Kindred Healthcare, Inc. (the “Company”) (NYSE:KND) today
announced its operating results for the first quarter ended March
31, 2011. 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.
First Quarter Highlights:
- Consolidated revenues rose 9% to $1.2
billion
-- Each operating division reported revenue
growth compared to last year
- Excluding certain charges in both
periods, diluted earnings per share rose 48% to $0.65 from $0.44 in
the first quarter last year
- Hospital results were bolstered by the
recent southern California hospital acquisition and volume
growth
-- Reported admissions grew 10% from last
year; same-facility admissions grew 3%
-- First quarter operating income grew 14% to
$108 million
- Strong admissions growth and higher
Medicare and managed care volumes drove nursing center growth
-- Admissions grew 8% compared to the first
quarter last year
-- First quarter operating income rose 24% to
$87 million
- Peoplefirst Rehabilitation reported
strong revenue growth and solid results
--Revenues grew 21% to $145 million primarily
from new contract growth
-- Division reported $15 million in operating
income
- Operating cash flows grew to $46
million, up $60 million from last year’s first quarter
- Accounts receivable days declined to
49.8 at March 31, 2011 from 50.9 at December 31, 2010 and 54.4 at
March 31, 2010
- Long-term debt pay-down in the quarter
totaled $15 million
First Quarter Results
Continuing Operations
Consolidated revenues for the first quarter ended March 31, 2011
rose 9% to $1.2 billion compared to $1.1 billion in the first
quarter last year. Income from continuing operations for the first
quarter of 2011 totaled $22.3 million or $0.55 per diluted share
compared to $15.2 million or $0.38 per diluted share in the first
quarter last year.
First quarter 2011 operating results included certain pretax
charges of $6.2 million primarily related to the pending
acquisition of RehabCare Group, Inc. (“RehabCare”) (NYSE:RHB), the
effect of which reduced income from continuing operations by $4.0
million or $0.10 per diluted share.
First quarter 2010 operating results included certain charges
that reduced income from continuing operations by $2.3 million or
$0.06 per diluted share.
Discontinued Operations
During the past few years, the Company has entered into
transactions related to the divestiture of unprofitable businesses.
For accounting purposes, the historical operating results of these
businesses and losses associated with these operations have been
classified as discontinued operations in the Company’s consolidated
statement of operations for all historical periods.
Management Commentary
Paul J. Diaz, President and Chief Executive Officer of the
Company, remarked, “We are pleased to report a good start to the
year. Each of our three operating divisions reported continued
improvements in their quality and clinical outcome measures which
helped drive solid volume and revenue growth. The operating results
of recently acquired businesses were in line with our expectations
and contributed to our earnings growth as well. Our top-line growth
was complemented by improved operating efficiencies across the
organization, resulting in significant earnings per share growth
compared to the first quarter last year.”
Commenting on the Company’s financial position, Mr. Diaz noted,
“In addition to our strong earnings growth in the quarter, we
reported a significant increase in operating cash flows. As in the
past, these funds will be used to finance our routine and cluster
market development capital spending and pay down our debt.”
Commenting on the pending RehabCare acquisition, Mr. Diaz noted,
“We are looking forward to the completion of the RehabCare
acquisition. The level of support and excitement about this
strategic opportunity among employees, customers, hospitals and
physician partners is growing and we are making progress on our
integration and team-building plans. Our first quarter operating
results are particularly impressive in light of all the work being
done to complete this transaction and reflect the team’s continued
focus on our core operations and the quality of our services.”
Company Suspends 2011 Earnings Guidance
As previously announced, the Company has suspended its fiscal
2011 earnings guidance in connection with the pending RehabCare
acquisition.
Pending RehabCare Acquisition
On February 8, 2011, Kindred and RehabCare announced that
Kindred had agreed to acquire RehabCare pursuant to which each
holder of RehabCare common stock will receive $26.00 per share in
cash and 0.471 of a share of Kindred common stock. The transaction
is expected to close by June 30, 2011. The acquisition is subject
to certain conditions, including approvals by the stockholders of
both companies, consummation of financing in accordance with the
terms of the commitment letter obtained by Kindred, and the receipt
of certain licensure and regulatory approvals.
As previously announced, the waiting period under the
Hart-Scott-Rodino Improvement Act of 1976 for the RehabCare
acquisition was terminated on April 8, 2011.
Webcast of Conference Call
As previously announced, investors and the general public can
access a live webcast of the first quarter 2011 conference call
through a link on the Company’s website at www.kindredhealthcare.com. The conference call
will be held April 26, 2011 at 10:00 a.m. (Eastern Time).
A telephone replay of the conference call will be available at
approximately 1:00 p.m. on April 26 by dialing (719) 457-0820,
access code: 8089971. The replay will be available through May
3.
