Kindred Healthcare Announces Fourth Quarter Results

  Kindred Healthcare Announces Fourth Quarter Results

 Excluding Certain Items, Continuing Operations Diluted EPS Totaled $0.15 in
the Fourth Quarter and $0.94 for the Full Year, Ahead of the Company’s Annual
                                   Guidance

Company Reports Strong Free Cash Flows of $130 Million for the Year Excluding
     Certain Items and $13 Million of Cash Dividends Paid to Shareholders

 Company Reports GAAP Continuing Operations Loss of $54 Million in the Fourth
Quarter and a Loss of $48 Million for the Full Year, Primarily Attributable to
                  an Asset Impairment Charge of $76 Million

 GAAP Operating Cash Flows Totaled $199 Million for the Year Compared to $263
                              Million a Year Ago

Company Maintains Fiscal 2014 Guidance for Core Earnings of $1.05 to $1.25 and
Free Cash Flow Guidance of $125 Million to $145 Million before $26 Million of
                      Estimated Full-Year Cash Dividends

Business Wire

LOUISVILLE, Ky. -- February 20, 2014

Kindred Healthcare, Inc. (“Kindred” or the “Company”) (NYSE:KND) today
announced its operating results for the fourth quarter and year ended December
31, 2013. The Company continues to benefit from its repositioning strategy
through the planned exit from a nursing center and a transitional care (“TC”)
hospital and the closure of another nursing center during the fourth quarter
of 2013. The Company has reclassified the operations of these three facilities
as discontinued for all periods presented. 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.

Highlights:

  *Volume softness in the hospital and nursing center divisions drove a 1%
    decline in fourth quarter consolidated revenues which were mitigated by
    cost controls throughout the Company
  *The closure or planned disposition of three additional non-strategic
    assets bolstered continuing operations diluted EPS by $0.05 in the quarter
    and $0.13 for the full year
  *Free cash flows for the full year were strong

       *Excluding certain items and dividend payments, fiscal 2013 free cash
         flows of $130 million were up 23% from last year
       *GAAP operating cash flows totaled $199 million compared to $263
         million a year ago

  *Kindred continued to execute on its Integrated Care Market and
    redeployment strategy in the fourth quarter

       *Senior Home Care purchase added $143 million of annualized home
         health revenues to Kindred at Home and the Care Management Division
       *The real estate of seven previously leased nursing centers were
         acquired for $61 million reducing annual rents by approximately $7
         million

  *Kindred is well positioned operationally and financially to grow moving
    into 2014

       *Available borrowing capacity under the Company’s revolving credit
         facility approximated $396 million at year-end

  *Board of Directors declared regular quarterly cash dividend of $0.12 per
    share payable on March 27, 2014

Fourth Quarter Results

Continuing Operations

Consolidated revenues for the fourth quarter ended December 31, 2013 declined
1% to $1.22 billion compared to $1.24 billion in the same period in 2012. The
Company reported a loss from continuing operations for the fourth quarter of
2013 of $54.1 million or $1.04 per share compared to a loss of $84.0 million
or $1.62 per share in the fourth quarter of 2012. Fourth quarter 2013
operating results included pretax charges of $87.7 million related to (1) an
asset impairment charge, (2) changes in estimates related to pending
litigation, (3) severance and retirement costs, (4) costs associated with the
closing of a TC hospital, (5) transaction-related costs and (6) an increase in
the estimated tax benefit associated with pending litigation, which in
aggregate reduced income from continuing operations by $62.4 million or $1.19
per share. Operating results for the fourth quarter of 2012 included an asset
impairment charge and severance, restructuring, lease termination and
transaction-related costs that reduced income from continuing operations by
$104.8 million or $2.03 per share.

During the fourth quarter of 2013, the Company recorded a $76 million goodwill
impairment charge to reflect circumstances in which the carrying value of its
home health reporting unit exceeded its fair value. The impairment charge
resulted primarily from the expected decline in operating results in the
Company’s home health business related to the Medicare reimbursement rate
reductions for each of the next four years beginning January 1, 2014 announced
by the Centers for Medicare and Medicaid Services (“CMS”) on November 22,
2013.

Fiscal Year Results

Continuing Operations

Consolidated revenues for the year ended December 31, 2013 declined 1% to
$4.90 billion compared to $4.93 billion in the previous year. The Company
reported a loss from continuing operations of $48.5 million or $0.93 per share
in 2013 compared to a loss of $48.0 million or $0.93 per share in 2012.

In addition to the charges discussed in the fourth quarter results above,
operating results in 2013 included (1) a one-time bonus to employees who do
not participate in the Company’s incentive plans distributed in the first
quarter of 2013, (2) changes in estimates related to pending litigation, (3)
severance and retirement costs, (4) costs associated with the closure of a TC
hospital and home health location and (5) charges associated with the
modification of certain of the Company’s senior debt, which in aggregate
reduced income from continuing operations by $99.1 million or $1.90 per share.
Operating results in 2012 included certain items that reduced income from
continuing operations by $112.8 million or $2.18 per share, most of which were
related to asset impairment charges, litigation and severance and
restructuring costs.

Discontinued Operations

In connection with the Company’s long-range plans to reposition its businesses
and enhance its Integrated Care Market strategy, the Company has completed
various transactions and entered into certain agreements to significantly
change its business mix, operating profile and future business prospects.
During 2013, the Company exited, sold or agreed to exit, 139 facilities (15 TC
hospitals, one inpatient rehabilitation hospital (“IRF”) and 123 nursing
centers) with annualized revenues approximating $1.3 billion. These
transactions generated approximately $250 million in cash proceeds from asset
sales and will reduce annual rents by approximately $125 million. For
accounting purposes, the historical operating results and losses on the
disposal of these businesses have been classified as discontinued operations
in the Company’s consolidated statement of operations for all historical
periods.

Management Commentary

Paul J. Diaz, Chief Executive Officer of the Company, remarked, “Our fourth
quarter results were in line with our expectations and reflected a
continuation of the difficult volume and utilization trends experienced by
many healthcare providers in the second half of 2013. We also continued to
advance our repositioning strategy with the closure or planned disposition of
three additional non-strategic assets. We were successful in managing costs in
response to volume weakness in our hospitals and nursing centers, and we are
seeing some volume momentum in January and February that we expect will help
us get the year off to a strong start.”

