ) 38,303 (65,430 )
Cash and cash equivalents at beginning of period   139,430     120,891     98,758     164,188  
Cash and cash equivalents at end of period $ 137,061   $ 98,758   $ 137,061   $ 98,758  
 
   
KINDRED HEALTHCARE, INC.
Condensed Consolidated and Business Segment Data
(Unaudited)
(In thousands, except per share amounts)
                           
Fourth quarter
2015 Quarters 2016 Quarters % change v.
First Second Third Fourth Year First Second Third Fourth Year prior year
Condensed consolidated income statement data:
GAAP presentation:
Revenues $ 1,675,967 $ 1,833,475 $ 1,764,516 $ 1,780,949 $ 7,054,907 $ 1,837,971 $ 1,842,070 $ 1,793,527 $ 1,745,951 $ 7,219,519 (2.0 )
Operating expenses 1,645,791 1,584,873 1,568,189 1,583,985 6,382,838 1,604,855 1,591,898 1,986,221 1,558,329 6,741,303 (1.6 )
Rent 91,788 95,731 95,436 96,934 379,889 97,517 100,093 98,415 94,509 390,534 (2.5 )
Depreciation and amortization 38,935 38,625 39,329 40,362 157,251 40,681 40,257 40,382 38,082 159,402 (5.6 )
Interest, net   61,777     56,140     56,008     55,664     229,589     57,245     57,559     58,052     58,629     231,485   5.3

Income (loss) from continuing operations before income taxes

(162,324 ) 58,106 5,554 4,004 (94,660 ) 37,673 52,263 (389,543 ) (3,598 ) (303,205 ) (189.9 )
Provision (benefit) for income taxes   (27,736 )   24,396     12,523     (51,980 )   (42,797 )   11,836     17,882     281,752     2,860     314,330   (105.5 )
Income (loss) from continuing operations (134,588 ) 33,710 (6,969 ) 55,984 (51,863 ) 25,837 34,381 (671,295 ) (6,458 ) (617,535 ) (111.5 )
Noncontrolling interests   (8,847 )   (11,735 )   (9,900 )   (12,082 )   (42,564 )   (12,514 )   (13,522 )   (14,305 )   (13,261 )   (53,602 ) 9.8
Net income (loss) attributable to Kindred $ (143,435 ) $ 21,975   $ (16,869 ) $ 43,902   $ (94,427 ) $ 13,323   $ 20,859   $ (685,600 ) $ (19,719 ) $ (671,137 ) (144.9 )
 
Diluted EPS $ (1.80 ) $ 0.25 $ (0.20 ) $ 0.50 $ (1.12 ) $ 0.15 $ 0.23 $ (7.89 ) $ (0.23 ) $ (7.73 ) (146.0 )
Diluted shares 79,575 86,402 86,184 87,232 84,558 87,249 87,500 86,869 86,904 86,800 (0.4 )
 
Core presentation (a):
EBITDAR $ 234,211 $ 261,800 $ 236,477 $ 247,839 $ 980,327 $ 246,834 $ 267,895 $ 220,075 $ 215,315 $ 950,119 (13.1 )
Rent 91,199 95,528 95,436 96,934 379,097 97,517 100,093 98,069 94,509 390,188 (2.5 )
Interest, net 44,346 56,140 56,008 55,664 212,158 57,245 57,559 58,052 58,629 231,485 5.3
Provision for income taxes 22,466 25,721 15,298 13,758 77,243 16,546 21,417 4,639 3,243 45,845 (76.4 )
Net income attributable to Kindred 28,418 34,051 20,506 29,039 112,014 22,331 34,031 4,340 7,591 68,293 (73.9 )
 
Core diluted EPS $ 0.34 $ 0.39 $ 0.23 $ 0.33 $ 1.28 $ 0.25 $ 0.38 $ 0.05 $ 0.08 $ 0.76 (75.8 )
Diluted shares 82,422 86,402 86,892 87,232 86,098 87,249 87,500 87,529 87,641 87,491 0.5
 
Revenues by segment:
Kindred at Home:
Home health $ 300,867 $ 427,820 $ 424,054 $ 425,759 $ 1,578,500 $ 430,035 $ 438,556 $ 449,958 $ 444,073 $ 1,762,622 4.3
Hospice   119,057     178,005     181,140     178,325     656,527     176,426     185,641     188,575     186,161     736,803   4.4
419,924 605,825 605,194 604,084 2,235,027 606,461 624,197 638,533 630,234 2,499,425 4.3
Hospital division 640,483 627,206 579,497 593,593 2,440,779 643,299 633,695 575,323 530,746 2,383,063 (10.6 )
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services 151,564 152,544 149,435 155,579 609,122 165,774 169,815 169,018 170,041 674,648 9.3
RehabCare   252,595     236,791     219,518     206,582     915,486     204,248     196,075     192,480     191,489     784,292   (7.3 )
404,159 389,335 368,953 362,161 1,524,608 370,022 365,890 361,498 361,530 1,458,940 (0.2 )
Nursing center division   274,308     273,870     270,510     273,387     1,092,075     272,227     272,395     270,259     273,055     1,087,936   (0.1 )
1,738,874 1,896,236 1,824,154 1,833,225 7,292,489 1,892,009 1,896,177 1,845,613 1,795,565 7,429,364 (2.1 )
Eliminations   (62,907 )   (62,761 )   (59,638 )   (52,276 )   (237,582 )   (54,038 )   (54,107 )   (52,086 )   (49,614 )   (209,845 ) (5.1 )
$ 1,675,967   $ 1,833,475   $ 1,764,516   $ 1,780,949   $ 7,054,907   $ 1,837,971   $ 1,842,070   $ 1,793,527   $ 1,745,951   $ 7,219,519   (2.0 )
 

__________

(a)

See reconciliation of GAAP results to non-GAAP results beginning on page 15.

