Filed pursuant to Rule 425 under the Securities Act of 1933 and
deemed filed pursuant to Rule 14a-6 of the Securities Exchange Act of 1934
Filer: Kindred Healthcare, Inc.
(Commission File No. 001-14057)
Subject Company: Gentiva Health Services, Inc.
(Commission File No. 001-15669)
 J.P.
Morgan Annual Healthcare
Conference
January 2015 |
 Forward-Looking Statements
This
presentation
includes
forward-looking
statements
within
the
meaning
of
Section
27A
of
the
Securities
Act
of
1933,
as
amended,
and
Section
21E
of
the
Securities
Exchange
Act
of
1934,
as
amended.
These
forward-
looking
statements
include,
but
are
not
limited
to,
statements
regarding
the
proposed
business
combination
transaction
between
Kindred
Healthcare,
Inc.
(“Kindred”
or
the
“Company”)
and
Gentiva
Health
Services,
Inc.
(“Gentiva”)
(including
financing
of
the
proposed
transaction
and
the
benefits,
results,
effects
and
timing
of
a
transaction),
all
statements
regarding
Kindred’s
(and
Kindred’s
and
Gentiva’s
combined)
expected
future
financial
position,
results
of
operations,
cash
flows,
dividends,
financing
plans,
business
strategy,
budgets,
capital
expenditures,
competitive
positions,
growth
opportunities,
plans
and
objectives
of
management,
and
statements
containing
the
words
such
as
“anticipate,”
“approximate,”
“believe,”
“plan,”
“estimate,”
“expect,”
“project,”
“could,”
“would,”
“should,”
“will,”
“intend,”
“may,”
“potential,”
“upside,”
and
other
similar
expressions.
Statements
in
this
presentation
concerning
the
business
outlook
or
future
economic
performance,
anticipated
profitability,
revenues,
expenses,
dividends
or
other
financial
items,
and
product
or
services
line
growth
of
Kindred
(and
the
combined
businesses
of
Kindred
and
Gentiva),
together
with
other
statements
that
are
not
historical
facts,
are
forward-looking
statements
that
are
estimates
reflecting
the
best
judgment
of
Kindred
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
Kindred’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
Kindred
is
unable
to
predict
or
control,
that
may
cause
Kindred’s
actual
results,
performance
or
plans
with
respect
to
Gentiva
to
differ
materially
from
any
future
results,
performance
or
plans
expressed
or
implied
by
such
forward-looking
statements.
These
statements
involve
risks,
uncertainties
and
other
factors
discussed
below
and
detailed
from
time
to
time
in
Kindred’s
filings
with
the
Securities
and
Exchange
Commission
(the
“SEC”).
Risks
and
uncertainties
related
to
the
proposed
merger
include,
but
are
not
limited
to,
the
risk
that
Gentiva’s
stockholders
do
not
approve
the
merger,
potential
adverse
reactions
or
changes
to
business
relationships
resulting
from
the
announcement
or
completion
of
the
merger,
uncertainties
as
to
the
timing
of
the
merger,
adverse
effects
on
Kindred’s
stock
price
resulting
from
the
announcement
or
completion
of
the
merger,
competitive
responses
to
the
announcement
or
completion
of
the
merger,
the
risk
that
healthcare
regulatory,
licensure
or
other
approvals
and
financing
required
for
the
consummation
of
the
merger
are
not
obtained
or
are
obtained
subject
to
terms
and
conditions
that
are
not
anticipated,
costs
and
difficulties
related
to
the
integration
of
Gentiva’s
businesses
and
operations
with
Kindred’s
businesses
and
operations,
the
inability
to
obtain,
or
delays
in
obtaining,
cost
savings
and
synergies
from
the
merger,
uncertainties
as
to
whether
the
completion
of
the
merger
or
any
transaction
will
have
the
accretive
effect
on
Kindred’s
earnings
or
cash
flows
that
it
expects,
unexpected
costs,
liabilities,
charges
or
expenses
resulting
from
the
merger,
litigation
relating
to
the
merger,
the
inability
to
retain
key
personnel,
and
any
changes
in
general
economic
and/or
industry-
specific
conditions.
In
addition
to
the
factors
set
forth
above,
other
factors
that
may
affect
Kindred’s
plans,
results
or
stock
price
are
set
forth
in
Kindred’s
Annual
Report
on
Form
10-K
and
in
its
reports
on
Forms
10-Q
and
8-K.
Many
of
these
factors
are
beyond
Kindred’s
control.
Kindred
cautions
investors
that
any
forward-looking
statements
made
by
Kindred
are
not
guarantees
of
future
performance.
Kindred
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.
Kindred
has
provided
information
in
this
presentation
to
compute
certain
non-GAAP
measurements
for
specified
periods.
A
reconciliation
of
the
non-GAAP
measurements
to
the
GAAP
measurements
is
included
in
this
presentation
and
on
Kindred’s
website
at
www.kindredhealthcare.com
under
the
heading
“investors.”
Additional Information
This
presentation
does
not
constitute
an
offer
to
sell
or
the
solicitation
of
an
offer
to
buy
any
securities
or
a
solicitation
of
any
vote
or
approval.
This
presentation
may
be
deemed
to
be
solicitation
material
in
respect
of
the
proposed
merger
between
Kindred
and
Gentiva.
In
connection
with
the
proposed
merger,
Kindred
has
filed
with
the
SEC
a
registration
statement
on
Form
S-4
(File
No.
333-200454),
including
Amendment
No.