Mr. Diaz further noted, “For the full year, we are pleased to report that we
exceeded our core earnings objectives that were announced in our third quarter
earnings release as we continued to mitigate the negative impact of
approximately $40 million of Medicare sequestration cuts across our
enterprise. This accomplishment reflects the commitment of our caregivers, and
a relentless focus on cost management across the enterprise, all while working
to maintain a culture of quality service and patient satisfaction under very
difficult circumstances. Despite volume challenges during the last half of the
year, and Medicare sequestration cuts, our hospital division results were
solid. Our RehabCare division made great progress in the midst of Medicare
reimbursement reductions and continues to perform well. For our nursing center
division, 2013 was a significant year of transition as we worked through
several divestitures. We expect 2014 to reflect more stabilized nursing center
operations with better financial performance. Our Care Management Division
experienced significant growth in 2013 and now has annualized revenues of over
$350 million. We expect operating improvements in our home health and hospice
operations in 2014 as we assimilate numerous acquisitions and execute on a
more standardized operating model.”

Commenting on the Company’s strategic initiatives, Mr. Diaz noted, “In 2013,
we continued advancing a strategy to reposition our business mix with the goal
of improving our long-term growth, profitability and financial position and
enhancing our Integrated Care Market capabilities, particularly in home health
and hospice services. Specifically, we exited, sold or agreed to exit 139
facilities with annualized revenues of $1.3 billion, completed several home
health and hospice acquisitions that added approximately $150 million of
annualized revenues and we acquired the real estate of nine previously leased
facilities for approximately $96 million that will benefit our balance sheet
leverage over time. Having substantially completed the divestiture phase of
our repositioning strategy, we are evaluating various opportunities to
redeploy our management capabilities, industry leading infrastructure and
financial resources as we move forward with the growth phase of our strategic
plan.”

Mr. Diaz stated, “Our free cash flows, adjusted for certain items, were up 23%
compared to last year before paying $13 million in quarterly dividends and
absorbing significant reimbursement headwinds. Our significant free cash flows
as well as our $396 million of available credit going into 2014, provide the
financial strength to further reposition the Company’s business mix and
advance our Continue the Care strategy in our Integrated Care Markets.”

Finally, Mr. Diaz added, “The new long-term acute care (“LTAC”) patient
criteria enacted in 2013 provides significant clarity to our business and
affirms the role of LTAC hospitals in the healthcare continuum. The new
criteria will not be fully phased in for most of our hospitals until the
summer of 2018, which provides us with significant time to develop clinical
programs and services that better align with the clinical needs of this
patient population and this new payment system. We believe that the new
criteria will afford us the opportunity to grow organically our patient
volumes and leverage our existing capacity of TC hospitals.”

Earnings Guidance – Continuing Operations

The Company maintained its previous earnings guidance for 2014. The Company
expects consolidated revenues for 2014 to approximate $5.2 billion. Operating
income, or earnings before interest, income taxes, depreciation, amortization
and rent, is expected to range from $725 million to $742 million. Rent expense
is expected to approximate $338 million, while depreciation and amortization
should approximate $165 million. Net interest expense is expected to
approximate $106 million. The Company expects to report income from continuing
operations for 2014 between $58 million and $68 million or $1.05 to $1.25 per
diluted share (based upon diluted shares of 53.2 million).

The Company’s 2014 earnings per share guidance includes $0.05 to $0.10 for the
estimated impact of new acquisitions that the Company expects to complete in
2014.

The Company updated its operating cash flow guidance for 2014 at a range
between $245 million and $275 million. Estimated routine capital expenditures
for 2014 are expected to range from $100 million to $105 million and estimated
costs to develop new or replacement TC hospitals, transitional care nursing
centers, and IRFs will approximate $20 million to $25 million in 2014.
Operating cash flows in excess of the Company’s routine and development
capital spending programs are expected to approximate $125 million to $145
million for 2014 and will be available to pay dividends, repay debt and fund
acquisitions. Estimated dividend payments for 2014 are expected to approximate
$26 million.

Benjamin A. Breier, President and Chief Operating Officer of the Company,
commented, “As we head into 2014, our confidence in our earnings guidance
range has increased as we are beginning to see traction in our sales and
marketing efforts to drive patient admissions as well as greater awareness
among managed care payors of our value proposition, particularly for our TC
hospitals. We also expect additional cost savings by continuing to push for
ongoing performance improvement with our efficiency initiatives inside the
Company.”

The Company’s earnings and cash flow guidance for 2014 excludes the effect of
reimbursement changes, severance and retirement costs, litigation costs,
transaction-related costs, any further acquisitions or divestitures (except as
otherwise noted), any impairment charges, and any repurchases of common stock.

Quarterly Cash Dividend

The Company also announced that its Board of Directors has approved the
payment of the regular quarterly cash dividend to its shareholders of $0.12
per common share to be paid on March 27, 2014 to shareholders of record as of
the close of business on March 6, 2014. Future declarations of quarterly
dividends will be subject to the approval of Kindred’s Board of Directors.

Conference Call

As previously announced, investors and the general public may access a live
webcast of the fourth quarter 2013 conference call through a link on the
Company’s website at http://investors.kindredhealthcare.com. The conference
call will be held on February 21 at 10:00 a.m. (Eastern Time).

A telephone replay of the conference call will become available at
approximately 1:00 p.m. onFebruary 21 by dialing (719) 457-0820, access code:
1522310.The replay will be available throughMarch 2.

