Excluding Certain Items, Company Reports Continuing Operations Diluted EPS of $0.41,
Exceeding the Company’s Guidance Range of $0.25 to $0.30
Company Reports GAAP Continuing Operations Income of $0.01 per Diluted Share
RehabCare Integration and Cost Synergies Ahead of Plan
Company Raises Fiscal 2011 Earnings Guidance to $1.87 to $1.92 from $1.80 to $1.90
(Continuing operations diluted EPS, excluding certain items)
Fourth Quarter EPS Expected at $0.35 to $0.40
Fiscal 2012 Earnings Guidance Reaffirmed at $1.65 to $1.85
LOUISVILLE, Ky.--(BUSINESS WIRE)-- Kindred Healthcare, Inc. (“Kindred” or the “Company”) (NYSE:KND) today announced its operating results for the third quarter ended September 30, 2011. Third quarter results reflect the first full interim period of combined operations since the Company completed the acquisition of RehabCare Group, Inc. (“RehabCare”) on June 1, 2011. The Company’s consolidated financial statements include the operating results of RehabCare since the closing of the transaction.
Third Quarter Highlights:
- Consolidated revenues rose 44% to $1.5 billion
- RehabCare added $343 million in third quarter revenues
- Hospital admissions rose 54% in the quarter; same-store admissions rose 4%
- Nursing and rehabilitation center admissions increased 4%
- Expanding rehabilitation therapy business reported revenue growth of 172%
- Excluding certain items, the Company reported improved margins in each operating division
- Adjusted operating income rose 69% to $210 million (13.9% of revenues) compared to $124 million (11.8% of revenues) in the third quarter last year
- Adjusted income from continuing operations nearly quadrupled to $21.5 million (1.4% of revenues) from $5.6 million (0.5% of revenues) in the third quarter last year
- Company continues to generate significant operating cash flows
- Excluding transaction-related payments, year to date operating cash flows were up 27% to $195 million from $153 million in the same period last year
- Company’s cost synergy forecast shows continued improvement
- Synergies from RehabCare acquisition to reach $55 million annual rate by year end 2011 and $62 million annual rate by the end of first quarter 2012
- Additional $14 million of annualized overhead reductions in the Company’s nursing center division will be achieved by year end 2011
Third Quarter Results (Continuing Operations)
Consolidated revenues for the third quarter ended September 30, 2011 rose 44% to $1.5 billion. The Company reported income from continuing operations for the third quarter of 2011 totaling $0.6 million or $0.01 per diluted share compared to income of $5.1 million or $0.13 per diluted share in the third quarter last year. As previously announced, third quarter 2011 results included a favorable income tax adjustment of $3.3 million or $0.06 per diluted share. Third quarter 2010 operating results included a $2.9 million or $0.07 per diluted share favorable income tax adjustment.
Excluding certain items discussed below, the Company’s income from continuing operations grew 287% to $21.5 million or $0.41 per diluted share from $5.6 million or $0.14 per diluted share in the third quarter last year.
During the third quarter of 2011, the Company incurred certain costs related to acquisitions that reduced pretax income by $6.5 million ($4.5 million net of income taxes or $0.09 per diluted share).
On July 29, 2011, the Centers for Medicare and Medicaid Services (“CMS”) issued final rules that, among other things, significantly reduced Medicare payments to nursing centers beginning October 1, 2011. As a result of these rules, the Company tested the recoverability of its assets and recorded a pretax asset impairment charge aggregating $26.7 million ($16.4 million net of income taxes or $0.31 per diluted share). This charge reflected the amount by which the carrying value of certain assets exceeded their estimated fair value.
Management Commentary
Paul J. Diaz, President and Chief Executive Officer of the Company, remarked, “We are very pleased to report an outstanding first full quarter of operations following the RehabCare acquisition. Our continued focus on the quality of our services and clinical outcomes drove solid volume growth and operating efficiencies that resulted in improved margins in each of our businesses and significant growth in our core earnings.”
“In light of continued reimbursement pressures, we are focused on the realization of cost synergies across the organization. The investments we have made in people and infrastructure in connection with the RehabCare acquisition are the foundation for achieving greater operating synergies and securing the benefits from our expanded size and scale. We are confident that we will reach annualized cost savings of $55 million by year end 2011 and $62 million by the end of the first quarter 2012 related to the RehabCare acquisition. In addition to the RehabCare synergies, we recently reorganized our nursing center division that will result in annualized cost savings of approximately $14 million by year end 2011.”