 
                             
KINDRED HEALTHCARE, INC.
Condensed Consolidated and Business Segment Data (Continued)
(Unaudited)
(In thousands, except statistics)
 
Fourth quarter
2015 Quarters 2016 Quarters % change v.
First Second Third Fourth Year First Second Third Fourth Year prior year
Segment EBITDAR:
Kindred at Home:
Home health $ 46,798 $ 72,917 $ 67,682 $ 68,776 $ 256,173 $ 66,941 $ 76,030 $ 75,073 $ 61,487 $ 279,531 (10.6 )
Hospice   16,996     27,887     34,025     30,212     109,120     24,866     31,329     31,326     28,805     116,326   (4.7 )
63,794 100,804 101,707 98,988 365,293 91,807 107,359 106,399 90,292 395,857 (8.8 )
Hospital division 134,111 131,532 96,108 116,454 478,205 135,495 125,932 82,752 91,892 436,071 (21.1 )
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services 44,564 44,531 42,141 44,891 176,127 47,870 50,469 49,470 49,314 197,123 9.9
RehabCare   15,708     14,681     14,544     (1,118 )   43,815     11,987     13,269     9,248     5,578     40,082   598.9
60,272 59,212 56,685 43,773 219,942 59,857 63,738 58,718 54,892 237,205 25.4
Nursing center division 36,963 39,877 35,923 36,601 149,364 30,100 33,662 29,922 33,658 127,342 (8.0 )
 
 
Core EBITDAR by segment (a):
Kindred at Home:
Home health $ 46,798 $ 72,917 $ 68,155 $ 68,826 $ 256,696 $ 65,803 $ 75,859 $ 75,073 $ 61,185 $ 277,920 (11.1 )
Hospice   16,996     27,887     34,025     30,212     109,120     24,866     31,329     31,326     27,668     115,189   (8.4 )
63,794 100,804 102,180 99,038 365,816 90,669 107,188 106,399 88,853 393,109 (10.3 )
Hospital division 134,786 131,532 97,128 117,675 481,121 135,495 125,932 82,752 91,262 435,441 (22.4 )
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services 44,564 44,531 42,141 45,098 176,334 47,870 50,469 50,217 49,314 197,870 9.3
RehabCare   16,493     14,681     14,544     11,858     57,576     11,987     13,269     9,248     5,578     40,082   (53.0 )
61,057 59,212 56,685 56,956 233,910 59,857 63,738 59,465 54,892 237,952 (3.6 )
Nursing center division 36,963 40,461 35,923 36,601 149,948 30,100 33,662 29,922 33,658 127,342 (8.0 )
Support center   (62,389 )   (70,209 )   (55,439 )   (62,431 ) (b)   (250,468 )   (69,287 )   (62,625 )   (58,463 )   (53,350 ) (b)   (243,725 ) (14.5 )
$ 234,211   $ 261,800   $ 236,477   $ 247,839   $ 980,327   $ 246,834   $ 267,895   $ 220,075   $ 215,315   $ 950,119   (13.1 )
 
EBITDAR margin by segment:
Kindred at Home:
Home health 15.6 17.0 16.0 16.2 16.2 15.6 17.3 16.7 13.8 15.9 (2.4 )
Hospice 14.3 15.7 18.8 16.9 16.6 14.1 16.9 16.6 15.5 15.8 (1.4 )
Kindred at Home 15.2 16.6 16.8 16.4 16.3 15.1 17.2 16.7 14.3 15.8 (2.1 )
Hospital division 20.9 21.0 16.6 19.6 19.6 21.1 19.9 14.4 17.3 18.3 (2.3 )
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services 29.4 29.2 28.2 28.9 28.9 28.9 29.7 29.3 29.0 29.2 0.1
RehabCare 6.2 6.2 6.6 (0.5 ) 4.8 5.9 6.8 4.8 2.9 5.1 3.4
Kindred Rehabilitation Services 14.9 15.2 15.4 12.1 14.4 16.2 17.4 16.2 15.2 16.3 3.1
Nursing center division 13.5 14.6 13.3 13.4 13.7 11.1 12.4 11.1 12.3 11.7 (1.1 )
 
Core EBITDAR margin by segment:
Kindred at Home:
Home health 15.6 17.0 16.1 16.2 16.3 15.3 17.3 16.7 13.8 15.8 (2.4 )
Hospice 14.3 15.7 18.8 16.9 16.6 14.1 16.9 16.6 14.9 15.6 (2.0 )
Kindred at Home 15.2 16.6 16.9 16.4 16.4 15.0 17.2 16.7 14.1 15.7 (2.3 )
Hospital division 21.0 21.0 16.8 19.8 19.7 21.1 19.9 14.4 17.2 18.3 (2.6 )
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services 29.4 29.2 28.2 29.0 28.9 28.9 29.7 29.7 29.0 29.3 -
RehabCare 6.5 6.2 6.6 5.7 6.3 5.9 6.8 4.8 2.9 5.1 (2.8 )
Kindred Rehabilitation Services 15.1 15.2 15.4 15.7 15.3 16.2 17.4 16.4 15.2 16.3 (0.5 )
Nursing center division 13.5 14.8 13.3 13.4 13.7 11.1 12.4 11.1 12.3 11.7 (1.1 )
Consolidated 14.0 14.3 13.4 13.9 13.9 13.4 14.5 12.3 12.3 13.2 (1.6 )
 

__________

(a)

See reconciliation of GAAP results to non-GAAP results beginning on page 15.

