Skip to main content
Kindred Healthcare

Call us to talk to a Registered Nurse

1.866.KINDRED | 1.866.546.3733

Kindred Healthcare Reports Third Quarter Results

October 29, 2012

Click Here for PDF

Reported Results of $0.15 Per Diluted Share Include Charges of $0.06 Per Share Related Primarily to Dispositions

Third Quarter Operating Cash Flows Surged to Near-Record $141 Million from $67 Million Last Year

Company Tightens 2012 Annual EPS Guidance Range to $1.40 to $1.50 from $1.35 to $1.55, Maintaining Annual Mid-Point at $1.45 and Fourth Quarter Mid-Point at $0.43

2013 Annual EPS Guidance Range of $1.20 to $1.40 Reaffirmed

LOUISVILLE, Ky.--(BUSINESS WIRE)--Oct. 29, 2012-- Kindred Healthcare, Inc. (the “Company”) (NYSE:KND) today announced its operating results for the third quarter ended September 30, 2012. The Company’s consolidated financial statements include the operating results of RehabCare Group, Inc. (“RehabCare”) since the closing of the acquisition on June 1, 2011.

Third Quarter Highlights:

  • Despite a seasonally weak period, consolidated revenues rose 1% to $1.5 billion and operating income was nearly $200 million
    • While hospital revenues grew 4%, adverse Medicare reimbursement changes hampered revenues in the nursing center and RehabCare contract therapy divisions
  • Operating cash flows surged to near-record $141 million in the quarter compared to $67 million last year
    • Results are on track to meet annual 2012 guidance range of $260 million to $280 million
  • Hospital division revenues rose 4% while operating income grew 10%
    • Same-store admissions rose 2% compared to last year
    • Cost per patient day rose only 1% from a year ago
  • Nursing center division reported stable operating income of $71 million in difficult reimbursement environment
  • RehabCare contract therapy division reported solid operating income of $37 million
    • Division reported brisk new contract sales in the first nine months this year
    • Recent Medicare rule changes adversely impacted results late in this year’s third quarter
  • PeopleFirst home health and hospice division reported significant revenue and operating income growth
    • Recent IntegraCare acquisition added approximately $71 million in annualized revenues
  • Corporate overhead declined as a percent of revenues to 3.0% from 3.2% in last year’s third quarter
    • RehabCare synergies and other cost reductions drove third quarter overhead lower by 6% compared to last year

Third Quarter Results

Continuing Operations

Consolidated revenues for the third quarter ended September 30, 2012 rose 1% to $1.5 billion compared to the third quarter last year. Income from continuing operations for the third quarter of 2012 totaled $7.9 million or $0.15 per diluted share compared to $0.6 million or $0.01 per diluted share in the third quarter last year.

Third quarter 2012 operating results included pretax charges of $4.9 million related to (1) an impairment charge in connection with the planned divestiture of a long-term acute care (“LTAC”) hospital, (2) employee retention costs incurred in connection with the decision to allow the leases to expire for 54 nursing and rehabilitation centers (the “54 Nursing Centers”) currently leased from Ventas, Inc. (“Ventas”) (NYSE:VTR), (3) a lease cancellation charge in connection with the closing of a LTAC hospital, and (4) transaction-related costs. These items reduced income from continuing operations in the third quarter by $3.3 million or $0.06 per diluted share.

Third quarter 2011 operating results included certain charges, most of which related to impairment charges and costs associated with the RehabCare acquisition, that reduced income from continuing operations by $20.9 million or $0.40 per diluted share.

Discontinued Operations

The Company periodically enters into transactions related to the divestiture of unprofitable businesses. For accounting purposes, the historical operating results of these businesses have been classified as discontinued operations in the Company’s condensed consolidated statement of operations for all historical periods.

Management Commentary

Paul J. Diaz, Chief Executive Officer of the Company, remarked, “Our third quarter operating results were in line with our expectations and position us to achieve our full-year earnings guidance. While the third quarter is typically a seasonally weak period, our results reflected the same solid cost management and commitment to quality that we have reported all year.”

Mr. Diaz continued, “Our third quarter operating cash flows of $141 million were near-record levels. In addition, our demonstrated ability to generate significant cash flows in excess of our routine capital spending and required repayments of debt provides the financial flexibility to continue to invest in our Cluster Market Strategy and strategic acquisitions.”

With respect to the Company’s $200 million credit expansion completed in early October, Mr. Diaz noted, “Our financial strength and significant liquidity have enabled us to expand our credit capacity to finance future growth. Following the closing of the transaction, our unused credit capacity totaled approximately $450 million compared to $237 million at June 30, 2012.”

Mr. Diaz also discussed the significant reimbursement pressure in the long-term healthcare industry, “Over the past year, both Kindred and our industry peers have struggled in an environment of severe Medicare and Medicaid payment pressures as well as significant survey and enforcement activity. Most recently, we have been challenged by new Medicare Part B regulations regarding rehabilitation therapy which have created inefficiencies in our operations (as much as $1 million per month), and more importantly, potentially restrict access to therapy services that benefit our most frail residents. As we have in the past, we will continue our dialogue with policymakers to improve the current system to make it more patient-centered, predictable and efficient.”

Earnings Guidance – Continuing Operations

The Company tightened its earnings guidance range for 2012. The Company expects consolidated revenues for 2012 to approximate $6.2 billion. Operating income, or earnings before interest, income taxes, depreciation, amortization and rent, is expected to range from $867 million to $875 million. Rent expense is expected to approximate $430 million, while depreciation and amortization should approximate $201 million. Net interest expense is expected to approximate $107 million. The Company expects to report income from continuing operations for 2012 between $75 million and $80 million or $1.40 to $1.50 per diluted share (based upon diluted shares of 52 million).

The Company also maintained its operating cash flow guidance range for 2012 at $260 million to $280 million. Estimated routine capital expenditures for 2012 are expected to range from $135 million to $145 million, including approximately $17 million of expenditures to complete the information systems integration of RehabCare. The Company’s expected routine capital expenditures also include approximately $13 million to upgrade the clinical information systems in its hospital, nursing center and home health businesses.

In addition to its routine capital expenditures, the Company expects that its previously announced development projects related to new and replacement hospitals and new transitional care centers will approximate $40 million to $45 million in 2012.

Operating cash flows in excess of the Company’s routine and development capital spending programs, which are expected to approximate $85 million to $90 million for 2012, will be available to repay debt and fund acquisitions.

The earnings guidance provided by the Company for 2012 excludes the effect of (1) any costs associated with the closing of a regional office, the planned divestiture or closing of five LTAC hospitals and the cancellation of a sub-acute unit project, (2) costs associated with employment-related lawsuits, (3) employee retention costs incurred in connection with the decision to allow the leases to expire for 54 Nursing Centers, (4) any transaction-related charges, (5) any other reimbursement changes, (6) any future acquisitions or divestitures, (7) any impairment charges, and (8) any repurchases of common stock.

In addition, the Company reaffirmed its preliminary earnings guidance for fiscal 2013. The Company expects consolidated revenues for 2013 to approximate $5.9 billion. Operating income is expected to range from $806 million to $825 million. Rent expense is expected to approximate $387 million, while depreciation and amortization should approximate $189 million. Net interest expense is expected to approximate $113 million. The Company expects to report income from continuing operations for 2013 between $65 million to $76 million or $1.20 to $1.40 per diluted share (based upon diluted shares of 52.7 million).

The Company estimated its operating cash flows for 2013 to range between $230 million to $250 million. Estimated routine capital expenditures for 2013 are expected to range from $120 million to $130 million.

In addition to its routine capital expenditures, the Company expects that its development projects related to new and replacement LTAC hospitals, transitional care centers, and inpatient rehabilitation hospitals will approximate $20 million to $30 million in 2013.

Operating cash flows in excess of the Company’s routine and development capital spending programs, which are expected to approximate $90 million for 2013, will be available to repay debt and fund acquisitions.