Mr. Diaz commented on the Company’s ongoing development activities, “We continue to advance our cluster market strategy through the selective development of our different businesses to meet the needs of patients, physicians, managed care plans and other healthcare partners in our key markets. Our recent acquisitions of home health operations in California, Arizona, Nevada, Utah and Massachusetts will further complement our existing operations and provide for future growth in these markets.”
Finally, Mr. Diaz discussed the Company’s improved liquidity, “Our operating cash flows continue to be a source of financial strength for Kindred as we continue to pursue our cluster market development strategy and reduce our leverage. Excluding transaction-related payments, our operating cash flows in the first nine months of 2011 increased 27% to $195 million from last year’s adjusted $153 million.”
Recent Regulatory Changes
As previously discussed, CMS recently issued final rules that became effective on October 1, 2011.
On July 29, 2011, CMS issued final rules which, among other things, will reduce Medicare payments to nursing centers by 11.1% and change the reimbursement for the provision of group rehabilitation therapy services to Medicare beneficiaries. Based upon its review of the final rules, the Company believes that its nursing center Medicare rates could decline by as much as 15% in 2012. The Company believes that these rules could reduce the Company’s annual revenues by approximately $95 million to $105 million in its nursing center business and approximately $10 million to $15 million in its rehabilitation therapy business. In addition, the Company believes that other technical changes required under the final rules may increase rehabilitation therapy costs by approximately $20 million to $25 million on an annual basis.
CMS also issued final rules that provided payment increases to inpatient rehabilitation facilities (“IRFs”) and long-term acute care (“LTAC”) hospitals. Among other things, CMS indicated that Medicare payment rates for IRFs are expected to increase at an annual rate of 2.2% and LTAC hospital payment rates are expected to rise 2.5%. Based upon its review of the final rules, the Company believes that the Medicare rate increase for the Company’s LTAC hospitals will likely approximate 0.7% in 2012.
Earnings Guidance – Continuing Operations
The Company also updated its earnings guidance for fiscal 2011 and 2012. The Company indicated that the earnings guidance for continuing operations reflects the anticipated impact of the previously discussed final rules recently issued by CMS related to payment rates for nursing centers, LTAC hospitals, IRFs and the Company’s rehabilitation therapy business, all of which became effective on October 1, 2011. The earnings guidance provided by the Company excludes the effect of (i) any transaction-related charges that have been recorded in prior periods or that may be incurred in the future, (ii) any other reimbursement changes, (iii) any material acquisitions or divestitures, (iv) any impairment charges that have been recorded in prior periods or that may be incurred in the future, or (v) any repurchases of common stock.
The Company expects consolidated revenues for 2011 to approximate $5.6 billion. Operating income, or earnings before interest, income taxes, depreciation, amortization and rent, is expected to range from $777 million to $780 million. Rent expense is expected to approximate $400 million, while depreciation and amortization should approximate $164 million. Net interest expense is expected to approximate $67 million. The Company expects to report income from continuing operations for 2011 between $91 million to $93 million or $1.87 to $1.92 per diluted share (based upon diluted shares of 47 million), an increase from its prior guidance of $1.80 to $1.90 per diluted share.
Excluding transaction-related charges and impairment charges, the Company has reported diluted earnings per common share of $1.56 in the first nine months of 2011.
The Company also provided its earnings outlook for the fourth quarter of 2011, estimating diluted earnings per share between $0.35 and $0.40 (based upon diluted shares of 52 million).
In addition, the Company reaffirmed its earnings guidance for fiscal 2012. The Company expects consolidated revenues for 2012 to approximate $6.4 billion. Operating income is expected to range from $911 million to $928 million. Rent expense is expected to approximate $445 million, while depreciation and amortization should approximate $200 million. Net interest expense is expected to approximate $110 million. The Company expects to report income from continuing operations for 2012 between $93 million to $104 million or $1.65 to $1.85 per diluted share (based upon diluted shares of 53 million).
The Company also indicated that it expects cash flows from operations in 2012 to range from $270 million to $290 million.
Routine capital expenditures in 2012 are expected to range from $135 million to $145 million, including approximately $16 million of expenditures to complete the information systems integration of RehabCare. The Company’s expected routine capital expenditures also include approximately $11 million to upgrade the clinical information systems in its hospital, nursing center and home health businesses.
In addition, the Company continues its ongoing development of its previously announced projects. At September 30, 2011, projects related to the replacement, expansion and upgrade of its LTAC hospitals in Dayton, Ohio and Charleston, South Carolina, as well as the development of two new IRFs in Texas and a new LTAC hospital in Seattle, will be completed at an aggregate additional cost of approximately $32 million through 2013 (these expenditures are not included in the routine capital spending estimates discussed above).
