SUMMARY

This summary highlights selected information contained elsewhere in this proxy statement/prospectus. It may not contain all of the information that is important to you. You should read carefully this entire proxy statement/prospectus and the other documents to which this proxy statement/prospectus refers to understand fully the merger and the related transactions. See “Where You Can Find More Information” beginning on page [—]. Most items in this summary include a page reference directing you to a more complete description of those items.

Information About Gentiva (page [—])

Gentiva is one of the nation’s largest providers of home health, hospice and community care services, delivering innovative, high quality care to patients across the United States. Gentiva is a single source for skilled nursing; physical, occupational, speech and neurorehabilitation services; hospice services; social work; nutrition; disease management education; help with daily living activities; and other therapies and services.

Gentiva is a Delaware corporation with principal executive offices at 3350 Riverwood Parkway, Suite 1400, Atlanta, GA 30339-3314. The telephone number of Gentiva’s executive offices is (770) 951-6450, and Gentiva’s website is www.gentiva.com. Gentiva common stock is listed on NASDAQ and trades under the symbol “GTIV.” Additional information about Gentiva is included in documents incorporated by reference into this proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page [—].

Information About Kindred (page [—])

Kindred is a healthcare services company that through its subsidiaries operates transitional care hospitals, inpatient rehabilitation hospitals, nursing centers, assisted living facilities, a contract rehabilitation services business and a home health and hospice business across the United States. At September 30, 2014, Kindred’s hospital division operated 97 transitional care hospitals (certified as long-term acute care hospitals under the Medicare program) and five inpatient rehabilitation hospitals in 22 states. Kindred’s nursing center division operated 99 nursing centers and six assisted living facilities in 21 states. Kindred’s rehabilitation division provided rehabilitation services primarily in hospitals and long-term care settings. Kindred’s care management division (formerly known as Kindred’s home health and hospice division) primarily provided home health, hospice and private duty services from 152 locations in 13 states.

Kindred is a Delaware corporation headquartered in Louisville, Kentucky. Kindred’s principal offices are located at 680 South Fourth Street, Louisville, Kentucky 40202 and its telephone number is (502) 596-7300. Kindred’s website is www.kindredhealthcare.com. Kindred common stock is listed on the NYSE and trades under the symbol “KND.” Additional information about Kindred is included in documents incorporated by reference into this proxy statement/prospectus. See the section entitled “Where You Can Find More Information” beginning on page [—].

Information About Merger Sub (page [—])

Kindred Healthcare Development 2, Inc., a Delaware corporation and wholly owned subsidiary of Kindred, was formed on June 13, 2014 for the purpose of commencing an offer to acquire all of the outstanding shares of Gentiva common stock, which we refer to as the tender offer, pursuant to a Tender Offer Statement on Schedule TO filed by Kindred and merger sub with the SEC on June 17, 2014. Merger sub has not carried on any activities or operations to date, except for those incidental to its formation and undertaken in connection with the tender offer and, following termination of the tender offer, the transactions contemplated by the merger agreement. By operation of the merger, merger sub will merge with and into Gentiva, with Gentiva continuing as the surviving corporation and a wholly owned subsidiary of Kindred.

 

The Merger (page [—])

Pursuant to the merger agreement, merger sub will merge with and into Gentiva, with Gentiva, which we sometimes refer to as the surviving corporation, surviving the merger as a wholly owned subsidiary of Kindred.

We encourage you to read the merger agreement, which governs the merger and is attached as Annex A to this proxy statement/prospectus, because it sets forth the terms of the merger.

Merger Consideration (page [—])

At the effective time of the merger, each share of Gentiva common stock outstanding, other than shares owned by Kindred or Gentiva or their respective wholly owned subsidiaries, or shares owned by stockholders who have properly exercised and perfected appraisal rights under Delaware law, will be converted into the right to receive $14.50 in cash, without interest, and 0.257 of a share of Kindred common stock.

The exchange ratio is a fixed ratio. Therefore, the number of shares of Kindred common stock to be received by holders of Gentiva common stock as a result of the merger will not change between now and the time the merger is completed to reflect changes to the trading price of Kindred common stock.

Effect of the Merger on Gentiva’s Equity Awards (page [—])

At the effective time, each Gentiva in-the-money option will be canceled and converted into the right to receive an amount in cash, without interest, equal to the cash consideration plus the value of the stock consideration (based on the Kindred closing price), less the exercise price, subject to withholding taxes. Each Gentiva out-of-the-money option or Gentiva option that will not vest as a result of the merger will be converted into an option to purchase a number of shares of Kindred common stock determined by multiplying the number of shares of Gentiva common stock subject to such Gentiva option by a fraction, the numerator of which is the sum of (A) the product of the stock consideration multiplied by the Kindred closing price and (B) the cash consideration and the denominator of which is the Kindred closing price.

Each outstanding share of Gentiva restricted stock that will vest as a result of the merger and each outstanding Gentiva deferred stock unit will receive the merger consideration, subject to withholding taxes. Each outstanding share of Gentiva restricted stock that will not vest as a result of the merger will receive merger consideration in the form of a restricted Kindred cash award and restricted Kindred common stock, in each case subject to the vesting conditions of such shares of Gentiva restricted stock prior to the effective time.

Each Gentiva performance cash award that will become vested as a result of the merger will be accelerated and the recipient thereof will receive an amount in cash, without interest, equal to the target amount of such cash award (unless such performance cash award provides for the accelerated vesting of such award at the maximum level, in which case the recipient thereof will receive an amount in cash, without interest, equal to the maximum amount of such cash award), subject to withholding taxes. Each Gentiva performance cash award that will not vest as a result of the merger will be converted into the right to receive a Kindred cash award, subject to the vesting conditions of such performance cash award prior to the effective time of the merger. To the extent that any performance cash award is, immediately prior to the effective time, subject to any performance-based vesting or other performance conditions, the board of directors of Kindred, or an applicable committee thereof, may, following the effective time, make such equitable adjustments, if any, to the applicable performance goals or conditions relating to the Kindred cash award received by the holder of such performance cash award, as the Kindred board (or such committee thereof) may determine to be necessary or appropriate as a result of the consummation of the transactions contemplated by the merger agreement, including the merger, and, in each case, subject to and in accordance with the terms and conditions of the applicable performance cash award and the applicable Gentiva stock plan.