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.
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 (the “SEC”).
In addition to the factors set forth above, other factors that
may affect the Company’s plans or results include, without
limitation, (a) the Company’s ability to integrate the operations
of the acquired hospitals and rehabilitation services operations
and realize the anticipated revenues, economies of scale, cost
synergies and productivity gains in connection with the RehabCare
acquisition and any other acquisitions that may be undertaken
during 2011, as and when planned, including the potential for
unanticipated issues, expenses and liabilities associated with
those acquisitions and the risk that RehabCare fails to meet its
expected financial and operating targets, (b) the receipt of all
required licensure and regulatory approvals and the satisfaction of
the closing conditions to the RehabCare acquisition, including
approval of the pending transaction by the stockholders of the
respective companies, and the Company’s ability to complete the
required financing as contemplated by the commitment letter, (c)
the potential for diversion of management time and resources in
seeking to complete the RehabCare acquisition and integrate its
operations, (d) the potential failure to retain key employees of
RehabCare, (e) the impact of the Company’s significantly increased
levels of indebtedness as a result of the RehabCare acquisition on
the Company’s funding costs, operating flexibility and ability to
fund ongoing operations, development capital expenditures or other
strategic acquisitions with additional borrowings, particularly in
light of ongoing volatility in the credit and capital markets, (f)
the potential for dilution to the Company’s stockholders as a
result of the RehabCare acquisition, (g) the impact of pending or
future litigation relating to the RehabCare acquisition, (h) the
impact of healthcare reform, which will initiate significant
reforms 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. Healthcare reform will impact each of the
Company’s businesses in some manner. Due to the substantial
regulatory changes that will need to be implemented by the Centers
for Medicare and Medicaid Services 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, (i) 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 reimbursements for nursing centers, and the
expiration of the Medicare Part B therapy cap exception process,
(j) 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, (k) 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, (l) the impact
of the Medicare, Medicaid and SCHIP Extension Act of 2007 (the
“SCHIP Extension Act”), including the ability of the Company’s
hospitals to adjust to potential LTAC certification, medical
necessity reviews and the moratorium on future hospital
development, (m) the impact of the expiration of several
moratoriums under the SCHIP Extension Act which could impact the
short stay rules, the budget neutrality adjustment as well as
implement the policy known as the “25 Percent Rule,” which
would limit certain patient admissions, (n) failure of the
Company’s facilities to meet applicable licensure and certification
requirements, (o) the further consolidation and cost containment
efforts of managed care organizations and other third party payors,
(p) the Company’s ability to meet its rental and debt service
obligations, (q) the Company’s ability to operate pursuant to the
terms of its debt obligations, including the Company’s obligations
under financings undertaken to complete the RehabCare acquisition,
and the Company’s ability to operate pursuant to its master lease
agreements with Ventas, Inc. (NYSE:VTR), (r) the condition of the
financial markets, including volatility and weakness in the equity,
capital and credit markets, which could limit the availability and
terms of debt and equity financing sources to fund the requirements
of the Company’s businesses, or which could negatively impact the
Company’s investment portfolio, (s) national and regional economic,
financial, business and political conditions, including their
effect on the availability and cost of labor, credit, materials and
other services, (t) the Company’s ability to control costs,
particularly labor and employee benefit costs, (u) increased
operating costs due to shortages in qualified nurses, therapists
and other healthcare personnel, (v) the Company’s ability to
attract and retain key executives and other healthcare personnel,
(w) the increase in the costs of defending and insuring against
alleged professional liability and other claims and the ability to
predict the estimated costs related to such claims, including the
impact of differences in actuarial assumptions and estimates
compared to eventual outcomes, (x) the Company’s ability to
successfully reduce (by divestiture of operations or otherwise) its
exposure to professional liability and other claims, (y) the
Company’s ability to successfully dispose of unprofitable
facilities, (z) events or circumstances which could result in the
impairment of an asset or other charges, (aa) changes in generally
accepted accounting principles (“GAAP”) or practices, and changes
in tax accounting or tax laws (or authoritative interpretations
relating to any of these matters), and (ab) 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 a non-GAAP measurement which presents
operating results for the three months ended March 31, 2011 and
2010 before certain charges or on a core basis. A reconciliation of
the non-GAAP measurement to the GAAP operating results 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 from continuing operations is the most comparable GAAP
measure. Readers of the Company’s financial information should
consider income 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 from
continuing operations provided in the Condensed Business Segment
Data is included in this press release.