1
thereto,
that
contains
a
definitive
proxy
statement
of
Gentiva
that
also
constitutes
a
prospectus
of
Kindred.
The
registration
statement
was
declared
effective
by
the
SEC
on
December
18,
2014,
and
Kindred
and
Gentiva
commenced
mailing
the
definitive
proxy
statement/prospectus
to
Gentiva
stockholders
on
December
22,
2014.
SHAREHOLDERS
OF
GENTIVA
ARE
URGED
TO
READ
ALL
RELEVANT
DOCUMENTS
FILED
WITH
THE
SEC,
INCLUDING
THE
DEFINITIVE
PROXY
STATEMENT/PROSPECTUS,
BECAUSE
THEY
WILL
CONTAIN
IMPORTANT
INFORMATION
ABOUT
THE
PROPOSED
MERGER.
Investors
and
security
holders
are
able
to
obtain
copies
of
the
definitive
proxy
statement/prospectus
as
well
as
other
filings
containing
information
about
Kindred
and
Gentiva,
without
charge,
at
the
SEC’s
website,
http://www.sec.gov.
Those
documents,
as
well
as
Kindred’s
other
public
filings
with
the
SEC,
may
be
obtained
without
charge
at
Kindred’s
website
at
www.kindredhealthcare.com.
Participants in Solicitation
Kindred,
Gentiva
and
their
respective
directors
and
executive
officers
may
be
deemed
to
be
participants
in
the
solicitation
of
proxies
from
the
holders
of
Gentiva
common
stock
in
respect
of
the
proposed
merger.
Information
about
the
directors
and
executive
officers
of
Kindred
is
set
forth
in
the
proxy
statement
for
Kindred’s
2014
Annual
Meeting
of
Shareholders,
which
was
filed
with
the
SEC
on
April
3,
2014.
Information
about
the
directors
and
executive
officers
of
Gentiva
is
set
forth
in
the
proxy
statement
for
Gentiva’s
2014
Annual
Meeting
of
Shareholders,
which
was
filed
with
the
SEC
on
March
25,
2014.
Investors
may
obtain
additional
information
regarding
the
interest
of
such
participants
by
reading
the
definitive
proxy
statement/prospectus
regarding
the
proposed
merger
using
the
contact
information
above.
2 |
 Kindred
Healthcare
Delivering on Quality, Value
and Innovation In Patient Care
3 |
 Kindred
Healthcare is one of the Leading Providers of Rehabilitation Services and
Post-Acute Care in the United States
4
Our Mission
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.
Our Management
Philosophy
Kindred’s management philosophy is
to focus on our people, on quality and
customer service and our business
results will follow.
105,200
1,100,000
2,880
47
Kindred will be
Dedicated teammates
taking care of over
Patients and residents in
locations in
States
Information above includes Kindred, Gentiva and Centerre Healthcare Corporation
(“Centerre”). |
 Kindred
with Gentiva and Centerre Creates Multiple Platforms for Growth
$2.5 billion Revenues
(3)
•
97 Transitional Care
Hospitals
(4)
•
7,145 licensed beds
(4)
•
5 Inpatient Rehabilitation
Hospitals with 215 licensed
beds
(4)
$2.3 billion Combined
Revenues
(5)
•
694 sites of service in
41 states
(4)
•
154 in Kindred’s
Integrated Care Markets
(4)
•
38,900
caregivers
serving 127,300
patients on a daily basis
(4)
$1.5 billion Revenues
(6)
•
2,275 sites of service served
through 20,338 therapists
(4)
•
Including 113 hospital-based
acute rehabilitation units
(4)
•
Includes Centerre’s 11 operating
locations, ~$200 million of
revenue and 1,600 employees
$1.1 billion Revenues
(3)
•
48 Transitional Care Centers
(Sub-Acute
facilities licensed as SNFs)
(4)
•
12 Hospital-Based Sub-Acute
Units
(4)
•
13 Nursing and Rehabilitation
Centers
(with Transitional Care Units)
(4)
•
38 Skilled Nursing Centers
(Traditional SNFs)
(4)
*
*Combined with Gentiva
(4)
#1 Operator of Transitional
Care Hospitals
(1)
#1 Operator of
Home Health and Hospice
(1)
#1 Operator of
Rehabilitation Services
(1)
#8 Operator of Sub-Acute &
Skilled Nursing Facilities
(2)
5
(1)
Ranking based on revenues.
(2)
Ranking from Provider
magazine June 20, 2014 issue.
(3)
Revenues for the twelve months ended September 30, 2014 (divisional revenues before
intercompany eliminations). (4)
As of September 30, 2014. Gentiva caregivers approximate 34,000 as of December 31, 2014.
(5)
Includes Kindred at Home and Gentiva revenues for the twelve months ended September 30,
2014. (6)
Kindred
revenues
for
RehabCare
for
the
twelve
months
ended
September
30,2014
plus
Centerre’s
2014estimated
revenue. |
 Kindred’s National Presence
and Integrated Care Market Penetration
•
Kindred’s 23 current and targeted
Integrated Care Markets are
among the top 30 MSAs in the
United States
•
Significant patient opportunity for
improved care transitions and
choice –
provides revenue
synergies from referrals across
the combined care delivery
platform
Source:
Kindred and Gentiva filings and investor presentations.
Note :
As of September 30, 2014.
