KINDRED HEALTHCARE, INC - FORM 8-K - EX-99.1

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EXHIBIT 99.1

LOGO

Contact:

Richard A. Lechleiter

Executive Vice President and

Chief Financial Officer

(502) 596-7734

KINDRED HEALTHCARE REPORTS SOLID SECOND QUARTER CORE EPS

OF $0.32 EXCLUDING CERTAIN ITEMS

BOARD INITIATES QUARTERLY CASH DIVIDEND OF $0.12 PER SHARE

Second Quarter GAAP Continuing Operations Diluted EPS Totaled $0.12 Compared to Last Year’s $0.29

Company Completes Initial Phase of Repositioning Strategy Through the Disposition of

54 Ventas Nursing Centers

Disposition Lifts Continuing Operations EPS by $0.06 in Second Quarter and $0.11 in First Half of 2013

Company Maintains Fiscal 2013 Core Earnings Guidance of $1.10 to $1.30 and

Raises Annual Cash Flow Guidance to Fund New Dividend Payment

LOUISVILLE, Ky. (August 5, 2013) – Kindred Healthcare, Inc. (“Kindred” or the “Company”) (NYSE:KND) today announced its operating results for the second quarter ended June 30, 2013. During the second quarter of 2013, the Company successfully completed the disposition of 54 nursing centers leased from Ventas, Inc. (“Ventas”) (NYSE:VTR) and reflected the related operations 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.

Second Quarter Highlights:

•

Consolidated revenues declined 1% to $1.41 billion
— Federal sequestration cuts of 2% (effective April 1) reduced consolidated revenues by over $13 million in the quarter

•

Despite soft volumes, cost management drove solid core operating performance
— Core aggregate operating expenses declined 0.8% compared to last year’s second quarter

•

Hospital division reported another successful quarter
— Sequestration diminished top line growth, but core operating income declined only 4% from last year

•

RehabCare division reported 7% growth in operating income driven by better cost controls

•

Home Health and Hospice revenues climbed 84% compared to last year
— Core operating income of $4.0 million improved 42% from a year ago

•

Operating cash flows net of routine capital spending totaled $37 million in the quarter, up 49% from last year’s $24 million

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680 South Fourth Street Louisville, Kentucky 40202

502.596.7300 www.kindredhealthcare.com

Kindred Healthcare Reports Solid Second Quarter Core EPS

Page 2

August 5, 2013

Second Quarter Results

Continuing Operations

Consolidated revenues for the second quarter ended June 30, 2013 declined 1% to $1.41 billion compared to $1.42 billion in the second quarter last year. Income from continuing operations for the second quarter of 2013 totaled $6.2 million or $0.12 per diluted share compared to $15.6 million or $0.29 per diluted share in the second quarter last year.

Second quarter 2013 operating results included pretax charges of approximately $18 million related to (1) a fixed asset impairment charge and certain other costs related to the planned sale of non-strategic facilities, (2) charges associated with the modification of certain of the Company’s senior debt, and (3) transaction related costs. These items reduced income from continuing operations by $10.9 million or $0.20 per diluted share.

Second quarter 2012 operating results included certain charges that reduced income from continuing operations by $5.4 million or $0.10 per diluted share.

Discontinued Operations

During the past several years, the Company has entered into transactions related to the divestiture of unprofitable businesses. For accounting purposes, the historical operating results of these businesses have been classified as discontinued operations in the Company’s condensed consolidated statement of operations for all historical periods.

Other Information

As previously announced, the Company successfully completed an amendment and restatement of its $785.5 million Term Loan Credit Agreement (the “Term Loan”) to effectively reduce its annual interest cost by 100 basis points beginning June 1, 2013. The applicable interest rate on the Term Loan, which matures on June 1, 2018, was reduced by 50 basis points to LIBOR + 325 basis points (previously LIBOR + 375 basis points). In addition, the LIBOR floor was reduced to 1.00% from 1.50%. Kindred expects that the amended and restated Term Loan will result in annualized interest savings of approximately $8 million.

Management Commentary

Paul J. Diaz, Chief Executive Officer of the Company, remarked, “Despite significant reimbursement pressures brought on by federal sequestration cuts of 2% beginning April 1, Kindred reported solid second quarter core results. This accomplishment reflects the commitment of our caregivers, and a relentless focus on cost management across the enterprise, all while maintaining our culture of quality service and patient satisfaction. In addition, we are continuing to see the benefits of the Ventas nursing center transition to our continuing operations. The disposition of these 54 nursing centers lifted our earnings from continuing operations by $0.11 per diluted share in the first half of 2013.”

Mr. Diaz continued, “The second quarter also provided tangible evidence that our asset repositioning strategy and related capital redeployment activities are accelerating. In addition to the Ventas nursing center disposition, we recently completed the sale of seven nursing centers for $47 million, and we have announced another transaction to sell non-strategic facilities that should provide net sales proceeds of approximately $180 million before the end of the year. Finally, our ongoing review of the 2015 Ventas lease renewals will provide additional opportunities for repositioning Kindred as a stronger, more market-focused and profitable post-acute services provider.”

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Commenting on the Company’s financial strength, Mr. Diaz noted, “Our financial liquidity and available capital resources to invest further in our Integrated Care Markets and acquire additional home health and hospice businesses has never been stronger. Our free operating cash flows, after funding $13 million of planned cash dividends, are expected to remain at $90 million for 2013. These free cash flows, along with over $400 million of unused revolving credit capacity, and $227 million of expected net proceeds from the announced asset sales, provide us with significant financial resources to invest in our strategic growth plan.”

Commenting on the Company’s development and acquisition activities, Mr. Diaz noted, “We recently completed the acquisition of a 54-bed transitional care (“TC”) hospital in St. Louis, and we have plans to build new transitional care centers in Phoenix, Indianapolis, Las Vegas and Louisville as we continue to expand our continuum of services in these Integrated Care Markets. In addition, we also completed two home health acquisitions and one hospice acquisition that will further expand our service offerings in Houston and West Texas. These transactions are expected to be accretive to earnings beginning in 2014.”

Quarterly Cash Dividends

The Company also announced that its Board of Directors has approved the initiation of a quarterly cash dividend to its shareholders. An initial quarterly cash dividend of $0.12 per common share will be paid on September 9, 2013 to shareholders of record as of the close of business on August 19, 2013. Future declarations of quarterly dividends will be subject to the approval of Kindred’s Board of Directors.

“We are pleased to announce the first cash dividend paid to shareholders in the Company’s history,” Mr. Diaz noted. “This cash dividend reflects the strength of our operating cash flows, our confidence in our business outlook, and our commitment to growing shareholder value. The quality and strength of our balance sheet, along with a proven track record of generating strong operating cash flows, provides us with the financial flexibility to return capital to shareholders in the form of a dividend while also continuing our strategic development activities in our key Integrated Care Markets.”

Earnings Guidance – Continuing Operations

The Company maintained its earnings guidance for 2013. The earnings guidance excludes the effect of (1) a one-time employee bonus distributed in the first quarter of 2013, (2) employee retention costs incurred in connection with the planned divestiture of non-strategic facilities, (3) any transaction-related charges, (4) charges associated with the modification of certain of the Company’s senior debt, (5) any other reimbursement changes, (6) any further acquisitions or divestitures (including the previously announced sales of non-strategic hospitals and nursing centers), (7) any impairment charges, and (8) any repurchases of common stock.

The Company expects consolidated revenues for 2013 to approximate $5.8 billion. Operating income, or earnings before interest, income taxes, depreciation, amortization and rent, is expected to range from $797 million to $813 million. Rent expense is expected to approximate $392 million, while depreciation and amortization should approximate $192 million. Net interest expense is expected to approximate $109 million. The Company expects to report income from continuing operations for 2013 between $60 million to $70 million or $1.10 to $1.30 per diluted share (based upon diluted shares of 52.5 million).

The Company raised its operating cash flow guidance for 2013 to a range between $235 million to $255 million (prior range was $230 million to $250 million) and lowered its estimated routine capital expenditures in 2013 to a range of $112 million to $122 million (prior range was $120 million to $130 million). In addition to its routine capital expenditures, the Company re-affirmed that its development of new or replacement TC hospitals, transitional care centers, and inpatient rehabilitation

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hospitals (“IRFs”) will approximate $20 million to $30 million in 2013. The new planned cash dividend will require the use of approximately $13 million in fiscal 2013, and approximately $27 million on an annual basis. Operating cash flows in excess of the Company’s routine and development capital spending programs and cash dividend payments, which are expected to approximate $90 million for 2013, will be available to repay debt and fund acquisitions.