 

Participants in the ESPP will be entitled to receive the merger consideration for shares of Gentiva common stock purchased through the ESPP prior to the effective time. No new offering periods under the ESPP will commence after the date of the merger agreement.

Financing Relating to the Merger (page [—])

Funds needed to complete the merger include funds to:

 

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pay Gentiva stockholders (and holders of Gentiva’s equity-based interests and any payable cash awards) amounts due to them under the merger agreement;

 

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refinance certain existing debt of Gentiva; and

 

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pay fees and expenses related to the merger and the debt financing for the merger.

Kindred anticipates that the funds needed to complete the merger will be obtained from a combination of (i) existing cash balances, (ii) the proceeds from the issuances of Kindred common stock and tangible equity units, and (iii) third party-financing, which we refer to as the debt financing, which may include some combination of the following: a senior secured asset-based revolving credit facility, a senior secured term loan facility, a senior unsecured bridge loan facility and/or the issuance of senior unsecured notes or other debt securities.

On October 9, 2014, Kindred obtained a debt commitment letter from Citigroup Global Markets Inc. (which we refer to as Citi), JPMorgan Chase Bank, N.A. and J.P. Morgan Securities LLC, which was amended and restated on October 30, 2014, and which, as amended and restated, we refer to as the debt commitment letter. The debt commitment letter was provided by Citi, Citibank, N.A., Citigroup USA, Inc., Citigroup North America, Inc. and/or their affiliates, JPMorgan Chase Bank, N.A., J.P. Morgan Securities LLC, General Electric Capital Corporation, GE Capital Markets, Inc., Guggenheim Securities, LLC (which we refer to as Guggenheim), Security Benefit Corporation and its designated affiliates, Morgan Stanley Senior Funding, Inc., Bank of Montreal, BMO Capital Markets Corp., Deutsche Bank AG New York Branch, Deutsche Bank Securities Inc., SunTrust Bank and SunTrust Robinson Humphrey, Inc., which we refer to collectively as the debt commitment parties. Under the debt commitment letter, the debt commitment parties agreed to provide a $750 million senior secured asset-based revolving credit facility, a $992.5 million senior secured term loan facility and a $1,700 million senior unsecured bridge loan facility. The bridge loan facility will only be drawn to the extent Kindred has not completed planned offerings of senior unsecured notes, common stock and tangible equity units prior to the closing of the merger. The commitments for the asset-based revolving credit facility and the term loan facility were only intended to allow Kindred to refinance Kindred’s existing credit facilities in the event that Kindred did not obtain the consents required for certain amendments to such credit facilities on or prior to the closing of the merger. On October 31, 2014, Kindred obtained the consents required for the amendments to its existing asset-based revolving credit facility and, as a result, the commitments for the new asset-based revolving credit facility in the debt commitment letter were terminated.

The definitive documentation governing the term loan facility and the bridge loan facility has not been finalized and, accordingly, the actual terms of the debt financing may differ from those described in this proxy statement/prospectus. Although the debt financing described in this proxy statement/prospectus is not subject to due diligence or a “market out,” such financing may not be considered assured. The obligation of the commitment parties to provide debt financing under the debt commitment letter is subject to a number of conditions. There is a risk that these conditions will not be satisfied and the debt financing may not be available when required. In the event that the facilities are not available to Kindred on the terms set forth in the debt commitment letter or Kindred anticipates that the facilities will not be available on the terms set forth in the debt commitment letter due to the failure of a condition thereto or for any other reason, Kindred has the right under

 

the merger agreement to seek alternative financing. As of the date of this proxy statement/prospectus, no such alternative financing has been arranged. Kindred’s obligation to complete the merger is not conditioned upon the receipt of any financing.

Gentiva’s Reasons for the Merger and Recommendation of Gentiva’s Board of Directors (page [—])

After careful consideration of the various factors as described in “The Merger—Gentiva’s Reasons for the Merger and Recommendation of Gentiva’s Board of Directors” beginning on page [—], the Gentiva board of directors has unanimously approved and declared advisable the merger agreement and the transactions contemplated thereby, including the merger, and has unanimously determined that the merger agreement and the transactions contemplated thereby, including the merger, are fair to, and in the best interests of, Gentiva and its stockholders. The Gentiva board of directors unanimously recommends that Gentiva stockholders vote “FOR” the proposal to adopt the merger agreement at the special meeting. In addition, the Gentiva board of directors unanimously recommends that Gentiva stockholders vote “FOR” the proposal to approve the merger-related executive compensation and “FOR” the proposal to approve adjournments of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement.

Opinion of Gentiva’s Financial Advisor (page [—])

In connection with the merger, Gentiva’s board of directors received a written opinion, dated October 8, 2014, of Barclays Capital Inc., which we refer to as Barclays, that as of such date and based upon and subject to the qualifications, limitations and assumptions stated in its opinion, the consideration to be offered to Gentiva stockholders (other than Kindred and its affiliates) in the merger was fair, from a financial point of view, to such stockholders. The full text of Barclays’ written opinion is attached to this proxy statement/prospectus as Annex C. Gentiva stockholders are encouraged to read Barclays’ opinion carefully in its entirety for a description of the assumptions made, procedures followed, matters considered and limitations on the review undertaken by Barclays.

Barclays’ opinion was provided for the benefit of Gentiva’s board of directors (in its capacity as such) in connection with, and for the purpose of, its evaluation of the merger consideration from a financial point of view and did not address any other aspect of the merger. The opinion did not address the relative merits of the merger as compared to other business strategies or transactions that might be available with respect to Gentiva or Gentiva’s underlying business decision to effect the merger. Barclays expressed no opinion on, and its opinion does not in any manner address, the fairness of the amount or the nature of any compensation to any officers, directors or employees of any parties to the merger, or any class of such persons, including relative to the consideration to be offered to Gentiva stockholders in the merger. The opinion does not constitute a recommendation to any stockholder as to how to vote or act with respect to the merger. See “The Merger—Opinion of Gentiva’s Financial Advisor” beginning on page [—].