In addition, the earnings guidance for 2013 (1) assumes the impact of Medicare reimbursement reductions that are expected to reduce the Company’s consolidated revenues between $90 million to $100 million, and further assumes that the operating results of the 54 Nursing Centers are classified as discontinued operations effective January 1, 2013, and (2) excludes the effect of any other reimbursement changes, any future acquisitions or other divestitures, any impairment charges, and any repurchases of common stock.

Mr. Diaz commented, “Our 2013 guidance reflects our best efforts to respond to a continued difficult reimbursement environment, including the anticipated Medicare reductions from sequestration and recently promulgated Medicare payment regulations negatively impacting our LTAC hospitals. Despite this environment, we remain committed to making the necessary investments to improve quality and clinical outcomes and demonstrate our value proposition to patients, families and payors. Moreover, we must support our dedicated caregivers by providing appropriate merit increases and affordable benefits. In this regard, we have continued our efforts to explore other cost saving initiatives and our 2013 guidance reflects our commitment to reduce enterprise costs an additional $20 million to $25 million in 2013 by expanding our shared services model across the Company and focusing on additional non-patient care expenses. Our confidence level in achieving these savings is high since we are following the same path we pursued in attaining the approximately $125 million of RehabCare synergies and other cost reductions in fiscal 2012.”

Finally, Mr. Diaz noted, “We also continue to look for ways to rationalize our portfolio, in addition to the expiration of the Ventas leases, to advance our cluster market strategy and improve our business and payor mix over time. The continued growth in our home health and hospice operations is another key to our integrated care model and our “Continue the Care” strategy. We believe that these actions in conjunction with our cost savings measures, position us well as healthcare reform accelerates over the next several years.”

Webcast of Conference Call

As previously announced, investors and the general public can access a live webcast of the third quarter 2012 conference call through a link on the Company’s website at www.kindredhealthcare.com. The conference call will be held October 30, 2012 at 10:00 a.m. (Eastern Time).

A telephone replay of the conference call will be available at approximately 1:00 p.m. on October 30 by dialing (719) 457-0820, access code: 9543758. The replay will be available through November 8.

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.

In addition to the factors set forth above, other factors that may affect the Company’s plans or results include, without limitation, (a) 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, including reforms resulting from the Patient Protection and Affordable Care Act and the Healthcare Education and Reconciliation Act (collectively, the “ACA”). Healthcare reform is affecting certain of the Company’s businesses and the Company expects that it will impact all of them in some manner. There is also the possibility that implementation of the provisions expanding health insurance coverage or the entire ACA will be delayed, revised or eliminated as a result of efforts to repeal or amend the law. Although the U.S. Supreme Court has upheld the constitutionality of the ACA, the potential for future court proceedings, the outcome of the 2012 presidential election and potential efforts in the U.S. Congress to repeal, amend or retract funding for various aspects of the ACA create additional uncertainty about the ultimate impact of the ACA on the Company and the healthcare industry. Due to the substantial regulatory changes that will need to be implemented by the Centers for Medicare and Medicaid Services (“CMS”) and others, and the numerous processes required to implement these reforms, the Company cannot predict which healthcare initiatives will be implemented at the federal or state level, the timing of any such reforms, or the effect such reforms or any other future legislation or regulation will have on the Company’s business, financial position, results of operations and liquidity, (b) the impact of the rules issued by CMS on August 1, 2012 which, among other things, will reduce Medicare reimbursement to the Company’s LTAC hospitals in 2013 and beyond by imposing a budget neutrality adjustment and modifying the short-stay outlier rules, (c) the impact of final rules issued by CMS on July 29, 2011 which significantly reduced Medicare reimbursement to nursing centers and changed payments for the provision of group therapy services effective October 1, 2011, (d) the impact of the Budget Control Act of 2011 which will automatically reduce federal spending by approximately $1.2 trillion split evenly between domestic and defense spending. At this time, the Company believes this will result in an automatic 2% reduction on each claim submitted to Medicare beginning February 1, 2013, (e) changes in the reimbursement rates or the methods or timing of payment from third party payors, including commercial payors and the Medicare and Medicaid programs, changes arising from and related to the Medicare prospective payment system for LTAC hospitals, including potential changes in the Medicare payment rules, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, and changes in Medicare and Medicaid reimbursements for the Company’s LTAC hospitals, nursing and rehabilitation centers, inpatient rehabilitation hospitals and home health and hospice operations, and the expiration of the Medicare Part B therapy cap exception process, (f) 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, (g) the impact of the Medicare, Medicaid and SCHIP Extension Act of 2007, including the ability of the Company’s hospitals to adjust to potential LTAC certification, medical necessity reviews and the moratorium on future hospital development, (h) 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, (i) the Company’s ability to successfully pursue its development activities, including through acquisitions, and successfully integrate new operations, including the realization of anticipated revenues, economies of scale, cost savings and productivity gains associated with such operations, as and when planned, including the potential impact of unanticipated issues, expenses and liabilities associated with those activities, (j) the failure of the Company’s facilities to meet applicable licensure and certification requirements, (k) the further consolidation and cost containment efforts of managed care organizations and other third party payors, (l) the Company’s ability to meet its rental and debt service obligations, (m) the Company’s ability to operate pursuant to the terms of its debt obligations, and comply with its covenants thereunder, and its ability to operate pursuant to its master lease agreements with Ventas, (n) 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, (o) national and regional economic, financial, business and political conditions, including their effect on the availability and cost of labor, credit, materials and other services, (p) the Company’s ability to control costs, particularly labor and employee benefit costs, (q) increased operating costs due to shortages in qualified nurses, therapists and other healthcare personnel, (r) the Company’s ability to attract and retain key executives and other healthcare personnel, (s) the increase in the costs of defending and insuring against alleged professional liability and other claims and the Company’s ability to predict the estimated costs related to such claims, including the impact of differences in actuarial assumptions and estimates compared to eventual outcomes, (t) the Company’s ability to successfully reduce (by divestiture of operations or otherwise) its exposure to professional liability and other claims, (u) the Company’s ability to successfully dispose of unprofitable facilities, (v) events or circumstances which could result in the impairment of an asset or other charges, such as the impact of the Medicare reimbursement regulations that resulted in the Company recording significant impairment charges in 2011, (w) 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 (x) the Company’s ability to maintain an effective system of internal control over financial reporting. Many of these factors are beyond the Company’s control. The Company cautions investors that any forward-looking statements made by the Company are not guarantees of future performance. The Company disclaims any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments.

In addition to the results provided in accordance with GAAP, the Company has provided information in this release to compute certain non-GAAP measurements for the third quarter and nine months ended September 30, 2012 and 2011 before certain charges or on a core basis. A reconciliation of the non-GAAP measurements to the GAAP measurements is included in this press release.

As noted above, the Company’s earnings release includes a financial measure referred to as operating income, or earnings before interest, income taxes, depreciation, amortization and rent. The Company’s management uses operating income as a meaningful measure of operational performance in addition to other measures. The Company uses operating income to assess the relative performance of its operating divisions as well as the employees that operate these businesses. In addition, the Company believes this measurement is important because securities analysts and investors use this measurement to compare the Company’s performance to other companies in the healthcare industry. The Company believes that income 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.