The two previously announced transactions to sell 16 hospitals and eight nursing centers are not reflected in the Company’s earnings guidance. As previously announced, these facilities generated combined revenues of approximately $352 million and earnings before interest, income taxes, depreciation and amortization of approximately $27 million (including the allocation of approximately $11 million of overhead cost) for the year ended December 31, 2012. Aggregate rents associated with these facilities approximated $16 million in 2012.

Webcast of Conference Call

As previously announced, investors and the general public can access a live webcast of the second quarter 2013 conference call through a link on the Company’s website at www.kindredhealthcare.com. The conference call will be held August 6, 2013 at 11:00 a.m. (Eastern Time).

A telephone replay of the conference call will be available at approximately 1:00 p.m. on August 6 by dialing (719) 457-0820, access code: 6192358. The replay will be available through August 15.

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

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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 the Centers for Medicare and Medicaid Services (“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 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 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 October 1, 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 will automatically reduce federal spending by approximately $1.2 trillion split evenly between domestic and defense spending. An automatic 2% reduction on each claim submitted to Medicare began on April 1, 2013, (e) the impact of the Taxpayer Relief Act which, among other things, reduces Medicare payments by 50% 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, (f) 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 long-term acute care (“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, (g) 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, (h) the ability of the Company’s hospitals to adjust to potential LTAC certification and medical necessity reviews, (i) 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, (j) the Company’s ability to successfully 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, (k) 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, (l) the failure of the Company’s facilities to meet applicable licensure and certification requirements, (m) the further consolidation and cost containment efforts of managed care organizations and other third party payors, (n) the Company’s ability to meet its rental and debt service obligations, (o) the Company’s ability to operate pursuant to the terms of its debt obligations, and comply with its covenants thereunder, and its ability to operate pursuant to its master lease agreements with Ventas, (p) 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, (q) the Company’s ability to control costs, particularly labor and employee benefit costs, (r) the costs of defending and insuring against alleged professional liability and other claims (including those related to pending wage and hour class action lawsuits against the Company) and the Company’s ability to predict the estimated costs related to such claims, including the impact of differences in actuarial assumptions and estimates compared to eventual outcomes, (s) the Company’s ability to successfully reduce (by divestiture of operations or otherwise) its exposure to professional liability and other claims, (t) 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

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sanctions, (u) national and regional economic, financial, business and political conditions, including their effect on the availability and cost of labor, credit, materials and other services, (v) increased operating costs due to shortages in qualified nurses, therapists and other healthcare personnel, (w) the Company’s ability to attract and retain key executives and other healthcare personnel, (x) the Company’s ability to successfully dispose of unprofitable facilities, (y) 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 2012 and 2011, (z) 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 (aa) 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 six months ended June 30, 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’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-125 private employer in the United States, is a FORTUNE 500 healthcare services company based in Louisville, Kentucky with annual revenues of approximately $6 billion and approximately 72,000 employees in 46 states. At June 30, 2013, Kindred through its subsidiaries provided healthcare services in 2,167 locations, including 116 transitional care hospitals, six inpatient rehabilitation hospitals, 169 nursing centers, 24 sub-acute units, 105 Kindred at Home hospice, home health and non-medical home care locations, 103 inpatient rehabilitation units (hospital-based) and a contract rehabilitation services business, RehabCare, which served 1,644 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.

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KINDRED HEALTHCARE, INC.

Financial Summary

(Unaudited)

(In thousands, except per share amounts)


	Three months ended						Six months ended
	June 30,						June 30,
	2013			2012			2013			2012
Revenues	$	1,410,360		$	1,424,918		$	2,896,678		$	2,891,603

Income from continuing operations	$	6,300		$	15,341		$	16,953		$	35,711
Discontinued operations, net of income taxes:
Income (loss) from operations		(3,533	)		278			(9,469	)		(280	)
Loss on divestiture of operations		(940	)		(356	)		(2,184	)		(1,526	)

Loss from discontinued operations		(4,473	)		(78	)		(11,653	)		(1,806	)

Net income		1,827			15,263			5,300			33,905
(Earnings) loss attributable to noncontrolling interests		(82	)		239			(498	)		(212	)

Income attributable to Kindred	$	1,745		$	15,502		$	4,802		$	33,693

Amounts attributable to Kindred stockholders:
Income from continuing operations	$	6,218		$	15,580		$	16,455		$	35,499
Loss from discontinued operations		(4,473	)		(78	)		(11,653	)		(1,806	)

Net income	$	1,745		$	15,502		$	4,802		$	33,693

Earnings per common share:
Basic:
Income from continuing operations	$	0.12		$	0.29		$	0.31		$	0.67
Discontinued operations:
Income (loss) from operations		(0.07	)		0.01			(0.18	)		—
Loss on divestiture of operations		(0.02	)		(0.01	)		(0.04	)		(0.03	)

Loss from discontinued operations		(0.09	)		—			(0.22	)		(0.03	)

Net income	$	0.03		$	0.29		$	0.09		$	0.64

Diluted:
Income from continuing operations	$	0.12		$	0.29		$	0.31		$	0.67
Discontinued operations:
Income (loss) from operations		(0.07	)		0.01			(0.18	)		—
Loss on divestiture of operations		(0.02	)		(0.01	)		(0.04	)		(0.03	)

Loss from discontinued operations		(0.09	)		—			(0.22	)		(0.03	)

Net income	$	0.03		$	0.29		$	0.09		$	0.64

Shares used in computing earnings per common share:
Basic		52,265			51,664			52,164			51,633
Diluted		52,284			51,675			52,184			51,657

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KINDRED HEALTHCARE, INC.

Condensed Consolidated Statement of Operations

(Unaudited)

(In thousands, except per share amounts)


	Three months ended						Six months ended
	June 30,						June 30,
	2013			2012			2013			2012
Revenues	$	1,410,360		$	1,424,918		$	2,896,678		$	2,891,603

Salaries, wages and benefits		829,407			848,342			1,735,413			1,732,580
Supplies		97,818			101,648			199,698			206,279
Rent		97,741			96,420			194,542			191,594
Other operating expenses		284,538			282,256			572,396			561,371
Other income		(24	)		(3,154	)		(1,022	)		(6,292	)
Impairment charges		16,228			279			16,588			1,053
Depreciation and amortization		46,338			46,499			95,651			91,751
Interest expense		29,086			26,715			57,260			53,292
Investment income		(1,481	)		(265	)		(1,571	)		(550	)

		1,399,651			1,398,740			2,868,955			2,831,078

Income from continuing operations before income taxes		10,709			26,178			27,723			60,525
Provision for income taxes		4,409			10,837			10,770			24,814

Income from continuing operations		6,300			15,341			16,953			35,711
Discontinued operations, net of income taxes:
Income (loss) from operations		(3,533	)		278			(9,469	)		(280	)
Loss on divestiture of operations		(940	)		(356	)		(2,184	)		(1,526	)

Loss from discontinued operations		(4,473	)		(78	)		(11,653	)		(1,806	)

Net income		1,827			15,263			5,300			33,905
(Earnings) loss attributable to noncontrolling interests		(82	)		239			(498	)		(212	)

Income attributable to Kindred	$	1,745		$	15,502		$	4,802		$	33,693

Amounts attributable to Kindred stockholders:
Income from continuing operations	$	6,218		$	15,580		$	16,455		$	35,499
Loss from discontinued operations		(4,473	)		(78	)		(11,653	)		(1,806	)

Net income	$	1,745		$	15,502		$	4,802		$	33,693

Earnings per common share:
Basic:
Income from continuing operations	$	0.12		$	0.29		$	0.31		$	0.67
Discontinued operations:
Income (loss) from operations		(0.07	)		0.01			(0.18	)		—
Loss on divestiture of operations		(0.02	)		(0.01	)		(0.04	)		(0.03	)

Loss from discontinued operations		(0.09	)		—			(0.22	)		(0.03	)

Net income	$	0.03		$	0.29		$	0.09		$	0.64

Diluted:
Income from continuing operations	$	0.12		$	0.29		$	0.31		$	0.67
Discontinued operations:
Income (loss) from operations		(0.07	)		0.01			(0.18	)		—
Loss on divestiture of operations		(0.02	)		(0.01	)		(0.04	)		(0.03	)

Loss from discontinued operations		(0.09	)		—			(0.22	)		(0.03	)

Net income	$	0.03		$	0.29		$	0.09		$	0.64

Shares used in computing earnings per common share:
Basic		52,265			51,664			52,164			51,633
Diluted		52,284			51,675			52,184			51,657

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KINDRED HEALTHCARE, INC.