Record Date; Outstanding Shares; Shares Entitled to Vote (page [—])

The record date for the special meeting of Gentiva stockholders is [—]. This means that you must be a holder of record of Gentiva common stock at the close of business on [—] in order to vote at the special meeting. You are entitled to one vote for each share of Gentiva common stock you own. As of the record date, there were [—] shares of Gentiva common stock outstanding and entitled to vote at the special meeting. As of the record date, the directors and executive officers of Gentiva and their affiliates owned and were entitled to vote approximately [—] shares of Gentiva common stock, representing approximately [—]% of the shares of Gentiva common stock outstanding on that date. For further information, see “The Merger Agreement—Voting and Support Agreement” beginning on page [—].

 

Quorum and Vote Required (page [—])

A majority of the shares of Gentiva common stock outstanding at the close of business on the record date and entitled to vote, present in person or represented by proxy, at the special meeting constitutes a quorum for purposes of the special meeting. Shares of Gentiva common stock represented at the special meeting but not voted, including shares of common stock for which a stockholder directs an “abstention” from voting, as well as broker non-votes, will be counted for purposes of establishing a quorum.

Approval of the proposal to adopt the merger agreement requires the affirmative vote of at least a majority of the outstanding shares of Gentiva common stock entitled to vote at the special meeting. The proposal to approve certain compensation arrangements for Gentiva’s named executive officers in connection with the merger requires the affirmative vote of the holders of a majority of shares of Gentiva common stock present in person or represented by proxy and entitled to vote thereon; however, such vote is advisory (non-binding) only. Approval of the proposal to adjourn the special meeting, if necessary or appropriate, to solicit proxies if there are insufficient votes at the time of the special meeting to adopt the merger agreement, requires the affirmative vote of the majority of stockholders present, in person or by proxy, and entitled to vote at the special meeting, whether or not a quorum is present.

Interests of Gentiva Directors and Executive Officers in the Merger (page [—])

In considering the recommendation of the Gentiva board of directors with respect to the proposal to adopt the merger agreement, you should be aware that our directors and executive officers may have interests in the merger that are different from, or in addition to, those of stockholders generally. These interests include, but are not limited to, the following: the treatment of equity awards held by Gentiva’s directors and executive officers (including the acceleration of deferred stock units and unvested stock options, restricted stock awards and performance cash awards); the potential payment of severance and other benefits to Gentiva’s executive officers; the continuation of certain rights to indemnification and of coverage under directors’ and officers’ liability insurance policies following completion of the merger; the potential to serve as directors and/or officers of Kindred; that the Gentiva compensation committee has discretion to award Mr. Rodney D. Windley, Gentiva’s Executive Chairman, and certain other core management team members certain incentive bonus compensation in an aggregate amount of a pool of $10 million to be allocated at the sole discretion of the compensation committee, provided that at least a significant minority of such pool will be allocated to core management team members other than Mr. Windley; that the Gentiva compensation committee has discretion to pay Mr. Windley, for 2014 and 2015, bonus payments in the ordinary course (apart from the timing of payment), both of which will be payable on or before the consummation of the merger; and the entry into an employment agreement between David A. Causby and Kindred. Other than Kindred’s entry into an employment agreement with David A. Causby, which took place after the signing of the merger agreement, the Gentiva board of directors was aware of and considered these interests, among other matters, in evaluating and negotiating the merger agreement and the merger and in recommending that the merger agreement be adopted by Gentiva stockholders. See the section titled “The Merger—Interests of Gentiva Directors and Executive Officers in the Merger” beginning on page [—].

Board of Directors and Management of Kindred Following the Merger (page [—])

Following the closing of the merger, the Kindred board of directors is expected to remain the same as the current Kindred board of directors, subject to the planned appointment of Benjamin A. Breier as a member, effective March 31, 2015. The Kindred senior management team after the closing of the merger is expected to be the same as the current senior management team of Kindred, with the addition of David A. Causby and subject to the planned transition of Mr. Breier, who currently serves as Kindred’s Chief Operating Officer and President, as successor to Paul J. Diaz as Chief Executive Officer, effective March 31, 2015. Following Gentiva and Kindred’s entry into the merger agreement, Mr. Causby, who is currently a named executive officer of Gentiva, entered into an employment agreement with Kindred, pursuant to which he will become President of the combined Kindred at Home business and will serve on Kindred’s Executive Committee following the closing of the merger.

 

Listing of Kindred Common Stock and De-listing of Gentiva Common Stock (page [—])

It is a condition to the merger that the shares of common stock to be issued by Kindred in connection with the merger be authorized for listing on the NYSE, subject to official notice of issuance. Shares of Kindred common stock are currently traded on the NYSE under the symbol “KND.” Shares of Gentiva common stock are currently traded on NASDAQ under the symbol “GTIV.” If the merger is completed, Gentiva common stock will no longer be listed on NASDAQ and will be deregistered under the Exchange Act and Gentiva will no longer file periodic reports with the SEC.

Appraisal Rights (page [—])

Gentiva stockholders have the right under Delaware law to dissent from the approval and adoption of the merger agreement, to exercise appraisal rights and to receive payment in cash of the judicially determined fair value for their shares, plus interest, if any, on the amount determined to be the fair value, in accordance with Delaware law. The fair value of shares of Gentiva common stock, as determined in accordance with Delaware law, may be more or less than, or equal to, the merger consideration to be paid to non-dissenting stockholders in the merger. To preserve their rights, Gentiva stockholders who wish to exercise appraisal rights must not vote in favor of the proposal to adopt the merger agreement and must follow the specific procedures provided under Delaware law for perfecting appraisal rights. Dissenting stockholders must precisely follow these specific procedures to exercise appraisal rights or their appraisal rights may be lost. These procedures are described in this proxy statement/prospectus, and a copy of Section 262 of the DGCL (which we refer to as Section 262), which grants appraisal rights and governs such procedures, is attached as Annex D to this proxy statement/prospectus.