As noted in this earnings release, the Company presents the
financial measure of free cash flows available for investment and
other capital uses. The Company recognizes that free cash flows
available for investment and other capital uses is a non-GAAP
measurement and is not intended to replace the presentation of the
Company’s cash flows in accordance with GAAP. The Company believes
that this non-GAAP measurement provides important information to
investors related to the amount of discretionary cash flows that
are available for other investing and other financing activities.
In addition, management uses free cash flows available for
investment and other capital uses in making decisions related to
acquisitions, development capital expenditures, long-term debt
repayments and other uses.
Additional Information About the
RehabCare Transaction
In connection with the pending transaction with RehabCare,
Kindred has filed with the SEC a Registration Statement on Form S-4
(commission file number 333-173050) that includes a joint proxy
statement of Kindred and RehabCare that also constitutes a
prospectus of Kindred. Kindred and RehabCare will mail the
definitive joint proxy statement/prospectus to their respective
stockholders after the Registration Statement has been declared
effective by the SEC. WE URGE INVESTORS AND SECURITY
HOLDERS TO READ THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE
PENDING TRANSACTION WHEN IT BECOMES AVAILABLE BECAUSE IT CONTAINS
IMPORTANT INFORMATION. You may obtain a free copy of the
joint proxy statement/prospectus (when available) and other related
documents filed by Kindred and RehabCare with the SEC at the SEC’s
website at www.sec.gov. The joint proxy statement/prospectus (when
available) and the other documents filed by Kindred and RehabCare
with the SEC may also be obtained for free by accessing Kindred’s
website at www.kindredhealthcare.com and clicking on the
“Investors” link and then clicking on the link for “SEC Filings” or
by accessing RehabCare’s website at www.rehabcare.com and clicking
on the “Investor Information” link and then clicking on the link
for “SEC Filings”.
Participants in the RehabCare
Transaction
Kindred, RehabCare and their respective directors, executive
officers and certain other members of management and employees may
be soliciting proxies from their respective stockholders in favor
of the pending transaction. You can find information about
Kindred’s executive officers and directors in Kindred’s joint proxy
statement/prospectus. You can find information about RehabCare’s
executive officers and directors in its definitive proxy statement
filed with the SEC on March 23, 2010. You can obtain a free
copy of these documents from Kindred or RehabCare, respectively,
using the contact information above.
About Kindred Healthcare
Kindred Healthcare, Inc., a top-200 private employer in the
United States, is a FORTUNE 500 healthcare services company based
in Louisville, Kentucky with annual revenues of over $4.3 billion
and approximately 56,700 employees in 40 states. At March 31, 2011,
Kindred through its subsidiaries provided healthcare services in
706 locations, including 89 long-term acute care hospitals, 224
nursing and rehabilitation centers and a contract rehabilitation
services business, Peoplefirst rehabilitation services, which
served 393 non-affiliated facilities. Ranked as one of Fortune
magazine’s Most Admired Healthcare Companies for three 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.
KINDRED HEALTHCARE, INC. Financial Summary
(Unaudited) (In thousands, except per share amounts)
Three months ended March
31, 2011 2010 Revenues
$
1,192,421 $ 1,089,837 Income from
continuing operations
$ 22,276 $ 15,155 Discontinued
operations, net of income taxes: Loss from operations
(179
) (154 ) Loss on divestiture of operations
-
(137 ) Net income
$ 22,097 $
14,864 Earnings per common share: Basic: Income from
continuing operations
$ 0.56 $ 0.38 Discontinued
operations: Loss from operations
- - Loss on divestiture of
operations
- - Net income
$ 0.56 $ 0.38 Diluted: Income
from continuing operations
$ 0.55 $ 0.38 Discontinued
operations: Loss from operations
- - Loss on divestiture of
operations
- - Net income
$ 0.55 $ 0.38
Shares used in computing earnings per
common share:
Basic
39,035 38,626 Diluted
39,543 38,859
KINDRED HEALTHCARE, INC. Condensed Consolidated Statement
of Operations (Unaudited) (In thousands, except per
share amounts)
Three months
ended March 31, 2011 2010 Revenues
$ 1,192,421 $ 1,089,837