About Kindred Healthcare

Kindred Healthcare, Inc., a top-125 private employer in the United States, is a FORTUNE 500 healthcare services company based in Louisville, Kentucky with annual revenues of $6 billion and approximately 78,000 employees in 46 states. At September 30, 2012, Kindred through its subsidiaries provided healthcare services in 2,212 locations, including 117 long-term acute care hospitals, six inpatient rehabilitation hospitals, 224 nursing and rehabilitation centers, 27 sub-acute units, 102 hospice, home care and private duty locations, 104 inpatient rehabilitation units (hospital-based) and a contract rehabilitation services business, RehabCare, which served 1,632 non-affiliated facilities. Ranked as one of Fortune magazine’s Most Admired Healthcare Companies for four 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 Nine months ended
September 30, September 30,
2012 2011 2012 2011
 
Revenues $ 1,525,792   $ 1,514,062   $ 4,641,590   $ 3,999,075
 
Income from continuing operations $ 7,909 $ 907 $ 41,718 $ 16,643
Discontinued operations, net of income taxes:
Income from operations 47 1,119 143 1,527
Loss on divestiture of operations   (349 )   -     (349 )   -
Income (loss) from discontinued operations   (302 )   1,119     (206 )   1,527
Net income 7,607 2,026 41,512 18,170
(Earnings) loss attributable to noncontrolling interests   (41 )   (241 )   (253 )   180
Income attributable to Kindred $ 7,566   $ 1,785   $ 41,259   $ 18,350
 
Amounts attributable to Kindred stockholders:
Income from continuing operations $ 7,868 $ 666 $ 41,465 $ 16,823
Income (loss) from discontinued operations   (302 )   1,119     (206 )   1,527
Net income $ 7,566   $ 1,785   $ 41,259   $ 18,350
 
Earnings per common share:
Basic:
Income from continuing operations $ 0.15 $ 0.01 $ 0.79 $ 0.37
Discontinued operations:
Income from operations - 0.02 - 0.03
Loss on divestiture of operations   (0.01 )   -     (0.01 )   -
Net income $ 0.14   $ 0.03   $ 0.78   $ 0.40
 
Diluted:
Income from continuing operations $ 0.15 $ 0.01 $ 0.79 $ 0.37
Discontinued operations:
Income from operations - 0.02 - 0.03
Loss on divestiture of operations   (0.01 )   -     (0.01 )   -
Net income $ 0.14   $ 0.03   $ 0.78   $ 0.40
 
Shares used in computing earnings per common share:
Basic 51,676 51,329 51,648 44,577
Diluted 51,709 51,406 51,675 44,934
 
 
 
 
 
 
KINDRED HEALTHCARE, INC.
Condensed Consolidated Statement of Operations
(Unaudited)
(In thousands, except per share amounts)
               
Three months ended Nine months ended
September 30, September 30,
2012 2011 2012 2011
 
Revenues $ 1,525,792   $ 1,514,062   $ 4,641,590   $ 3,999,075  
 
Salaries, wages and benefits 912,924 900,570 2,765,332 2,344,398
Supplies 106,594 107,514 326,127 294,254
Rent 108,449 105,511 323,958 292,641
Other operating expenses 305,988 305,305 929,947 851,806
Other income (2,775 ) (2,815 ) (8,221 ) (8,480 )
Impairment charges 3,911 26,712 5,107 26,712
Depreciation and amortization 50,600 46,947 149,092 117,367
Interest expense 26,668 25,790 79,962 54,675
Investment income   (229 )   (37 )   (796 )   (789 )
  1,512,130     1,515,497     4,570,508     3,972,584  
Income (loss) from continuing operations before income taxes 13,662 (1,435 ) 71,082 26,491
Provision (benefit) for income taxes   5,753     (2,342 )   29,364     9,848  
Income from continuing operations 7,909 907 41,718 16,643
Discontinued operations, net of income taxes:
Income from operations 47 1,119 143 1,527
Loss on divestiture of operations   (349 )   -     (349 )   -  
Income (loss) from discontinued operations   (302 )   1,119     (206 )   1,527  
Net income 7,607 2,026 41,512 18,170
(Earnings) loss attributable to noncontrolling interests   (41 )   (241 )   (253 )   180  
Income attributable to Kindred $ 7,566   $ 1,785   $ 41,259   $ 18,350  
 
Amounts attributable to Kindred stockholders:
Income from continuing operations $ 7,868 $ 666 $ 41,465 $ 16,823
Income (loss) from discontinued operations   (302 )   1,119     (206 )   1,527  
Net income $ 7,566   $ 1,785   $ 41,259   $ 18,350  
 
Earnings per common share:
Basic:
Income from continuing operations $ 0.15 $ 0.01 $ 0.79 $ 0.37
Discontinued operations:
Income from operations - 0.02 - 0.03
Loss on divestiture of operations   (0.01 )   -     (0.01 )   -  
Net income $ 0.14   $ 0.03   $ 0.78   $ 0.40  
 
Diluted:
Income from continuing operations $ 0.15 $ 0.01 $ 0.79 $ 0.37
Discontinued operations:
Income from operations - 0.02 - 0.03
Loss on divestiture of operations   (0.01 )   -     (0.01 )   -  
Net income $ 0.14   $ 0.03   $ 0.78   $ 0.40  
 
Shares used in computing earnings per common share:
Basic 51,676 51,329 51,648 44,577
Diluted 51,709 51,406 51,675 44,934
 
 
 
 
 
 
KINDRED HEALTHCARE, INC.
Condensed Consolidated Balance Sheet
(Unaudited)
(In thousands, except per share amounts)
           
September 30, December 31,
2012 2011
ASSETS
Current assets:
Cash and cash equivalents $ 35,695 $ 41,561
Cash - restricted 5,344 5,551
Insurance subsidiary investments 79,642 70,425
Accounts receivable less allowance for loss 1,050,077 994,700
Inventories 31,787 31,060
Deferred tax assets 24,641 17,785
Income taxes 6,424 39,513
Other   32,477     32,687  
1,266,087 1,233,282
 
Property and equipment 2,144,499 1,975,063
Accumulated depreciation   (1,041,036 )   (916,022 )
1,103,463 1,059,041
 
Goodwill 1,146,801 1,084,655
Intangible assets less accumulated amortization 446,165 447,207
Assets held for sale 4,103 5,612
Insurance subsidiary investments 118,256 110,227
Other   212,952     198,469  
Total assets $ 4,297,827   $ 4,138,493  
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 208,213 $ 216,801
Salaries, wages and other compensation 392,564 407,493
Due to third party payors 39,820 37,306
Professional liability risks 48,931 46,010
Other accrued liabilities 148,882 130,693
Long-term debt due within one year   8,787     10,620  
847,197 848,923
 
Long-term debt 1,610,888 1,531,882
Professional liability risks 236,296 217,717
Deferred tax liabilities 20,537 17,955
Deferred credits and other liabilities 211,109 191,771
 
Noncontrolling interests-redeemable - 9,704
 
Equity:
Stockholders' equity:

Common stock, $0.25 par value; authorized 175,000 shares; issued 53,271 shares - September 30, 2012 and 52,116 shares - December 31, 2011

13,318 13,029
Capital in excess of par value 1,142,923 1,138,189
Accumulated other comprehensive loss (1,092 ) (1,469 )
Retained earnings   180,426     139,172  
1,335,575 1,288,921
Noncontrolling interests-nonredeemable   36,225     31,620  
Total equity   1,371,800     1,320,541  
Total liabilities and equity $ 4,297,827   $ 4,138,493  
 
 
 
 
 
 
KINDRED HEALTHCARE, INC.
Condensed Consolidated Statement of Cash Flows
(Unaudited)
(In thousands)
               
Three months ended Nine months ended
September 30, September 30,
2012 2011 2012 2011
Cash flows from operating activities:
Net income $ 7,607 $ 2,026 $ 41,512 $ 18,170
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 50,600 46,947 149,092 117,367
Amortization of stock-based compensation costs 3,132 3,505 8,011 9,611
Amortization of deferring financing costs 2,375 2,141 7,091 5,231
Payment of lender fees related to debt issuance - - - (46,232 )
Provision for doubtful accounts 9,117 7,793 22,654 22,049
Deferred income taxes (1,235 ) (2,286 ) (18,140 ) (4,975 )
Impairment charges 3,911 26,712 5,107 26,712
Loss on divestiture of discontinued operations 349 - 349 -
Other 732 (3,063 ) 3,077 (3,766 )
Change in operating assets and liabilities:
Accounts receivable 13,175 (27,497 ) (67,913 ) (108,072 )
Inventories and other assets (5,490 ) 6,304 (20,897 ) 3,649
Accounts payable 5,281 (831 ) (7,252 ) 386
Income taxes 6,366 (6,881 ) 37,097 20,792
Due to third party payors 12,627 1,143 1,688 4,698
Other accrued liabilities   32,942     10,505     29,611     52,186  
Net cash provided by operating activities   141,489     66,518     191,087     117,806  
 