Mr. Diaz continued, “Our 2012 earnings guidance reflects our significant outperformance in the first nine months of this year, our continuing efforts to grow the Company organically as well as our enhanced view of the cost synergies and lower than expected financing costs associated with the RehabCare acquisition. Despite the worse than expected negative impact of the recently issued CMS rules for nursing centers and rehabilitation therapy, we will continue to seek new growth opportunities that are available to us as a result of our diverse lines of business and larger size and scale as we look forward to 2012 and beyond.”
Webcast of Conference Call
As previously announced, investors and the general public can access a live webcast of the third quarter 2011 conference call through a link on the Company’s website at http://investors.kindredhealthcare.com or at www.earnings.com. The conference call will be held November 3, 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 November 3 by dialing (719) 457-0820, access code: 2597040. The replay will be available through November 12.
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 Kindred’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 Kindred’s expectations as a result of a variety of factors, including, without limitation, those discussed below. Such forward-looking statements are based upon management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which Kindred is unable to predict or control, that may cause Kindred’s actual results 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 Kindred’s filings with the Securities and Exchange Commission.
In addition to the factors set forth above, other factors that may affect Kindred’s plans or results include, without limitation, (a) the impact of a final rule issued by CMS on July 29, 2011 providing for a 11.1% reduction in Medicare reimbursement to nursing centers as well as changes in payments for the provision of group rehabilitation therapy services, (b) other potential reimbursement changes resulting from the Budget Control Act of 2011, (c) Kindred’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, (d) the potential for diversion of management time and resources in seeking to integrate RehabCare’s operations, (e) the potential failure to retain key employees of RehabCare, (f) the impact of Kindred’s significantly increased levels of indebtedness as a result of the RehabCare acquisition on Kindred’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, (g) 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 Kindred’s businesses in some manner. Due to the substantial regulatory changes that will need to be implemented by CMS and others, and the numerous processes required to implement these reforms, Kindred 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 Kindred’s business, financial position, results of operations and liquidity, (h) 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 nursing centers, and the expiration of the Medicare Part B therapy cap exception process, (i) 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, (j) Kindred’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, (k) the impact of the Medicare, Medicaid and SCHIP Extension Act of 2007 (the “SCHIP Extension Act”), including the ability of Kindred’s hospitals to adjust to potential LTAC certification, medical necessity reviews and the moratorium on future hospital development, (l) 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, (m) failure of Kindred’s facilities to meet applicable licensure and certification requirements, (n) the further consolidation and cost containment efforts of managed care organizations and other third party payors, (o) Kindred’s ability to meet its rental and debt service obligations, (p) Kindred’s ability to operate pursuant to the terms of its debt obligations and its master lease agreements with Ventas, Inc. (NYSE:VTR), (q) 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 Kindred’s businesses, or which could negatively impact Kindred’s investment portfolio, (r) national and regional economic, financial, business and political conditions, including their effect on the availability and cost of labor, credit, materials and other services, (s) Kindred’s ability to control costs, particularly labor and employee benefit costs, (t) increased operating costs due to shortages in qualified nurses, therapists and other healthcare personnel, (u) Kindred’s ability to attract and retain key executives and other healthcare personnel, (v) 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, (w) Kindred’s ability to successfully reduce (by divestiture of operations or otherwise) its exposure to professional liability and other claims, (x) Kindred’s ability to successfully dispose of unprofitable facilities, (y) events or circumstances which could result in the impairment of an asset or other charges, (z) changes in generally accepted accounting principles (“GAAP”) or practices, and changes in tax accounting or tax laws (or authoritative interpretations relating to any of these matters), and (aa) Kindred’s ability to maintain an effective system of internal control over financial reporting. Many of these factors are beyond Kindred’s control. Kindred cautions investors that any forward-looking statements made by Kindred are not guarantees of future performance. Kindred disclaims any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments.