Salaries, wages and benefits
678,695 627,175 Supplies
90,022 85,886 Rent
91,453 88,319 Other operating
expenses
259,369 234,204 Other income
(2,785 )
(3,084 ) Depreciation and amortization
32,549 31,121
Interest expense
5,728 1,307 Investment income
(495 ) (877 )
1,154,536
1,064,051 Income from continuing operations before
income taxes
37,885 25,786 Provision for income taxes
15,609 10,631 Income from continuing
operations
22,276 15,155 Discontinued operations, net of
income taxes: Loss from operations
(179 ) (154 ) Loss
on divestiture of operations
- (137 )
Net income
$ 22,097 $ 14,864
Earnings per common share: Basic: Income from continuing operations
$ 0.56 $ 0.38 Discontinued operations: Loss from
operations
- - Loss on divestiture of operations
- - Net income
$ 0.56
$ 0.38 Diluted: Income from continuing
operations
$ 0.55 $ 0.38 Discontinued operations:
Loss from operations
- - Loss on divestiture of operations
- - Net income
$
0.55 $ 0.38
Shares used in computing earnings per
common share:
Basic
39,035 38,626 Diluted
39,543 38,859
KINDRED HEALTHCARE, INC. Condensed Consolidated Balance
Sheet (Unaudited) (In thousands, except per share
amounts)
March 31, December
31, 2011 2010 ASSETS Current assets: Cash
and cash equivalents
$ 18,500 $ 17,168
Cash - restricted
5,456 5,494 Insurance subsidiary
investments
62,414 76,753 Accounts receivable less
allowance for loss
662,687 631,877 Inventories
24,662 24,327 Deferred tax assets
12,981
13,439 Income taxes
1,492 42,118 Other
29,935 24,862 818,127
836,038 Property and equipment
1,791,356
1,754,170 Accumulated depreciation
(885,254
) (857,623 ) 906,102
896,547 Goodwill
242,420 242,420
Intangible assets less accumulated amortization
92,399
92,883 Assets held for sale
7,082 7,167
Insurance subsidiary investments
106,501 101,210
Deferred tax assets
89,713 88,816 Other
71,264 72,334 $
2,333,608 $ 2,337,415
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Accounts payable
$ 161,258 $ 174,495
Salaries, wages and other compensation
289,550
291,116 Due to third party payors
24,093
27,115 Professional liability risks
40,145
41,555 Other accrued liabilities
85,841 87,012
Long-term debt due within one year
92
91 600,979 621,384 Long-term
debt
350,533 365,556 Professional liability risks
214,791 207,669 Deferred credits and other
liabilities
111,435 111,047 Stockholders'
equity:
Common stock, $0.25 par value; authorized
175,000 shares; issued 39,979 shares - March 31, 2011 and 39,495
shares - December 31, 2010
9,995 9,874 Capital in excess of par value
830,657 828,593 Accumulated other comprehensive
income
393 135 Retained earnings
214,825 193,157
1,055,870 1,031,759 $
2,333,608 $ 2,337,415
KINDRED HEALTHCARE, INC. Condensed Consolidated Statement
of Cash Flows (Unaudited) (In thousands)
Three months ended March 31,
2011 2010 Cash flows from operating
activities: Net income
$ 22,097 $ 14,864
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization
32,549 31,121 Amortization of
stock-based compensation costs
2,644 2,775 Provision for
doubtful accounts
5,830 6,431 Deferred income taxes
(730 ) (7,463 ) Loss on divestiture of discontinued
operations
- 137 Other
370 (163 ) Change in operating
assets and liabilities: Accounts receivable
(36,640 )
(59,126 ) Inventories and other assets
(3,525 )
(11,245 ) Accounts payable
(12,348 ) (7,582 ) Income
taxes
40,623 29,286 Due to third party payors
(3,022
) (1,894 ) Other accrued liabilities
(1,412
) (11,137 ) Net cash provided by (used in) operating
activities
46,436 (13,996 ) Cash
flows from investing activities: Routine capital expenditures
(24,718 ) (14,815 ) Development capital expenditures
(11,109 ) (7,567 ) Acquisitions
(8,027
) (47,696 ) Sale of assets
1,714 - Purchase of
insurance subsidiary investments
(7,817 ) (14,278 )
Sale of insurance subsidiary investments
18,656 53,211 Net
change in insurance subsidiary cash and cash equivalents
(1,300 ) (5,575 ) Change in other investments
1,000 - Other
132 (28 ) Net cash
used in investing activities
(31,469 )
(36,748 ) Cash flows from financing activities: Proceeds
from borrowings under revolving credit
445,200 389,600
Repayment of borrowings under revolving credit
(460,200
) (340,600 ) Payment of deferred financing costs
(417
) (22 ) Issuance of common stock
1,415 35 Other
367 103 Net cash provided by
(used in) financing activities
(13,635 )
49,116 Change in cash and cash equivalents
1,332 (1,628 ) Cash and cash equivalents at beginning of
period
17,168 16,303 Cash and
cash equivalents at end of period
$ 18,500 $
14,675
KINDRED HEALTHCARE, INC.