Cash flows from investing activities:
Routine capital expenditures (25,939 ) (36,595 ) (76,804 ) (95,263 )
Development capital expenditures (15,177 ) (44,152 ) (38,175 ) (69,570 )
Acquisitions, net of cash acquired (71,440 ) (50,928 ) (139,308 ) (710,907 )
Sale of assets - - 1,110 1,714
Purchase of insurance subsidiary investments (9,692 ) (8,867 ) (30,890 ) (25,904 )
Sale of insurance subsidiary investments 8,063 10,398 30,073 37,587
Net change in insurance subsidiary cash and cash equivalents (685 ) (826 ) (15,171 ) (4,870 )
Change in other investments 1,003 - 1,454 1,000
Other   (25 )   (663 )   (1,029 )   (692 )
Net cash used in investing activities   (113,892 )   (131,633 )   (268,740 )   (866,905 )
 
Cash flows from financing activities:
Proceeds from borrowings under revolving credit 364,600 533,200 1,329,300 1,633,300
Repayment of borrowings under revolving credit (390,400 ) (474,700 ) (1,244,900 ) (1,749,800 )
Proceeds from issuance of senior unsecured notes - - - 550,000
Proceeds from issuance of term loan, net of discount - - - 693,000
Repayment of other long-term debt (2,665 ) (2,545 ) (7,976 ) (348,233 )
Payment of deferred financing costs (288 ) (1,855 ) (601 ) (8,715 )
Contribution made by noncontrolling interest - - 200 -
Distribution made to noncontrolling interests - - (3,521 ) -
Purchase of noncontrolling interests (715 ) (7,292 ) (715 ) (7,292 )
Issuance of common stock - - - 3,019
Other   -     3     -     747  
Net cash provided by (used in) financing activities   (29,468 )   46,811     71,787     766,026  
Change in cash and cash equivalents (1,871 ) (18,304 ) (5,866 ) 16,927
Cash and cash equivalents at beginning of period   37,566     52,399     41,561     17,168  
Cash and cash equivalents at end of period $ 35,695   $ 34,095   $ 35,695   $ 34,095  
 
 
 
 
 
 
KINDRED HEALTHCARE, INC.
Condensed Consolidated Statement of Operations
(Unaudited)
(In thousands, except per share amounts)
                     
 
2011 Quarters 2012 Quarters
First Second Third Fourth First Second Third
 
Revenues $ 1,192,421   $ 1,292,592   $ 1,514,062   $ 1,522,688   $ 1,579,970   $ 1,535,828   $ 1,525,792  
 
Salaries, wages and benefits 678,695 765,133 900,570 911,417 945,302 907,106 912,924
Supplies 90,022 96,718 107,514 107,760 111,295 108,238 106,594
Rent 91,453 95,677 105,511 106,616 107,968 107,541 108,449
Other operating expenses 259,369 287,132 305,305 312,674 310,964 312,995 305,988
Other income (2,785 ) (2,880 ) (2,815 ) (2,711 ) (2,748 ) (2,698 ) (2,775 )
Impairment charges - - 26,712 102,569 867 329 3,911
Depreciation and amortization 32,549 37,871 46,947 48,227 48,690 49,802 50,600
Interest expense 5,728 23,157 25,790 26,244 26,578 26,716 26,668

Investment income

  (495 )   (257 )   (37 )   (242 )   (292 )   (275 )   (229 )
  1,154,536     1,302,551     1,515,497     1,612,554     1,548,624     1,509,754     1,512,130  

Income (loss) from continuing operations before income taxes

37,885 (9,959 ) (1,435 ) (89,866 ) 31,346 26,074 13,662
Provision (benefit) for income taxes   15,609     (3,419 )   (2,342 )   (16,952 )   12,814     10,797     5,753  
Income (loss) from continuing operations 22,276 (6,540 ) 907 (72,914 ) 18,532 15,277 7,909
Discontinued operations, net of income taxes:
Income (loss) from operations (179 ) 587 1,119 1,025 110 (14 ) 47
Loss on divestiture of operations   -     -     -     -     -     -     (349 )
Income (loss) from discontinued operations   (179 )   587     1,119     1,025     110     (14 )   (302 )
Net income (loss) 22,097 (5,953 ) 2,026 (71,889 ) 18,642 15,263 7,607
(Earnings) loss attributable to noncontrolling interests   -     421     (241 )   58     (451 )   239     (41 )
Income (loss) attributable to Kindred $ 22,097   $ (5,532 ) $ 1,785   $ (71,831 ) $ 18,191   $ 15,502   $ 7,566  
 
Amounts attributable to Kindred stockholders:
Income (loss) from continuing operations $ 22,276 $ (6,119 ) $ 666 $ (72,856 ) $ 18,081 $ 15,516 $ 7,868
Income (loss) from discontinued operations   (179 )   587     1,119     1,025     110     (14 )   (302 )
Net income (loss) $ 22,097   $ (5,532 ) $ 1,785   $ (71,831 ) $ 18,191   $ 15,502   $ 7,566  
 
Earnings (loss) per common share:
Basic:
Income (loss) from continuing operations $ 0.56 $ (0.14 ) $ 0.01 $ (1.42 ) $ 0.35 $ 0.29 $ 0.15
Discontinued operations:
Income (loss) from operations - 0.01 0.02 0.02 - - -
Loss on divestiture of operations   -     -     -     -     -     -     (0.01 )
Net income (loss) $ 0.56   $ (0.13 ) $ 0.03   $ (1.40 ) $ 0.35   $ 0.29   $ 0.14  
 
Diluted:
Income (loss) from continuing operations $ 0.55 $ (0.14 ) $ 0.01 $ (1.42 ) $ 0.35 $ 0.29 $ 0.15
Discontinued operations:
Income (loss) from operations - 0.01 0.02 0.02 - - -
Loss on divestiture of operations   -     -     -     -     -     -     (0.01 )
Net income (loss) $ 0.55   $ (0.13 ) $ 0.03   $ (1.40 ) $ 0.35   $ 0.29   $ 0.14  
 

Shares used in computing earnings (loss) per common share:

Basic 39,035 43,231 51,329 51,335 51,603 51,664 51,676
Diluted 39,543 43,231 51,406 51,335 51,638 51,675 51,709
 
 
 
 
 
 
KINDRED HEALTHCARE, INC.
Condensed Business Segment Data
(Unaudited)
(In thousands)
 
 
  2011 Quarters   2012 Quarters
First   Second   Third   Fourth First   Second   Third
Revenues:
  Hospital division $ 558,974 $ 593,425 $ 684,781 $ 712,812 $ 765,823 $ 729,419 $ 714,738
 
Nursing center division 567,472 568,199 571,226 547,202 544,319 535,644 534,188
 
Rehabilitation division:
Skilled nursing rehabilitation services 114,618 161,246 252,574 246,720 255,451 255,187 253,459
Hospital rehabilitation services   22,490     38,291     69,811     70,232     74,369     73,379     71,899
  137,108     199,537     322,385     316,952     329,820     328,566     325,358
 
Home health and hospice division   8,038     10,828     15,419     26,451     28,432     28,872     35,943
1,271,592 1,371,989 1,593,811 1,603,417 1,668,394 1,622,501 1,610,227
 
Eliminations:
Skilled nursing rehabilitation services (57,081 ) (57,587 ) (57,922 ) (57,087 ) (58,433 ) (57,056 ) (55,534 )
Hospital rehabilitation services (21,225 ) (20,706 ) (20,528 ) (22,167 ) (28,317 ) (27,755 ) (27,097 )
Nursing and rehabilitation centers   (865 )   (1,104 )   (1,299 )   (1,475 )   (1,674 )   (1,862 )   (1,804 )
  (79,171 )   (79,397 )   (79,749 )   (80,729 )   (88,424 )   (86,673 )   (84,435 )
$ 1,192,421   $ 1,292,592   $ 1,514,062   $ 1,522,688   $ 1,579,970   $ 1,535,828   $ 1,525,792
 