(b)

Includes changes in estimate of $8 million and $10 million for the fourth quarters of 2015 and 2016, respectively, to lower incentive compensation costs recorded in prior periods.

                             
KINDRED HEALTHCARE, INC.
Condensed Business Segment Data
(Unaudited)
 
Fourth quarter
2015 Quarters 2016 Quarters % change v.
First Second Third Fourth Year First Second Third Fourth Year 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) 415 411 388 373 384 384 395 390
Revenue mix %:
Medicare 80.9 80.4 80.0 80.0 80.3 79.8 79.3 78.1 77.9 78.8
Medicaid 2.1 2.1 2.1 2.1 2.1 2.1 2.1 2.5 1.9 2.1
Commercial and other 7.3 7.9 8.2 8.5 8.1 8.4 8.2 8.6 10.6 8.9
Commercial paid at episodic rates 9.7 9.6 9.7 9.4 9.5 9.7 10.4 10.8 9.6 10.2
Episodic revenues ($ 000s) $ 308,317 $ 324,027 $ 319,820 $ 320,698 $ 1,272,862 $ 325,821 $ 332,193 $ 332,562 $ 323,398 $ 1,313,974 0.8
Total episodic admissions 69,936 67,808 66,753 66,157 270,654 71,426 70,212 69,219 67,501 278,358 2.0
Medicare episodic admissions 61,186 59,394 58,479 57,804 236,863 62,011 60,730 59,823 59,540 242,104 3.0
Total episodes 110,980 109,599 108,519 108,300 437,398 113,887 113,278 113,256 111,164 451,585 2.6
Episodes per admission 1.59 1.62 1.63 1.64 1.62 1.59 1.61 1.64 1.65 1.62 0.6
Revenue per episode $ 2,778 $ 2,956 $ 2,947 $ 2,961 $ 2,910 $ 2,861 $ 2,933 $ 2,936 $ 2,909 $ 2,910 (1.8 )
Hospice:
Sites of service (at end of period) 190 185 181 175 177 177 185 183
Admissions 13,164 12,574 12,091 12,129 49,958 13,234 13,149 12,916 12,660 51,959 4.4
Average length of stay 95 93 101 100 97 92 91 98 100 95 -
Patient days 1,150,841 1,190,604 1,211,291 1,185,330 4,738,066 1,183,908 1,238,584 1,277,125 1,246,152 4,945,769 5.1
Average daily census 12,787 13,084 13,166 12,884 12,981 13,010 13,611 13,882 13,545 13,513 5.1
Revenue per patient day $ 151 $ 150 $ 150 $ 150 $ 150 $ 149 $ 150 $ 148 $ 149 $ 149 (0.7 )

Community Care and other revenues (included in Home Health business segment) ($ 000s)

$ 65,530 $ 67,647 $ 67,338 $ 67,684 $ 268,199 $ 66,305 $ 68,229 $ 75,978 $ 74,875 $ 285,387 10.6
 