Supplemental Cash Flow Data (Unaudited) (In
thousands)
Three
months ended March 31, 2011 2010
Reconciliation of net cash flows provided
by (used in) operating activities to free cash flows:
Net cash provided by (used in) operating activities
$
46,436 ($13,996 ) Less routine capital expenditures
(24,718 ) (14,815 )
Free cash flows available for investment
and other capital uses
$ 21,718 ($28,811 )
Routine capital expenditures represent
expenditures necessary to maintain existing facilities that
generally do not increase capacity or add services. As disclosed in
the accompanying Condensed Consolidated Statement of Cash Flows,
the Company also expends discretionary capital for the development
of new facilities or the expansion of services at existing
facilities. Due to the discretionary nature of these capital
expenditures, they are excluded from the computation of free cash
flows available for investment and other capital uses.
The Company recognizes that free cash
flows available for investment and other capital uses is a non-GAAP
measurement and is not intended to replace the presentation of the
Company's cash flows in accordance with GAAP. The Company believes
that this non-GAAP measurement provides important information to
investors related to the amount of discretionary cash flows that
are available for other investing and other financing activities.
In addition, management uses free cash flows available for
investment and other capital uses in making decisions related to
acquisitions, development capital expenditures, long-term debt
repayments and other uses.
KINDRED HEALTHCARE, INC. Condensed Consolidated
Statement of Operations (Unaudited) (In thousands,
except per share amounts)
First 2010 Quarters
Quarter First Second Third
Fourth Year 2011 Revenues $ 1,089,837
$ 1,081,364 $ 1,053,012 $ 1,135,484 $
4,359,697 $ 1,192,421 Salaries, wages and
benefits 627,175 612,205 613,607 652,703 2,505,690 678,695 Supplies
85,886 85,455 83,753 87,103 342,197 90,022 Rent 88,319 88,981
89,295 90,777 357,372 91,453 Other operating expenses 234,204
238,687 234,968 240,750 948,609 259,369 Other income (3,084 )
(2,857 ) (2,794 ) (2,687 ) (11,422 ) (2,785 ) Depreciation and
amortization 31,121 29,852 29,167 31,412 121,552 32,549 Interest
expense 1,307 1,298 1,642 2,843 7,090 5,728 Investment (income)
loss (877 ) 377 (403 ) (342 )
(1,245 ) (495 ) 1,064,051
1,053,998 1,049,235 1,102,559
4,269,843 1,154,536
Income from continuing operations before
income taxes
25,786 27,366 3,777 32,925 89,854 37,885 Provision (benefit) for
income taxes 10,631 11,230
(1,323 ) 13,170 33,708 15,609
Income from continuing operations 15,155 16,136 5,100 19,755
56,146 22,276 Discontinued operations, net of income taxes: Income
(loss) from operations (154 ) 87 (260 ) 1,125 798 (179 ) Gain
(loss) on divestiture of operations (137 ) 54
86 (456 ) (453 ) - Net
income $ 14,864 $ 16,277 $ 4,926 $ 20,424
$ 56,491 $ 22,097 Earnings per common
share: Basic: Income from continuing operations $ 0.38 $ 0.41 $
0.13 $ 0.50 $ 1.42 $ 0.56 Discontinued operations: Income (loss)
from operations - - (0.01 ) 0.03 0.02 - Gain (loss) on divestiture
of operations - - -
(0.01 ) (0.01 ) - Net income $ 0.38
$ 0.41 $ 0.12 $ 0.52 $ 1.43 $
0.56 Diluted: Income from continuing operations $
0.38 $ 0.41 $ 0.13 $ 0.50 $ 1.42 $ 0.55 Discontinued operations:
Income (loss) from operations - - (0.01 ) 0.03 0.02 - Gain (loss)
on divestiture of operations - -
- (0.01 ) (0.01 ) - Net income $
0.38 $ 0.41 $ 0.12 $ 0.52 $ 1.43
$ 0.55
Shares used in computing earnings per
common share:
Basic 38,626 38,756 38,778 38,790 38,738 39,035 Diluted 38,859
38,914 38,838 39,089 38,954 39,543
KINDRED HEALTHCARE,
INC. Condensed Business Segment Data (Unaudited)
(In thousands)
First 2010
Quarters Quarter First Second Third
Fourth Year 2011 Revenues: Hospital
division $ 507,062 $ 493,401 $ 465,198 $ 507,660 $ 1,973,321 $
558,974 Nursing center division 539,321 542,215 539,914
566,435 2,187,885 567,472 Rehabilitation division 120,144
122,061 124,243 138,507 504,955 145,146 1,166,527 1,157,677
1,129,355 1,212,602 4,666,161 1,271,592 Eliminations
(76,690) (76,313) (76,343) (77,118) (306,464) (79,171) $ 1,089,837
$ 1,081,364 $ 1,053,012 $ 1,135,484 $ 4,359,697 $ 1,192,421
Income from continuing operations: Operating income (loss):
Hospital division $ 95,440 $ 91,790 $ 75,784 $ 97,343 $ 360,357 $
108,385 Nursing center division 70,614 76,529 69,363 86,912
303,418 87,350 Rehabilitation division 14,683 14,100 14,214
9,609 52,606 14,481 Corporate: Overhead (33,831) (32,799)
(34,329) (33,002) (133,961) (38,315) Insurance subsidiary (480)
(791) (783) (1,099) (3,153) (602) (34,311) (33,590) (35,112)
(34,101) (137,114) (38,917) Transaction costs (a) (770)
(955) (771) (2,148) (4,644) (4,179) Operating income 145,656
147,874 123,478 157,615 574,623 167,120 Rent (88,319) (88,981)
(89,295) (90,777) (357,372) (91,453) Depreciation and amortization
(31,121) (29,852) (29,167) (31,412) (121,552) (32,549) Interest,
net (430) (1,675) (1,239) (2,501) (5,845) (5,233) (b)
Income from continuing operations before
income taxes
25,786 27,366 3,777 32,925 89,854 37,885 Provision (benefit) for
income taxes 10,631 11,230 (1,323) 13,170 33,708 15,609 $ 15,155 $
16,136 $ 5,100 $ 19,755 $ 56,146 $ 22,276
(a) Transaction costs for the 2010 periods
have been reclassified to conform with the current period
presentation. (b) Includes $2.0 million of financing costs
related to the pending transaction with RehabCare.