Condensed Consolidated Balance Sheet

(Unaudited)

(In thousands, except per share amounts)


	June 30,			December 31,
	2013			2012
ASSETS
Current assets:
Cash and cash equivalents	$	37,427		$	50,007
Cash - restricted		5,046			5,197
Insurance subsidiary investments		93,952			86,168
Accounts receivable less allowance for loss		1,036,562			1,038,605
Inventories		30,723			32,021
Deferred tax assets		20,433			12,663
Income taxes		14,901			13,573
Other		32,725			35,532

		1,271,769			1,273,766
Property and equipment		2,168,640			2,226,903
Accumulated depreciation		(1,071,595	)		(1,083,777	)

		1,097,045			1,143,126
Goodwill		1,041,796			1,041,266
Intangible assets less accumulated amortization		429,752			439,767
Assets held for sale		2,803			4,131
Insurance subsidiary investments		150,034			116,424
Other		221,452			219,466

Total assets	$	4,214,651		$	4,237,946

LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	190,279		$	210,668
Salaries, wages and other compensation		370,082			389,009
Due to third party payors		26,205			35,420
Professional liability risks		59,362			54,088
Other accrued liabilities		123,824			137,204
Long-term debt due within one year		8,356			8,942

		778,108			835,331
Long-term debt		1,662,286			1,648,706
Professional liability risks		246,386			236,630
Deferred tax liabilities		10,622			9,764
Deferred credits and other liabilities		218,072			214,671
Equity:
Stockholders’ equity:
Common stock, $0.25 par value; authorized 175,000 shares; issued 54,052 shares - June 30, 2013 and 53,280 shares - December 31, 2012		13,513			13,320
Capital in excess of par value		1,147,787			1,145,922
Accumulated other comprehensive loss		(1,023	)		(1,882	)
Retained earnings		103,227			98,799

		1,263,504			1,256,159
Noncontrolling interests		35,673			36,685

Total equity		1,299,177			1,292,844

Total liabilities and equity	$	4,214,651		$	4,237,946

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KINDRED HEALTHCARE, INC.

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(In thousands)


	Three months ended						Six months ended
	June 30,						June 30,
	2013			2012			2013			2012
Cash flows from operating activities:
Net income	$	1,827		$	15,263		$	5,300		$	33,905
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		46,960			49,802			99,914			98,492
Amortization of stock-based compensation costs		3,840			3,077			6,088			4,879
Amortization of deferred financing costs		4,407			2,359			7,020			4,716
Payment of lender fees related to debt issuance		(1,600	)		—			(1,600	)		—
Provision for doubtful accounts		10,071			6,041			21,337			13,537
Deferred income taxes		(24,977	)		(13,243	)		(25,321	)		(16,905	)
Impairment charges		16,279			329			16,715			1,196
Loss on divestiture of discontinued operations		940			356			2,184			1,526
Other		(1,284	)		1,690			(864	)		1,967
Change in operating assets and liabilities:
Accounts receivable		48,294			(23,891	)		(19,117	)		(81,088	)
Inventories and other assets		4,747			498			(3,400	)		(15,407	)
Accounts payable		(3,288	)		(2,983	)		(19,078	)		(12,533	)
Income taxes		3,622			455			15,792			31,697
Due to third party payors		(8,187	)		(1,963	)		(9,215	)		(10,939	)
Other accrued liabilities		(48,017	)		15,233			(17,288	)		(5,445	)

Net cash provided by operating activities		53,634			53,023			78,467			49,598

Cash flows from investing activities:
Routine capital expenditures		(17,430	)		(28,759	)		(39,800	)		(50,865	)
Development capital expenditures		(5,086	)		(12,376	)		(7,474	)		(22,998	)
Acquisitions, net of cash acquired		(26,933	)		(17,420	)		(26,933	)		(67,868	)
Acquisition deposit		—			16,866			—			—
Sale of assets		7,243			—			12,303			1,110
Purchase of insurance subsidiary investments		(11,759	)		(7,425	)		(22,595	)		(21,198	)
Sale of insurance subsidiary investments		15,526			8,004			25,528			22,010
Net change in insurance subsidiary cash and cash equivalents		(9,782	)		(1,363	)		(42,878	)		(14,486	)
Change in other investments		39			182			358			451
Other		(77	)		(255	)		(221	)		(1,004	)

Net cash used in investing activities		(48,259	)		(42,546	)		(101,712	)		(154,848	)

Cash flows from financing activities:
Proceeds from borrowings under revolving credit		377,900			449,300			861,400			964,700
Repayment of borrowings under revolving credit		(385,200	)		(457,500	)		(844,400	)		(854,500	)
Repayment of other long-term debt		(2,060	)		(2,645	)		(4,726	)		(5,311	)
Payment of deferred financing costs		(455	)		(270	)		(657	)		(313	)
Contribution made by noncontrolling interests		—			200			—			200
Distribution made to noncontrolling interests		(1,019	)		(2,133	)		(1,510	)		(3,521	)
Issuance of common stock		203			—			207			—
Other		19			—			351			—

Net cash provided by (used in) financing activities		(10,612	)		(13,048	)		10,665			101,255

Change in cash and cash equivalents		(5,237	)		(2,571	)		(12,580	)		(3,995	)
Cash and cash equivalents at beginning of period		42,664			40,137			50,007			41,561

Cash and cash equivalents at end of period	$	37,427		$	37,566		$	37,427		$	37,566

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Kindred Healthcare Reports Solid Second Quarter Core EPS

Page 11

August 5, 2013

KINDRED HEALTHCARE, INC.

Condensed Consolidated Statement of Operations

(Unaudited)

(In thousands, except per share amounts)


	2012 Quarters												2013 Quarters
	First			Second			Third			Fourth			First			Second
Revenues	$	1,466,685		$	1,424,918		$	1,417,789		$	1,441,794		$	1,486,318		$	1,410,360

Salaries, wages and benefits		884,238			848,342			855,652			859,282			906,006			829,407
Supplies		104,631			101,648			100,323			100,772			101,880			97,818
Rent		95,174			96,420			97,594			97,247			96,801			97,741
Other operating expenses		279,115			282,256			275,600			275,068			287,858			284,538
Other income		(3,138	)		(3,154	)		(3,157	)		(3,187	)		(998	)		(24	)
Impairment charges		774			279			609			108,828			360			16,228
Depreciation and amortization		45,252			46,499			47,270			48,987			49,313			46,338
Interest expense		26,577			26,715			26,666			27,933			28,174			29,086
Investment income		(285	)		(265	)		(229	)		(252	)		(90	)		(1,481	)

		1,432,338			1,398,740			1,400,328			1,514,678			1,469,304			1,399,651

Income (loss) from continuing operations before income taxes		34,347			26,178			17,461			(72,884	)		17,014			10,709
Provision for income taxes		13,977			10,837			7,225			6,430			6,361			4,409

Income (loss) from continuing operations		20,370			15,341			10,236			(79,314	)		10,653			6,300
Discontinued operations, net of income taxes:
Income (loss) from operations		(558	)		278			(349	)		(583	)		(5,936	)		(3,533	)
Loss on divestiture of operations		(1,170	)		(356	)		(2,280	)		(939	)		(1,244	)		(940	)

Loss from discontinued operations		(1,728	)		(78	)		(2,629	)		(1,522	)		(7,180	)		(4,473	)

Net income (loss)		18,642			15,263			7,607			(80,836	)		3,473			1,827
(Earnings) loss attributable to noncontrolling interests		(451	)		239			(41	)		(790	)		(416	)		(82	)

Income (loss) attributable to Kindred	$	18,191		$	15,502		$	7,566		$	(81,626	)	$	3,057		$	1,745

Amounts attributable to Kindred stockholders:
Income (loss) from continuing operations	$	19,919		$	15,580		$	10,195		$	(80,104	)	$	10,237		$	6,218
Loss from discontinued operations		(1,728	)		(78	)		(2,629	)		(1,522	)		(7,180	)		(4,473	)

Net income (loss)	$	18,191		$	15,502		$	7,566		$	(81,626	)	$	3,057		$	1,745

Earnings (loss) per common share:
Basic:
Income (loss) from continuing operations	$	0.38		$	0.29		$	0.19		$	(1.55	)	$	0.19		$	0.12
Discontinued operations:
Income (loss) from operations		(0.01	)		0.01			(0.01	)		(0.01	)		(0.11	)		(0.07	)
Loss on divestiture of operations		(0.02	)		(0.01	)		(0.04	)		(0.02	)		(0.02	)		(0.02	)

Loss from discontinued operations		(0.03	)		—			(0.05	)		(0.03	)		(0.13	)		(0.09	)

Net income (loss)	$	0.35		$	0.29		$	0.14		$	(1.58	)	$	0.06		$	0.03

Diluted:
Income (loss) from continuing operations	$	0.38		$	0.29		$	0.19		$	(1.55	)	$	0.19		$	0.12
Discontinued operations:
Income (loss) from operations		(0.01	)		0.01			(0.01	)		(0.01	)		(0.11	)		(0.07	)
Loss on divestiture of operations		(0.02	)		(0.01	)		(0.04	)		(0.02	)		(0.02	)		(0.02	)

Loss from discontinued operations		(0.03	)		—			(0.05	)		(0.03	)		(0.13	)		(0.09	)

Net income (loss)	$	0.35		$	0.29		$	0.14		$	(1.58	)	$	0.06		$	0.03

Shares used in computing earnings (loss) per common share:
Basic		51,603			51,664			51,676			51,692			52,062			52,265
Diluted		51,638			51,675			51,709			51,692			52,083			52,284

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Kindred Healthcare Reports Solid Second Quarter Core EPS

Page 12

August 5, 2013

KINDRED HEALTHCARE, INC.