Income (loss) from continuing operations:
Operating income (loss):
Hospital division $ 108,385 $ 108,465 $ 125,701 $ 144,891 $ 160,669 $ 141,511 $ 138,762
 
Nursing center division 87,350 93,532 89,592 67,791 65,533 71,005 70,928 (a)
 
Rehabilitation division:
Skilled nursing rehabilitation services 9,159 15,978 27,575 13,204 14,193 22,942 19,659
Hospital rehabilitation services   5,332     8,033     15,606     14,760     16,116     17,860     16,977
  14,491     24,011     43,181     27,964     30,309     40,802     36,636
 
Home health and hospice division (10 ) (447 ) 1,107 2,453 2,341 2,789 3,645
 
Corporate:
Overhead (38,315 ) (43,801 ) (48,806 ) (43,878 ) (42,728 ) (44,723 ) (45,883 )
Insurance subsidiary   (602 )   (420 )   (750 )   (534 )   (482 )   (600 )   (545 )
(38,917 ) (44,221 ) (49,556 ) (44,412 ) (43,210 ) (45,323 ) (46,428 )
 
Impairment charges - - (26,712 ) (102,569 ) (867 ) (329 ) (3,911 )(b)
Transaction costs   (4,179 )   (34,851 )   (6,537 )   (5,139 )   (485 )   (597 )   (482 )
  Operating income 167,120 146,489 176,776 90,979 214,290 209,858 199,150
Rent (91,453 ) (95,677 ) (105,511 ) (106,616 ) (107,968 ) (107,541 ) (108,449 )(c)
Depreciation and amortization (32,549 ) (37,871 ) (46,947 ) (48,227 ) (48,690 ) (49,802 ) (50,600 )
Interest, net   (5,233 )   (22,900 )   (25,753 )   (26,002 )   (26,286 )   (26,441 )   (26,439 )

Income (loss) from continuing operations before income taxes

37,885 (9,959 ) (1,435 ) (89,866 ) 31,346 26,074 13,662
Provision (benefit) for income taxes   15,609     (3,419 )   (2,342 )   (16,952 )   12,814     10,797     5,753
$ 22,276   $ (6,540 ) $ 907   $ (72,914 ) $ 18,532   $ 15,277   $ 7,909
 
 
(a) Includes employee retention costs of $0.6 million incurred in connection with the decision to allow the leases to expire for 54 nursing and rehabilitation centers leased from Ventas.
 
(b) Includes an impairment charge of $3.2 million incurred in connection with the planned divestiture of a LTAC hospital.
 
(c) Includes a lease cancellation charge of $0.6 million incurred in connection with the closing of a LTAC hospital.
 
 
 
 
 
 
KINDRED HEALTHCARE, INC.
Condensed Consolidating Statement of Operations
(Unaudited)
(In thousands)
                         
 
Third Quarter 2012
Nursing Rehabilitation division Home Transaction-
Hospital center Skilled nursing Hospital health and related
division (a) division (b) services services Total hospice Corporate costs Eliminations Consolidated
 
Revenues $ 714,738   $ 534,188   $ 253,459   $ 71,899   $ 325,358   $ 35,943 $ -   $ -   $ (84,435 ) $ 1,525,792  
 
Salaries, wages and benefits 321,810 259,095 223,305 50,724 274,029 26,332 32,008 (350 ) - 912,924
Supplies 77,536 26,587 697 33 730 1,557 184 - - 106,594
Rent 55,391 50,290 1,309 2 1,311 805 652 - - 108,449
Other operating expenses 176,630 177,578 9,798 4,165 13,963 4,409 17,011 832 (84,435 ) 305,988
Other income - - - - - - (2,775 ) - - (2,775 )
Impairment charges 3,487 424 - - - - - - - 3,911
Depreciation and amortization 23,110 13,564 2,791 2,328 5,119 1,137 7,670 - - 50,600
Interest expense 231 20 36 - 36 4 26,377 - - 26,668
Investment income   (17 )   (22 )   -     -     -     -   (190 )   -     -     (229 )
  658,178     527,536     237,936     57,252     295,188     34,244   80,937     482     (84,435 )   1,512,130  

Income from continuing operations before income taxes

$ 56,560   $ 6,652   $ 15,523   $ 14,647   $ 30,170   $ 1,699 $ (80,937 ) $ (482 ) $ -   13,662
Provision for income taxes   5,753  
Income from continuing operations $ 7,909  
 

Capital expenditures, excluding acquisitions (including discontinued operations):

Routine $ 9,015 $ 4,965 $ 707 $ 125 $ 832 $ 160 $ 10,967 $ - $ - $ 25,939
Development   14,334     843     -     -     -     -   -     -     -     15,177  
$ 23,349   $ 5,808   $ 707   $ 125   $ 832   $ 160 $ 10,967   $ -   $ -   $ 41,116  
 
 
 
Third Quarter 2011
Nursing Rehabilitation division Home Transaction-
Hospital center Skilled nursing Hospital health and related
division division services services Total hospice Corporate costs Eliminations Consolidated
 
Revenues $ 684,781   $ 571,226   $ 252,574   $ 69,811   $ 322,385   $ 15,419 $ -   $ -   $ (79,749 ) $ 1,514,062  
 
Salaries, wages and benefits 316,507 272,505 215,889 49,297 265,186 11,653 33,482 1,256 (19 ) 900,570
Supplies 77,045 28,650 858 58 916 652 251 - - 107,514
Rent 52,737 49,862 1,811 95 1,906 358 648 - - 105,511
Other operating expenses 165,528 180,479 8,252 4,850 13,102 2,007 18,638 5,281 (79,730 ) 305,305
Other income - - - - - - (2,815 ) - - (2,815 )
Impairment charges 3,102 23,610 - - - - - - - 26,712
Depreciation and amortization 21,612 12,655 2,699 2,372 5,071 324 7,285 - - 46,947
Interest expense 206 25 - - - - 25,559 - - 25,790
Investment income   (1 )   (18 )   (1 )   (1 )   (2 )   -   (16 )   -     -     (37 )
  636,736     567,768     229,508     56,671     286,179     14,994   83,032     6,537     (79,749 )   1,515,497  

Income (loss) from continuing operations before income taxes

$ 48,045   $ 3,458   $ 23,066   $ 13,140   $ 36,206   $ 425 $ (83,032 ) $ (6,537 ) $ -   (1,435 )
Income tax benefit   (2,342 )
Income from continuing operations $ 907  
 

Capital expenditures, excluding acquisitions (including discontinued operations):

Routine $ 12,919 $ 10,572 $ 255 $ 81 $ 336 $ 41 $ 12,727 $ - $ - $ 36,595
Development   39,964     4,113     -     -     -     75   -     -     -     44,152  
$ 52,883   $ 14,685   $ 255   $ 81   $ 336   $ 116 $ 12,727   $ -   $ -   $ 80,747  
 
 
(a)

Includes an impairment charge of $3.2 million and a lease cancellation charge of $0.6 million incurred in connection with the planned divestiture of a LTAC hospital and the closing of a LTAC hospital, respectively.

 
(b) Includes employee retention costs of $0.6 million incurred in connection with the decision to allow the leases to expire for 54 nursing and rehabilitation centers leased from Ventas.
 