6
Transitional Care Hospitals (97)
Inpatient Rehabilitation Hospitals (16)
Nursing and Rehabilitation Centers (99)
Kindred at Home Locations (152)
Hospital-Based Inpatient Rehabilitation Units (102)
RehabCare External Customers (1,899)
National and Regional Support Centers
Gentiva Locations (493)
Integrated Care Markets (23)
National presence across 47 states |
 …
and More Quickly…
(Reducing Average
Length-of-Stay)
(2)
Sending More
Patients Home…
(1)
Kindred Healthcare
Delivering on Quality, Value and Innovation
in Patient Care Delivery
…
Reducing
Rehospitalizations
(2)
•
56%
of our Nursing Center
patients go home
after 32
days
•
70%
of our Hospital patients
go home or to a Lower Level
of Care after
27 days
Reduced the total average length
of stay
•
by
10.3%
in our Hospitals
•
by 11% in our Nursing Centers
Kindred Hospitals reduced
rehospitalization rates by
14%
Kindred Nursing Centers have
reduced rehospitalization rates
by 15%
(1)
Kindred 2013 Results.
(2)
Kindred Same-store Comparison 2009 to 2013.
7
Market-leading
care
outcomes
position
us
well
for
future
reimbursement
characterized
by
bundled payments,
pay-for-performance,
gain
sharing,
at-risk
contracts
and
capitated
population
health arrangements.
Outperforming National Quality Benchmarks
Kindred Hospitals, Nursing Centers, and Home Health and Hospice continue to improve
on quality indicators and beat industry benchmarks
|
 CONTINUE
THE CARE
Tremendous Opportunities Exist to Better Manage
Patient Care for Patients Discharged From Acute Care Hospitals
Intensity of Service
Lower
Higher
Medicare Patients’
Use of Post-Acute Services Throughout an “Episode of Care”
Patients’
first
site of
discharge after acute care
hospital stay
Patients’
use of site
during a 90 day
episode
SHORT-TERM
ACUTE CARE
HOSPITALS
LONG-TERM
ACUTE CARE
HOSPITALS
INPATIENT
REHAB
SKILLED
NURSING
FACILITIES
OUTPATIENT
REHAB
HOME
HEALTH
CARE
37%
2%
10%
11%
41%
52%
9%
21%
2%
61%
8
There
are
47.6
(1)
million
Medicare
beneficiaries
and
9,100
are
added
to
the
program
each
day.
More
than
35%
(2)
of
these
patients
need
post-acute
care
following
a
discharge
from
an
acute
care
hospital.
(1)
Source: RTI, 2009: Examining Post-Acute Care Relationships in an Integrated Hospital
System. (2)
Source: Kaiser Family Foundation, 2011 statehealthfacts.org and AARP 2011 projections.
|
 9
Demand for Post-Acute Care Services Strong
Increasing Demand for Integrated and
Coordinated Post-Acute Care Services
Expanding Role for Home-Based Services
Care Management Across a Post-Acute
Episode of Care is Highly Valued to Support
Emerging Payment Models
Fee for
Service
(FFS)
Managed
Care
FFS
Hospitals
Health Systems
Other PAC providers
9
Current
Approximate
Payor Mix
Potential
Future Payor
Mix
Managed
Care
Payment Policy and Market Trends that are
Influencing Kindred’s Strategy
Kindred is poised to benefit from these trends
because of our unique combination of care
management capabilities and diversified PAC
sites of service on the ground
ACOs, bundle
holders |
 Kindred’s
Continue
The
Care
Strategy is at the
Forefront of Healthcare Delivery System Reform
10
Helping to shape the
evolution of the
American Healthcare
Delivery System
by improving patient
outcomes, smoothing
care transitions,
lowering costs and
transitioning patients
home at the highest
level of wellness |
 11
A Transformed
Kindred |
 Leadership Among
Premium Healthcare Service Providers 2014 Wall Street
Consensus Revenue
(5)
($ in billions)
Post-Acute Providers
Alternate Site Providers
(7)
$7.3
$5.5
$3.8
$3.1
$2.4
$6.4
$12.7
$4.4
OCR
IPCM
DVA
EVHC
AMSG
SCAI
The Acquisitions of Gentiva and Centerre
Further Strengthens Kindred’s Ability To Serve
Patients Across the Full Continuum of Care
($ in millions)
Kindred
(2)
Gentiva
(2)
Centerre
Combined
States
(1)
47
40
8
47
Locations
(1)
2,376
493
11
2,880
Employees
(1)
62,600
41,000
1,600
105,200
Revenue
$5.1 billion
$2.0 billion
$199 million
(3)
$7.3 billion
EBITDAR
$697 million
$232 million
$48 million
(3)
$1,047 million
(4)
$1.2
$2.8
$1.6
(1)
As of September 30, 2014. Gentiva employee count is approximately 41,000 as of December 31,
2014. (2)
Per Kindred 2014 guidance as provided on November 5, 2014 and 2014 current average analyst
consensus estimates for Gentiva. (3)
Estimated 2014 revenue and earnings before interest, taxes, depreciation, amortization and rent
(or “EBITDAR”), prior to deducting $14 million of minority interest expense owned by Centerre’s hospital
partners, see Appendix.
(4)
Combined EBITDAR includes full run rate of cost synergies of $70
million expected to be achieved in two years post closing.
(5)
FactSet consensus estimates as of November 13, 2014.
(6)
Combined 2014 revenues of Kindred (based on November 5, 2014 guidance), Gentiva (based on
analyst consensus) and Centerre (based on internal estimates).
(7)
Twelve months ended as of June 30, 2014 and pro forma for Skilled Healthcare merger.