Hospital division:
End of period data:
Number of transitional care hospitals 97 96 95 95 95 97 94 82
Number of licensed beds 7,147 7,124 7,094 7,094 7,089 7,067 6,890 6,107
Revenue mix %:
Medicare 56.8 55.2 57.1 57.3 56.6 57.8 55.5 54.6 53.5 55.5
Medicaid 5.5 5.3 5.3 5.1 5.3 4.2 4.2 4.0 4.5 4.2
Medicare Advantage 11.9 11.6 10.8 11.1 11.4 11.5 12.0 12.1 11.0 11.7
Medicaid Managed 4.7 5.6 6.1 6.2 5.6 5.6 6.3 7.3 8.0 6.7
Commercial insurance and other 21.1 22.3 20.7 20.3 21.1 20.9 22.0 22.0 23.0 21.9
Admissions:
Medicare 8,775 8,267 7,976 8,169 33,187 8,919 8,253 7,861 7,351 32,384 (10.0 )
Medicaid 610 610 556 520 2,296 463 386 375 336 1,560 (35.4 )
Medicare Advantage 1,555 1,352 1,212 1,304 5,423 1,453 1,382 1,327 1,210 5,372 (7.2 )
Medicaid Managed 643 675 646 612 2,576 733 768 861 787 3,149 28.6
Commercial insurance and other   1,868   1,815   1,763   1,701   7,147   1,871   1,807   1,727   1,488   6,893 (12.5 )
  13,451   12,719   12,153   12,306   50,629   13,439   12,596   12,151   11,172   49,358 (9.2 )
Patient days:
Medicare 228,483 218,577 210,870 210,409 868,339 229,004 219,013 202,482 186,290 836,789 (11.5 )
Medicaid 28,663 25,213 23,167 21,795 98,838 21,134 19,409 16,781 12,181 69,505 (44.1 )
Medicare Advantage 48,448 44,740 39,585 41,079 173,852 45,760 47,697 43,241 37,526 174,224 (8.6 )
Medicaid Managed 22,013 24,833 24,412 24,802 96,060 25,341 27,267 28,534 29,275 110,417 18.0
Commercial insurance and other   62,241   62,922   58,631   57,321   241,115   62,769   63,009   59,856   54,148   239,782 (5.5 )
  389,848   376,285   356,665   355,406   1,478,204   384,008   376,395   350,894   319,420   1,430,717 (10.1 )
Average length of stay:
Medicare 26.0 26.4 26.4 25.8 26.2 25.7 26.5 25.8 25.3 25.8 (1.9 )
Medicaid 47.0 41.3 41.7 41.9 43.0 45.6 50.3 44.7 36.3 44.6 (13.4 )
Medicare Advantage 31.2 33.1 32.7 31.5 32.1 31.5 34.5 32.6 31.0 32.4 (1.6 )
Medicaid Managed 34.2 36.8 37.8 40.5 37.3 34.6 35.5 33.1 37.2 35.1 (8.1 )
Commercial insurance and other 33.3 34.7 33.3 33.7 33.7 33.5 34.9 34.7 36.4 34.8 8.0
Weighted average 29.0 29.6 29.3 28.9 29.2 28.6 29.9 28.9 28.6 29.0 (1.0 )
Revenues per admission:
Medicare $ 41,483 $ 41,892 $ 41,451 $ 41,656 $ 41,620 $ 41,717 $ 42,579 $ 39,945 $ 38,602 $ 40,800 (7.3 )
Medicaid 57,594 54,795 55,415 57,724 56,352 57,928 69,797 61,338 70,333 64,356 21.8
Medicare Advantage 48,908 53,578 51,495 50,680 51,077 51,080 55,105 52,363 48,387 51,826 (4.5 )
Medicaid Managed 46,740 51,950 54,976 60,263 53,383 49,287 51,696 48,631 54,238 50,932 (10.0 )
Commercial insurance and other 72,395 77,110 68,151 70,735 72,150 71,651 77,193 73,515 82,066 75,819 16.0
Weighted average 47,616 49,312 47,683 48,236 48,209 47,868 50,309 47,348 47,507 48,281 (1.5 )
Revenues per patient day:
Medicare $ 1,593 $ 1,584 $ 1,568 $ 1,617 $ 1,591 $ 1,625 $ 1,605 $ 1,551 $ 1,523 $ 1,579 (5.8 )
Medicaid 1,226 1,326 1,330 1,377 1,309 1,269 1,388 1,371 1,940 1,444 40.9
Medicare Advantage 1,570 1,619 1,577 1,609 1,593 1,622 1,597 1,607 1,560 1,598 (3.0 )
Medicaid Managed 1,365 1,412 1,455 1,487 1,432 1,426 1,456 1,467 1,458 1,453 (2.0 )
Commercial insurance and other 2,173 2,224 2,049 2,099 2,139 2,136 2,214 2,121 2,255 2,180 7.4
Weighted average 1,643 1,667 1,625 1,670 1,651 1,675 1,684 1,640 1,662 1,666 (0.5 )

Medicare case mix index (discharged patients only)

1.166 1.163 1.150 1.164 1.162 1.163 1.179 1.172 1.153 1.169 (0.9 )
Average daily census 4,332 4,135 3,877 3,863 4,050 4,220 4,136 3,814 3,472 3,909 (10.1 )
Occupancy % 69.2 66.1 62.2 62.2 64.9 68.0 67.5 61.6 64.1 65.1 3.1
 
                             
KINDRED HEALTHCARE, INC.
Condensed Business Segment Data (Continued)
(Unaudited)
 