Condensed Business Segment Data

(Unaudited)

(In thousands)


	2012 Quarters												2013 Quarters
	First			Second			Third			Fourth			First			Second
Revenues:
Hospital division	$	749,383		$	714,517		$	699,175		$	712,005		$	748,214		$	691,316
Nursing center division		433,408			425,812			428,207			429,862			427,194			419,497
Rehabilitation division:
Skilled nursing rehabilitation services		255,423			255,139			253,885			246,260			259,520			250,543
Hospital rehabilitation services		74,369			73,402			71,899			73,910			74,523			69,777

		329,792			328,541			325,784			320,170			334,043			320,320

Home health and hospice division		28,432			28,872			35,943			50,093			51,621			53,039

		1,541,015			1,497,742			1,489,109			1,512,130			1,561,072			1,484,172
Eliminations:
Skilled nursing rehabilitation services		(44,527	)		(43,353	)		(42,506	)		(40,694	)		(44,701	)		(44,958	)
Hospital rehabilitation services		(28,161	)		(27,646	)		(26,909	)		(27,620	)		(27,994	)		(27,308	)
Nursing centers		(1,642	)		(1,825	)		(1,905	)		(2,022	)		(2,059	)		(1,546	)

		(74,330	)		(72,824	)		(71,320	)		(70,336	)		(74,754	)		(73,812	)

	$	1,466,685		$	1,424,918		$	1,417,789		$	1,441,794		$	1,486,318		$	1,410,360

Income (loss) from continuing operations:
Operating income (loss):
Hospital division	$	161,826		$	142,668		$	138,250		$	156,924		$	161,819		$	142,907	(a)
Nursing center division		52,519			56,952			58,729			53,330			43,146			54,034
Rehabilitation division:
Skilled nursing rehabilitation services		12,732			21,477			18,680			22,776			14,009			22,519
Hospital rehabilitation services		16,116			17,860			16,977			18,792			18,132			19,573

		28,848			39,337			35,657			41,568			32,141			42,092

Home health and hospice division		2,341			2,789			3,645			4,933			2,786			3,961
Corporate:
Overhead		(42,728	)		(44,723	)		(45,883	)		(45,729	)		(45,582	)		(43,199	)
Insurance subsidiary		(482	)		(600	)		(545	)		(500	)		(509	)		(384	)

		(43,210	)		(45,323	)		(46,428	)		(46,229	)		(46,091	)		(43,583	)
Impairment charges		(774	)		(279	)		(609	)		(108,828	)		(360	)		(16,228	)(a)
Transaction costs		(485	)		(597	)		(482	)		(667	)		(2,229	)		(790	)

Operating income		201,065			195,547			188,762			101,031			191,212			182,393
Rent		(95,174	)		(96,420	)		(97,594	)		(97,247	)		(96,801	)		(97,741	)
Depreciation and amortization		(45,252	)		(46,499	)		(47,270	)		(48,987	)		(49,313	)		(46,338	)
Interest, net		(26,292	)		(26,450	)		(26,437	)		(27,681	)		(28,084	)		(27,605	)(b)

Income (loss) from continuing operations before income taxes		34,347			26,178			17,461			(72,884	)		17,014			10,709
Provision for income taxes		13,977			10,837			7,225			6,430			6,361			4,409

	$	20,370		$	15,341		$	10,236		$	(79,314	)	$	10,653		$	6,300

(a)	Includes employee retention costs of $0.2 million and impairment charges of $15.6 million incurred in connection with the planned divestiture of non-strategic facilities.

(b)	Includes $1.4 million of charges associated with the modification of certain of the Company’s senior debt.

- MORE -

Kindred Healthcare Reports Solid Second Quarter Core EPS

Page 13

August 5, 2013

KINDRED HEALTHCARE, INC.

Condensed Consolidating Statement of Operations

(Unaudited)

(In thousands)


	Three months ended June 30, 2013
				Nursing			Rehabilitation division								Home					Transaction-
	Hospital			center			Skilled nursing			Hospital					health and					related
	division (a)			division			services			services		Total			hospice		Corporate (b)			costs			Eliminations			Consolidated
Revenues	$	691,316		$	419,497		$	250,543		$	69,777	$	320,320		$	53,039	$	—		$	—		$	(73,812	)	$	1,410,360

Salaries, wages and benefits		300,399			198,044			219,874			46,236		266,110			39,730		25,191			—			(67	)		829,407
Supplies		73,523			20,983			785			30		815			2,325		172			—			—			97,818
Rent		53,855			40,890			1,197			19		1,216			1,155		625			—			—			97,741
Other operating expenses		174,305			146,691			7,326			3,930		11,256			7,023		18,218			790			(73,745	)		284,538
Other (income) expense		182			(255	)		39			8		47			—		2			—			—			(24	)
Impairment charges		15,476			752			—			—		—			—		—			—			—			16,228
Depreciation and amortization		21,752			10,371			2,878			2,319		5,197			1,615		7,403			—			—			46,338
Interest expense		179			13			73			—		73			—		28,821			—			—			29,086
Investment income		(4	)		(18	)		(74	)		—		(74	)		—		(1,385	)		—			—			(1,481	)

		639,667			417,471			232,098			52,542		284,640			51,848		79,047			790			(73,812	)		1,399,651

Income from continuing operations before income taxes	$	51,649		$	2,026		$	18,445		$	17,235	$	35,680		$	1,191	$	(79,047	)	$	(790	)	$	—			10,709

Provision for income taxes																											4,409

Income from continuing operations																										$	6,300

Capital expenditures, excluding acquisitions (including discontinued operations):
Routine	$	5,593		$	4,259		$	464		$	45	$	509		$	339	$	6,730		$	—		$	—		$	17,430
Development		5,079			7			—			—		—			—		—			—			—			5,086

	$	10,672		$	4,266		$	464		$	45	$	509		$	339	$	6,730		$	—		$	—		$	22,516


	Three months ended June 30, 2012
				Nursing			Rehabilitation division						Home					Transaction-
	Hospital			center			Skilled nursing		Hospital				health and					related
	division (c)			division (d)			services		services		Total		hospice		Corporate			costs			Eliminations			Consolidated
Revenues	$	714,517		$	425,812		$	255,139	$	73,402	$	328,541	$	28,872	$	—		$	—		$	(72,824	)	$	1,424,918

Salaries, wages and benefits		313,579			206,396			225,453		50,949		276,402		21,206		30,796			—			(37	)		848,342
Supplies		76,942			22,505			739		40		779		1,236		186			—			—			101,648
Rent		54,079			39,699			1,408		39		1,447		609		586			—			—			96,420
Other operating expenses		181,531			140,235			7,470		4,530		12,000		3,641		17,039			597			(72,787	)		282,256
Other income		(203	)		(276	)		—		23		23		—		(2,698	)		—			—			(3,154	)
Impairment charges		47			232			—		—		—		—		—			—			—			279
Depreciation and amortization		22,807			9,957			2,752		2,323		5,075		925		7,735			—			—			46,499
Interest expense		273			19			—		—		—		—		26,423			—			—			26,715
Investment income		(35	)		(18	)		—		—		—		—		(212	)		—			—			(265	)

		649,020			418,749			237,822		57,904		295,726		27,617		79,855			597			(72,824	)		1,398,740

Income from continuing operations before income taxes	$	65,497		$	7,063		$	17,317	$	15,498	$	32,815	$	1,255	$	(79,855	)	$	(597	)	$	—			26,178

Provision for income taxes																									10,837

Income from continuing operations																								$	15,341

Capital expenditures, excluding acquisitions (including discontinued operations):
Routine	$	9,095		$	3,417		$	569	$	60	$	629	$	145	$	15,473		$	—		$	—		$	28,759
Development		11,289			1,087			—		—		—		—		—			—			—			12,376

	$	20,384		$	4,504		$	569	$	60	$	629	$	145	$	15,473		$	—		$	—		$	41,135

(a)	Includes employee retention costs of $0.2 million incurred in connection with the planned divestiture of non-strategic facilities.