(6)
12 |
 Nursing
47%
Hospital
42%
Rehab
11%
Kindred
at Home
31%
Rehab
20%
(1)
Kindred revenues and earnings before interest, taxes, depreciation and amortization (or
“EBITDA”) as reported in the respective 2010 and 2012 Form 10-K. See Appendix.
(2)
Represents adjusted EBITDA margin as reconciled in the Appendix.
(3)
Includes combined results for the twelve months ended September 30, 2014 for Centerre, Gentiva
and Kindred, see Appendix. Combined EBITDA run rate of cost synergies of $70 million
expected to be achieved two years post closing. (4)
Revenues before intercompany eliminations.
Kindred has Significantly Diversified its Service
Offerings and Transformed its Business Mix
Yesterday
Today
2010
(1)
Kindred at Home 0%
Nursing
21%
Hospital
48%
Rehab
25%
LTM 9/30/2014
Kindred at Home 6%
Combined Kindred
(3)
13
Tomorrow
Community
Care 3%
Home
Health
18%
Hospice
10%
Hospital
34%
Nursing
15%
SRS
14%
HRS
6%
$7.2
8.6%
Combined 2014
(2)(3)
$4.4
5.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
2010
(1)
$6.2
5.1%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
2012
(1)
$5.0
7.1%
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
LTM 9/30/2014
(2)
EBITDA Margin
Revenue |
 14
Legislative
and Financial
Overview |
 Reimbursement Outlook
Overview and Context
This year, like every year, Congress is considering
changes to Medicare to help pay for the cost of avoiding
steep cuts to physician payments (SGR/“Doc Fix”).
There are several key considerations this year.
Key Considerations
•
Only half of Kindred’s revenue is directly affected by SGR
outcome
•
Policymakers recognize that post-acute providers have
contributed to Medicare deficit reduction disproportionately
to Medicare spending for post-acute care and did not
benefit from Affordable Care Act expanded coverage
•
Policymakers prefer “reform-oriented”
changes to reduce
spending versus cuts
Readmission penalties for all post-acute care
providers
Rate equalization/site neutrality
Medicare
49.7%
($3.6b)
Commercial
37.8%
($2.7b)
Medicare Advantage,
Managed Care and
Managed
Medicaid
Medicaid
12.5%
($0.9b)
Revenue by Payor Mix
(1)
Approximately half of Kindred’s
total revenue is Medicare
(1) Revenues before intercompany eliminations for both Kindred and Gentiva for the twelve
months ended September 20, 2014. 15 |
 Overview
of Key Payment Provisions in LTAC Criteria Legislation
•
Definition of Patients Eligible for LTAC Rate
–
Patients are eligible for payment under the current LTAC PPS if they meet either
one of two criteria: patients admitted from an acute care hospital
with 3 or more days in an acute care hospital Intensive Care Unit (ICU);
or
patients
receiving
“prolonged
mechanical
ventilation”
(greater
than
96
hours)
in
the
LTAC
hospital
–
Many new patients today who do not use LTAC services will qualify under the new
criteria. These patients are high
acuity,
have
extended
stays
in
acute
care
hospitals
and
are
at
high
risk
for
re-hospitalization.
•
Definition
of
Patients
Eligible
for
“Site
Neutral”
Rate
–
Other
medically
complex
patients
may
still
be
admitted
to
LTACs
and
receive
a
“site
neutral”
rate
that
is
either
at
LTAC cost or at a per diem rate “comparable”
to payments made to acute care hospitals under the IPPS payment
system (and capped at the IPPS rate)
–
The
length
of
stay
for
these
patients
and
Medicare
Advantage
patients
will
not
count
towards
the
25-day
LOS
requirement
•
Effective Date and Phase-In
–
Effective date: Two-year Phase-in of criteria begins after October 1,
2015, linked to each LTAC’s cost-reporting period
–
All Kindred LTACs have cost-reporting periods that begin September 1 of each
year; phase-in of new criteria would not begin for Kindred LTACs until
September 1, 2016, and will not be fully effective until September 2018
–
During
phase-in,
cases
receiving
“site
neutral”
rate
get
paid
50%
based
on
current
LTAC
rate
and
50%
based
on
the “site neutral”
rate
16
The new criteria would not become fully effective until September 1, 2018 for Kindred
LTACS |
 2014
2015
2016
2017
2018
Oct. 1
July 1
Oct. 1
July 1
Oct. 1
July 1
Oct. 1
July 1
Oct. 1
July 1
1. Patient Criteria Effective
Date (depending on cost
report date)
2. Patient Criteria effective
date for Kindred LTACs –
Phase-in begins
3. Site Neutral IPPS
Equivalent Rate:
•
50/50 Blend
•
Full Site Neutral Rate
4. 25-Day Length of Stay
does not count for site
neutral and Medicare
Advantage cases
5. 25% Rule Relief for LTACs
certified as of 10/1/2004
6. Moratorium
7. “50%”
Compliance Test
2020
LTAC Legislation Effective Dates,
Phase-in and Timeline for Kindred Hospitals
January 1, 2014
April 1, 2015
September 1, 2016
September 1, 2016
September 1, 2018
17
October 1, 2015
September 1, 2016 |
 Kindred
Has Delivered Attractive Financial Performances
18
EBITDAR Margin:
12.7%
14.0%
13.6%
13.7%
Share Price & Dividends
Despite sequential years of significant
reimbursement cuts and a wholesale
restructuring of the Company’s business
and capital structure, the Company has
delivered on its promise to its patients,
customers, teammates and shareholders!