Fourth quarter
2015 Quarters 2016 Quarters % change v.
First Second Third Fourth Year First Second Third Fourth Year prior year
Same-hospital data (a):
End of period data:
Number of transitional care hospitals 78 78 78 78 78 78 78 78
Number of licensed beds 5,965 5,965 5,965 5,965 5,960 5,960 5,960 5,960
Revenues $ 555,986 $ 546,476 $ 506,887 $ 520,087 $ 2,129,436 $ 563,201 $ 557,989 $ 508,608 $ 521,244 $ 2,151,042 0.2
Revenue mix %:
Medicare 57.2 55.4 57.6 57.8 57.0 58.0 55.4 54.1 53.0 55.2
Medicaid 5.0 4.7 4.8 4.5 4.8 3.7 3.9 3.7 4.5 3.9
Medicare Advantage 11.5 11.2 10.2 10.7 10.9 11.3 11.7 12.3 11.0 11.6
Medicaid Managed 4.9 5.8 6.3 6.4 5.8 5.8 6.6 7.8 8.2 7.1
Commercial insurance and other 21.4 22.9 21.1 20.6 21.5 21.2 22.4 22.1 23.3 22.2
Admissions:
Medicare 7,594 7,155 7,008 7,161 28,918 7,802 7,209 6,882 7,132 29,025 (0.4 )
Medicaid 520 527 485 430 1,962 395 342 343 336 1,416 (21.9 )
Medicare Advantage 1,284 1,099 1,020 1,082 4,485 1,219 1,148 1,165 1,187 4,719 9.7
Medicaid Managed 562 609 572 547 2,290 632 702 792 787 2,913 43.9
Commercial insurance and other   1,548   1,514   1,457   1,410   5,929   1,567   1,528   1,462   1,456   6,013 3.3
  11,508   10,904   10,542   10,630   43,584   11,615   10,929   10,644   10,898   44,086 2.5
Patient days:
Medicare 198,834 189,440 184,829 185,149 758,252 200,004 190,955 177,079 180,794 748,832 (2.4 )
Medicaid 21,074 18,041 16,596 14,788 70,499 14,670 13,547 12,085 12,175 52,477 (17.7 )
Medicare Advantage 40,387 37,070 32,588 34,630 144,675 38,617 40,835 38,462 36,900 154,814 6.6
Medicaid Managed 19,537 22,351 21,700 22,063 85,651 22,421 24,893 26,698 29,284 103,296 32.7
Commercial insurance and other   52,945   53,110   49,896   49,141   205,092   53,613   53,821   51,772   53,391   212,597 8.6
  332,777   320,012   305,609   305,771   1,264,169   329,325   324,051   306,096   312,544   1,272,016 2.2
Average length of stay:
Medicare 26.2 26.5 26.4 25.9 26.2 25.6 26.5 25.7 25.3 25.8 (2.3 )
Medicaid 40.5 34.2 34.2 34.4 35.9 37.1 39.6 35.2 36.2 37.1 5.2
Medicare Advantage 31.5 33.7 31.9 32.0 32.3 31.7 35.6 33.0 31.1 32.8 (2.8 )
Medicaid Managed 34.8 36.7 37.9 40.3 37.4 35.5 35.5 33.7 37.2 35.5 (7.7 )
Commercial insurance and other 34.2 35.1 34.2 34.9 34.6 34.2 35.2 35.4 36.7 35.4 5.2
Weighted average 28.9 29.3 29.0 28.8 29.0 28.4 29.7 28.8 28.7 28.9 (0.3 )
Revenues per admission:
Medicare $ 41,914 $ 42,350 $ 41,669 $ 41,954 $ 41,973 $ 41,876 $ 42,883 $ 39,959 $ 38,720 $ 40,896 (7.7 )
Medicaid 53,340 48,832 50,400 54,199 51,591 53,232 62,945 54,765 70,288 59,996 29.7
Medicare Advantage 49,842 55,649 50,807 51,604 51,909 51,955 57,112 53,701 48,440 52,757 (6.1 )
Medicaid Managed 48,002 52,017 55,653 61,296 54,156 51,511 52,419 50,027 54,286 52,076 (11.4 )
Commercial insurance and other 76,859 82,490 73,279 75,877 77,184 76,305 81,779 77,047 83,278 79,565 9.8
Weighted average 48,313 50,117 48,083 48,926 48,858 48,489 51,056 47,784 47,829 48,792 (2.2 )
Revenues per patient day:
Medicare $ 1,601 $ 1,600 $ 1,580 $ 1,623 $ 1,601 $ 1,634 $ 1,619 $ 1,553 $ 1,527 $ 1,585 (5.9 )
Medicaid 1,316 1,426 1,473 1,576 1,436 1,433 1,589 1,554 1,940 1,619 23.1
Medicare Advantage 1,585 1,650 1,590 1,612 1,609 1,640 1,606 1,627 1,558 1,608 (3.3 )
Medicaid Managed 1,381 1,417 1,467 1,520 1,448 1,452 1,478 1,484 1,459 1,469 (4.0 )
Commercial insurance and other 2,247 2,352 2,140 2,177 2,231 2,230 2,322 2,176 2,271 2,250 4.3
Weighted average 1,671 1,708 1,659 1,701 1,684 1,710 1,722 1,662 1,668 1,691 (1.9 )
 
Average daily census 3,698 3,517 3,322 3,324 3,463 3,619 3,561 3,327 3,397 3,475 2.2

__________

(a)

All historical statistics have been adjusted to present the ongoing hospital division portfolio excluding four hospitals acquired during the second quarter of 2016. See reconciliation of same-hospital revenues to reported revenues for the Hospital Division on page 18.

                             
KINDRED HEALTHCARE, INC.
Condensed Business Segment Data (Continued)
(Unaudited)
 
Fourth quarter
2015 Quarters 2016 Quarters % change v.
First Second Third Fourth Year First Second Third Fourth Year prior year
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services:
Freestanding IRFs:
End of period data:
Number of IRFs 16 16 18 18 19 19 19 19
Number of licensed beds 829 829 919 919 969 969 969 995
Discharges (a) 3,806 3,927 3,941 4,317 15,991 4,448 4,646 4,644 4,671 18,409 8.2
Same-hospital discharges (a) 3,806 3,927 3,842 4,173 15,748 4,016 4,089 4,069 4,366 16,540 4.6
Occupancy % (a) 73.2 71.5 68.7 68.0 70.2 70.6 70.6 68.8 66.5 69.1 (2.2 )
Average length of stay (a) 13.7 13.1 13.2 12.7 13.2 13.2 12.9 12.7 12.6 12.8 (0.8 )
Revenue per discharge (a) $ 19,517 $ 19,325 $ 18,992 $ 18,640 $ 19,104 $ 19,731 $ 19,318 $ 19,599 $ 19,486 $ 19,531 4.5
Contract services:
Sites of service (at end of period):
Inpatient rehabilitation units 100 99 101 100 104 105 104 102
LTAC hospitals 120 120 119 119 119 121 120 119
Sub-acute units 8 8 7 7 7 7 7 5
Outpatient units   138   139   135   130   139   138   139   132
  366   366   362   356   369   371   370   358
 
Revenue per site $ 211,151 $ 209,436 $ 206,041 $ 210,978 $ 837,606 $ 211,417 $ 215,798 $ 210,810 $ 220,733 $ 858,758 4.6
 
RehabCare:
Sites of service (at end of period) 1,829 1,789 1,821 1,798 1,767 1,759 1,754 1,718
Revenue per site $ 138,106 $ 132,359 $ 120,548 $ 114,896 $ 505,909 $ 115,590 $ 111,470 $ 109,738 $ 111,460 $ 448,258 (3.0 )
 