 
 
 
 
 
KINDRED HEALTHCARE, INC.
Condensed Consolidating Statement of Operations (Continued)
(Unaudited)
(In thousands)
                         
 
Nine months ended September 30, 2012
Nursing Rehabilitation division Home Transaction-
Hospital center Skilled nursing Hospital health and related
division (a,b) division (c) services services Total hospice Corporate costs Eliminations Consolidated
 
Revenues $ 2,209,980   $ 1,614,151   $ 764,097   $ 219,647   $ 983,744   $ 93,247   $ -   $ -   $ (259,532 ) $ 4,641,590  
 
Salaries, wages and benefits 982,054 786,766 679,915 155,404 835,319 68,829 92,783 (350 ) (69 ) 2,765,332
Supplies 239,443 79,927 2,225 127 2,352 3,826 579 - - 326,127
Rent 165,477 150,457 4,060 119 4,179 2,029 1,816 - - 323,958
Other operating expenses 547,541 539,992 25,163 13,163 38,326 11,817 49,820 1,914 (259,463 ) 929,947
Other income - - - - - - (8,221 ) - - (8,221 )
Impairment charges 3,838 1,269 - - - - - - - 5,107
Depreciation and amortization 68,579 39,534 8,143 6,975 15,118 2,960 22,901 - - 149,092
Interest expense 810 68 36 - 36 4 79,044 - - 79,962
Investment income   (60 )   (68 )   (1 )   -     (1 )   -     (667 )   -     -     (796 )
  2,007,682     1,597,945     719,541     175,788     895,329     89,465     238,055     1,564     (259,532 )   4,570,508  

Income from continuing operations before income taxes

$ 202,298   $ 16,206   $ 44,556   $ 43,859   $ 88,415   $ 3,782   $ (238,055 ) $ (1,564 ) $ -   71,082
Provision for income taxes   29,364  
Income from continuing operations $ 41,718  
 

Capital expenditures, excluding acquisitions (including discontinued operations):

Routine $ 28,455 $ 12,611 $ 1,602 $ 231 $ 1,833 $ 429 $ 33,476 $ - $ - $ 76,804
Development   35,572     2,603     -     -     -     -     -     -     -     38,175  
$ 64,027   $ 15,214   $ 1,602   $ 231   $ 1,833   $ 429   $ 33,476   $ -   $ -   $ 114,979  
 
 
 
Nine months ended September 30, 2011
Nursing Rehabilitation division Home Transaction-
Hospital center Skilled nursing Hospital health and related
division division services services Total hospice Corporate costs Eliminations Consolidated
 
Revenues $ 1,837,180   $ 1,706,897   $ 528,438   $ 130,592   $ 659,030   $ 34,285   $ -   $ -   $ (238,317 ) $ 3,999,075  
 
Salaries, wages and benefits 842,829 816,022 457,773 93,996 551,769 26,223 91,502 16,122 (69 ) 2,344,398
Supplies 206,504 83,645 1,983 122 2,105 1,413 587 - - 294,254
Rent 137,033 148,808 4,860 156 5,016 798 986 - - 292,641
Other operating expenses 445,296 536,756 15,970 7,503 23,473 5,999 49,085 29,445 (238,248 ) 851,806
Other income - - - - - - (8,480 ) - - (8,480 )
Impairment charges 3,102 23,610 - - - - - - - 26,712
Depreciation and amortization 52,462 37,486 4,574 3,288 7,862 547 19,010 - - 117,367
Interest expense 272 76 - - - - 40,525 13,802 - 54,675
Investment income   (4 )   (58 )   (3 )   (1 )   (4 )   -     (723 )   -     -     (789 )
  1,687,494     1,646,345     485,157     105,064     590,221     34,980     192,492     59,369     (238,317 )   3,972,584  

Income (loss) from continuing operations before income taxes

$ 149,686   $ 60,552   $ 43,281   $ 25,528   $ 68,809   $ (695 ) $ (192,492 ) $ (59,369 ) $ -   26,491
Provision for income taxes   9,848  
Income from continuing operations $ 16,643  
 

Capital expenditures, excluding acquisitions (including discontinued operations):

Routine $ 36,872 $ 26,727 $ 669 $ 178 $ 847 $ 99 $ 30,718 $ - $ - $ 95,263
Development   54,164     15,140     -     -     -     266     -     -     -     69,570  
$ 91,036   $ 41,867   $ 669   $ 178   $ 847   $ 365   $ 30,718   $ -   $ -   $ 164,833  
 
       
(a)

Includes severance costs ($2.6 million), an impairment charge ($3.2 million) and other miscellaneous costs ($2.3 million) incurred in connection with the closing of a regional office, the planned divestiture or closing of five LTAC hospitals and the cancellation of a sub-acute unit project, and $5.0 million for employment-related lawsuits.

 
(b) Includes lease cancellation charges of $3.5 million incurred in connection with the closing of four LTAC hospitals.
 
(c) Includes employee retention costs of $1.3 million incurred in connection with the decision to allow the leases to expire for 54 nursing and rehabilitation centers leased from Ventas.
 
 
 
 
 
 
KINDRED HEALTHCARE, INC.
Condensed Business Segment Data
(Unaudited)
                     
2011 Quarters 2012 Quarters
First Second Third Fourth First Second Third
Hospital division data:
End of period data:
Number of hospitals:
Long-term acute care 89 120 120 121 120 118 117
Inpatient rehabilitation - 5 5 5 6 6 6
89 125 125 126 126 124 123
 
Number of licensed beds:
Long-term acute care 6,889 8,609 8,597 8,597 8,510 8,448 8,391
Inpatient rehabilitation - 183 183 183 229 259 259
6,889 8,792 8,780 8,780 8,739 8,707 8,650
 
Revenue mix %:
Medicare 60 60 60 62 62 61 61
Medicaid 8 8 8 7 6 6 6
Medicare Advantage 10 10 10 10 10 11 11
Commercial insurance and other 22 22 22 21 22 22 22
 
Admissions:
Medicare 8,504 8,913 11,002 11,682 12,400 11,544 11,277
Medicaid 1,085 1,163 1,236 1,163 1,025 1,038 1,025
Medicare Advantage 1,172 1,348 1,609 1,549 1,782 1,970 1,804
Commercial insurance and other 2,282 2,290 2,669 2,853 3,081 2,770 2,797
13,043 13,714 16,516 17,247 18,288 17,322 16,903
Admissions mix %:
Medicare 65 65 67 68 68 67 67
Medicaid 8 8 7 7 5 6 6
Medicare Advantage 9 10 10 9 10 11 11
Commercial insurance and other 18 17 16 16 17 16 16
 
Patient days:
Medicare 219,213 237,257 275,561 285,358 304,795 290,273 281,757
Medicaid 45,650 45,746 48,911 48,648 45,058 43,174 46,295
Medicare Advantage 35,639 39,503 47,819 47,738 51,129 53,822 52,100
Commercial insurance and other 70,522 72,759 83,375 84,677 89,305 85,645 85,647
371,024 395,265 455,666 466,421 490,287 472,914 465,799
Average length of stay:
Medicare 25.8 26.6 25.0 24.4 24.6 25.1 25.0
Medicaid 42.1 39.3 39.6 41.8 44.0 41.6 45.2
Medicare Advantage 30.4 29.3 29.7 30.8 28.7 27.3 28.9
Commercial insurance and other 30.9 31.8 31.2 29.7 29.0 30.9 30.6
Weighted average 28.4 28.8 27.6 27.0 26.8 27.3 27.6
 
 
 
 
 
 
KINDRED HEALTHCARE, INC.
Condensed Business Segment Data (Continued)
(Unaudited)
                   
2011 Quarters 2012 Quarters
First Second Third Fourth First Second Third
Hospital division data (continued):
Revenues per admission:
Medicare $ 39,439 $ 40,089 $ 37,408 $ 37,643 $ 38,491 $ 38,716 $ 38,429
Medicaid 42,432 41,576 40,720 44,618 45,868 44,470 45,561
Medicare Advantage 46,217 42,708 43,616 46,154 42,632 39,541 42,784
Commercial insurance and other 54,065 56,850 57,216 52,465 53,733 57,194 56,308
Weighted average 42,856 43,271 41,462 41,330 41,876 42,109 42,285
 
Revenues per patient day:
Medicare $ 1,530 $ 1,506 $ 1,494 $ 1,541 $ 1,566 $ 1,540 $ 1,538
Medicaid 1,009 1,057 1,029 1,067 1,043 1,069 1,009
Medicare Advantage 1,520 1,457 1,468 1,498 1,486 1,447 1,481
Commercial insurance and other 1,749 1,789 1,832 1,768 1,854 1,850 1,839
Weighted average 1,507 1,501 1,503 1,528 1,562 1,542 1,534
 