Revenue
($ billions)
EBITDAR
($ millions)
14.4%
(1)(2)
(3)
(3)
(4)
(4)
$529
$679
$658
$697
$1,047
2011
2012
2013
2014
2014
Combined
12/31/2011
12/31/2012
12/31/2013
12/31/2014
$4.2
$4.8
$7.3
2011
2012
2013
2014
2014
Combined
$4.9
$5.1
(1)
Before certain disclosed items as reconciled in the Appendix.
(2)
Reimbursement cuts totaled $70 million.
(3)
Reflects midpoint of Company’s November 5, 2014 earnings guidance.
(4)
Assumes Centerre and Gentiva acquired on January 1, 2014 and combined with Kindred. Amount for
Gentiva is based upon current analyst consensus estimates. Centerre amounts are 2014
estimates, as reconciled in Appendix. In addition, combined EBITDAR includes
full
run
rate
cost
synergies
of
$70
million
expected
to
be
achieved
two
years
post
closing.
(1)
(1) |
 (1)
Kindred growth calculations based upon 2014 earnings guidance provided on November 5, 2014
compared to the current average analyst consensus estimate for 2015. (2)
Combined
growth
calculation
represents
Kindred,
Gentiva
and
Centerre.
For
Gentiva,
2014
and
2015
revenues
are
derived
from
current
average
analyst
consensus
estimates,
including
$60
million
of
annual
run
rate
revenue
synergies. Centerre amounts based upon internal projections.
(3)
Represents adjusted EBITDA as reconciled in the Appendix.
(4)
Based
upon
mid
point
of
2014
guidance
for
Kindred
as
of
November
5,
2014.
(5)
Combined
to
include
Kindred,
Gentiva
and
Centerre.
Kindred
EBITDA
is
mid
point
of
2014
earnings
guidance
as
of
November
5,
2014,
Gentiva
is
based
upon
current
average
analyst
consensus estimates and includes EBITDA impact of full run rate of cost synergies of $70
million expected to be achieved two years post closing, and Centerre is based upon internal projections. See the Appendix.
Kindred has Successfully Shifted its Business to
Faster Growing Businesses, Improving Margins,
Profitability and Operating Cash Flows
Improves Margin and Profitability
Enhances Growth Profile
2014 –
2015 Revenue Growth
19
EBITDA Margin
(5)
2.9%
4.4%
0.0%
2.0%
4.0%
6.0%
Kindred
(1)
Combined
(2)
6.1%
7.4%
9.1%
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
Kindred 2011
Kindred 2014
Combined
2014
(3)
(4) |
 Deleveraging Profile
20
Long-Term
Goal
Estimated
At Closing
(4)
Goal Two Years
Post Closing
(5)
<5.0x
Mid-4x
Range
~5.5x
Declining Rent Burden as a % of 2014 Revenue
Adjusted Debt to EBITDAR
(3)
(1)
Based upon midpoint of guidance for Kindred as of November 5, 2014, see
Appendix. (2)
Based upon Kindred, Gentiva and Centerre combined revenues and rent expense based
upon guidance and assuming Centerre and Gentiva were acquired January 1,
2014. (3)
Estimated Adjusted Debt to EBITDAR is computed by dividing a numerator comprised of
combined long-term debt at closing plus estimated combined annual rent
expense multiplied by six, less unrestricted cash, by a denominator comprised of full-year estimated EBITDAR. Our ability to
achieve our goals is subject to uncertainties; see Forward-Looking Statements
on slide 2 of this presentation. (4)
Assumes half of full run-rate of expected cost synergies, or $35 million.
(5)
Assumes full run-rate of cost synergies, or $70 million, expected to be
achieved two years post closing. Pro forma adjusted net leverage expected to
be in the mid-5x range at Gentiva closing
with a goal of delevering to below 5.0x two
years post closing |
 Investment Rationale
Kindred Is Poised to Help Shape the Future of Care
for the Aging Population in America
•
Kindred Is Uniquely Positioned To Succeed in a Fee-For-
Service World While Preparing for A Fee-For-Value World
•
Continue The Care Competitive Advantage
–
Kindred is the only post-acute provider today with the full
continuum in place to successfully manage an entire episode of care and achieve the
CMS triple aim •
Transformational Growth
•
Strong Growth and Margin Profile
•
Substantial Operating Cash Flows and Deleveraging Profile
•
Experienced Management Team
21 |
 Q & A
22 |
 J.P.
Morgan Annual Healthcare
Conference
January 2015 |
 Appendix
24 |
 25
Explanation of Non-GAAP Measures
In
addition
to
the
results
provided
in
accordance
with
generally
accepted
accounting
principles
(“GAAP”),
Kindred
Healthcare,
Inc.
(“Kindred”
or the "Company") has provided information in this presentation to compute certain
non-GAAP measurements for the three and twelve months ended September 30 2014, and
the for the twelve months ended December 31, 2013, 2012 and 2011. A reconciliation of the non-
GAAP measurements to the GAAP measurements is included in this presentation.
This presentation also includes financial measures referred to as operating income, or
earnings before interest, income taxes, depreciation, amortization and rent
(“EBITDAR”), and earnings before interest, income taxes, depreciation and amortization ("EBITDA"). The Company's
management uses EBITDAR or EBITDA as meaningful measures of operational performance in
addition to other measures. The Company uses EBITDAR or EBITDA to assess the relative
performance of its operating divisions as well as the employees that operate these businesses. In
addition,
the
Company
believes
these
measurements
are
important
because
securities
analysts
and
investors
use
these
measurements
to
compare the Company's performance to other companies in the healthcare industry. The Company
believes that income (loss) from continuing
operations
is
the
most
comparable
GAAP
measure.