Kindred’s Dividend Policy (page [—])

Kindred paid dividends of $0.12 per share in each of the last two quarters of 2013 and each of the first three quarters of 2014 and has declared a dividend of $0.12 per share for the fourth quarter of 2014, payable on December 9, 2014. Gentiva stockholders have historically not received dividends. The payment of dividends by Kindred after the merger will be subject to the determination of the Kindred board of directors. Decisions by the Kindred board of directors regarding whether or not to pay dividends on Kindred common stock and the amount of any dividends will be based on compliance with the DGCL, compliance with agreements governing Kindred’s indebtedness, earnings, cash requirements, results of operations, cash flows, financial condition and other factors that the Kindred board of directors considers important.

Conditions to Completion of the Merger (page [—])

The respective obligations of Kindred and Gentiva to complete the merger are subject to the satisfaction or, if permissible, waiver, of certain conditions, including:

 

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the adoption of the merger agreement by the Gentiva stockholders at the special meeting;

 

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the authorization for listing on the NYSE, subject to official notice of issuance, of the shares of Kindred common stock to be issued in the merger;

 

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the effectiveness of the registration statement on Form S-4, of which this proxy statement/prospectus forms a part, and absence of any stop order by the SEC, or pending or threatened proceedings of the SEC seeking a stop order, suspending the effectiveness of such registration statement;

 

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the absence of any laws or orders by any governmental authority that make illegal, enjoin or otherwise prohibit consummation of the merger or the other transactions contemplated by the merger agreement; and

 

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the accuracy of the representations and warranties of the parties (subject to customary exceptions) and material compliance by the parties with their respective obligations under the merger agreement.

 

The obligation of Kindred to consummate the merger is also subject to obtaining certain regulatory approvals or licenses and delivery of certain notices by Gentiva as set forth in the merger agreement, provided that, if not previously fulfilled, this condition will be deemed satisfied on February 28, 2015.

Regulatory Approvals (page [—])

The completion of the merger is not conditioned upon the expiration or termination of any statutory waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (which we refer to as the HSR Act). Pursuant to the requirements of the HSR Act, Kindred, merger sub and Gentiva each made filings with the U.S. Federal Trade Commission (which we refer to as the FTC) and the Antitrust Division of the U.S. Department of Justice (which we refer to as the Antitrust Division) in connection with the tender offer. On July 22, 2014, the FTC granted termination of the waiting period under the HSR Act.

The obligation of Kindred to consummate the merger is subject to obtaining certain regulatory approvals or licenses and delivery of certain notices by Gentiva as set forth in the merger agreement, provided that, if not previously fulfilled, this condition will be deemed satisfied on February 28, 2015.

Termination of the Merger Agreement (page [—])

The merger agreement may be terminated at any time before the effective time, whether or not the Gentiva stockholders have adopted the merger agreement (except in the case of Gentiva’s fiduciary termination right described below):

 

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by mutual written agreement of Kindred, merger sub and Gentiva;

 

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by either Kindred or Gentiva if:

 

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the merger has not been consummated on or before the outside date of March 31, 2015, unless the breach of any representation, warranty, covenant or agreement set forth in the merger agreement by the party seeking to terminate was the direct cause of the failure to consummate the merger by such date;

 

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if any governmental entity has enacted, issued, promulgated, enforced or entered any law or order making illegal, permanently enjoining or otherwise permanently prohibiting the consummation of the merger or the other transactions contemplated by the merger agreement, and such law or order has become final and nonappealable, unless the breach of any representation, warranty, covenant or agreement set forth in the merger agreement by the party seeking to terminate was the direct cause of such action; or

 

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the adoption of the merger agreement by the Gentiva stockholders was not obtained at the special meeting of Gentiva stockholders (or adjournment or postponement of the meeting);

 

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by Kindred if:

 

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(i) there occurs a company adverse recommendation change (as defined on page [—]), (ii) Gentiva has entered into, or publicly announced its intention to enter into, a company acquisition agreement (as defined on page [—]) other than an acceptable confidentiality agreement (as defined on page [—]), (iii) the Gentiva board of directors fails to reaffirm (publicly, if requested by Kindred) its recommendation to Gentiva stockholders to approve the merger agreement within ten business days after the date a takeover proposal is first publicly disclosed, or (iv) Gentiva or its board of directors has publicly announced its intention to do any of the foregoing; or

 

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Gentiva breaches its representations or warranties or fails to perform any covenants or agreements set forth in the merger agreement, which breach or failure would cause the conditions to the closing relating to the accuracy of the representations and warranties of Gentiva or compliance by Gentiva with its obligations under the merger agreement not to be satisfied and such breach is incapable of being cured by March 31, 2015, provided that Kindred gives 30 days’ written notice of its intention to terminate the merger agreement;

 

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by Gentiva if:

 

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at any time prior to the adoption of the merger agreement by Gentiva stockholders, the Gentiva board of directors authorizes Gentiva, in full compliance with the terms of the merger agreement, to enter into a written definitive agreement with respect to a superior proposal (as defined on page [—]) and Gentiva concurrently pays a $32.5 million termination fee; or

 

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Kindred or merger sub breaches its representations or warranties or fails to perform any covenants or agreements set forth in the merger agreement, which breach or failure would cause the conditions to the closing relating to the accuracy of the representations and warranties of Kindred or compliance by Kindred with its obligations under the merger agreement not to be satisfied, and such breach is incapable of being cured by March 31, 2015, provided that Gentiva gives 30 days’ written notice of its intention to terminate the merger agreement.

Termination Fees and Expenses (page [—])

If the merger agreement is terminated in certain circumstances described under “The Merger Agreement—Termination of the Merger Agreement” beginning on page [—], Gentiva may be obligated to pay to Kindred a termination fee of $32.5 million.

In general, each of Kindred and Gentiva will bear its own expenses in connection with the merger agreement and the related transactions.