KINDRED HEALTHCARE, INC. Condensed
Consolidating Statement of Operations (Unaudited) (In
thousands)
First Quarter 2010 First Quarter
2011 Nursing Nursing Hospital
center Rehabilitation Transaction
Hospital center Rehabilitation
Transaction division division division
Corporate costs Eliminations
Consolidated division division division
Corporate costs Eliminations
Consolidated Revenues $ 507,062 $ 539,321
$ 120,144 $ - $ - $ (76,690 ) $
1,089,837 $ 558,974 $ 567,472 $ 145,146
$ - $ - $ (79,171 ) $ 1,192,421
Salaries, wages and benefits 227,641 273,242 100,512 25,780 - -
627,175 253,062 273,170 124,831 27,666 - (34 ) 678,695 Supplies
57,934 27,128 687 137 - - 85,886 61,847 27,125 907 143 - - 90,022
Rent 37,415 49,392 1,475 37 - - 88,319 40,299 49,384 1,726 44 - -
91,453 Other operating expenses 126,047 168,337 4,262 11,478 770
(76,690 ) 234,204 135,680 179,827 4,927 13,893 4,179 (79,137 )
259,369 Other income - - - (3,084 ) - - (3,084 ) - - - (2,785 ) - -
(2,785 ) Depreciation and amortization 13,014 12,113 585 5,409 - -
31,121 14,278 11,793 856 5,622 - - 32,549 Interest expense 2 31 -
1,274 - - 1,307 - 29 - 3,700 1,999 - 5,728 Investment income
(1 ) (18 ) (1 ) (857 ) -
- (877 ) (1 ) (20 ) (1 )
(473 ) - - (495 ) 462,052
530,225 107,520 40,174
770 (76,690 ) 1,064,051
505,165 541,308 133,246
47,810 6,178 (79,171 )
1,154,536
Income from continuing operations before
income taxes
$ 45,010 $ 9,096 $ 12,624 $ (40,174 ) $ (770 )
$ - 25,786 $ 53,809 $ 26,164 $ 11,900 $
(47,810 ) $ (6,178 ) $ - 37,885 Provision for income taxes
10,631 15,609 Income from continuing
operations $ 15,155 $ 22,276
Capital expenditures, excluding
acquisitions (including discontinued operations):
Routine $ 6,065 $ 4,049 $ 267 $ 4,434 $ - $ - $ 14,815 $ 12,144 $
8,155 $ 280 $ 4,139 $ - $ - $ 24,718 Development 5,774
1,793 - - -
- 7,567 7,777
3,322 10 - -
- 11,109 $ 11,839 $ 5,842
$ 267 $ 4,434 $ - $ - $ 22,382
$ 19,921 $ 11,477 $ 290 $ 4,139
$ - $ - $ 35,827
KINDRED HEALTHCARE,
INC. Condensed Business Segment Data (Continued)
(Unaudited)
First 2010 Quarters
Quarter First Second Third
Fourth Year 2011 Hospital data: End of
period data: Number of hospitals 83 83 83 89 89 Number of licensed
beds 6,580 6,576 6,563 6,887 6,889 Revenue mix %: Medicare
56 56 55 58 56 60 Medicaid 9 9 9 9 9 8 Medicare Advantage 10 10 10
9 10 10 Commercial insurance and other 25 25 26 24 25 22
Admissions: Medicare 7,432 7,125 6,769 7,640 28,966 8,504 Medicaid
997 990 1,022 1,034 4,043 1,085 Medicare Advantage 1,129 1,106 936