In addition to the results provided in accordance with GAAP, the Company has provided non-GAAP measurements which present operating results and cash flows from operations for the third quarter and nine months ended September 30, 2011 and 2010 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-150 private employer in the United States, is a healthcare services company based in Louisville, Kentucky with annual revenues of $6 billion and approximately 76,900 employees in 46 states. At September 30, 2011, Kindred through its subsidiaries provided healthcare services in over 2,250 locations, including 120 long-term acute care hospitals, five inpatient rehabilitation hospitals, 224 nursing and rehabilitation centers, 23 sub-acute units, 47 hospice and home care locations, 102 inpatient rehabilitation units (hospital-based) and a contract rehabilitation services business, RehabCare, which served approximately 1,740 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 | Nine months ended | ||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||||||
Revenues | $ | 1,514,062 | $ | 1,053,012 | $ | 3,999,075 | $ | 3,224,213 | |||||||||||
Income from continuing operations | $ | 907 | $ | 5,100 | $ | 16,643 | $ | 36,391 | |||||||||||
Discontinued operations, net of income taxes: | |||||||||||||||||||
Income (loss) from operations | 1,119 | (260 | ) | 1,527 | (327 | ) | |||||||||||||
Gain on divestiture of operations | - | 86 | - | 3 | |||||||||||||||
Income (loss) from discontinued operations | 1,119 | (174 | ) | 1,527 | (324 | ) | |||||||||||||
Net income | 2,026 | 4,926 | 18,170 | 36,067 | |||||||||||||||
(Earnings) loss attributable to noncontrolling interests | (241 | ) | - | 180 | - | ||||||||||||||
Income attributable to Kindred | $ | 1,785 | $ | 4,926 | $ | 18,350 | $ | 36,067 | |||||||||||
Amounts attributable to Kindred stockholders: | |||||||||||||||||||
Income from continuing operations | $ | 666 | $ | 5,100 | $ | 16,823 | $ | 36,391 | |||||||||||
Income (loss) from discontinued operations | 1,119 | (174 | ) | 1,527 | (324 | ) | |||||||||||||
Net income | $ | 1,785 | $ | 4,926 | $ | 18,350 | $ | 36,067 | |||||||||||
Earnings per common share: | |||||||||||||||||||
Basic: | |||||||||||||||||||
Income from continuing operations | $ | 0.01 | $ | 0.13 | $ | 0.37 | $ | 0.92 | |||||||||||
Discontinued operations: | |||||||||||||||||||
Income (loss) from operations | 0.02 | (0.01 | ) | 0.03 | (0.01 | ) | |||||||||||||
Gain on divestiture of operations | - | - | - | - | |||||||||||||||
Net income | $ | 0.03 | $ | 0.12 | $ | 0.40 | $ | 0.91 | |||||||||||
Diluted: | |||||||||||||||||||
Income from continuing operations | $ | 0.01 | $ | 0.13 | $ | 0.37 | $ | 0.92 | |||||||||||
Discontinued operations: | |||||||||||||||||||
Income (loss) from operations | 0.02 | (0.01 | ) | 0.03 | (0.01 | ) | |||||||||||||
Gain on divestiture of operations | - | - | - | - | |||||||||||||||
Net income | $ | 0.03 | $ | 0.12 | $ | 0.40 | $ | 0.91 | |||||||||||
Shares used in computing earnings per common share: |
|||||||||||||||||||
Basic | 51,329 | 38,778 | 44,577 | 38,720 | |||||||||||||||
Diluted | 51,406 | 38,838 | 44,934 | 38,855 |
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, | |||||||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||||
Revenues | $ | 1,514,062 | $ | 1,053,012 | $ | 3,999,075 | $ | 3,224,213 | ||||||||||||
Salaries, wages and benefits | 900,570 | 613,607 | 2,344,398 | 1,852,987 | ||||||||||||||||
Supplies | 107,514 | 83,753 | 294,254 | 255,094 | ||||||||||||||||
Rent | 105,511 | 89,295 | 292,641 | 266,595 | ||||||||||||||||
Other operating expenses | 332,017 | 234,968 | 878,518 | 707,859 | ||||||||||||||||
Other income | (2,815 | ) | (2,794 | ) | (8,480 | ) | (8,735 | ) | ||||||||||||
Depreciation and amortization | 46,947 | 29,167 | 117,367 | 90,140 | ||||||||||||||||
Interest expense | 25,790 | 1,642 | 54,675 | 4,247 | ||||||||||||||||
Investment income | (37 | ) | (403 | ) | (789 | ) | (903 | ) | ||||||||||||