(b)	Includes $1.4 million of charges associated with the modification of certain of the Company’s senior debt.

(c)	Includes severance ($0.5 million), other miscellaneous costs ($0.9 million) and lease cancellation charges ($0.9 million) incurred in connection with the closing of two TC hospitals and $5.0 million for employment-related lawsuits.

(d)	Includes $0.9 million incurred in connection with the cancellation of a sub-acute unit project.

- MORE -

Kindred Healthcare Reports Solid Second Quarter Core EPS

Page 14

August 5, 2013

KINDRED HEALTHCARE, INC.

Condensed Consolidating Statement of Operations

(Unaudited)

(In thousands)


	Six months ended June 30, 2013
				Nursing			Rehabilitation division								Home					Transaction-
	Hospital			center			Skilled nursing			Hospital					health and		Corporate			related
	division (a,b)			division (a)			services (a)			services (a)		Total			hospice (a)		(a,c)			costs			Eliminations			Consolidated
Revenues	$	1,439,530		$	846,691		$	510,063		$	144,300	$	654,363		$	104,660	$	—		$	—		$	(148,566	)	$	2,896,678

Salaries, wages and benefits		632,655			414,727			454,718			98,656		553,374			80,044		54,921			—			(308	)		1,735,413
Supplies		151,160			41,929			1,596			62		1,658			4,563		388			—			—			199,698
Rent		107,003			81,479			2,432			36		2,468			2,341		1,251			—			—			194,542
Other operating expenses		350,908			293,504			17,182			7,849		25,031			13,306		34,886			3,019			(148,258	)		572,396
Other (income) expense		81			(649	)		39			28		67			—		(521	)		—			—			(1,022	)
Impairment charges		15,652			936			—			—		—			—		—			—			—			16,588
Depreciation and amortization		45,693			21,208			5,990			4,650		10,640			3,141		14,969			—			—			95,651
Interest expense		361			33			169			—		169			—		56,697			—			—			57,260
Investment income		(9	)		(30	)		(102	)		—		(102	)		—		(1,430	)		—			—			(1,571	)

		1,303,504			853,137			482,024			111,281		593,305			103,395		161,161			3,019			(148,566	)		2,868,955

Income (loss) from continuing operations before income taxes	$	136,026		$	(6,446	)	$	28,039		$	33,019	$	61,058		$	1,265	$	(161,161	)	$	(3,019	)	$	—			27,723

Provision for income taxes																											10,770

Income from continuing operations																										$	16,953

Capital expenditures, excluding acquisitions (including discontinued operations):
Routine	$	15,864		$	10,078		$	1,069		$	77	$	1,146		$	534	$	12,178		$	—		$	—		$	39,800
Development		7,467			7			—			—		—			—		—			—			—			7,474

	$	23,331		$	10,085		$	1,069		$	77	$	1,146		$	534	$	12,178		$	—		$	—		$	47,274


	Six months ended June 30, 2012
				Nursing			Rehabilitation division								Home					Transaction-
	Hospital			center			Skilled nursing			Hospital					health and					related
	division (d)			division (e)			services			services		Total			hospice		Corporate			costs			Eliminations			Consolidated
Revenues	$	1,463,900		$	859,220		$	510,562		$	147,771	$	658,333		$	57,304	$	—		$	—		$	(147,154	)	$	2,891,603

Salaries, wages and benefits		643,888			422,152			458,657			104,680		563,337			42,497		60,775			—			(69	)		1,732,580
Supplies		156,989			44,985			1,547			94		1,641			2,269		395			—			—			206,279
Rent		107,230			79,011			2,848			117		2,965			1,224		1,164			—			—			191,594
Other operating expenses		358,823			283,187			16,149			8,998		25,147			7,408		32,809			1,082			(147,085	)		561,371
Other income		(294	)		(575	)		—			23		23			—		(5,446	)		—			—			(6,292	)
Impairment charges		351			702			—			—		—			—		—			—			—			1,053
Depreciation and amortization		45,153			19,485			5,412			4,647		10,059			1,823		15,231			—			—			91,751
Interest expense		579			46			—			—		—			—		52,667			—			—			53,292
Investment income		(43	)		(29	)		(1	)		—		(1	)		—		(477	)		—			—			(550	)

		1,312,676			848,964			484,612			118,559		603,171			55,221		157,118			1,082			(147,154	)		2,831,078

Income from continuing operations before income taxes	$	151,224		$	10,256		$	25,950		$	29,212	$	55,162		$	2,083	$	(157,118	)	$	(1,082	)	$	—			60,525

Provision for income taxes																											24,814

Income from continuing operations																										$	35,711

Capital expenditures, excluding acquisitions (including discontinued operations):
Routine	$	19,440		$	7,646		$	895		$	106	$	1,001		$	269	$	22,509		$	—		$	—		$	50,865
Development		21,238			1,760			—			—		—			—		—			—			—			22,998

	$	40,678		$	9,406		$	895		$	106	$	1,001		$	269	$	22,509		$	—		$	—		$	73,863

(a)

Includes one-time bonus costs of $24.5 million (hospital division - $8.8 million, nursing center division - $8.3 million, rehabilitation division - $6.3 million (skilled nursing rehabilitation services - $5.0 million and hospital rehabilitation services - $1.3 million), home health and hospice division - $0.8 million and corporate - $0.3 million).

(b)	Includes employee retention costs of $0.5 million incurred in connection with the planned divestiture of non-strategic facilities.

(c)	Includes $1.4 million of charges associated with the modification of certain of the Company’s senior debt.

(d)	Includes severance ($2.5 million), other miscellaneous costs ($1.0 million) and lease cancellation charges ($0.9 million) incurred in connection with the closing of a regional office and two TC hospitals and $5.0 million for employment-related lawsuits.

(e)	Includes $0.9 million incurred in connection with the cancellation of a sub-acute unit project.

- MORE -

Kindred Healthcare Reports Solid Second Quarter Core EPS

Page 15

August 5, 2013

KINDRED HEALTHCARE, INC.

Condensed Business Segment Data

(Unaudited)


	2012 Quarters								2013 Quarters
	First		Second		Third		Fourth		First		Second
Hospital division data:
End of period data:
Number of hospitals:
Transitional care		118		117		116		116		116		116
Inpatient rehabilitation		6		6		6		6		6		6

		124		123		122		122		122		122

Number of licensed beds:
Transitional care		8,454		8,404		8,347		8,382		8,382		8,382
Inpatient rehabilitation		229		259		259		259		259		259

		8,683		8,663		8,606		8,641		8,641		8,641

Revenue mix %:
Medicare		63		62		61		63		63		61
Medicaid		6		6		6		6		5		6
Medicare Advantage		10		10		11		10		10		11
Commercial insurance and other		21		22		22		21		22		22
Admissions:
Medicare		11,989		11,152		10,891		11,023		11,867		10,940
Medicaid		984		1,009		1,006		941		778		850
Medicare Advantage		1,658		1,757		1,616		1,579		1,734		1,638
Commercial insurance and other		2,868		2,630		2,661		2,509		2,512		2,392

		17,499		16,548		16,174		16,052		16,891		15,820

Admissions mix %:
Medicare		69		67		67		69		70		69
Medicaid		6		6		6		6		5		6
Medicare Advantage		9		11		10		10		10		10
Commercial insurance and other		16		16		17		15		15		15
Patient days:
Medicare		293,746		278,614		270,555		275,008		290,942		271,363
Medicaid		38,487		36,654		40,169		38,045		35,447		36,525
Medicare Advantage		46,824		49,672		47,659		46,193		48,784		47,971
Commercial insurance and other		84,372		81,957		81,445		77,562		82,466		74,937

		463,429		446,897		439,828		436,808		457,639		430,796

Average length of stay:
Medicare		24.5		25.0		24.8		24.9		24.5		24.8
Medicaid		39.1		36.3		39.9		40.4		45.6		43.0
Medicare Advantage		28.2		28.3		29.5		29.3		28.1		29.3
Commercial insurance and other		29.4		31.2		30.6		30.9		32.8		31.3
Weighted average		26.5		27.0		27.2		27.2		27.1		27.2

- MORE -

Kindred Healthcare Reports Solid Second Quarter Core EPS

Page 16

August 5, 2013

KINDRED HEALTHCARE, INC.