Nursing center division:
End of period data:
Number of nursing centers 90 90 90 90 92 92 91 91
Number of licensed beds 11,535 11,535 11,535 11,535 11,815 11,815 11,568 11,568
Admissions (b) 10,376 9,831 9,558 9,237 39,002 9,815 9,480 9,698 9,409 38,402 1.9
Medicare average length of stay (b) 28.9 28.9 28.5 28.4 28.7 28.2 28.4 27.4 26.7 27.7 (6.0 )
Patient days (b) 861,278 852,691 851,332 845,924 3,411,225 846,578 842,681 845,037 846,361 3,380,657 0.1
Revenues per patient day (b) $ 319 $ 321 $ 318 $ 323 $ 320 $ 322 $ 323 $ 320 $ 323 $ 322 -
Average daily census (b) 9,570 9,370 9,254 9,195 9,346 9,303 9,260 9,185 9,200 9,237 0.1
Occupancy % (b) 81.3 79.6 78.6 78.1 79.4 77.3 76.7 77.5 77.9 77.4 (0.3 )

__________

(a)

Excludes non-consolidating IRF.

(b)

Excludes managed facilities.

 
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 ability to exit the skilled nursing facility business and the expected timing of such exit, as well as the Company's ability to realize the anticipated benefits, sale proceeds, cost savings and strategic gains from this initiative, 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 words such as “anticipate,” “approximate,” “believe,” “plan,” “estimate,” “expect,” “project,” “could,” “would,” “should,” “will,” “intend,” “hope,” “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, and 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 Measures
 
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, restructuring 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, 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.
 
Non-GAAP Measures (Continued)
 
Same-Hospital Revenues: The same-hospital revenues are calculated by excluding from the Company's Hospital Division revenues the results from four hospitals acquired in 2016, 15 hospitals sold in 2016, three hospitals that closed during 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, research and development, restructuring charges, debt amendment costs, 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, research and development, restructuring charges, debt amendment costs, 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, INC.
Reconciliation of GAAP Results to Non-GAAP Measures
(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 measures for the three months and year ended December 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 (provision) associated with the excluded charges, including the deferred tax valuation allowance, was calculated using an effective income tax rate of 1.4% and 129.2% for the three months ended December 31, 2016 and 2015, respectively, and 56.9% and 36.8% for the year ended December 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 deferred tax valuation allowance recorded in 2016 and the composition of charges that are non-deductible for income tax purposes, including the impairment charges, litigation contingency expense and transaction costs. For the three months ended December 31, 2015, the Company recorded an income tax benefit of $47.1 million based upon the final settlement terms of an investigation of RehabCare Group, Inc. by the United States Department of Justice, which was completed in January 2016. The investigation was settled for $126.3 million, including interest, and $125 million of the settlement cost was recorded during the nine months ended September 31, 2015.
 
 
Three months ended Year ended
December 31, December 31,
2016 2015 2016 2015
Reconciliation of income from continuing operations before charges:
 
As reported:
Income (loss) from continuing operations attributable to Kindred ($19,719 ) $ 43,902 ($671,137 ) ($94,427 )
Diluted income (loss) per common share from continuing operations ($0.23 ) $ 0.50 ($7.73 ) ($1.12 )
Weighted average diluted shares outstanding 86,904 87,232 86,800 84,558
 
Detail of charges:
Restructuring charges:
Facility/branch divestitures and closings ($6,742 ) ($3,288 ) ($28,976 ) ($9,727 )
Retention and severance costs (9,344 ) - (14,393 ) (523 )
Transaction costs   (837 )   -     (2,414 )   -  
(16,923 ) (3,288 ) (45,783 ) (10,250 )
Lease termination costs (charged to rent restructuring charges) (2,029 ) (889 ) (61,392 ) (2,720 )
 
Impairment charges (4,351 ) (18,031 ) (342,559 ) (18,031 )
Research and development (4,293 ) - (11,520 ) -
RehabCare customer contract litigation - (12,864 ) - (12,864 )
Litigation contingency expense - (8,261 ) (2,840 ) (138,648 )
Other retirement and severance costs - (2,125 ) (658 ) (7,752 )
Other facility/branch sales/closings/consolidations - (50 ) (821 ) (2,136 )
Business interruption settlements 2,069 - 3,378 -
Debt amendment fees not capitalized - - (1,103 ) -
Gentiva transaction costs: -
Professional and consulting fees (1,779 ) (2,662 ) (5,610 ) (37,840 )
Severance and retention - (1,527 ) (696 ) (60,358 )
Lease termination (charged to rent expense) - - (272 ) (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 )
Other transaction costs   (387 )   (1,178 )   (2,373 )   (4,928 )
(27,693 ) (50,875 ) (472,249 ) (326,481 )
Income tax benefit 22,385 65,738 119,987 120,040
Deferred tax valuation allowance   (22,002 )   -     (388,472 )   -  
Charges net of income taxes (27,310 ) 14,863 (740,734 ) (206,441 )
Noncontrolling interest adjustment related to impairment charges   -     -     1,304     -  
(27,310 ) 14,863 (739,430 ) (206,441 )
Allocation to participating unvested restricted stockholders   -     (204 )   -     -  
Available to common stockholders   ($27,310 ) $ 14,659     ($739,430 )   ($206,441 )
 
Diluted loss per common share related to charges ($0.31 ) $ 0.17 ($8.52 ) ($2.44 )
 