Forward-Looking Statements

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

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

In addition to the factors set forth above, other factors that may affect the
Company’s plans, results or stock price include, without limitation, (a) the
impact of healthcare reform, which will initiate significant changes to the
United States healthcare system, including potential material changes to the
delivery of healthcare services and the reimbursement paid for such services
by the government or other third party payors, including reforms resulting
from the Patient Protection and Affordable Care Act and the Healthcare
Education and Reconciliation Act (collectively, the “ACA”) or future deficit
reduction measures adopted at the federal or state level. Healthcare reform is
affecting each of the Company’s businesses in some manner. Potential future
efforts in the U.S. Congress to repeal, amend, modify or retract funding for
various aspects of the ACA create additional uncertainty about the ultimate
impact of the ACA on the Company and the healthcare industry. Due to the
substantial regulatory changes that will need to be implemented by CMS and
others, and the numerous processes required to implement these reforms, the
Company cannot predict which healthcare initiatives will be implemented at the
federal or state level, the timing of any such reforms, or the effect such
reforms or any other future legislation or regulation will have on the
Company’s business, financial position, results of operations and liquidity,
(b) the impact of the final rules issued by CMS on August 1, 2012 which, among
other things, will reduce Medicare reimbursement to the Company’s TC hospitals
in 2013 and beyond by imposing a budget neutrality adjustment and modifying
the short-stay outlier rules, (c) the impact of the final rules issued by CMS
on July 29, 2011 which significantly reduced Medicare reimbursement to the
Company’s nursing centers and changed payments for the provision of group
therapy services effective October1, 2011, (d) the impact of the Budget
Control Act of 2011 (as amended by the American Taxpayer Relief Act of 2012
(the “Taxpayer Relief Act”)) which instituted an automatic 2% reduction on
each claim submitted to Medicare beginning April1, 2013, (e) the Company’s
ability to adjust to the new patient criteria for LTAC hospitals under the
Pathway for SGR Reform Act of 2013, which will reduce the population of
patients eligible for the Company’s hospital services and change the basis
upon which the Company is paid, (f) the impact of the Taxpayer Relief Act
which, among other things, reduces Medicare payments by an additional 25% for
subsequent procedures when multiple therapy services are provided on the same
day. At this time, the Company believes that the rules related to multiple
therapy services will reduce the Company’s Medicare revenues by $25 million to
$30 million on an annual basis, (g) changes in the reimbursement rates or the
methods or timing of payment from third party payors, including commercial
payors and the Medicare and Medicaid programs, changes arising from and
related to the Medicare prospective payment system for LTAC hospitals,
including potential changes in the Medicare payment rules, the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003, and changes in
Medicare and Medicaid reimbursement for the Company’s TC hospitals, nursing
centers, IRFs and home health and hospice operations, and the expiration of
the Medicare Part B therapy cap exception process, (h) the effects of
additional legislative changes and government regulations, interpretation of
regulations and changes in the nature and enforcement of regulations governing
the healthcare industry, (i) the ability of the Company’s hospitals and
nursing centers to adjust to medical necessity reviews, (j) the costs of
defending and insuring against alleged professional liability and other claims
(including those related to pending whistleblower and wage and hour class
action lawsuits against the Company) and the Company’s ability to predict the
estimated costs and reserves related to such claims, including the impact of
differences in actuarial assumptions and estimates compared to eventual
outcomes, (k) the impact of the Company’s significant level of indebtedness on
the Company’s funding costs, operating flexibility and ability to fund ongoing
operations, development capital expenditures or other strategic acquisitions
with additional borrowings, (l) the Company’s ability to successfully redeploy
its capital and proceeds of asset sales in pursuit of its business strategy
and pursue its development activities, including through acquisitions, and
successfully integrate new operations, including the realization of
anticipated revenues, economies of scale, cost savings and productivity gains
associated with such operations, as and when planned, including the potential
impact of unanticipated issues, expenses and liabilities associated with those
activities, (m) the Company’s ability to pay a dividend as, when and if
declared by the Board of Directors, in compliance with applicable laws and the
Company’s debt and other contractual arrangements, (n) the failure of the
Company’s facilities to meet applicable licensure and certification
requirements, (o) the further consolidation and cost containment efforts of
managed care organizations and other third party payors, (p) the Company’s
ability to meet its rental and debt service obligations, (q) the Company’s
ability to operate pursuant to the terms of its debt obligations, and comply
with its covenants thereunder, and the Company’s ability to operate pursuant
to its master lease agreements with Ventas, Inc. (NYSE:VTR), (r) the condition
of the financial markets, including volatility and weakness in the equity,
capital and credit markets, which could limit the availability and terms of
debt and equity financing sources to fund the requirements of the Company’s
businesses, or which could negatively impact the Company’s investment
portfolio, (s) the Company’s ability to control costs, particularly labor and
employee benefit costs, (t) the Company’s ability to successfully reduce (by
divestiture of operations or otherwise) its exposure to professional liability
and other claims, (u) the Company’s obligations under various laws to
self-report suspected violations of law by the Company to various government
agencies, including any associated obligation to refund overpayments to
government payors, fines and other sanctions, (v) national and regional
economic, financial, business and political conditions, including their effect
on the availability and cost of labor, credit, materials and other services,
(w) increased operating costs due to shortages in qualified nurses, therapists
and other healthcare personnel, (x) the Company’s ability to attract and
retain key executives and other healthcare personnel, (y) the Company’s
ability to successfully dispose of unprofitable facilities, (z) events or
circumstances which could result in the impairment of an asset or other
charges, such as the impact of the Medicare reimbursement regulations that
resulted in the Company recording significant impairment charges in the last
three fiscal years, (aa) changes in generally accepted accounting principles
(“GAAP”) or practices, and changes in tax accounting or tax laws (or
authoritative interpretations relating to any of these matters), and (bb) the
Company’s ability to maintain an effective system of internal control over
financial reporting.

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.

In addition to the results provided in accordance with GAAP, the Company has
provided information in this release to compute certain non-GAAP measurements
for the three months and years ended December 31, 2013 and 2012 before certain
charges or on a core basis.A reconciliation of the non-GAAP measurements to
the GAAP measurements is included in this press release.

As noted above, the Company discusses the financial measure of free cash flows
excluding certain items. The Company recognizes that free cash flows excluding
certain items is a non-GAAP measurement and is not intended to replace the
presentation of the Company’s cash flows in accordance with GAAP. The Company
believes that this non-GAAP measurement provides important information to
investors related to the amount of discretionary cash flows that are available
for other investing and financing activities. In addition, management uses
free cash flows excluding certain items in making decisions related to
acquisitions, development capital expenditures, dividends, long-term debt
repayments and other uses. The Company believes net cash flows provided by
operating activities is the most comparable GAAP measure. Readers of the
Company’s financial information should consider net cash flows provided by
operating activities as an important measure of the Company’s financial
performance because it provides the most complete measure of its
performance.Free cash flows excluding certain items should be considered in
addition to, not as a substitute for, or superior to, financial measures based
upon GAAP as an indicator of operating performance. A reconciliation of net
cash flows provided by operating activities to free cash flows excluding
certain items is included in this press release.