Medicare case mix index (discharged patients only) 1.21 1.22 1.17 1.14 1.17 1.17 1.15
 
Average daily census 4,122 4,344 4,953 5,070 5,388 5,197 5,063
Occupancy % 68.7 65.5 62.6 63.5 67.4 64.8 63.8
 
Annualized employee turnover % 21.2 22.1 21.4 20.3 21.8 22.2 21.1
 
Nursing center division data:
End of period data:
Number of facilities:
Nursing and rehabilitation centers:
Owned or leased 220 220 220 220 220 220 220
Managed 4 4 4 4 4 4 4
Assisted living facilities   6   6   6   6   6   6   6
  230   230   230   230   230   230   230
Number of licensed beds:
Nursing and rehabilitation centers:
Owned or leased 26,767 26,687 26,687 26,663 26,663 26,711 26,711
Managed 485 485 485 485 485 485 485
Assisted living facilities   413   413   413   413   413   341   341
  27,665   27,585   27,585   27,561   27,561   27,537   27,537
Revenue mix %:
Medicare 38 37 36 33 34 33 32
Medicaid 37 38 38 40 39 41 41
Medicare Advantage 7 7 7 7 8 7 7
Private and other 18 18 19 20 19 19 20
 
Patient days (a):
Medicare 370,395 358,760 345,362 334,156 342,567 328,011 313,642
Medicaid 1,232,620 1,229,517 1,255,418 1,248,442 1,218,903 1,215,623 1,226,855
Medicare Advantage 97,460 94,483 95,751 95,730 101,312 97,583 93,287
Private and other   425,414   435,667   436,074   441,362   422,983   412,403   423,070
  2,125,889   2,118,427   2,132,605   2,119,690   2,085,765   2,053,620   2,056,854
 
(a) Excludes managed facilities.
 
 
 
 
 
 
KINDRED HEALTHCARE, INC.
Condensed Business Segment Data (Continued)
(Unaudited)
                   
2011 Quarters 2012 Quarters
First Second Third Fourth First Second Third
Nursing center division data (continued):
Patient day mix % (a):
Medicare 17 17 16 16 16 16 15
Medicaid 58 58 59 59 59 59 60
Medicare Advantage 5 4 5 4 5 5 4
Private and other 20 21 20 21 20 20 21
 
Revenues per patient day (a):
Medicare Part A $ 537 $ 544 $ 550 $ 491 $ 484 $ 483 $ 490
Total Medicare (including Part B) 579 589 599 544 536 538 546
Medicaid 172 173 174 176 176 178 179
Medicaid (net of provider taxes) (b) 155 156 155 156 156 158 158
Medicare Advantage 416 420 421 405 407 405 409
Private and other 235 240 243 241 248 250 250
Weighted average 267 268 268 258 261 261 260
 
Average daily census (a) 23,621 23,279 23,180 23,040 22,920 22,567 22,357
Admissions (a) 20,619 20,143 20,118 19,914 20,863 19,593 19,064
Occupancy % (a) 86.9 85.9 85.5 85.1 84.7 83.5 82.6
Medicare average length of stay (a) 32.9 33.4 33.0 32.1 31.8 32.2 32.8
 
Annualized employee turnover % 37.8 39.8 40.2 39.2 36.9 39.2 39.9
 
Rehabilitation division data:
Skilled nursing rehabilitation services:
Revenue mix %:
Company-operated 50 36 23 23 23 22 22
Non-affiliated 50 64 77 77 77 78 78
 
Sites of service (at end of period) 641 1,848 1,835 1,774 1,722 1,730 1,735
Revenue per site $ 178,812 $ 137,316 $ 137,643 $ 139,077 $ 148,346 $ 147,507 $ 146,086
 
Therapist productivity % 80.6 81.6 80.5 80.1 80.3 80.4 80.5
 
Hospital rehabilitation services:
Revenue mix %:
Company-operated 94 54 29 32 38 38 38
Non-affiliated 6 46 71 68 62 62 62
 
Sites of service (at end of period):
Inpatient rehabilitation units 1 104 102 102 100 102 104
LTAC hospitals 93 97 99 115 125 125 123
Sub-acute units 8 22 23 25 19 20 20
Outpatient units 12 119 114 115 111 115 117
Other   5   8   7   8   5   5   5
  119   350   345   365   360   367   369
 
Revenue per site $ 188,989 $ 199,661 $ 202,352 $ 192,410 $ 206,580 $ 199,943 $ 194,848
 
Annualized employee turnover % 14.5 17.1 16.5 16.5 19.6 16.9 17.3
 
(a) Excludes managed facilities.
(b) Provider taxes are recorded in other operating expenses for all periods presented.
 
 
 
 
 
 
KINDRED HEALTHCARE, INC.
Earnings Per Common Share Reconciliation (a)
(Unaudited)
(In thousands, except per share amounts)
                     
Three months ended September 30, Nine months ended September 30,
2012 2011 2012 2011
Basic Diluted Basic Diluted Basic Diluted Basic Diluted
Earnings:
Amounts attributable to Kindred stockholders:
Income from continuing operations:
As reported in Statement of Operations $ 7,868 $ 7,868 $ 666 $ 666 $ 41,465 $ 41,465 $ 16,823 $ 16,823

Allocation to participating unvested restricted stockholders

(200) (200) (10) (10) (874) (873) (287) (284)
Available to common stockholders $ 7,668 $ 7,668 $ 656 $ 656 $ 40,591 $ 40,592 $ 16,536 $ 16,539
 
Discontinued operations, net of income taxes:
Income from operations:
As reported in Statement of Operations $ 47 $ 47 $ 1,119 $ 1,119 $ 143 $ 143 $ 1,527 $ 1,527

Allocation to participating unvested restricted stockholders

(1) (1) (17) (17) (3) (3) (26) (26)
Available to common stockholders $ 46 $ 46 $ 1,102 $ 1,102 $ 140 $ 140 $ 1,501 $ 1,501
 
Loss on divestiture of operations:
As reported in Statement of Operations $ (349) $ (349) $ - $ - $ (349) $ (349) $ - $ -

Allocation to participating unvested restricted stockholders

9 9 - - 7 7 - -
Available to common stockholders $ (340) $ (340) $ - $ - $ (342) $ (342) $ - $ -
 
Net income:
As reported in Statement of Operations $ 7,566 $ 7,566 $ 1,785 $ 1,785 $ 41,259 $ 41,259 $ 18,350 $ 18,350

Allocation to participating unvested restricted stockholders

(192) (192) (27) (27) (870) (869) (313) (310)
Available to common stockholders $ 7,374 $ 7,374 $ 1,758 $ 1,758 $ 40,389 $ 40,390 $ 18,037 $ 18,040
 
Shares used in the computation:

Weighted average shares outstanding - basic computation

51,676 51,676 51,329 51,329 51,648 51,648 44,577 44,577
Dilutive effect of employee stock options 33 77 27 357

Adjusted weighted average shares outstanding - diluted computation

 

51,709

 

51,406

 

51,675

 

44,934
 
Earnings per common share:
Income from continuing operations $ 0.15 $ 0.15 $ 0.01 $ 0.01 $ 0.79 $ 0.79 $ 0.37 $ 0.37
Discontinued operations:
Income from operations - - 0.02 0.02 - - 0.03 0.03
Loss on divestiture of operations (0.01) (0.01) - - (0.01) (0.01) - -
Net income $ 0.14 $ 0.14 $ 0.03 $ 0.03 $ 0.78 $ 0.78 $ 0.40 $ 0.40
 
 
(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 information in this release to compute certain non-GAAP measurements for the third quarter and nine months ended September 30, 2012 and 2011 before certain charges or on a core basis. The charges that were excluded from core operating results for the third quarter ended September 30, 2012 relate to severance costs, an impairment charge in connection with the planned divestiture of a LTAC hospital, a lease cancellation charge in connection with the closing of a LTAC hospital, employee retention costs incurred in connection with the decision to allow the leases to expire for 54 nursing and rehabilitation centers leased from Ventas and transaction costs. The charges that were excluded from core operating results for the nine months ended September 30, 2012 relate to severance and employee retention costs, an impairment charge, lease cancellation charges and other miscellaneous costs in connection with the closing of a regional office, the planned divestiture or closing of five LTAC hospitals, the cancellation of a sub-acute unit project, the decision to allow the leases to expire for 54 nursing and rehabilitation centers leased from Ventas, employment-related lawsuits and transaction costs. The charges that were excluded from core operating results for the third quarter ended September 30, 2011 relate to severance costs, transaction costs and impairment charges. The charges that were excluded from core operating results for the nine months ended September 30, 2011 relate to severance, transaction and financing costs and impairment charges.
           