Weighted average diluted shares outstanding 86,904 87,232 86,800 84,558
 
Core:
Income from continuing operations before charges $ 7,591 $ 29,039 $ 68,293 $ 112,014
Diluted earnings per common share from continuing operations before charges (a) $ 0.08 $ 0.33 $ 0.76 $ 1.28

Weighted average diluted shares outstanding used to compute earnings per common share from continuing operations before charges

87,641 87,232 87,491 86,098
 
Reconciliation of effective income tax rate before charges:
Effective income tax rate before charges 13.5 % 25.1 % 27.1 % 33.3 %
Impact of charges on effective income tax rate   66.0 %   1273.1 %   76.6 %   11.9 %
Reported effective income tax rate   79.5 %   1298.2 %   103.7 %   45.2 %

__________

(a)

For purposes of computing diluted earnings per common share before charges, income from continuing operations before charges was reduced by $0.2 million and $0.4 million for the three months ended December 31, 2016 and 2015, respectively, and by $1.5 million and $1.8 million for the year ended December 31, 2016 and 2015, respectively, for the allocation of income to participating unvested restricted stockholders.

 
                   
KINDRED HEALTHCARE, INC.
Reconciliation of GAAP Results to Non-GAAP Measures (Continued)
(Unaudited)
(In thousands)
 
 
A reconciliation of combined Kindred and Gentiva home health revenues (excluding community care) for each historical period follows:
 
Fourth quarter
2015 Quarters 2016 Quarters % change v.
First Second Third Fourth Year First Second Third Fourth Year prior year
Kindred $ 254,965 $ 360,173 $ 356,716 $ 358,075 $ 1,329,929 $ 363,730 $ 370,327 $ 373,980 $ 369,198 $ 1,477,235
Gentiva   87,520     -     -     -     87,520     -     -     -     -     -  
$ 342,485   $ 360,173   $ 356,716   $ 358,075   $ 1,417,449   $ 363,730   $ 370,327   $ 373,980   $ 369,198   $ 1,477,235   3.1
 
 
 
 
A reconciliation of reported revenues to same-hospital revenues for the Hospital Division for each historical period follows:
 
Fourth quarter
2015 Quarters 2016 Quarters % change v.
First Second Third Fourth Year First Second Third Fourth Year prior year
Reported revenues $ 640,483 $ 627,206 $ 579,497 $ 593,593 $ 2,440,779 $ 643,299 $ 633,695 $ 575,323 $ 530,746 $ 2,383,063 (10.6 )
Hospitals acquired during 2016 (a) - - - - - - (2,836 ) (10,655 ) (9,958 ) (23,449 )
Hospitals sold during 2016 (b) (71,307 ) (68,185 ) (63,074 ) (66,533 ) (269,099 ) (71,941 ) (64,084 ) (47,098 ) 732 (182,391 )
Hospitals closed during 2016 (c) (7,682 ) (7,357 ) (7,376 ) (7,471 ) (29,886 ) (8,271 ) (8,864 ) (8,908 ) (183 ) (26,226 )
Hospitals closed during 2015 (d)   (5,508 )   (5,188 )   (2,160 )   498     (12,358 )   114     78     (54 )   (93 )   45  
Same-hospital revenues $ 555,986   $ 546,476   $ 506,887   $ 520,087   $ 2,129,436   $ 563,201   $ 557,989   $ 508,608   $ 521,244   $ 2,151,042   0.2
 

__________

(a)

Four hospitals acquired during the second quarter of 2016.

(b)

Three hospitals sold during the second quarter of 2016 and 12 hospitals sold during the fourth quarter of 2016.

(c)

Three hospitals closed during the third quarter of 2016.

(d)

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

 
                               
KINDRED HEALTHCARE, INC.
Reconciliation of GAAP Results to Non-GAAP Measures (Continued)
(Unaudited)
(In thousands, except per share amounts)
 
 
Three months ended December 31, 2016
Charges
Gentiva Deferred
Business transaction tax Before
As interruption Impairment Research and Restructuring and Other valuation charges
reported settlements charges development charges integration transaction allowance Total ("core")
Income (loss) from continuing operations:
Segment EBITDAR:
Kindred at Home:
Home health $ 61,487 $ (302 ) $ - $ - $ - $ - $ - $ - $ (302 ) $ 61,185
Hospice   28,805     (1,137 )   -   -   -     -   -   -     (1,137 )   27,668  
  90,292     (1,439 )   -   -   -     -   -   -     (1,439 )   88,853  
 
Hospital division 91,892 (630 ) - - - - - - (630 ) 91,262
 
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services 49,314 - - - - - - - - 49,314
RehabCare   5,578     -     -   -   -     -   -   -     -     5,578  
  54,892     -     -   -   -     -   -   -     -     54,892  
 
Nursing center division 33,658 - - - - - - - - 33,658
 
Support center (57,643 ) - - 4,293 - - - - 4,293 (53,350 )
Impairment charges (4,351 ) - 4,351 - - - - - 4,351 -
Restructuring charges (16,923 ) - - - 16,923 - - - 16,923 -
Transaction costs   (2,166 )   -     -   -   -     1,779   387   -     2,166     -  
EBITDAR 189,651 (2,069 ) 4,351 4,293 16,923 1,779 387 - 25,664 215,315
Rent (94,509 ) - - - - - - - - (94,509 )
Restructuring charges - rent (2,029 ) - - - 2,029 - - - 2,029 -
Depreciation and amortization (38,082 ) - - - - - - - - (38,082 )
Interest, net   (58,629 )   -     -   -   -     -   -   -     -     (58,629 )