The Company’s earnings release includes a financial measure referred to as
operating income, or earnings before interest, income taxes, depreciation,
amortization and rent. The Company’s management uses operating income as a
meaningful measure of operational performance in addition to other measures.
The Company uses operating income to assess the relative performance of its
operating divisions as well as the employees that operate these businesses. In
addition, the Company believes this measurement is important because
securities analysts and investors use this measurement to compare the
Company’s performance to other companies in the healthcare industry. The
Company believes that income (loss) from continuing operations is the most
comparable GAAP measure. Readers of the Company’s financial information should
consider income (loss) from continuing operations as an important measure of
the Company’s financial performance because it provides the most complete
measure of its performance.Operating income 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. A reconciliation of operating
income to income (loss) from continuing operations provided in the Condensed
Business Segment Data is included in this press release.

About Kindred Healthcare

Kindred Healthcare, Inc., a top-150 private employer in the United States, is
a FORTUNE 500 healthcare services company based in Louisville, Kentucky with
annual revenues of approximately $5 billion and approximately 63,000 employees
in 47 states. At December 31, 2013, Kindred through its subsidiaries provided
healthcare services in 2,280 locations, including 101 transitional care
hospitals, five inpatient rehabilitation hospitals, 100 nursing centers, 22
sub-acute units, 159 Kindred at Home hospice, home health and non-medical home
care locations, 104 inpatient rehabilitation units (hospital-based) and a
contract rehabilitation services business, RehabCare, which served 1,789
non-affiliated facilities. Ranked as one of Fortune magazine’s Most Admired
Healthcare Companies for five years in a row, 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.
Financial Summary
(In thousands, except per share amounts)
                                                                   
                            Three months ended              Year ended
                            December 31,                    December 31,
                            2013            2012            2013            2012
                                                                            
Revenues                    $ 1,224,374    $ 1,237,392    $ 4,900,510    $ 4,928,509 
                                                                            
Loss from continuing        $ (51,737   )   $ (83,209   )   $ (44,812   )   $ (46,927   )
operations
Discontinued
operations, net of
income taxes:
  Income (loss) from          (6,160    )     3,312           (36,136   )     12,348
  operations
  Loss on divestiture        (5,994    )    (939      )    (83,887   )    (4,745    )
  of operations
      Income (loss)
      from discontinued      (12,154   )    2,373         (120,023  )    7,603     
      operations
         Net loss             (63,891   )     (80,836   )     (164,835  )     (39,324   )
Earnings attributable
to noncontrolling            (2,405    )    (790      )    (3,657    )    (1,043    )
interests
           Loss
           attributable     $ (66,296   )   $ (81,626   )   $ (168,492  )   $ (40,367   )
           to Kindred
                                                                            
Amounts attributable to
Kindred stockholders:
  Loss from continuing      $ (54,142   )   $ (83,999   )   $ (48,469   )   $ (47,970   )
  operations
  Income (loss) from
  discontinued               (12,154   )    2,373         (120,023  )    7,603     
  operations
           Net loss         $ (66,296   )   $ (81,626   )   $ (168,492  )   $ (40,367   )
                                                                            
Loss per common share:
  Basic:
      Loss from
      continuing            $ (1.04     )   $ (1.62     )   $ (0.93     )   $ (0.93     )
      operations
      Discontinued
      operations:
         Income (loss)
         from                 (0.12     )     0.06            (0.69     )     0.24
         operations
         Loss on
         divestiture of      (0.11     )    (0.02     )    (1.61     )    (0.09     )
         operations
          Income (loss)
          from               (0.23     )    0.04          (2.30     )    0.15      
          discontinued
          operations
           Net loss         $ (1.27     )   $ (1.58     )   $ (3.23     )   $ (0.78     )
                                                                            
  Diluted:
      Loss from
      continuing            $ (1.04     )   $ (1.62     )   $ (0.93     )   $ (0.93     )
      operations
      Discontinued
      operations:
         Income (loss)
         from                 (0.12     )     0.06            (0.69     )     0.24
         operations
         Loss on
         divestiture of      (0.11     )    (0.02     )    (1.61     )    (0.09     )
         operations
          Income (loss)
          from               (0.23     )    0.04          (2.30     )    0.15      
          discontinued
          operations
           Net loss         $ (1.27     )   $ (1.58     )   $ (3.23     )   $ (0.78     )
                                                                            
Shares used in
computing loss per
common share:
  Basic                       52,344          51,692          52,249          51,659
  Diluted                     52,344          51,692          52,249          51,659



KINDRED HEALTHCARE, INC.
Condensed Consolidated Statement of Operations
(In thousands, except per share amounts)
                                                                      
                           Three months ended                  Year ended
                           December 31,                        December 31,
                           2013              2012              2013              2012
                                                                                 
Revenues                   $ 1,224,374      $ 1,237,392      $ 4,900,510      $ 4,928,509 
                                                                                 
Salaries, wages and          746,399           754,530           2,988,487         3,012,321
benefits
Supplies                     80,167            84,613            328,999           343,102
Rent                         82,563            78,222            318,077           310,178
Other operating              250,137           224,543           985,883           914,272
expenses
Other (income) expense       (457      )       (3,181    )       (1,440    )       (12,660   )
Impairment charges           76,127            108,113           77,193            108,953
Depreciation and             38,437            42,296            157,329           162,685
amortization
Interest expense             25,161            27,929            108,049           107,875
Investment income           (1,255    )      (246      )      (4,051    )      (997      )
                            1,297,279       1,316,819       4,958,526       4,945,729 
Loss from continuing
operations before            (72,905   )       (79,427   )       (58,016   )       (17,220   )
income taxes
Provision (benefit)         (21,168   )      3,782           (13,204   )      29,707    
for income taxes
  Loss from continuing       (51,737   )       (83,209   )       (44,812   )       (46,927   )
  operations
Discontinued
operations, net of
income taxes:
  Income (loss) from         (6,160    )       3,312             (36,136   )       12,348
  operations
  Loss on divestiture       (5,994    )      (939      )      (83,887   )      (4,745    )
  of operations
      Income (loss)
      from                  (12,154   )      2,373           (120,023  )      7,603     
      discontinued
      operations
        Net loss             (63,891   )       (80,836   )       (164,835  )       (39,324   )
Earnings attributable
to noncontrolling           (2,405    )      (790      )      (3,657    )      (1,043    )
interests
          Loss
          attributable     $ (66,296   )     $ (81,626   )     $ (168,492  )     $ (40,367   )
          to Kindred
                                                                                 