The income tax benefit associated with the excluded charges was calculated using an effective income tax rate of 33.4% and 37.4% for the third quarter and nine months ended September 30, 2012, respectively, and an effective income tax rate of 37.2% and 36.8% for the third quarter and nine months ended September 30, 2011, respectively. Certain of the excluded charges for the third quarter of 2012 are not deductible for income tax purposes thus resulting in a lower effective income tax rate than the comparable prior year period.
 
The use of these non-GAAP measurements are not intended to replace the presentation of the Company's financial results in accordance with GAAP. The Company believes that the presentation of core operating results provides additional information to investors to facilitate the comparison between periods by excluding certain charges for the third quarter and nine months ended September 30, 2012 and 2011 that the Company believes are not representative of its ongoing operations due to the materiality and nature of the charges. The Company's core operating results also represent a key performance measure for the purpose of evaluating performance internally.
 

 

Three months ended

Nine months ended

September 30,

September 30,

2012 2011 2012 2011
Detail of charges:
Severance, employee retention and other miscellaneous costs ($318 ) ($1,256 ) ($5,925 ) ($16,122 )
Lease cancellation charges (596 ) - (3,518 ) -
Employment-related lawsuits - - (5,000 ) -
Transaction costs (832 ) (5,281 ) (1,914 ) (29,445 )
Impairment charges (3,203 ) (26,712 ) (3,203 ) (26,712 )
Financing costs (in connection with RehabCare acquisition)   -     -     -     (13,802 )
(4,949 ) (33,249 ) (19,560 ) (86,081 )
Income tax benefit   1,654     12,371     7,316     31,708  
Charges net of income taxes (3,295 ) (20,878 ) (12,244 ) (54,373 )
Allocation to participating unvested restricted stockholders   84     314     258     920  
Available to common stockholders   ($3,211 )   ($20,564 )   ($11,986 )   ($53,453 )
 
Weighted average diluted shares outstanding   51,709     51,406     51,675     44,934  
 
Diluted loss per common share related to charges   ($0.06 )   ($0.40 )   ($0.23 )   ($1.19 )
 
Reconciliation of operating income before charges:
Operating income before charges $ 203,503 $ 210,025 $ 639,340 $ 562,664
Detail of charges excluded from core operating results:
Severance, employee retention and other miscellaneous costs (318 ) (1,256 ) (5,925 ) (16,122 )
Employment-related lawsuits - - (5,000 ) -
Transaction costs (832 ) (5,281 ) (1,914 ) (29,445 )
Impairment charges   (3,203 )   (26,712 )   (3,203 )   (26,712 )
  (4,353 )   (33,249 )   (16,042 )   (72,279 )
Reported operating income $ 199,150   $ 176,776   $ 623,298   $ 490,385  
 
Reconciliation of income from continuing operations before charges:
Amounts attributable to Kindred stockholders:
Income from continuing operations before charges $ 11,163 $ 21,544 $ 53,709 $ 71,196
Charges net of income taxes   (3,295 )   (20,878 )   (12,244 )   (54,373 )
Reported income from continuing operations $ 7,868   $ 666   $ 41,465   $ 16,823  
 
Reconciliation of diluted income per common share from continuing operations before charges:
Diluted income per common share before charges (a) $ 0.21 $ 0.41 $ 1.02 $ 1.56
Charges net of income taxes   (0.06 )   (0.40 )   (0.23 )   (1.19 )
Reported diluted income per common share from continuing operations $ 0.15   $ 0.01   $ 0.79   $ 0.37  
 
Weighted average diluted shares outstanding 51,709 51,406 51,675 44,934
 
Reconciliation of effective income tax rate before charges:
Effective income tax rate before charges 39.8 % 31.5 % 40.5 % 36.9 %
Impact of charges on effective income tax rate   2.3 %   131.7 %   0.8 %   0.3 %
Reported effective income tax rate   42.1 %   163.2 %   41.3 %   37.2 %
 
 
(a) For purposes of computing diluted earnings per common share before charges, income from continuing operations before charges was reduced by $0.3 million for each of the third quarters ended September 30, 2012 and 2011, and $1.1 million and $1.2 million for the nine months ended September 30, 2012 and 2011, respectively, for the allocation of income to participating unvested restricted stockholders.
 

 

 

 

 
 
KINDRED HEALTHCARE, INC.
Reconciliation of Earnings Guidance for 2012 and 2013 - Continuing Operations
(Unaudited)
(In millions, except per share amounts)
                       
 
As of October 29, 2012 As of September 14, 2012
2012 (a) 2013 (b) 2012 (a) 2013 (b)
Low High Low High Low High Low High
 
Operating income $ 867   $ 875   $ 806   $ 825   $ 868   $ 884   $ 806   $ 825  
 
Rent 430 430 387 387 432 432 389 389
Depreciation and amortization 201 201 189 189 201 201 190 190
Interest, net   107     107     113     113     107     107     110     110  

Income from continuing operations before income taxes

129 137 117 136 128 144 117 136
Provision for income taxes   53     56     50     58     53     59     50     58  
Income from continuing operations 76 81 67 78 75 85 67 78

Earnings attributable to noncontrolling interests

  (1 )   (1 )   (2 )   (2 )   (2 )   (2 )   (2 )   (2 )

Income from continuing operations attributable to the Company

75 80 65 76 73 83 65 76
Allocation to participating unvested
restricted stockholders   (2 )   (2 )   (2 )   (2 )   (2 )   (2 )   (2 )   (2 )
Available to common stockholders $ 73   $ 78   $ 63   $ 74   $ 71   $ 81   $ 63   $ 74  
 
 
Earnings per diluted share $ 1.40 $ 1.50 $ 1.20 $ 1.40 $ 1.35 $ 1.55 $ 1.20 $ 1.40
 

Shares used in computing earnings per diluted share

52.0 52.0 52.7 52.7 52.0 52.0 52.7 52.7
 
(a) The Company's earnings guidance for 2012 excludes the effect of (1) any costs associated with the closing of a regional office, the planned divestiture or closing of five LTAC hospitals and the cancellation of a sub-acute unit project, (2) costs associated with employment-related lawsuits, (3) employee retention costs incurred in connection with the decision to allow the leases to expire for 54 nursing and rehabilitation centers leased from Ventas, (4) any transaction-related charges, (5) any other reimbursement changes, (6) any future acquisitions or divestitures, (7) any impairment charges, and (8) any repurchases of common stock.
 
(b) The Company's earnings guidance for 2013 (1) assumes the impact of Medicare reimbursement reductions that are expected to reduce the Company's consolidated revenues between $90 million to $100 million, and further assumes that the operating results of the 54 nursing and rehabilitation centers leased from Ventas are classified as discontinued operations effective January 1, 2013, and (2) excludes the effect of any other reimbursement changes, any future acquisitions or other divestitures, any impairment charges, and any repurchases of common stock.
 
 
 

Source: Kindred Healthcare, Inc.

Kindred Healthcare, Inc.
Richard A. Lechleiter, 502-596-7734
Executive Vice President and Chief Financial Officer