Voting and Support Agreement (page [—])

In connection with the merger agreement, Kindred entered into a Voting and Support Agreement, dated as of October 9, 2014 (which we refer to as the voting agreement), with each of the directors and executive officers of Gentiva, to, among other things, vote their shares of Gentiva common stock in favor of the merger, the adjournment proposal if there are not sufficient votes to adopt the merger agreement, and against any proposals for an alternative business combination transaction or which would be reasonably likely to prevent, materially impede or materially delay the merger, in each case subject to the terms and conditions of the voting agreement. As of the record date, the voting agreement covered [—] shares of Gentiva common stock, or approximately [—]% of the outstanding shares of Gentiva common stock. A copy of the voting agreement is attached as Annex  B to this proxy statement/prospectus.

Litigation Related to the Merger (page [—])

Three lawsuits have been filed in the Delaware Court of Chancery against Gentiva, the members of the Gentiva board of directors, Kindred and merger sub. The lawsuits allege that the Gentiva board breached its fiduciary duties by agreeing to the merger for inadequate consideration and by agreeing to terms in the merger agreement that deter alternative bids. The lawsuits further allege that Gentiva, Kindred and merger sub aided and abetted these alleged breaches of fiduciary duties. The lawsuits seek, among other things, an injunction against the completion of the merger, damages in an unspecified amount and attorneys’ fees and expenses incurred in connection with the actions. Gentiva, the members of the Gentiva board of directors, Kindred and merger sub each believe that all allegations contained in the complaints filed in these actions are without merit. On November 18, 2014, all three lawsuits were consolidated for all purposes by the Delaware Court of Chancery. See “The Merger—Litigation Related to the Merger” beginning on page [—].

 

Material United States Federal Income Tax Consequences (page [—])

The merger will be a taxable transaction to U.S. holders of Gentiva common stock for U.S. federal income tax purposes. You should read the section entitled “Material United States Federal Income Tax Consequences of the Merger” beginning on page [—] for a more complete discussion of the U.S. federal income tax consequences of the transaction. Tax matters can be complicated, and the tax consequences of the transaction to Gentiva stockholders will depend on their particular tax situations. Gentiva stockholders should consult their tax advisors to determine the tax consequences of the transaction to them.

Accounting Treatment (page [—])

The merger will be accounted for under the acquisition method of accounting in conformity with U.S. generally accepted accounting principles (which we refer to as GAAP), for accounting and financial reporting purposes.

Risk Factors (page [—])

In evaluating the merger and the merger agreement, you should read carefully this proxy statement/prospectus and especially consider the factors discussed in the section titled “Risk Factors” beginning on page [—].

Comparison of Rights of Stockholders (page [—])

As a result of the merger, holders of Gentiva common stock will become holders of Kindred common stock and their rights as stockholders will be governed by the DGCL and by Kindred’s certificate of incorporation and bylaws. Following the merger, Gentiva stockholders will have different rights as stockholders of Kindred than they currently have as stockholders of Gentiva. For a summary of the material differences between the rights of Gentiva stockholders and Kindred stockholders, see “Comparison of Rights of Stockholders” beginning on page [—].

 

FINANCIAL SUMMARY

Comparative Market Price Data and Dividends

Kindred common stock is traded on the NYSE under the symbol “KND” and Gentiva common stock is traded on the NASDAQ under the symbol “GTIV.” The following table shows the high and low daily sales prices per share of Kindred common stock and Gentiva common stock, and cash dividends paid or declared per share, during the periods indicated. For current price information, you are urged to consult publicly available sources.

 

		Kindred												Gentiva
Fiscal Year Ended		Price Range of Common Stock								Dividends Paid				Price Range of Common Stock								Dividends Paid
		High				Low								High				Low
December 31, 2012:
First Quarter		$	13.62			$	8.63				—			$	8.99			$	6.25				—
Second Quarter			10.87				7.60				—				9.04				5.13				—
Third Quarter			12.76				8.80				—				12.85				6.05				—
Fourth Quarter			12.13				9.68				—				11.79				9.20				—
December 31, 2013:
First Quarter			11.74				10.21				—				12.90				9.20				—
Second Quarter			14.49				9.75				—				11.90				9.09				—
Third Quarter			16.63				12.50				0.12				13.85				8.47				—
Fourth Quarter			20.51				13.13				0.12				13.54				10.28				—
December 31, 2014:
First Quarter			23.57				17.59				0.12				12.50				8.45				—
Second Quarter			26.81				21.74				0.12				16.13				7.35				—
Third Quarter			24.94				18.80				0.12				18.93				14.96				—
Fourth Quarter (through November 20)			22.12				18.96				0.12				19.90				16.30				—

The Kindred board of directors has the power to determine the amount and frequency of the payment of dividends. Decisions regarding whether to pay dividends and the amount of any dividends are based upon compliance with the DGCL, compliance with agreements governing Kindred’s indebtedness, earnings, cash requirements, results of operations, cash flows, financial condition and other factors that the Kindred board of directors considers important. Kindred paid dividends of $0.12 per share in each of the last two quarters of 2013 and each of the first three quarters of 2014 and has declared a dividend of $0.12 per share for the fourth quarter of 2014, payable on December 9, 2014.

The Gentiva board of directors has the power to determine the amount and frequency of the payment of dividends. Decisions regarding whether to pay dividends and the amount of any dividends are based upon compliance with the DGCL, compliance with agreements governing Gentiva’s indebtedness, earnings, cash requirements, results of operations, cash flows, financial condition and other factors that the Gentiva board of directors considers important. While Gentiva anticipates that if the merger were not consummated it would continue not to pay dividends, it cannot assure that will be the case. Under the merger agreement, until the effective time, Gentiva will not declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock.

 

Selected Historical Consolidated Financial Data of Kindred

The following table shows selected historical financial data for Kindred for the periods indicated. The selected financial data as of and for the years ended December 31, 2013, 2012, 2011, 2010 and 2009 were derived from the historical consolidated financial statements and related footnotes of Kindred.

Detailed historical financial information included in the audited consolidated balance sheets as of December 31, 2013 and 2012, and the consolidated statements of operations, stockholders’ equity, cash flows and related notes for each of the years in the three-year period ended December 31, 2013, are included in Kindred’s Current Report on Form 8-K filed on November 14, 2014 and incorporated by reference in this proxy statement/prospectus. You should read the following selected financial data together with Kindred’s historical consolidated financial statements, including the related notes, and the other information contained or incorporated by reference in this proxy statement/prospectus. The selected consolidated balance sheet data as of December 31, 2011, 2010 and 2009 and the selected consolidated financial and operating data for the years ended December 31, 2010 and 2009 have been derived from Kindred’s audited consolidated financial statements and related notes for such years, which have not been incorporated by reference into this proxy statement/prospectus.