Amounts attributable
to Kindred
stockholders:
  Loss from continuing     $ (54,142   )     $ (83,999   )     $ (48,469   )     $ (47,970   )
  operations
  Income (loss) from
  discontinued              (12,154   )      2,373           (120,023  )      7,603     
  operations
          Net loss         $ (66,296   )     $ (81,626   )     $ (168,492  )     $ (40,367   )
                                                                                 
Loss per common share:
  Basic:
      Loss from
      continuing           $ (1.04     )     $ (1.62     )     $ (0.93     )     $ (0.93     )
      operations
      Discontinued
      operations:
        Income (loss)
        from                 (0.12     )       0.06              (0.69     )       0.24
        operations
        Loss on
        divestiture of      (0.11     )      (0.02     )      (1.61     )      (0.09     )
        operations
         Income (loss)
         from               (0.23     )      0.04            (2.30     )      0.15      
         discontinued
         operations
          Net loss         $ (1.27     )     $ (1.58     )     $ (3.23     )     $ (0.78     )
                                                                                 
  Diluted:
      Loss from
      continuing           $ (1.04     )     $ (1.62     )     $ (0.93     )     $ (0.93     )
      operations
      Discontinued
      operations:
        Income (loss)
        from                 (0.12     )       0.06              (0.69     )       0.24
        operations
        Loss on
        divestiture of      (0.11     )      (0.02     )      (1.61     )      (0.09     )
        operations
         Income (loss)
         from               (0.23     )      0.04            (2.30     )      0.15      
         discontinued
         operations
          Net loss         $ (1.27     )     $ (1.58     )     $ (3.23     )     $ (0.78     )
                                                                                 
Shares used in
computing loss per
common share:
  Basic                      52,344            51,692            52,249            51,659
  Diluted                    52,344            51,692            52,249            51,659

                                                         
                                                                
KINDRED HEALTHCARE, INC.
Condensed Consolidated Balance Sheet
(In thousands, except per share amounts)
                                                                
                                              December 31,      December 31,
                                              2013              2012
ASSETS
Current assets:
   Cash and cash equivalents                  $ 35,972          $ 50,007
   Cash - restricted                            3,713             5,197
   Insurance subsidiary investments             96,295            86,168
   Accounts receivable less allowance for       916,529           1,038,605
   loss
   Inventories                                  25,780            32,021
   Deferred tax assets                          37,920            12,663
   Income taxes                                 36,846            13,573
   Other                                       43,673          35,532     
                                                1,196,728         1,273,766
                                                                
Property and equipment                          1,906,366         2,226,903
Accumulated depreciation                       (979,791  )      (1,083,777 )
                                                926,575           1,143,126
                                                                
Goodwill                                        992,102           1,041,266
Intangible assets less accumulated              423,303           439,767
amortization
Assets held for sale                            20,978            4,131
Insurance subsidiary investments                149,094           116,424
Deferred tax assets                             17,043            -
Other                                          220,046         219,466    
              Total assets                    $ 3,945,869      $ 4,237,946  
LIABILITIES AND EQUITY
Current liabilities:
   Accounts payable                           $ 181,772         $ 210,668
   Salaries, wages and other compensation       361,192           389,009
   Due to third party payors                    33,747            35,420
   Professional liability risks                 60,993            54,088
   Other accrued liabilities                    146,495           137,204
   Long-term debt due within one year          8,222           8,942      
                                                792,421           835,331
                                                                
Long-term debt                                  1,579,391         1,648,706
Professional liability risks                    246,230           236,630
Deferred tax liabilities                        -                 9,764
Deferred credits and other liabilities          206,611           214,671
                                                                
Equity:
   Stockholders' equity:
     Common stock, $0.25 par value;
     authorized 175,000 shares; issued
     54,165 shares - December 31, 2013          13,541            13,320
     and 53,280 shares - December 31,
     2012
     Capital in excess of par value             1,146,193         1,145,922
     Accumulated other comprehensive loss       (252      )       (1,882     )
     Retained earnings (deficit)               (76,825   )      98,799     
                                                1,082,657         1,256,159
   Noncontrolling interests                    38,559          36,685     
              Total equity                     1,121,216       1,292,844  
              Total liabilities and           $ 3,945,869      $ 4,237,946  
              equity

                                                                
                                                                            
KINDRED HEALTHCARE, INC.
Condensed Consolidated Statement of Cash Flows
(In thousands)
                                                                            
                       Three months ended                Year ended
                       December 31,                     December 31,
                       2013             2012             2013               2012
Cash flows from
operating
activities:
  Net loss             $ (63,891  )     $ (80,836  )     $ (164,835   )     $ (39,324    )
  Adjustments to
  reconcile net
  loss to net cash
  provided by
  operating
  activities:
     Depreciation
     and                 39,644           52,392           182,389            201,484
     amortization
     Amortization
     of
     stock-based         3,542            2,841            11,183             10,852
     compensation
     costs
     Amortization
     of deferred         2,376            2,592            11,905             9,683
     financing
     costs
     Payment of
     lender fees
     related to          -                (2,940   )       (6,189     )       (2,940     )
     senior debt
     modifications
     Provision for
     doubtful            10,151           1,038            44,640             23,692
     accounts
     Deferred            (13,665  )       6,616            (36,650    )       (11,524    )
     income taxes
     Impairment          77,748           108,952          87,825             110,856
     charges
     Loss on
     divestiture
     of                  5,994            939              83,887             4,745
     discontinued
     operations
     Other               (1,151   )       (981     )       4,301              1,772
     Change in
     operating
     assets and
     liabilities:
       Accounts          25,526           9,208            52,271             (58,705    )
       receivable
       Inventories
       and other         4,195            (8,485   )       4,262              (29,382    )
       assets
       Accounts          9,884            737              (22,095    )       (6,515     )
       payable
       Income            (11,763  )       (9,294   )       (17,032    )       29,991
       taxes
       Due to
       third party       (18,387  )       (4,411   )       (1,671     )       (2,723     )
       payors
       Other
       accrued          (60,008  )      (6,893   )      (34,779    )      20,600     
       liabilities
        Net cash
        provided
        by              10,195         71,475         199,412          262,562    
        operating
        activities
                                                                            