Income (loss) from continuing operations before income taxes

(3,598 ) (2,069 ) 4,351 4,293 18,952 1,779 387 - 27,693 24,095
Provision for income taxes   2,860     (1,692 )   3,559   3,511   15,501     1,190   316   (22,002 )   383     3,243  
(6,458 ) $ (377 ) $ 792 $ 782 $ 3,451   $ 589 $ 71 $ 22,002   $ 27,310   20,852
Noncontrolling interests   (13,261 )   (13,261 )
Income (loss) attributable to Kindred $ (19,719 ) $ 7,591  
 
Diluted earnings (loss) per common share $ (0.23 ) $ 0.08

Diluted shares used in computing earnings (loss) per common share

86,904 87,641
 
Three months ended December 31, 2015
Charges
RehabCare Gentiva
Retirement Facility/ customer transaction Before
As and branch contract Litigation Impairment Restructuring and Other charges
reported severance closings litigation contingency charges charges integration transaction Total ("core")
Income from continuing operations:
Segment EBITDAR:
Kindred at Home:
Home health $ 68,776 $ - $ 50 $ - $ - $ - $ - $ - $ - $ 50 $ 68,826
Hospice   30,212     -     -   -   -     -   -   -     -     -     30,212  
  98,988     -     50   -   -     -   -   -     -     50     99,038  
 
Hospital division 116,454 1,221 - - - - - - - 1,221 117,675
 
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 -
Restructuring charges (3,288 ) - - - - - 3,288 - - 3,288 -
Transaction costs   (5,367 )   -     -   -   -     -   -   4,189     1,178     5,367     -  
EBITDAR 197,853 2,125 50 12,864 8,261 18,031 3,288 4,189 1,178 49,986 247,839
Rent (96,934 ) - - - - - - - - - (96,934 )
Restructuring charges - rent (889 ) - - - - - 889 - - 889 -
Depreciation and amortization (40,362 ) - - - - - - - - - (40,362 )
Interest, net   (55,664 )   -     -   -   -     -   -   -     -     -     (55,664 )

Income from continuing operations before income taxes

4,004 2,125 50 12,864 8,261 18,031 4,177 4,189 1,178 50,875 54,879
Provision (benefit) for income taxes   (51,980 )   836     20   5,062   50,329     6,205   1,643   1,487     156     65,738     13,758  
55,984 $ 1,289   $ 30 $ 7,802 $ (42,068 ) $ 11,826 $ 2,534 $ 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, INC.
Reconciliation of GAAP Results to Non-GAAP Measures (Continued)
(Unaudited)
(In thousands, except per share amounts)
 
 
Year ended December 31, 2016
Charges
Gentiva Deferred
Retirement Facility/ Business transaction tax Before
As and branch interruption Litigation Impairment Research and Debt Restructuring and Other valuation charges
reported severance closings settlements contingency charges development amendment charges integration transaction allowance Total ("core")
Income (loss) from continuing operations:
Segment EBITDAR:
Kindred at Home:
Home health $ 279,531 $ - $ - $ (1,611 ) $ - $ - $ - $ - $ - $ - $ - $ - $ (1,611 ) $ 277,920
Hospice   116,326     -   -   (1,137 )   -   -     -   -   -   -   -   -     (1,137 )   115,189  
  395,857     -   -   (2,748 )   -   -     -   -   -   -   -   -     (2,748 )   393,109  
 
Hospital division 436,071 - - (630 ) - - - - - - - - (630 ) 435,441
 
Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services 197,123 - 747 - - - - - - - - - 747 197,870
RehabCare   40,082     -   -   -     -   -     -   -   -   -   -   -     -     40,082  
  237,205     -   747   -     -   -     -   -   -   -   -   -     747     237,952  
 
Nursing center division 127,342 - - - - - - - - - - - - 127,342
 
Support center (257,006 ) 658 - - - - 11,520 1,103 - - - - 13,281 (243,725 )
Litigation contingency expense (2,840 ) - - - 2,840 - - - - - - - 2,840 -
Impairment charges (342,559 ) - - - - 342,559 - - - - - - 342,559 -
Restructuring charges (45,783 ) - - - - - - - 45,783 - - - 45,783 -
Transaction costs   (8,679 )   -   -   -     -   -     -   -   -   6,306   2,373   -     8,679     -  
EBITDAR 539,608 658 747 (3,378 ) 2,840 342,559 11,520 1,103 45,783 6,306 2,373 - 410,511 950,119
Rent (390,534 ) - 74 - - - - - - 272 - - 346 (390,188 )
Restructuring charges - rent (61,392 ) - - - - - - - 61,392 - - - 61,392 -
Depreciation and amortization (159,402 ) - - - - - - - - - - - - (159,402 )
Interest, net   (231,485 )   -   -   -     -   -     -   -   -   -   -   -     -     (231,485 )

Income (loss) from continuing operations before income taxes

(303,205 ) 658 821 (3,378 ) 2,840 342,559 11,520 1,103 107,175 6,578 2,373 - 472,249 169,044
Provision for income taxes   314,330     263     328     (1,349 )     36     69,438       4,599     440     42,788     2,497   947     (388,472 )     (268,485 )   45,845  
(617,535 ) 395 493 (2,029 ) 2,804 273,121 6,921 663 64,387 4,081 1,426 388,472 740,734 123,199
Noncontrolling interests   (53,602 )   -   -   -     -   (1,304 )   -   -   -   -   -   -