Condensed Business Segment Data (Continued)

(Unaudited)


	2012 Quarters								2013 Quarters
	First		Second		Third		Fourth		First		Second
Hospital division data (continued):
Revenues per admission:
Medicare	$	39,256	$	39,467	$	39,188	$	40,479	$	39,697	$	38,542
Medicaid		44,447		42,787		43,272		43,492		51,806		47,225
Medicare Advantage		43,923		42,639		45,885		45,646		43,949		45,550
Commercial insurance and other		56,549		59,427		58,134		60,903		63,940		64,764
Weighted average		42,824		43,178		43,228		44,356		44,297		43,699
Revenues per patient day:
Medicare	$	1,602	$	1,580	$	1,577	$	1,622	$	1,619	$	1,554
Medicaid		1,136		1,178		1,084		1,076		1,137		1,099
Medicare Advantage		1,555		1,508		1,556		1,560		1,562		1,555
Commercial insurance and other		1,922		1,907		1,899		1,970		1,948		2,067
Weighted average		1,617		1,599		1,590		1,630		1,635		1,605
Medicare case mix index (discharged patients only)		1.18		1.17		1.15		1.14		1.18		1.17
Average daily census		5,093		4,911		4,781		4,748		5,085		4,734
Occupancy %		67.4		64.6		63.5		63.1		67.4		62.6
Annualized employee turnover %		21.8		22.2		21.1		20.1		21.1		21.4
Nursing center division data:
End of period data:
Number of facilities:
Nursing and rehabilitation centers:
Owned or leased		166		166		166		165		165		165
Managed		4		4		4		4		4		4
Assisted living facilities		6		6		6		6		6		6

		176		176		176		175		175		175

Number of licensed beds:
Nursing and rehabilitation centers:
Owned or leased		20,523		20,571		20,571		20,517		20,517		20,517
Managed		485		485		485		485		485		485
Assisted living facilities		413		341		341		341		341		341

		21,421		21,397		21,397		21,343		21,343		21,343

Revenue mix %:
Medicare		34		34		33		33		33		32
Medicaid		38		40		40		40		39		39
Medicare Advantage		8		7		7		7		8		8
Private and other		20		19		20		20		20		21

- MORE -

Kindred Healthcare Reports Solid Second Quarter Core EPS

Page 17

August 5, 2013

KINDRED HEALTHCARE, INC.

Condensed Business Segment Data (Continued)

(Unaudited)


	2012 Quarters								2013 Quarters
	First		Second		Third		Fourth		First		Second
Nursing center division data (continued):
Patient days (a):
Medicare		275,658		266,529		258,383		256,537		260,756		248,224
Medicaid		932,973		932,785		940,491		932,062		898,951		898,741
Medicare Advantage		80,355		74,899		74,495		72,684		81,955		79,481
Private and other		349,822		339,711		348,935		348,758		335,779		334,965

		1,638,808		1,613,924		1,622,304		1,610,041		1,577,441		1,561,411

Patient day mix % (a):
Medicare		17		16		16		16		17		16
Medicaid		57		58		58		58		57		58
Medicare Advantage		5		5		5		4		5		5
Private and other		21		21		21		22		21		21
Revenues per patient day (a):
Medicare Part A	$	487	$	487	$	495	$	512	$	504	$	503
Total Medicare (including Part B)		535		537		546		553		546		546
Medicaid		179		181		181		183		183		183
Medicaid (net of provider taxes) (b)		158		160		160		162		162		161
Medicare Advantage		412		410		412		415		412		417
Private and other		245		245		248		250		257		259
Weighted average		264		264		264		267		271		269
Average daily census (a)		18,009		17,735		17,634		17,500		17,527		17,158
Admissions (a)		16,598		15,514		15,312		15,630		16,600		15,518
Occupancy % (a)		84.6		83.5		82.9		82.4		82.5		80.7
Medicare average length of stay (a)		31.6		32.1		32.6		31.4		30.6		31.6
Annualized employee turnover %		37.8		40.6		40.1		39.6		40.6		41.7
Rehabilitation division data:
Skilled nursing rehabilitation services:
Revenue mix %:
Company-operated		17		17		17		17		17		18
Non-affiliated		83		83		83		83		83		82
Sites of service (at end of period)		1,722		1,730		1,735		1,726		1,729		1,713
Revenue per site	$	148,329	$	147,479	$	146,331	$	142,678	$	150,099	$	146,260
Therapist productivity %		80.3		80.4		80.5		80.5		81.1		80.4
Hospital rehabilitation services:
Revenue mix %:
Company-operated		38		38		37		37		38		39
Non-affiliated		62		62		63		63		62		61
Sites of service (at end of period):
Inpatient rehabilitation units		100		102		104		105		103		103
LTAC hospitals		125		125		123		123		123		123
Sub-acute units		19		20		20		21		8		8
Outpatient units		111		115		117		119		98		104
Other		5		5		5		5		—		—

		360		367		369		373		332		338

Revenue per site	$	206,580	$	200,006	$	194,849	$	198,150	$	224,466	$	206,441
Annualized employee turnover %		19.6		16.9		17.3		16.9		10.4		13.2

(a)	Excludes managed facilities.

(b)	Provider taxes are recorded in other operating expenses for all periods presented.

- MORE -

Kindred Healthcare Reports Solid Second Quarter Core EPS

Page 18

August 5, 2013

KINDRED HEALTHCARE, INC.

Earnings Per Common Share Reconciliation (a)

(Unaudited)

(In thousands, except per share amounts)


	Three months ended June 30,												Six months ended June 30,
	2013						2012						2013						2012
	Basic			Diluted			Basic			Diluted			Basic			Diluted			Basic			Diluted
Earnings:
Amounts attributable to Kindred stockholders:
Income from continuing operations:
As reported in Statement of Operations	$	6,218		$	6,218		$	15,580		$	15,580		$	16,455		$	16,455		$	35,499		$	35,499
Allocation to participating unvested restricted stockholders		(205	)		(205	)		(374	)		(373	)		(504	)		(504	)		(669	)		(669	)

Available to common stockholders	$	6,013		$	6,013		$	15,206		$	15,207		$	15,951		$	15,951		$	34,830		$	34,830

Discontinued operations, net of income taxes:
Income (loss) from operations:
As reported in Statement of Operations	$	(3,533	)	$	(3,533	)	$	278		$	278		$	(9,469	)	$	(9,469	)	$	(280	)	$	(280	)
Allocation to participating unvested restricted stockholders		117			117			(7	)		(7	)		290			290			5			5

Available to common stockholders	$	(3,416	)	$	(3,416	)	$	271		$	271		$	(9,179	)	$	(9,179	)	$	(275	)	$	(275	)

Loss on divestiture of operations:
As reported in Statement of Operations	$	(940	)	$	(940	)	$	(356	)	$	(356	)	$	(2,184	)	$	(2,184	)	$	(1,526	)	$	(1,526	)
Allocation to participating unvested restricted stockholders		31			31			9			9			67			67			29			29

Available to common stockholders	$	(909	)	$	(909	)	$	(347	)	$	(347	)	$	(2,117	)	$	(2,117	)	$	(1,497	)	$	(1,497	)

Loss from discontinued operations:
As reported in Statement of Operations	$	(4,473	)	$	(4,473	)	$	(78	)	$	(78	)	$	(11,653	)	$	(11,653	)	$	(1,806	)	$	(1,806	)
Allocation to participating unvested restricted stockholders		148			148			2			2			357			357			34			34

Available to common stockholders	$	(4,325	)	$	(4,325	)	$	(76	)	$	(76	)	$	(11,296	)	$	(11,296	)	$	(1,772	)	$	(1,772	)

Net income:
As reported in Statement of Operations	$	1,745		$	1,745		$	15,502		$	15,502		$	4,802		$	4,802		$	33,693		$	33,693
Allocation to participating unvested restricted stockholders		(57	)		(57	)		(372	)		(371	)		(147	)		(147	)		(635	)		(635	)

Available to common stockholders	$	1,688		$	1,688		$	15,130		$	15,131		$	4,655		$	4,655		$	33,058		$	33,058

Shares used in the computation:
Weighted average shares outstanding - basic computation		52,265			52,265			51,664			51,664			52,164			52,164			51,633			51,633

Dilutive effect of employee stock options					19						11						20						24

Adjusted weighted average shares outstanding - diluted computation					52,284						51,675						52,184						51,657


Earnings per common share:
Income from continuing operations	$	0.12		$	0.12		$	0.29		$	0.29		$	0.31		$	0.31		$	0.67		$	0.67
Discontinued operations:
Income (loss) from operations		(0.07	)		(0.07	)		0.01			0.01			(0.18	)		(0.18	)		—			—
Loss on divestiture of operations		(0.02	)		(0.02	)		(0.01	)		(0.01	)		(0.04	)		(0.04	)		(0.03	)		(0.03	)

Loss from discontinued operations		(0.09	)		(0.09	)		—			—			(0.22	)		(0.22	)		(0.03	)		(0.03	)

Net income	$	0.03		$	0.03		$	0.29		$	0.29		$	0.09		$	0.09		$	0.64		$	0.64

(a)

Earnings per common share are based upon the weighted average number of common shares outstanding during the respective periods. The diluted calculation of earnings per common share includes the dilutive effect of stock options. The Company follows the provisions of the authoritative guidance for determining whether instruments granted in share-based payment transactions are participating securities, which requires that certain unvested restricted stock be included as a participating security in the basic and diluted earnings per common share calculation pursuant to the two-class method.