Cash flows from
investing
activities:
  Routine capital        (37,956  )       (38,371  )       (100,908   )       (115,175   )
  expenditures
  Development
  capital                (1,115   )       (12,147  )       (11,824    )       (50,322    )
  expenditures
  Acquisitions,
  net of cash            (185,213 )       (38,904  )       (224,319   )       (178,212   )
  acquired
  Acquisition            14,675           -                -                  -
  deposit
  Sale of assets         1,906            150              250,606            1,260
  Purchase of
  insurance              (15,767  )       (7,151   )       (46,127    )       (38,041    )
  subsidiary
  investments
  Sale of
  insurance              14,527           8,290            49,954             38,363
  subsidiary
  investments
  Net change in
  insurance
  subsidiary cash        217              (6,114   )       (44,077    )       (21,285    )
  and cash
  equivalents
  Change in other        (96      )       11               122                1,465
  investments
  Other                 518            490            376              (539       )
        Net cash
        used in         (208,304 )      (93,746  )      (126,197   )      (362,486   )
        investing
        activities
                                                                            
Cash flows from
financing
activities:
  Proceeds from
  borrowings under       575,500          455,000          1,675,800          1,784,300
  revolving credit
  Repayment of
  borrowings under       (376,800 )       (512,200 )       (1,740,400 )       (1,757,100 )
  revolving credit
  Proceeds from
  issuance of term       -                97,500           -                  97,500
  loan, net of
  discount
  Repayment of
  other long-term        (2,058   )       (2,688   )       (6,876     )       (10,664    )
  debt
  Payment of
  deferred               (326     )       (864     )       (1,666     )       (1,465     )
  financing costs
  Contribution
  made by                -                -                -                  200
  noncontrolling
  interests
  Distribution
  made to                (423     )       (308     )       (2,051     )       (3,829     )
  noncontrolling
  interests
  Purchase of
  noncontrolling         -                (4       )       -                  (719       )
  interests
  Issuance of            32               147              461                147
  common stock
  Dividends paid         (6,502   )       -                (13,001    )       -
  Other                 79             -              483              -          
        Net cash
        provided
        by (used        189,502        36,583         (87,250    )      108,370    
        in)
        financing
        activities
Change in cash and       (8,607   )       14,312           (14,035    )       8,446
cash equivalents
Cash and cash
equivalents at          44,579         35,695         50,007           41,561     
beginning of
period
Cash and cash
equivalents at end     $ 35,972        $ 50,007        $ 35,972          $ 50,007     
of period

                                                                                                                                                               
                                                                                                                                                                              
KINDRED HEALTHCARE, INC.
Condensed Consolidated Statement of Operations
(In thousands, except per share amounts)
                                                                                                                                                                              
                            2012 Quarters                                                                     2013 Quarters
                            First           Second          Third           Fourth          Year              First           Second          Third           Fourth          Year
                                                                                                                                                                              
Revenues                    $ 1,257,132    $ 1,218,336    $ 1,215,649    $ 1,237,392    $ 4,928,509      $ 1,278,327    $ 1,207,979    $ 1,189,830    $ 1,224,374    $ 4,900,510 
                                                                                                                                                                              
Salaries, wages and           770,602         740,041         747,148         754,530         3,012,321         791,728         724,067         726,293         746,399         2,988,487
benefits
Supplies                      88,620          85,662          84,207          84,613          343,102           85,900          82,040          80,892          80,167          328,999
Rent                          76,092          77,379          78,485          78,222          310,178           78,134          78,970          78,410          82,563          318,077
Other operating               229,754         233,145         226,830         224,543         914,272           235,892         232,910         266,944         250,137         985,883
expenses
Other (income) expense        (3,136    )     (3,165    )     (3,178    )     (3,181    )     (12,660   )       (1,009    )     (26       )     52              (457      )     (1,440    )
Impairment charges            356             108             376             108,113         108,953           187             438             441             76,127          77,193
Depreciation and              39,098          40,318          40,973          42,296          162,685           42,322          39,303          37,267          38,437          157,329
amortization
Interest expense              26,570          26,713          26,663          27,929          107,875           28,171          29,084          25,633          25,161          108,049
Investment income            (282      )    (258      )    (211      )    (246      )    (997      )      (87       )    (1,475    )    (1,234    )    (1,255    )    (4,051    )
                             1,227,674     1,199,943     1,201,293     1,316,819     4,945,729       1,261,238     1,185,311     1,214,698     1,297,279     4,958,526 
Income (loss) from
continuing operations         29,458          18,393          14,356          (79,427   )     (17,220   )       17,089          22,668          (24,868   )     (72,905   )     (58,016   )
before income taxes
Provision (benefit) for      12,083        7,820         6,022         3,782         29,707          6,391         9,103         (7,530    )    (21,168   )    (13,204   )
income taxes
  Income (loss) from          17,375          10,573          8,334           (83,209   )     (46,927   )       10,698          13,565          (17,338   )     (51,737   )     (44,812   )
  continuing operations
Discontinued
operations, net of
income taxes:
  Income (loss) from          2,437           5,046           1,553           3,312           12,348            (5,200    )     (886      )     (23,890   )     (6,160    )     (36,136   )
  operations
  Loss on divestiture        (1,170    )    (356      )    (2,280    )    (939      )    (4,745    )      (2,025    )    (10,852   )    (65,016   )    (5,994    )    (83,887   )
  of operations
     Income (loss) from
     discontinued            1,267         4,690         (727      )    2,373         7,603           (7,225    )    (11,738   )    (88,906   )    (12,154   )    (120,023  )
     operations
        Net income            18,642          15,263          7,607           (80,836   )     (39,324   )       3,473           1,827           (106,244  )     (63,891   )     (164,835  )
        (loss)
(Earnings) loss
attributable to              (451      )    239           (41       )    (790      )    (1,043    )      (416      )    (82       )    (754      )    (2,405    )    (3,657    )
noncontrolling
interests
           Income
           (loss)           $ 18,191       $ 15,502       $ 7,566        $ (81,626   )   $ (40,367   )     $ 3,057        $ 1,745        $ (106,998  )   $ (66,296   )   $ (168,492  )
           attributable
           to Kindred
                                                                                                                                                                              
Amounts attributable to
Kindred stockholders:
  Income (loss) from        $ 16,924        $ 10,812        $ 8,293         $ (83,999   )   $ (47,970   )     $ 10,282        $ 13,483        $ (18,092   )   $ (54,142   )   $ (48,469   )
  continuing operations
  Income (loss) from
  discontinued               1,267         4,690         (727      )    2,373         7,603           (7,225    )    (11,738   )    (88,906   )    (12,154   )    (120,023  )
  operations
           Net income       $ 18,191       $ 15,502       $ 7,566        $ (81,626   )   $ (40,367   )     $ 3,057        $ 1,745        $ (106,998  )   $ (66,296   )   $ (168,492  )
           (loss)
                                                                                                                                                                              