The selected financial data of Kindred as of September 30, 2014, and for the nine months ended September 30, 2014 and 2013 have been derived from Kindred’s historical unaudited interim consolidated financial statements contained in its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014, which is incorporated by reference into this proxy statement/prospectus. The selected historical consolidated financial data of Kindred as of September 30, 2013 has been derived from Kindred’s historical unaudited interim consolidated financial statements contained in its Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2013, as adjusted for certain discontinued operations, which is not incorporated by reference into this proxy statement/prospectus. Kindred’s management believes Kindred’s interim unaudited financial statements have been prepared on a basis consistent with its audited financial statements and include all normal and recurring adjustments necessary for a fair statement of the results for each interim period. Results of interim periods are not necessarily indicative of the results expected for a full year or for future periods. This information is only a summary and should be read in conjunction with Kindred’s management’s discussion and analysis of financial condition and results of operations and Kindred’s consolidated financial statements and notes thereto incorporated by reference into this proxy statement/prospectus. For additional information, see “Where You Can Find More Information” beginning on page [—].

 

Kindred Selected Financial Data

(In thousands, except per share amounts)

 

		Nine months ended September 30,								Year ended December 31,
		2014				2013				2013				2012				2011				2010				2009
Statement of Operations Data:
Revenues		$	3,806,019			$	3,625,909			$	4,835,585			$	4,856,142			$	4,160,108			$	3,105,013			$	3,027,216
Salaries, wages and benefits			2,300,567				2,215,711				2,954,663				2,974,342				2,548,832				1,844,981				1,808,639
Supplies			242,176				244,247				322,941				335,905				309,103				259,140				251,937
Rent			241,449				230,605				311,526				303,564				276,540				240,493				232,210
Other operating expenses			768,247				720,498				965,760				893,974				838,647				648,308				609,421
Other income			(741	)			(984	)			(1,442	)			(12,660	)			(13,180	)			(12,225	)			(13,112	)
Impairment charges			—				1,066				77,193				108,953				73,554				—				—
Depreciation and amortization			117,802				116,659				154,206				160,066				126,905				90,594				93,534
Interest expense			128,845				82,857				108,009				107,825				80,841				6,987				7,777
Investment income			(2,975	)			(2,794	)			(4,046	)			(986	)			(987	)			(1,211	)			(4,379	)
			3,795,370				3,607,865				4,888,810				4,870,983				4,240,255				3,077,067				2,986,027
Income (loss) from continuing operations before income taxes			10,649				18,044				(53,225	)			(14,841	)			(80,147	)			27,946				41,189
Provision (benefit) for income taxes			3,582				9,203				(11,319	)			30,642				(13,604	)			9,873				15,808
Income (loss) from continuing operations			7,067				8,841				(41,906	)			(45,483	)			(66,543	)			18,073				25,381
Discontinued operations, net of income taxes:
Income (loss) from operations			(22,255	)			(31,892	)			(39,042	)			10,904				12,824				38,871				38,162
Loss on divestiture of operations			(3,637	)			(77,893	)			(83,887	)			(4,745	)			—				(453	)			(23,432	)
Income (loss) from discontinued operations			(25,892	)			(109,785	)			(122,929	)			6,159				12,824				38,418				14,730
Net income (loss)			(18,825	)			(100,944	)			(164,835	)			(39,324	)			(53,719	)			56,491				40,111
(Earnings) loss attributable to noncontrolling interests:
Continuing operations			(13,729	)			(1,424	)			(3,890	)			(1,382	)			81				—				—
Discontinued operations			401				172				233				339				157				—				—
			(13,328	)			(1,252	)			(3,657	)			(1,043	)			238				—				—
Income (loss) attributable to Kindred		$	(32,153	)		$	(102,196	)		$	(168,492	)		$	(40,367	)		$	(53,481	)		$	56,491			$	40,111
Amounts attributable to Kindred stockholders:
Income (loss) from continuing operations		$	(6,662	)		$	7,417			$	(45,796	)		$	(46,865	)		$	(66,462	)		$	18,073			$	25,381
Income (loss) from discontinued operations			(25,491	)			(109,613	)			(122,696	)			6,498				12,981				38,418				14,730
Net income (loss)		$	(32,153	)		$	(102,196	)		$	(168,492	)		$	(40,367	)		$	(53,481	)		$	56,491			$	40,111
Earnings (loss) per common share:
Basic:
Income (loss) from continuing operations		$	(0.12	)		$	0.14			$	(0.88	)		$	(0.91	)		$	(1.44	)		$	0.46			$	0.65
Discontinued operations:
Income (loss) from operations			(0.39	)			(0.59	)			(0.74	)			0.22				0.28				0.98				0.98
Loss on divestiture of operations			(0.06	)			(1.44	)			(1.61	)			(0.09	)			—				(0.01	)			(0.60	)
Income (loss) from discontinued operations			(0.45	)			(2.03	)			(2.35	)			0.13				0.28				0.97				0.38
Net income (loss)		$	(0.57	)		$	(1.89	)		$	(3.23	)		$	(0.78	)		$	(1.16	)		$	1.43			$	1.03
Diluted:
Income (loss) from continuing operations		$	(0.12	)		$	0.14			$	(0.88	)		$	(0.91	)		$	(1.44	)		$	0.46			$	0.65
Discontinued operations:
Income (loss) from operations			(0.39	)			(0.59	)			(0.74	)			0.22				0.28				0.98				0.97
Loss on divestiture of operations			(0.06	)			(1.44	)			(1.61	)			(0.09	)			—				(0.01	)			(0.60	)
Income (loss) from discontinued operations			(0.45	)			(2.03	)			(2.35	)			0.13				0.28				0.97				0.37
Net income (loss)		$	(0.57	)		$	(1.89	)		$	(3.23	)		$	(0.78	)		$	(1.16	)		$	1.43			$	1.02
Shares used in computing earnings (loss) per common share:
Basic			56,443				52,218				52,249				51,659				46,280				38,738				38,339
Diluted			56,443				52,234				52,249				51,659				46,280				38,954				38,502
Cash dividends declared and paid per common share		$	0.36			$	0.12			$	0.24			$	—			$	—			$	—			$	—
Financial Position:
Working capital		$	553,856			$	370,512			$	404,307			$	438,435			$	384,359			$	214,654			$	241,032
Total assets			4,024,788				3,864,609				3,945,869				4,237,946				4,138,493				2,337,415				2,022,224
Long-term debt			1,484,436				1,382,385				1,579,391				1,648,706				1,531,882				365,556				147,647
Equity			1,303,454				1,187,728				1,121,216				1,292,844				1,320,541				1,031,759				966,594