- MORE -

Kindred Healthcare Reports Solid Second Quarter Core EPS

Page 19

August 5, 2013

KINDRED HEALTHCARE, INC.

Reconciliation of Non-GAAP Measurements to GAAP Results

(Unaudited)

(In thousands, except per share amounts and statistics)

In addition to the results provided in accordance with GAAP, the Company has provided information in this release to compute certain non-GAAP measurements for the three months and six months ended June 30, 2013 and 2012 before certain charges or on a core basis. The charges that were excluded from core operating results are denoted in the tables below.

The income tax benefit associated with the excluded charges was calculated using an effective income tax rate of 39.2% and 38.7% for the three months ended June 30, 2013 and 2012, respectively, and 40.0% and 38.7% for the six months ended June 30, 2013 and 2012, respectively.

The use of these non-GAAP measurements are not intended to replace the presentation of the Company’s financial results in accordance with GAAP. The Company believes that the presentation of core operating results provides additional information to investors to facilitate the comparison between periods by excluding certain charges for the three months and six months ended June 30, 2013 and 2012 that the Company believes are not representative of its ongoing operations due to the materiality and nature of the charges. The Company’s core operating results also represent a key performance measure for the purpose of evaluating performance internally.


	Three months ended						Six months ended
	June 30,						June 30,
	2013			2012			2013			2012
Detail of charges:
One-time bonus costs	$	—		$	—		($	24,445	)	$	—
Severance, employee retention and other costs		(165	)		(2,292	)		(495	)		(4,476	)
Employment-related lawsuits		—			(5,000	)		—			(5,000	)
Transaction costs		(790	)		(597	)		(3,019	)		(1,082	)
Impairment charges		(15,633	)		—			(15,633	)		—
Lease cancellation charges (rent expense)		—			(919	)		—			(919	)
Senior debt modification charges (interest expense)		(1,365	)		—			(1,365	)		—

		(17,953	)		(8,808	)		(44,957	)		(11,477	)
Income tax benefit		7,046			3,413			17,982			4,447

Charges net of income taxes		(10,907	)		(5,395	)		(26,975	)		(7,030	)
Allocation to participating unvested restricted stockholders		360			129			826			132

Available to common stockholders	($	10,547	)	($	5,266	)	($	26,149	)	($	6,898	)

Weighted average diluted shares outstanding		52,284			51,675			52,184			51,657

Diluted loss per common share related to charges	($	0.20	)	($	0.10	)	($	0.50	)	($	0.13	)

Reconciliation of operating income before charges:
Operating income before charges	$	198,981		$	203,436		$	417,197		$	407,170
Detail of charges excluded from core operating results:
One-time bonus costs		—			—			(24,445	)		—
Severance, employee retention and other costs		(165	)		(2,292	)		(495	)		(4,476	)
Employment-related lawsuits		—			(5,000	)		—			(5,000	)
Transaction costs		(790	)		(597	)		(3,019	)		(1,082	)
Impairment charges		(15,633	)		—			(15,633	)		—

		(16,588	)		(7,889	)		(43,592	)		(10,558	)

Reported operating income	$	182,393		$	195,547		$	373,605		$	396,612

Reconciliation of income from continuing operations before charges:
Amounts attributable to Kindred stockholders:
Income from continuing operations before charges	$	17,125		$	20,975		$	43,430		$	42,529
Charges net of income taxes		(10,907	)		(5,395	)		(26,975	)		(7,030	)

Reported income from continuing operations	$	6,218		$	15,580		$	16,455		$	35,499

Reconciliation of diluted income per common share from continuing operations before charges:
Diluted income per common share before charges (a)	$	0.32		$	0.39		$	0.81		$	0.80
Charges net of income taxes		(0.20	)		(0.10	)		(0.50	)		(0.13	)

Reported diluted income per common share from continuing operations	$	0.12		$	0.29		$	0.31		$	0.67

Reconciliation of effective income tax rate before charges:
Effective income tax rate before charges		40.0	%		40.7	%		39.6	%		40.6	%
Impact of charges on effective income tax rate		1.2	%		0.7	%		-0.8	%		0.4	%

Reported effective income tax rate		41.2	%		41.4	%		38.8	%		41.0	%

(a)

For purposes of computing diluted earnings per common share before charges, income from continuing operations before charges was reduced by $0.6 million and $0.5 million for the three months ended June 30, 2013 and 2012, respectively, and $1.3 million and $0.8 million for the six months ended June 30, 2013 and 2012, respectively, for the allocation of income to participating unvested restricted stockholders.

- MORE -

Kindred Healthcare Reports Solid Second Quarter Core EPS

Page 20

August 5, 2013

KINDRED HEALTHCARE, INC.

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

(Unaudited)

(In thousands)


	Three months ended June 30, 2013
				Charges
	Before charges			Employee retention			Impairment charges			Transaction costs			Senior debt modification charges			Total			As reported
Income from continuing operations:
Operating income (loss):
Hospital division	$	143,072		$	(165	)	$	—		$	—		$	—		$	(165	)	$	142,907
Nursing center division		54,034			—			—			—			—			—			54,034
Rehabilitation division:
Skilled nursing rehabilitation services		22,519			—			—			—			—			—			22,519
Hospital rehabilitation services		19,573			—			—			—			—			—			19,573

		42,092			—			—			—			—			—			42,092

Home health and hospice division		3,961			—			—			—			—			—			3,961
Corporate:
Overhead		(43,199	)		—			—			—			—			—			(43,199	)
Insurance subsidiary		(384	)		—			—			—			—			—			(384	)

		(43,583	)		—			—			—			—			—			(43,583	)
Impairment charges		(595	)		—			(15,633	)		—			—			(15,633	)		(16,228	)
Transaction costs		—			—			—			(790	)		—			(790	)		(790	)

Operating income		198,981			(165	)		(15,633	)		(790	)		—			(16,588	)		182,393
Rent		(97,741	)		—			—			—			—			—			(97,741	)
Depreciation and amortization		(46,338	)		—			—			—			—			—			(46,338	)
Interest, net		(26,240	)		—			—			—			(1,365	)		(1,365	)		(27,605	)

Income from continuing operations before income taxes		28,662			(165	)		(15,633	)		(790	)		(1,365	)		(17,953	)		10,709
Provision for income taxes		11,455			(64	)		(6,136	)		(310	)		(536	)		(7,046	)		4,409

	$	17,207		$	(101	)	$	(9,497	)	$	(480	)	$	(829	)	$	(10,907	)	$	6,300


	Three months ended June 30, 2012
				Charges
	Before charges			Severance and other			Employment- related lawsuits			Transaction costs			Lease cancellation charges			Total			As reported
Income from continuing operations:
Operating income (loss):
Hospital division	$	149,051		$	(1,383	)	$	(5,000	)	$	—		$	—		$	(6,383	)	$	142,668
Nursing center division		57,861			(909	)		—			—			—			(909	)		56,952
Rehabilitation division:
Skilled nursing rehabilitation services		21,477			—			—			—			—			—			21,477
Hospital rehabilitation services		17,860			—			—			—			—			—			17,860

		39,337			—			—			—			—			—			39,337

Home health and hospice division		2,789			—			—			—			—			—			2,789
Corporate:
Overhead		(44,723	)		—			—			—			—			—			(44,723	)
Insurance subsidiary		(600	)		—			—			—			—			—			(600	)

		(45,323	)		—			—			—			—			—			(45,323	)
Impairment charges		(279	)		—			—			—			—			—			(279	)
Transaction costs		—			—			—			(597	)		—			(597	)		(597	)

Operating income		203,436			(2,292	)		(5,000	)		(597	)		—			(7,889	)		195,547
Rent		(95,501	)		—			—						(919	)		(919	)		(96,420	)
Depreciation and amortization		(46,499	)		—			—			—			—			—			(46,499	)
Interest, net		(26,450	)		—			—			—			—			—			(26,450	)

Income from continuing operations before income taxes		34,986			(2,292	)		(5,000	)		(597	)		(919	)		(8,808	)		26,178
Provision for income taxes		14,250			(888	)		(1,938	)		(231	)		(356	)		(3,413	)		10,837

	$	20,736		$	(1,404	)	$	(3,062	)	$	(366	)	$	(563	)	$	(5,395	)	$	15,341

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Kindred Healthcare Reports Solid Second Quarter Core EPS

Page 21

August 5, 2013

KINDRED HEALTHCARE, INC.