Earnings (loss) per
common share:
  Basic:
     Income (loss) from
     continuing             $ 0.32          $ 0.20          $ 0.16          $ (1.62     )   $ (0.93     )     $ 0.19          $ 0.25          $ (0.34     )   $ (1.04     )   $ (0.93     )
     operations
     Discontinued
     operations:
        Income (loss)         0.05            0.10            0.02            0.06            0.24              (0.09     )     (0.02     )     (0.46     )     (0.12     )     (0.69     )
        from operations
        Loss on
        divestiture of       (0.02     )    (0.01     )    (0.04     )    (0.02     )    (0.09     )      (0.04     )    (0.20     )    (1.24     )    (0.11     )    (1.61     )
        operations
          Income (loss)
          from               0.03          0.09          (0.02     )    0.04          0.15            (0.13     )    (0.22     )    (1.70     )    (0.23     )    (2.30     )
          discontinued
          operations
           Net income       $ 0.35         $ 0.29         $ 0.14         $ (1.58     )   $ (0.78     )     $ 0.06         $ 0.03         $ (2.04     )   $ (1.27     )   $ (3.23     )
           (loss)
                                                                                                                                                                              
  Diluted:
     Income (loss) from
     continuing             $ 0.32          $ 0.20          $ 0.16          $ (1.62     )   $ (0.93     )     $ 0.19          $ 0.25          $ (0.34     )   $ (1.04     )   $ (0.93     )
     operations
     Discontinued
     operations:
        Income (loss)         0.05            0.10            0.02            0.06            0.24              (0.09     )     (0.02     )     (0.46     )     (0.12     )     (0.69     )
        from operations
        Loss on
        divestiture of       (0.02     )    (0.01     )    (0.04     )    (0.02     )    (0.09     )      (0.04     )    (0.20     )    (1.24     )    (0.11     )    (1.61     )
        operations
          Income (loss)
          from               0.03          0.09          (0.02     )    0.04          0.15            (0.13     )    (0.22     )    (1.70     )    (0.23     )    (2.30     )
          discontinued
          operations
           Net income       $ 0.35         $ 0.29         $ 0.14         $ (1.58     )   $ (0.78     )     $ 0.06         $ 0.03         $ (2.04     )   $ (1.27     )   $ (3.23     )
           (loss)
                                                                                                                                                                              
Shares used in
computing earnings
(loss) per common
share:
     Basic                    51,603          51,664          51,676          51,692          51,659            52,062          52,265          52,323          52,344          52,249
     Diluted                  51,638          51,675          51,709          51,692          51,659            52,083          52,284          52,323          52,344          52,249

                                                                                                                                                             
                   
KINDRED HEALTHCARE, INC.
Condensed Business Segment Data
(In thousands)
                                                                                                                                                                             
                       2012 Quarters                                                                     2013 Quarters
                       First           Second          Third           Fourth          Year              First           Second          Third           Fourth              Year
Revenues:
  Hospital             $ 679,813       $ 645,714       $ 633,972       $ 645,426       $ 2,604,925       $ 674,363       $ 621,454       $ 606,488       $ 619,344           $ 2,521,649
  division
                                                                                                                                                                             
  Nursing center         274,358         269,986         273,265         274,807         1,092,416         275,141         269,501         270,210         274,908             1,089,760
  division
                                                                                                                                                                             
  Rehabilitation
  division:
    Skilled
    nursing              253,370         253,013         252,134         244,485         1,003,002         257,557         248,321         243,974         241,938             991,790
    rehabilitation
    services
    Hospital
    rehabilitation      74,369        73,402        71,899        73,910        293,580         74,523        69,777        68,296        74,017            286,613   
    services
                        327,739       326,415       324,033       318,395       1,296,582       332,080       318,098       312,270       315,955           1,278,403 
                                                                                                                                                                             
  Care management       28,432        28,872        35,943        50,093        143,340         51,621        53,039        53,801        66,466            224,927   
  division
                         1,310,342       1,270,987       1,267,213       1,288,721       5,137,263         1,333,205       1,262,092       1,242,769       1,276,673           5,114,739
                                                                                                                                                                             
  Eliminations:
    Skilled
    nursing              (27,888   )     (27,551   )     (27,037   )     (26,123   )     (108,599  )       (29,303   )     (29,257   )     (28,698   )     (28,728   )         (115,986  )
    rehabilitation
    services
    Hospital
    rehabilitation       (24,686   )     (24,225   )     (23,666   )     (24,200   )     (96,777   )       (24,362   )     (23,855   )     (23,080   )     (22,696   )         (93,993   )
    services
    Nursing             (636      )    (875      )    (861      )    (1,006    )    (3,378    )      (1,213    )    (1,001    )    (1,161    )    (875      )        (4,250    )
    centers
                        (53,210   )    (52,651   )    (51,564   )    (51,329   )    (208,754  )      (54,878   )    (54,113   )    (52,939   )    (52,299   )        (214,229  )
                       $ 1,257,132    $ 1,218,336    $ 1,215,649    $ 1,237,392    $ 4,928,509      $ 1,278,327    $ 1,207,979    $ 1,189,830    $ 1,224,374        $ 4,900,510 
                                                                                                                                                                             
Income (loss) from
continuing
operations:
Operating income
(loss):
  Hospital             $ 151,784       $ 132,358       $ 131,041       $ 147,041       $ 562,224         $ 150,043       $ 132,170       $ 113,014       $ 127,929     (a)   $ 523,156
  division
                                                                                                                                                                             
  Nursing center         34,067          36,215          38,960          32,016          141,258           29,844          36,678          32,146          36,694              135,362
  division
                                                                                                                                                                             
  Rehabilitation
  division:
    Skilled
    nursing              10,679          19,351          16,929          21,001          67,960            12,046          20,297          (8,565    )     12,918      (b)     36,696
    rehabilitation
    services
    Hospital
    rehabilitation      16,116        17,860        16,977        18,792        69,745          18,132        19,573        18,215        18,005     (c)    73,925    
    services
                        26,795        37,211        33,906        39,793        137,705         30,178        39,870        9,650         30,923            110,621   
                                                                                                                                                                             