1,071 4,242 1,172 Commercial insurance and other 2,262 2,048 1,978
2,020 8,308 2,282 11,820 11,269 10,705 11,765 45,559 13,043
Admissions mix %: Medicare 63 63 63 65 64 65 Medicaid 8 9 10 9 9 8
Medicare Advantage 10 10 9 9 9 9 Commercial insurance and other 19
18 18 17 18 18 Patient days: Medicare 202,882 195,964
179,324 198,129 776,299 219,213 Medicaid 47,813 45,952 48,514
46,596 188,875 45,650 Medicare Advantage 34,524 36,000 31,186
32,868 134,578 35,639 Commercial insurance and other 75,483 70,651
70,198 69,585 285,917 70,522 360,702 348,567 329,222 347,178
1,385,669 371,024 Average length of stay: Medicare 27.3 27.5 26.5
25.9 26.8 25.8 Medicaid 48.0 46.4 47.5 45.1 46.7 42.1 Medicare
Advantage 30.6 32.5 33.3 30.7 31.7 30.4 Commercial insurance and
other 33.4 34.5 35.5 34.4 34.4 30.9 Weighted average 30.5 30.9 30.8
29.5 30.4 28.4
KINDRED HEALTHCARE, INC. Condensed
Business Segment Data (Continued) (Unaudited)
First 2010 Quarters Quarter First
Second Third Fourth Year 2011
Hospital data (continued): Revenues per admission: Medicare
$ 38,078 $ 38,938 $ 37,675 $ 38,368 $ 38,272 $ 39,439 Medicaid
45,738 42,774 42,910 41,704 43,266 42,432 Medicare Advantage 45,187
46,169 48,122 44,744 45,979 46,217 Commercial insurance and other
56,344 59,842 61,314 61,131 59,553 54,065 Weighted average 42,899
43,784 43,456 43,150 43,313 42,856 Revenues per patient day:
Medicare $ 1,395 $ 1,416 $ 1,422 $ 1,479 $ 1,428 $ 1,530 Medicaid
954 922 904 925 926 1,009 Medicare Advantage 1,478 1,418 1,444
1,458 1,449 1,520 Commercial insurance and other 1,688 1,735 1,728
1,775 1,730 1,749 Weighted average 1,406 1,416 1,413 1,462 1,424
1,507
Medicare case mix index (discharged
patients only)
1.21 1.21 1.19 1.17 1.19 1.21 Average daily census 4,008
3,830 3,579 3,774 3,796 4,122 Occupancy % 68.2 66.1 62.0 64.0 65.1
68.7 Annualized employee turnover % 21.8 22.6 22.3 22.0 21.2
Nursing and rehabilitation center data: End of period
data: Number of facilities: Nursing and rehabilitation centers:
Owned or leased 218 219 222 222 220 Managed 4 4 4 4 4 Assisted
living facilities 6 7 7 7 6
228 230 233 233 230 Number of
licensed beds: Nursing and rehabilitation centers: Owned or leased
26,711 26,760 27,030 26,957 26,767 Managed 485 485 485 485 485
Assisted living facilities 327 463 463
463 413 27,523 27,708 27,978
27,905 27,665 Revenue mix %: Medicare 35 34 33 36 35 38
Medicaid 41 41 41 39 40 37 Medicare Advantage 6 7 7 7 7 7 Private
and other 18 18 19 18 18 18
KINDRED HEALTHCARE, INC.