Readers
of
the
Company's
financial
information
should
consider
income
(loss)
from continuing operations as an important measure of the Company's financial performance
because it provides the most complete measure of its performance. EBITDAR or EBITDA
should be considered in addition to, not as a substitute for, or superior to, financial measures based
upon GAAP as an indicator of operating performance. A reconciliation of Adjusted EBITDAR or
Adjusted EBITDA to income (loss) from continuing operations is included in this
presentation and exclude the effects of certain charges listed herein. We believe
that the presentation of these measurements included in this presentation provides useful information to investors with which to
analyze Kindred’s and Gentiva’s operating trends and performance. Further, we
believe these measurements facilitate company-to-company operating performance
comparisons by backing out potential differences caused by variations in capital structures, taxation and the age and
depreciation of property and equipment, which may vary for different companies for reasons
unrelated to operating performance. In addition,
we
believe
that
these
measurements
are
frequently
used
by
securities
analysts,
investors
and
other
interested
parties
in
their
evaluation of companies. |
 Reconciliation of Kindred Earnings Guidance
(a)
Continuing Operations
($ in millions, except per share amounts)
26
As of November 5, 2014
Low
High
Revenues
5,100
$
5,100
$
Operating income (EBITDAR)
692
$
702
$
Rent
322
322
EBITDA
370
380
Depreciation and amortization
157
157
Interest, net
92
92
Income from continuing operations before income taxes
121
131
Provision for income taxes
44
48
Income from continuing operations
77
83
Earnings attributable to noncontrolling interests
(18)
(18)
Income from continuing operations attributable to the Company
59
65
Allocation to participating unvested restricted stockholders
(2)
(2)
Available to common stockholders
57
$
63
$
Earnings per diluted share
0.98
$
1.08
$
Shares used in computing earnings per diluted share
58.3
58.3
(a)
The earnings guidance excludes the effect of reimbursement changes, debt refinancing costs,
severance, retirement, retention and restructuring costs, customer bankruptcy costs,
litigation costs, transaction costs, any further acquisitions or divestitures, any
impairment charges, any further issuances of common stock, debt or mandatory
convertible equity securities in conjunction with the Gentiva transaction and any
repurchases of common stock. |
 27
Reconciliation of Kindred Non-GAAP Measures
($ in thousands)
2014 Quarters
Nine months ended
Twelve months ended
First
Second
Third
Fourth
First
Second
Third
Sept. 30, 2014
Sept. 30, 2014
Revenues:
Hospital division
$657,814
$606,604
$594,154
$606,988
$646,458
$632,156
$609,452
$1,888,066
$2,495,054
Nursing center division
270,205
264,847
265,696
270,080
277,902
280,255
279,561
837,718
1,107,798
Rehabilitation division:
Skilled nursing rehabilitation services
258,750
249,647
245,330
243,280
254,255
253,989
247,042
755,286
998,566
Hospital rehabilitation services
74,523
69,777
68,296
74,017
73,964
75,324
74,808
224,096
298,113
Care management division
51,621
53,039
53,801
66,466
87,704
87,986
86,186
261,876
328,342
Eliminations
(53,479)
(52,884)
(51,832)
(51,155)
(53,541)
(53,746)
(53,736)
(161,023)
(212,178)
Totals
$1,259,434
$1,191,030
$1,175,445
$1,209,676
$1,286,742
$1,275,964
$1,243,313
$3,806,019
$5,015,695
Income (loss) from continuing operations:
Operating income (loss):
Hospital division
$147,493
$129,366
$112,483
$126,788
$145,395
$132,878
$121,744
$400,017
$526,805
Nursing center division
29,145
36,018
31,505
35,585
38,471
36,880
36,179
111,530
147,115
Rehabilitation division:
Skilled nursing rehabilitation services
13,239
21,623
(7,209)
14,260
18,328
19,982
17,552
55,862
70,122
Hospital rehabilitation
services 18,132
19,573
18,215
18,005
19,820
20,084
18,273
58,177
76,182
Care management
division 2,786
3,961
1,085
2,131
4,697
7,065
6,789
18,551
20,682
Corporate:
Overhead
(45,585)
(43,196)
(39,157)
(48,557)
(44,050)
(48,365)
(45,173)
(137,588)
(186,145)
Insurance subsidiary
(509)
(384)
(482)
(539)
(406)
(443)
(637)
(1,486)
(2,025)
(46,094)
(43,580)
(39,639)
(49,096)
(44,456)
(48,808)
(45,810)
(139,074)
(188,170)
Impairment charges
(187)
(438)
(441)
(76,127)
-
-
-
-
(76,127)
Transaction costs
(944)
(108)
(613)
(447)
(683)
(4,496)
(4,114)
(9,293)
(9,740)
Operating income
(EBITDAR) 163,570
166,415
115,386
71,099
181,572
163,585
150,613
495,770
566,869
Rent
(76,519)
(77,324)
(76,762)
(80,921)
(81,048)
(80,209)
(80,192)
(241,449)
(322,370)
EBITDA
87,051
89,091
38,624
(9,822)
100,524
83,376
70,421
254,321
244,499
Depreciation and amortization
(41,598)
(38,554)
(36,507)
(37,547)
(39,337)
(39,442)
(39,023)
(117,802)
(155,349)
Interest, net
(28,074)
(27,600)
(24,389)
(23,900)
(25,616)
(78,081)
(22,173)
(125,870)
(149,770)
Income (loss) from continuing operations
before income taxes
17,379
22,937
(22,272)
(71,269)
35,571
(34,147)
9,225
10,649
(60,620)
Provision (benefit) for income
taxes 6,505
9,208
(6,510)
(20,522)
13,585
(13,082)
3,079
3,582
(16,940)
Income (loss) from continuing
operations $10,874
$13,729
($15,762)
($50,747)
$21,986
($21,065)
$6,146
$7,067
($43,680)
2013 Quarters |
 28
Reconciliation of Kindred
Non-GAAP Measures
(continued)
($ in thousands)
2010
2011
2012
Revenues
4,359,697
$
5,521,763
$
6,181,291
$
Operating income (EBITDAR)
574,623
581,364
743,630
Rent
(357,372)
(399,257)
(428,979)
EBITDA
217,251
182,107
314,651
Depreciation and amortization
(121,552)
(165,594)
(201,068)
Interest, net
(5,845)
(79,888)
(106,842)
Income (loss) from continuing operations
before income taxes
89,854
(63,375)
6,741
Provision (benefit) for income taxes
33,708
(7,104)
39,112
Income (loss) from continuing operations
56,146
$
(56,271)
$
(32,371)
$
* All amounts are as originally reported on each respective Form 10-K.