  Care management        2,341           2,789           3,645           4,933           13,708            2,786           3,961           1,085           2,131       (d)     9,963
  division
                                                                                                                                                                             
  Corporate:
    Overhead             (42,728   )     (44,723   )     (45,883   )     (45,729   )     (179,063  )       (45,582   )     (43,199   )     (39,151   )     (48,563   ) (e)     (176,495  )
    Insurance           (482      )    (600      )    (545      )    (500      )    (2,127    )      (509      )    (384      )    (482      )    (539      )        (1,914    )
    subsidiary
                         (43,210   )     (45,323   )     (46,428   )     (46,229   )     (181,190  )       (46,091   )     (43,583   )     (39,633   )     (49,102   )         (178,409  )
                                                                                                                                                                             
  Impairment             (356      )     (108      )     (376      )     (108,113  )     (108,953  )       (187      )     (438      )     (441      )     (76,127   )         (77,193   )
  charges
  Transaction           (485      )    (597      )    (482      )    (667      )    (2,231    )      (944      )    (108      )    (613      )    (447      )        (2,112    )
  costs
      Operating          170,936         162,545         160,266         68,774          562,521           165,629         168,550         115,208         72,001              521,388
      income
Rent                     (76,092   )     (77,379   )     (78,485   )     (78,222   )     (310,178  )       (78,134   )     (78,970   )     (78,410   )     (82,563   )         (318,077  )
Depreciation and         (39,098   )     (40,318   )     (40,973   )     (42,296   )     (162,685  )       (42,322   )     (39,303   )     (37,267   )     (38,437   )         (157,329  )
amortization
Interest, net           (26,288   )    (26,455   )    (26,452   )    (27,683   )    (106,878  )      (28,084   )    (27,609   )    (24,399   )    (23,906   )        (103,998  )
Income (loss) from
continuing               29,458          18,393          14,356          (79,427   )     (17,220   )       17,089          22,668          (24,868   )     (72,905   )         (58,016   )
operations before
income taxes
Provision
(benefit) for           12,083        7,820         6,022         3,782         29,707          6,391         9,103         (7,530    )    (21,168   )        (13,204   )
income taxes
                       $ 17,375       $ 10,573       $ 8,334        $ (83,209   )   $ (46,927   )     $ 10,698       $ 13,565       $ (17,338   )   $ (51,737   )       $ (44,812   )
                                                                                                                                                                             
 
(a) Includes costs of $0.5 million in connection with the closing of a TC hospital and a litigation charge of $7.0 million.
                                                                                                                                                                             
(b) Includes $0.1 million of severance and retirement costs.
                                                                                                                                                                             
(c) Includes $1.1 million of severance and retirement costs.
                                                                                                                                                                             
(d) Includes $0.1 million of severance and retirement costs.
                                                                                                                                                                             
(e) Includes $2.4 million of severance and retirement costs.

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KINDRED HEALTHCARE, INC.
Condensed Consolidating Statement of Operations
(In thousands)
                                                                                                                                                 
                    Three months ended December 31, 2013
                                  Nursing       Rehabilitation division                Care                        Transaction-
                    Hospital      center        Skilled       Hospital                 management                  related
                                                nursing
                    division     division      services     services  Total         division     Corporate    costs          Eliminations  Consolidated
                    (a)                         (b)           (b)                      (b)           (b)
                                                                                                                                                 
Revenues            $ 619,344    $ 274,908    $ 241,938    $ 74,017   $ 315,955    $ 66,466     $ -          $   -         $  (52,299 )   $ 1,224,374 
                                                                                                                                                 
Salaries, wages       268,475       127,261       219,484       51,773     271,257       52,353        27,181          -             (128    )     746,399
and benefits
Supplies              64,278        12,102        733           36         769           2,791         227             -             -             80,167
Rent                  53,849        25,461        1,171         51         1,222         1,567         464             -             -             82,563
Other operating       158,572       99,393        8,801         4,197      12,998        9,204         21,694          447           (52,171 )     250,137
expenses
Other (income)        90            (542    )     2             6          8             (13     )     -               -             -             (457      )
expense
Impairment            -             45            -             -          -             76,082        -               -             -             76,127
charges
Depreciation
and                   17,092        7,213         2,559         2,498      5,057         1,829         7,246           -             -             38,437
amortization
Interest              199           12            60            -          60            9             24,881          -             -             25,161
expense
Investment           1           (10     )    (31     )    -         (31     )    (1      )    (1,214  )      -           -           (1,255    )
income
                     562,556     270,935     232,779     58,561    291,340     143,821     80,479        447         (52,299 )    1,297,279 
Income (loss)
from continuing
operations          $ 56,788     $ 3,973      $ 9,159      $ 15,456   $ 24,615     $ (77,355 )   $ (80,479 )   $   (447  )    $  -            (72,905   )
before income
taxes
Income tax                                                                                                                                       (21,168   )
benefit
   Loss from
   continuing                                                                                                                                    $ (51,737   )
   operations
                                                                                                                                                 
Capital
expenditures,
excluding
acquisitions
(including
discontinued
operations):
    Routine         $ 6,286       $ 7,361       $ 679         $ 165      $ 844         $ 467         $ 22,998      $   -          $  -           $ 37,956
    Development      1,115       -           -           -         -           -           -             -           -           1,115     
                    $ 7,401      $ 7,361      $ 679        $ 165      $ 844        $ 467        $ 22,998     $   -         $  -          $ 39,071    
                                                                                                                                                 
                                                                                                                                                 
                    Three months ended December 31, 2012
                                  Nursing       Rehabilitation division                Care                        Transaction-
                    Hospital      center        Skilled       Hospital                 management                  related
                                                nursing
                    division     division     services     services  Total         division     Corporate    costs          Eliminations  Consolidated
                    (c,d)         (c)           (c)           (c)                      (c)           (c)
                                                                                                                                                 
Revenues            $ 645,426    $ 274,807    $ 244,485    $ 73,910   $ 318,395    $ 50,093     $ -          $   -         $  (51,329 )   $ 1,237,392 
                                                                                                                                                 
Salaries, wages       280,682       136,868       220,331       51,210     271,541       36,474        29,065          (100  )       -             754,530
and benefits
Supplies              66,391        14,959        876           36         912           2,127         224             -             -             84,613
Rent                  51,611        23,628        1,238         21         1,259         1,111         613

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