 

Selected Historical Consolidated Financial Data of Gentiva

The following table shows selected historical financial data for Gentiva for the periods indicated. The selected financial data as of and for the years ended December 31, 2013, 2012, 2011, 2010, and January 3, 2010 were derived from the audited historical consolidated financial statements and related footnotes of Gentiva.

Detailed historical financial information included in the audited consolidated balance sheets as of December 31, 2013 and 2012, and the consolidated statements of comprehensive income (loss), changes in shareholders’ equity, cash flows and related notes for each of the years in the three-year period ended December 31, 2013, are included in Gentiva’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2013 filed on November 14, 2014 and are incorporated by reference in this proxy statement/prospectus. You should read the following selected financial data together with Gentiva’s historical consolidated financial statements, including the related notes, and the other information contained or incorporated by reference in this proxy statement/prospectus. The selected consolidated balance sheet data as of December 31, 2011, 2010 and January 3, 2010 and the selected consolidated financial and operating data for the years ended December 31, 2010 and January 3, 2010 have been derived from Gentiva’s audited consolidated financial statements and related notes for such years, which have not been incorporated by reference into this proxy statement/prospectus.

The selected financial data of Gentiva as of September 30, 2014, and for the nine months ended September 30, 2014 and 2013 have been derived from Gentiva’s historical unaudited interim consolidated financial statements contained in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2014, which is incorporated by reference into this proxy statement/prospectus. The selected historical consolidated financial data of Gentiva as of September 30, 2013 has been derived from Gentiva’s historical unaudited interim consolidated financial statements contained in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2013, which is not incorporated by reference into this proxy statement/prospectus. Certain historical financial information contained in Gentiva’s Quarterly Report on Form 10-Q has subsequently been revised. See Note 1A in Gentiva’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2014. Gentiva’s management believes Gentiva’s interim unaudited financial statements have been prepared on a basis consistent with its audited financial statements and include all normal and recurring adjustments necessary for a fair statement of the results for each interim period. Results of interim periods are not necessarily indicative of the results expected for a full year or for future periods. This information is only a summary and should be read in conjunction with Gentiva’s management’s discussion and analysis of financial condition and results of operations and Gentiva’s consolidated financial statements and notes thereto incorporated by reference into this proxy statement/prospectus. For additional information, see “Where You Can Find More Information” beginning on page [—].

 

Gentiva Selected Financial Data

(in thousands, except per share amounts)

 

		For the nine months ended September 30								For the Year
		2014				2013 (Revised)				2013 (Restated)				2012 (Revised)				2011 (Revised)				2010 (Revised)				2009
Statement of Operations Data
Net revenues		$	1,483,551			$	1,240,507			$	1,726,644	(1)		$	1,712,804			$	1,798,778			$	1,414,459	(8)		$	1,118,811
Gross profit			672,474				579,509				784,464	(1)			804,063				850,323				734,385	(8)			584,614
Selling, general and administrative expenses			(567,722	)			(483,243	)			(706,227	)(1),(7)			(655,766	)(7)			(731,299	)(7)			(608,860	)(7),(8)			(480,461	)(7)
Goodwill, intangibles and other long-lived asset impairment			—				(210,672	)			(612,380	)(4)			(19,132	)(4)			(643,305	)(4)			—				—
Income (loss) from continuing operations attributable to Gentiva shareholders			30,846				(181,189	)			(605,061	)(5)			26,796	(2),(3)			(459,377	)			54,087				67,331
Discontinued operations, net of tax (6)			—				—				—				—				8,315				(3,135	)			(8,149	)
Net income (loss) attributable to Gentiva shareholders			17,687				(184,441	)			(605,061	)(5)			26,796	(2),(3)			(451,062	)			50,952				59,182	(9)
Basic earnings per share:
Income (loss) from continuing operations attributable to Gentiva shareholders		$	0.49			$	(5.97	)		$	(18.94	)		$	0.88			$	(15.14	)		$	1.82			$	2.31
Discontinued operations, net of tax			—				—				—				—				0.28				(0.11	)			(0.28	)
Net income (loss) attributable to Gentiva shareholders			0.49				(5.97	)			(18.94	)			0.88				(14.86	)			1.71				2.03
Weighted average shares outstanding—basic			36,285				30,921				31,954				30,509				30,336				29,724				29,103
Diluted earnings per share:
Income (loss) from continuing operations attributable to Gentiva shareholders		$	0.48			$	(5.97	)		$	(18.94	)		$	0.87			$	(15.14	)		$	1.77			$	2.26
Discontinued operations, net of tax			—				—				—				—				0.28				(0.10	)			(0.28	)
Net income (loss) attributable to Gentiva shareholders			0.48				(5.97	)			(18.94	)			0.87				(14.86	)			1.67				1.98
Weighted average shares outstanding—diluted			37,052				30,921				31,954				30,687				30,336				30,468				29,822
Balance Sheet Data
Cash items and short-term investments		$	114,206			$	183,294			$	86,957			$	207,052			$	164,912			$	104,752			$	152,410
Working capital			130,016				238,884				94,291				226,128				225,139				124,764				190,918
Total assets			1,225,226				1,262,218				1,253,468				1,508,046				1,527,440				2,118,133				1,060,603
Long-term debt and capital leases			1,105,750				891,432				1,124,432				910,182				973,261				1,026,760				232,466
Gentiva’s shareholders’ equity			(289,010	)			54,808				(310,876	)			231,422				198,198				634,371				571,163
Common shares outstanding			36,902				31,389				36,375				30,748				30,779				30,158				29,480

 

(1)

Effective October 18, 2013, Gentiva completed the acquisition of Harden Healthcare Holdings, Inc., which we refer to as Harden, and its home health, hospice, and community care businesses. Gentiva also completed several other smaller acquisitions during 2013. For additional information, see Note 5 to Gentiva’s consolidated financial statements incorporated by reference to the Gentiva Annual Report on Form 10-K/A for the year ended December 31, 2013.