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

(Unaudited)

(In thousands)


	Six months ended June 30, 2013
				Charges
																Senior debt
	Before			One-time			Employee			Impairment			Transaction			modification						As
	charges			bonus			retention			charges			costs			charges			Total			reported
Income from continuing operations:
Operating income (loss):
Hospital division	$	313,998		$	(8,777	)	$	(495	)	$	—		$	—		$	—		$	(9,272	)	$	304,726
Nursing center division		105,393			(8,213	)		—			—			—			—			(8,213	)		97,180
Rehabilitation division:
Skilled nursing rehabilitation services		41,580			(5,052	)		—			—			—			—			(5,052	)		36,528
Hospital rehabilitation services		38,960			(1,255	)		—			—			—			—			(1,255	)		37,705

		80,540			(6,307	)		—			—			—			—			(6,307	)		74,233

Home health and hospice division		7,580			(833	)		—			—			—			—			(833	)		6,747
Corporate:
Overhead		(88,466	)		(315	)		—			—			—			—			(315	)		(88,781	)
Insurance subsidiary		(893	)		—			—			—			—			—			—			(893	)

		(89,359	)		(315	)		—			—			—			—			(315	)		(89,674	)
Impairment charges		(955	)		—			—			(15,633	)		—			—			(15,633	)		(16,588	)
Transaction costs		—			—			—			—			(3,019	)		—			(3,019	)		(3,019	)

Operating income		417,197			(24,445	)		(495	)		(15,633	)		(3,019	)		—			(43,592	)		373,605
Rent		(194,542	)		—			—			—			—			—			—			(194,542	)
Depreciation and amortization		(95,651	)		—			—			—			—			—			—			(95,651	)
Interest, net		(54,324	)		—			—			—			—			(1,365	)		(1,365	)		(55,689	)

Income from continuing operations before income taxes		72,680			(24,445	)		(495	)		(15,633	)		(3,019	)		(1,365	)		(44,957	)		27,723
Provision for income taxes		28,752			(9,778	)		(198	)		(6,253	)		(1,207	)		(546	)		(17,982	)		10,770

	$	43,928		$	(14,667	)	$	(297	)	$	(9,380	)	$	(1,812	)	$	(819	)	$	(26,975	)	$	16,953


	Six months ended June 30, 2012
				Charges
							Employment-						Lease
	Before			Severance			related			Transaction			cancellation						As
	charges			and other			lawsuits			costs			charges			Total			reported
Income from continuing operations:
Operating income (loss):
Hospital division	$	312,979		$	(3,485	)	$	(5,000	)	$	—		$	—		$	(8,485	)	$	304,494
Nursing center division		110,380			(909	)		—			—			—			(909	)		109,471
Rehabilitation division:
Skilled nursing rehabilitation services		34,245			(36	)		—			—			—			(36	)		34,209
Hospital rehabilitation services		33,987			(11	)		—			—			—			(11	)		33,976

		68,232			(47	)		—			—			—			(47	)		68,185

Home health and hospice division		5,130			—			—			—			—			—			5,130
Corporate:
Overhead		(87,416	)		(35	)		—			—			—			(35	)		(87,451	)
Insurance subsidiary		(1,082	)		—			—			—			—			—			(1,082	)

		(88,498	)		(35	)		—			—			—			(35	)		(88,533	)
Impairment charges		(1,053	)		—			—			—			—			—			(1,053	)
Transaction costs		—			—			—			(1,082	)		—			(1,082	)		(1,082	)

Operating income		407,170			(4,476	)		(5,000	)		(1,082	)		—			(10,558	)		396,612
Rent		(190,675	)		—			—						(919	)		(919	)		(191,594	)
Depreciation and amortization		(91,751	)		—			—			—			—			—			(91,751	)
Interest, net		(52,742	)		—			—			—			—			—			(52,742	)

Income from continuing operations before income taxes		72,002			(4,476	)		(5,000	)		(1,082	)		(919	)		(11,477	)		60,525
Provision for income taxes		29,261			(1,734	)		(1,938	)		(419	)		(356	)		(4,447	)		24,814

	$	42,741		$	(2,742	)	$	(3,062	)	$	(663	)	$	(563	)	$	(7,030	)	$	35,711

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Kindred Healthcare Reports Solid Second Quarter Core EPS

Page 22

August 5, 2013

KINDRED HEALTHCARE, INC.

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

(Unaudited)

(In thousands)


Operating expenses (a):	Three months ended June 30, 2013
				Charges
	Before charges			Employee retention		Impairment charges		Transaction costs		Total		As reported
Salaries, wages and benefits	$	829,242		$	165	$	—	$	—	$	165	$	829,407
Supplies		97,818			—		—		—		—		97,818
Other operating expenses		283,748			—		—		790		790		284,538
Other income		(24	)		—		—				—		(24	)
Impairment charges		595			—		15,633		—		15,633		16,228

	$	1,211,379		$	165	$	15,633	$	790	$	16,588	$	1,227,967


	Three months ended June 30, 2012
				Charges
	Before charges			Severance and other		Employment- related lawsuits		Transaction costs		Total		As reported
Salaries, wages and benefits	$	847,821		$	521	$	—	$	—	$	521	$	848,342
Supplies		101,648			—		—		—		—		101,648
Other operating expenses		274,888			1,771		5,000		597		7,368		282,256
Other income		(3,154	)		—		—				—		(3,154	)
Impairment charges		279			—		—		—		—		279

	$	1,221,482		$	2,292	$	5,000	$	597	$	7,889	$	1,229,371

(a)	As used in the derivation of operating income.

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Kindred Healthcare Reports Solid Second Quarter Core EPS

Page 23

August 5, 2013

KINDRED HEALTHCARE, INC.

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

(Unaudited)

(In thousands)


Operating expenses (a):	Six months ended June 30, 2013
				Charges
	Before charges			One-time bonus		Employee retention		Impairment charges		Transaction costs		Total		As reported
Salaries, wages and benefits	$	1,710,473		$	24,445	$	495	$	—	$	—	$	24,940	$	1,735,413
Supplies		199,698			—		—		—		—		—		199,698
Other operating expenses		569,377			—		—		—		3,019		3,019		572,396
Other income		(1,022	)		—		—		—				—		(1,022	)
Impairment charges		955			—		—		15,633		—		15,633		16,588

	$	2,479,481		$	24,445	$	495	$	15,633	$	3,019	$	43,592	$	2,523,073


	Six months ended June 30, 2012
				Charges
	Before charges			Severance and other		Employment- related lawsuits		Transaction costs		Total		As reported
Salaries, wages and benefits	$	1,729,969		$	2,611	$	—	$	—	$	2,611	$	1,732,580
Supplies		206,279			—		—		—		—		206,279
Other operating expenses		553,424			1,865		5,000		1,082		7,947		561,371
Other income		(6,292	)		—		—		—		—		(6,292	)
Impairment charges		1,053			—		—		—		—		1,053

	$	2,484,433		$	4,476	$	5,000	$	1,082	$	10,558	$	2,494,991

(a)	As used in the derivation of operating income.

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Kindred Healthcare Reports Solid Second Quarter Core EPS

Page 24

August 5, 2013

KINDRED HEALTHCARE, INC.

Reconciliation of Earnings Guidance for 2013 - Continuing Operations (a)

(Unaudited)

(In millions, except per share amounts)


	As of August 5, 2013						As of May 1, 2013
	Low			High			Low			High
Operating income	$	797		$	813		$	806		$	822

Rent		392			392			399			399
Depreciation and amortization		192			192			189			189
Interest, net		109			109			113			113

Income from continuing operations before income taxes		104			120			105			121
Provision for income taxes		43			49			44			50

Income from continuing operations		61			71			61			71
Earnings attributable to noncontrolling interests		(1	)		(1	)		(1	)		(1	)

Income from continuing operations attributable to the Company		60			70			60			70
Allocation to participating unvested restricted stockholders		(2	)		(2	)		(2	)		(2	)

Available to common stockholders	$	58		$	68		$	58		$	68

Earnings per diluted share	$	1.10		$	1.30		$	1.10		$	1.30
Shares used in computing earnings per diluted share		52.5			52.5			52.7			52.7

(a)

The earnings guidance excludes the effect of (1) a one-time employee bonus distributed in the first quarter of 2013, (2) employee retention costs incurred in connection with the planned divestiture of non-strategic facilities, (3) any transaction-related charges, (4) charges associated with the modification of certain of the Company’s senior debt, (5) any other reimbursement changes, (6) any further acquisitions or divestitures (including the previously announced sales of non-strategic hospitals and nursing centers), (7) any impairment charges, and (8) any repurchases of common stock.

- END -

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