|
 Reconciliation of Kindred Non-GAAP Measures
(continued)
29
(in thousands)
2013
2012
2011
2014
2013
Consolidated operating data:
Revenues:
Hospital division
$
2,465,560
$
2,543,829
$
2,227,048
$
1,888,066
$
1,858,572
$
2,495,054
Nursing center division
1,070,828
1,071,512
1,085,268
837,718
800,748
1,107,798
Rehabilitation division:
Skilled nursing rehabilitation services
997,007
1,007,335
766,973
755,286
753,727
998,566
Hospital rehabilitation services
286,613
293,580
200,824
224,096
212,596
298,113
Care management division
224,927
143,340
60,736
261,876
158,461
328,342
Eliminations
(209,350)
(203,454)
(180,741)
(161,023)
(158,195)
(212,178)
Totals
$
4,835,585
$
4,856,142
$
4,160,108
$
3,806,019
$
3,625,909
$
5,015,695
Income (loss) from continuing operations:
Operating income (loss):
Hospital division
$ 516,130
$
555,333
$
452,978
$
400,017
$
389,342
$
526,805
Nursing center division
132,253
136,923
150,028
111,530
96,668
147,115
Rehabilitation division:
Skilled nursing rehabilitation services
41,913
72,293
54,678
55,862
27,653
70,122
Hospital rehabilitation services
73,925
69,745
43,731
58,177
55,920
76,182
Care management division
9,963
13,708
3,103
18,551
7,832
20,682
Corporate:
Overhead
(176,495)
(179,063)
(174,800)
(137,588)
(127,938)
(186,145)
Insurance subsidiary
(1,914)
(2,127)
(2,306)
(1,486)
(1,375)
(2,025)
Impairment charges
(77,193)
(108,953)
(73,554)
-
(1,066)
(76,127)
Transaction costs
(2,112)
(2,231)
(50,706)
(9,293)
(1,665)
(9,740)
Operating income (EBITDAR)
516,470
555,628
403,152
495,770
445,371
566,869
Rent
(311,526)
(303,564)
(276,540)
(241,449)
(230,605)
(322,370)
EBITDA 204,944
252,064
126,612
254,321
214,766
244,499
Depreciation and amortization
(154,206)
(160,066)
(126,905)
(117,802)
(116,659)
(155,349)
Interest, net
(103,963)
(106,839)
(79,854)
(125,870)
(80,063)
(149,770)
Income (loss) from continuing operations before income
taxes
(53,225)
(14,841)
(80,147)
10,649
18,044
(60,620)
Provision (benefit) for income taxes
(11,319)
30,642
(13,604)
3,582
9,203
(16,940)
Income (loss) from continuing operations
(41,906)
(45,483)
(66,543)
7,067
8,841
(43,680)
(Earnings) loss attributable to noncontrolling interests
(3,890)
(1,382)
81 (13,729)
(1,424)
(16,195)
Income (loss) from continuing operations
attributable to Kindred
$ (45,796)
$
(46,865)
$ (66,462)
$ (6,662)
$ 7,417
$ (59,875)
Twelve months
ended
September 30,
2014
Year ended December 31,
Nine months ended September 30, |
 (in
thousands) 2013
2012
2011
2014
2013
$
$
$
Depreciation and amortization
154,206
160,066
126,905
117,802
116,659
155,349
Interest, net
103,963
106,839
79,854
125,870
80,063
149,770
Provision (benefit) for income taxes
(11,319)
30,642
(13,604)
3,582
9,203
(16,940)
Kindred EBITDA
204,944
252,064
126,612
254,321
214,766
244,499
Impairment charges
76,082
107,899
73,554
-
-
76,082
Litigation costs
30,850
5,000
-
4,600 23,850
11,600
One-time bonus costs
19,842
-
-
- 19,842
- Facility closing costs
6,542
- 1,490
-
6,043
499 Customer bankruptcy costs
-
-
-
1,857
-
1,857 Severance, retirement and other restructuring costs
6,016
8,730
16,769
6,636
2,353
10,299
Lease cancellation charges
- 1,691
1,819
247
-
247 Transaction costs
2,112
2,231
33,937
9,293
1,665
9,740
Kindred Adjusted EBITDA
$
346,388
$
377,615
$
254,181
$
276,954
$
268,519
354,823
Gentiva Adjusted EBITDA
163,347
$
Estimated cost savings in year one
35,000
$
Kindred EBITDA
$
204,944
$
252,064
$
126,612
$
254,321
$
214,766
$
244,499
Rent expense
311,526
303,564
276,540
241,449
230,605
322,370
Kindred EBITDAR
$
516,470
$
555,628
$
403,152
$
495,770
$
445,371
$
566,869
Kindred Adjusted EBITDA
$
346,388
$
377,615
$
254,181
$
276,954
$
268,519
$
354,823
Rent expense, less lease cancellation charges
311,526
301,873
274,721
241,202
230,605
322,123
Kindred Adjusted EBITDAR
$
657,914