Condensed Business Segment Data (Continued)
(Unaudited)
First 2010 Quarters
Quarter First Second Third
Fourth Year 2011 Nursing and rehabilitation
center data (continued): Patient days (excludes managed
facilities): Medicare 369,102 363,149 346,837 344,018 1,423,106
370,395 Medicaid 1,312,517 1,292,246 1,289,643 1,287,739 5,182,145
1,232,620 Medicare Advantage 87,692 92,051 91,643 94,336 365,722
97,460 Private and other 397,550 415,921
437,413 453,357 1,704,241 425,414
2,166,861 2,163,367 2,165,536 2,179,450
8,675,214 2,125,889 Patient day mix %: Medicare 17 17
16 16 16 17 Medicaid 61 60 60 59 60 58 Medicare Advantage 4 4 4 4 4
5 Private and other 18 19 20 21 20 20 Revenues per patient
day: Medicare Part A $ 470 $ 469 $ 468 $ 534 $ 485 $ 537 Total
Medicare (including Part B) 513 515 519 587 533 579 Medicaid 168
171 171 171 170 172 Medicare Advantage 398 400 405 432 409 416
Private and other 238 234 232 228 233 235 Weighted average 249 250
249 260 252 267 Average daily census 24,076 23,773 23,538
23,690 23,768 23,621 Admissions (excludes managed facilities)
19,026 18,924 19,383 19,118 76,451 20,619 Occupancy % 89.0 87.3
86.8 86.4 87.4 86.9 Medicare average length of stay 33.7 35.2 34.3
33.0 34.0 32.9 Annualized employee turnover % 36.7 38.8 39.8
39.6 37.8
Rehabilitation data: Revenue mix %:
Company-operated 64 63 61 56 61 55 Non-affiliated 36 37 39 44 39 45
Sites of service (at end of period) 619 633 650 696 705
Revenue per site $ 194,094 $ 192,829 $ 191,142 $ 199,004 $ 777,069
$ 205,881 Therapist productivity % 83.8 84.2 82.1 78.6 82.0
80.6 Annualized employee turnover % 12.6 14.2 15.4 14.4 14.5
KINDRED HEALTHCARE, INC. Earnings Per Common Share
Reconciliation (a) (Unaudited) (In thousands, except per
share amounts)
Three months ended March 31, 2011 2010
Basic Diluted Basic Diluted Earnings:
Income from continuing operations: As reported in Statement of
Operations $ 22,276 $ 22,276 $ 15,155 $ 15,155
Allocation to participating unvested
restricted stockholders
(428 ) (423 ) (277 ) (275 ) Available
to common stockholders $ 21,848 $ 21,853 $ 14,878
$ 14,880 Discontinued operations, net of
income taxes: Loss from operations: As reported in Statement of
Operations $ (179 ) $ (179 ) $ (154 ) $ (154 )
Allocation to participating unvested
restricted stockholders
3 3 3 3
Available to common stockholders $ (176 ) $ (176 ) $ (151 ) $ (151
) Loss on divestiture of operations: As reported in
Statement of Operations $ - $ - $ (137 ) $ (137 )
Allocation to participating unvested
restricted stockholders
- - 2 2
Available to common stockholders $ - $ - $ (135 ) $
(135 ) Net income: As reported in Statement of Operations $
22,097 $ 22,097 $ 14,864 $ 14,864
Allocation to participating unvested
restricted stockholders
(425 ) (420 ) (272 ) (270 ) Available
to common stockholders $ 21,672 $ 21,677 $ 14,592
$ 14,594 Shares used in the computation:
Weighted average shares outstanding - basic computation
39,035 39,035 38,626 38,626 Dilutive effect of
employee stock options 508 233 Adjusted
weighted average shares outstanding - diluted computation
39,543 38,859 Earnings per common
share: Income from continuing operations $ 0.56 $ 0.55 $ 0.38 $
0.38 Discontinued operations: Loss from operations - - - - Loss on
divestiture of operations - - -
- Net income $ 0.56 $ 0.55 $
0.38 $ 0.38 (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.
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 a non-GAAP
measurement which presents operating results for the three months
ended March 31, 2011 and 2010 before certain charges or on a core
basis. The charges that were excluded from core operating results
for the three months ended March 31, 2011 relate to transaction and
financing costs. The charges that were excluded from core operating
results for the three months ended March 31, 2010 relate to
transaction, severance and retirement costs.
This non-GAAP measurement is 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 ended March 31, 2011 and 2010 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 purposes of evaluating performance internally.
Three months ended March 31, 2011
2010 Detail of charges excluded from core operating results:
Transaction costs ($4,179 ) ($770 ) Financing costs (in connection
with pending RehabCare acquisition) (1,999 ) - Severance and
retirement costs - (2,906 ) (6,178 ) (3,676 )
Income tax benefit 2,223 1,415 Charges
net of income taxes (3,955 ) (2,261 ) Allocation to participating
unvested restricted stockholders 75 42
Available to common stockholders ($3,880 ) ($2,219 )
Weighted average diluted shares outstanding 39,543
38,859 Diluted loss per common share
related to charges ($0.10 ) ($0.06 )
Reconciliation of income from continuing operations before charges:
Income from continuing operations before charges $ 26,231 $ 17,416
Charges (3,955 ) (2,261 ) Reported income from
continuing operations $ 22,276 $ 15,155
Reconciliation of diluted earnings per common share from continuing
operations before charges: Diluted earnings per common share before
charges $ 0.65 $ 0.44 Charges (0.10 ) (0.06 )
Reported diluted earnings per common share $ 0.55 $ 0.38
Reconciliation of effective income tax rate before
charges: Effective income tax rate before charges 40.5 % 40.9 %
Impact on effective income tax rate as a result of charges
0.7 % 0.3 % Reported effective income tax rate 41.2 %
41.2 %
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