 

(2)

For the year ended December 31, 2012, net income includes an $8.0 million pre-tax gain related to the (i) sale of the Phoenix area hospice operations, (ii) the sale of the Gentiva consulting business and (iii) the sale of eight home health branches and four hospice branches in Louisiana. For additional information, see Note 5 to Gentiva’s consolidated financial statements incorporated by reference to the Gentiva Annual Report on Form 10-K/A for the year ended December 31, 2013.

(3)

In anticipation of a settlement of claims alleged by the owner of CareCentrix Holdings Inc., which we refer to as CareCentrix, and working capital adjustments as set forth in the stock purchase agreement, during the fourth quarter of 2012, Gentiva recorded a $6.5 million adjustment to the seller financing note receivable to reflect its revised estimated fair value of $3.4 million, which is recorded in equity in net loss of CareCentrix. For additional information, see Note 8 to Gentiva’s consolidated financial statements incorporated by reference to the Gentiva Annual Report on Form 10-K/A for the year ended December 31, 2013.

(4)

Gentiva performed its annual impairment test as of December 31, 2013 for its home health, hospice and community care reporting units. Based on this assessment, Gentiva recorded non-cash impairment charges relating to the goodwill and intangibles of its Hospice segment of approximately $399.7 million and $2.0 million, respectively, for the year 2013.

At March 31, 2013, Gentiva performed an interim impairment test of its hospice reporting unit. Based on the results of the interim impairment test, Gentiva recorded a non-cash impairment charge relating to goodwill of approximately $207.2 million. As part of that analysis, Gentiva reviewed the valuation of its owned real estate utilized in the hospice business. The analysis indicated that two of Gentiva’s hospice inpatient units had estimated fair values lower than their carrying values and, as such, Gentiva recorded a non-cash impairment charge of approximately $1.9 million.

In addition, Gentiva conducted an evaluation of the various systems used to support its field operations. In connection with that review, Gentiva made a strategic decision to replace its business intelligence software platform and, as such, recorded a non-cash impairment charge, related to developed software, of approximately $1.6 million.

For the year ended December 31, 2012, Gentiva recorded non-cash impairment charges associated with a write-off of its trade name intangibles of $19.1 million in connection with Gentiva’s initiative to re-brand its operations under the Gentiva name.

For the year ended December 31, 2011, Gentiva recorded non-cash impairment charges associated with goodwill, intangibles and other long-lived assets of $643.3 million. This charge was the result of (i) changes in Gentiva’s business climate, (ii) uncertainties around Medicare reimbursement as the federal government worked to reduce the federal deficit, (iii) a significant decline in the price of Gentiva’s common stock during the fiscal year, (iv) a write-down of software and (v) a change in the estimated fair value of real estate. For additional information, see Notes 9 and 10 to Gentiva’s consolidated financial statements incorporated by reference to the Gentiva Annual Report on Form 10-K/A for the year ended December 31, 2013.

 

(5)	For the year ended December 31, 2013, net loss includes $19.1 million relating to the write-off of deferred debt issuance costs and fees associated with Gentiva entering a new credit agreement, dated October 18, 2013.

(6)

During 2011, Gentiva sold its Rehab Without Walls® and homemaker service agency businesses. As such, Gentiva has reflected the financial results of these businesses as discontinued operations. In addition, in the fourth quarter of 2009, Gentiva committed to a plan to exit its HME and IV businesses. As such, Gentiva has reflected the financial results of the operating segments as discontinued operations, including a write-down of goodwill associated with these businesses of approximately $9.6 million for 2009. Results for all prior years have been reclassified to conform to this presentation. For additional information, see Note 5 to Gentiva’s consolidated financial statements incorporated by reference to the Gentiva Annual Report on Form 10-K/A for the year ended December 31, 2013.

(7)

Gentiva recorded charges relating to cost savings initiatives and other restructuring costs, acquisition and integration costs, and legal settlements of $27.5 million, $5.7 million, $49.1 million, $46.0 million and $2.4 million, as summarized below. For additional information, see Note 11 to Gentiva’s consolidated financial statements incorporated herein by reference to the Gentiva Annual Report on Form 10-K/A for the year ended December 31, 2013.

 

		2013				2012				2011				2010				2009
Home Health		$	3.3			$	5.6			$	7.7			$	11.8			$	1.4
Hospice			8.2				0.4				3.7				0.3				—
Community Care			—				—				—				—				—
Corporate expenses			16.0				(0.3	)			37.7				33.9				1.0
Total		$	27.5			$	5.7			$	49.1			$	46.0			$	2.4

 

(8)

Effective August 17, 2010, Gentiva completed the acquisition of 100 percent of the equity interest of Odyssey HealthCare Inc., a leading provider of hospice care, operating approximately 100 Medicare-certified providers in 30 states. Gentiva also completed several other smaller acquisitions in 2010. For additional information, see Note 5 to Gentiva’s consolidated financial statements incorporated herein by reference to the Gentiva Annual Report on Form 10-K/A for the year ended December 31, 2013.

(9)

Net income includes a $6.0 million pre-tax gain related to the (i) sale of assets and certain branch offices that specialized primarily in pediatric home care services and (ii) sale of assets associated with two branch offices in upstate New York providing home health services under New York Medicaid programs. For additional information, see Note 5 to Gentiva’s consolidated financial statements incorporated by reference to the Gentiva Annual Report on Form 10-K/A for the year ended December 31, 2013.