$
679,488
$
528,902
$
518,156
$
499,124
676,946
Gentiva Adjusted EBITDAR
208,068
$
Estimated cost savings in year one
35,000
$
(43,680)
Twelve months
ended September 30,
2014
(66,543)
$
8,841
Income (loss) from continuing operations
(41,906)
$
(45,483)
Year ended December 31,
Nine months ended September 30,
$
7,067
Kindred Acquisition Adjusted EBITDA
518,170
885,014
Kindred Acquisition Adjusted EBITDA - pro forma with cost savings
553,170
Kindred Acquisition Adjusted EBITDAR - pro forma with cost savings
920,014
Kindred Acquisition Adjusted EBITDAR
Reconciliation of Kindred Non-GAAP Measures
(continued)
30 |
 Gentiva
Reconciliation of Non-GAAP Measures
31
(in thousands)
2013
2014
2013
Consolidated statement of income data:
Home Health
$
965,848
$
793,467
$
706,141
$
1,053,174
Hospice
715,190
519,073
534,366
699,897
Community Care
45,606
171,011
-
216,617
Net Revenue
$
1,726,644
$
1,483,551
$
1,240,507
$
1,969,688
Cost of services sold
942,180
811,077
660,998
1,092,259
Gross profit
784,464
672,474
579,509
877,429
Selling, general and administrative expenses
(706,227)
(567,722)
(483,243)
(790,706)
Goodwill and other long-lived asset impairment
(612,380)
-
(210,672) (401,708)
Interest income
2,704
1,899
2,066
2,537
Interest expense and other
(113,088)
(75,805)
(68,849)
(120,044)
Income (loss) from continuing operations before income taxes and equity in net
(loss) earnings of CareCentrix Holdings, Inc.
(644,527)
30,846
(181,189)
(432,492)
Income tax (expense) benefit
39,953
(12,499)
(2,827)
30,281
Equity in net (loss) earnings of CareCentrix Holdings, Inc.
-
(490)
-
(490)
Net income (loss) from continuing operations
(604,574)
17,857
(184,016)
(402,701)
Net income attributable to noncontrolling interests
(487)
(170)
(425)
(232) $
$
Twelve months
ended
September 30,
2014
(402,933)
Net income (loss) from continuing operations attributable to Gentiva shareholders
(605,061)
Year ended
December 31,
Nine months ended September 30,
$
(184,441)
$
17,687
|
 Gentiva
Reconciliation of Non-GAAP Measures
(continued)
32
(in thousands)
2013
2014
2013
$
$
Interest, net
110,384
73,906
66,783
117,507
Depreciation and amortization
24,621
21,207
14,541
31,287 Gentiva EBITDA
(509,522)
125,959
(99,865)
(283,698)
Impairment charges
612,380
-
210,672
Cost savings initiatives and other restructuring costs
8,742
4,317
262 Acquisition, merger and integration costs
18,797
8,466
2,322
24,941 Impact of closed locations
4,565
3,034
-
7,599 Gentiva Adjusted EBITDA
$
134,962
$
141,776
$
113,391
$
163,347
Gentiva EBITDA
$
(509,522)
$
125,959
$
(99,865)
$
(283,698)
Rent expense
43,370
33,467
30,584
46,253 Gentiva EBITDAR
$
(466,152)
$
159,426
$
(69,281)
$
(237,445)
Gentiva Adjusted EBITDA
$
134,962
$
141,776
$
113,391
$
163,347
Rent expense, excluding certain charges
42,351
32,954
30,584
44,721 Gentiva Adjusted EBITDAR
$
177,313
$
174,730
$
143,975
$
208,068
401,708
12,797 $
30,846
$
(181,189)
Nine months ended September 30,
Income (loss) from continuing operations before income taxes
and equity in net (loss) earnings of CareCentrix Holdings, Inc.
(644,527)
Twelve months ended
September 30,
2014
(432,492)
Year ended
December 31, |
 33
Centerre Reconciliation of
Non-GAAP Measures
($ In Thousands)
Twelve months ended
Sept. 30, 2014
Estimated 2014
Revenues
$183,438
$198,513
Operating income (EBITDAR)
$48,797
$48,337
Rent
18,030
20,199
EBITDA
30,767
28,138
Depreciation and
amortization 3,177
3,060
Interest, net
582
500
Income from continuing operations before income taxes
27,008
24,578
Provision for income
taxes 4,848
4,300
Income
from continuing operations 22,160
20,278
Earnings
attributable to noncontrolling interests (14,937)
(13,871)
Income from continuing
operations attributable to Centerre $7,223
$6,407 |
 J.P.
Morgan Annual Healthcare
Conference
January 2015 |