1,515,497 | 1,049,235 | 3,972,584 | 3,167,284 | |||||||||||||||||
Income (loss) from continuing operations before income taxes | (1,435 | ) | 3,777 | 26,491 | 56,929 | |||||||||||||||
Provision (benefit) for income taxes | (2,342 | ) | (1,323 | ) | 9,848 | 20,538 | ||||||||||||||
Income from continuing operations | 907 | 5,100 | 16,643 | 36,391 | ||||||||||||||||
Discontinued operations, net of income taxes: | ||||||||||||||||||||
Income (loss) from operations | 1,119 | (260 | ) | 1,527 | (327 | ) | ||||||||||||||
Gain on divestiture of operations | - | 86 | - | 3 | ||||||||||||||||
Income (loss) from discontinued operations | 1,119 | (174 | ) | 1,527 | (324 | ) | ||||||||||||||
Net income | 2,026 | 4,926 | 18,170 | 36,067 | ||||||||||||||||
(Earnings) loss attributable to noncontrolling interests | (241 | ) | - | 180 | - | |||||||||||||||
Income attributable to Kindred | $ | 1,785 | $ | 4,926 | $ | 18,350 | $ | 36,067 | ||||||||||||
Amounts attributable to Kindred stockholders: | ||||||||||||||||||||
Income from continuing operations | $ | 666 | $ | 5,100 | $ | 16,823 | $ | 36,391 | ||||||||||||
Income (loss) from discontinued operations | 1,119 | (174 | ) | 1,527 | (324 | ) | ||||||||||||||
Net income | $ | 1,785 | $ | 4,926 | $ | 18,350 | $ | 36,067 | ||||||||||||
Earnings per common share: | ||||||||||||||||||||
Basic: | ||||||||||||||||||||
Income from continuing operations | $ | 0.01 | $ | 0.13 | $ | 0.37 | $ | 0.92 | ||||||||||||
Discontinued operations: | ||||||||||||||||||||
Income (loss) from operations | 0.02 | (0.01 | ) | 0.03 | (0.01 | ) | ||||||||||||||
Gain on divestiture of operations | - | - | - | - | ||||||||||||||||
Net income | $ | 0.03 | $ | 0.12 | $ | 0.40 | $ | 0.91 | ||||||||||||
Diluted: | ||||||||||||||||||||
Income from continuing operations | $ | 0.01 | $ | 0.13 | $ | 0.37 | $ | 0.92 | ||||||||||||
Discontinued operations: | ||||||||||||||||||||
Income (loss) from operations | 0.02 | (0.01 | ) | 0.03 | (0.01 | ) | ||||||||||||||
Gain on divestiture of operations | - | - | - | - | ||||||||||||||||
Net income | $ | 0.03 | $ | 0.12 | $ | 0.40 | $ | 0.91 | ||||||||||||
Shares used in computing earnings per common share: |
||||||||||||||||||||
Basic | 51,329 | 38,778 | 44,577 | 38,720 | ||||||||||||||||
Diluted | 51,406 | 38,838 | 44,934 | 38,855 |
KINDRED HEALTHCARE, INC. | ||||||||||||
Condensed Consolidated Balance Sheet | ||||||||||||
(Unaudited) | ||||||||||||
(In thousands, except per share amounts) | ||||||||||||
September 30, | December 31, | |||||||||||
2011 | 2010 | |||||||||||
ASSETS | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 34,095 | $ | 17,168 | ||||||||
Cash - restricted | 5,402 | 5,494 | ||||||||||
Insurance subsidiary investments | 64,846 | 76,753 | ||||||||||
Accounts receivable less allowance for loss | 972,340 | 631,877 | ||||||||||
Inventories | 30,821 | 24,327 | ||||||||||
Deferred tax assets | 28,799 | 13,439 | ||||||||||
Income taxes | 18,039 | 42,118 | ||||||||||
Other | 30,796 | 24,862 | ||||||||||
1,185,138 | 836,038 | |||||||||||
Property and equipment | 1,926,726 | 1,754,170 | ||||||||||
Accumulated depreciation | (875,885 | ) | (857,623 | ) | ||||||||
1,050,841 | 896,547 | |||||||||||
Goodwill | 1,123,699 | 242,420 | ||||||||||
Intangible assets less accumulated amortization | 506,066 | 92,883 | ||||||||||
Assets held for sale | 7,094 | 7,167 | ||||||||||
Insurance subsidiary investments | 104,298 | 101,210 | ||||||||||
Deferred tax assets | - | 88,816 | ||||||||||
Other | 198,441 | 72,334 | ||||||||||
Total assets | $ | 4,175,577 | $ | 2,337,415 | ||||||||
LIABILITIES AND EQUITY | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 218,523 | $ | 174,495 | ||||||||
Salaries, wages and other compensation | 392,297 | 291,116 | ||||||||||
Due to third party payors | 41,436 | 27,115 | ||||||||||
Professional liability risks | 41,728 | 41,555 | ||||||||||
Other accrued liabilities | 140,840 | 87,012 | ||||||||||
Long-term debt due within one year | 10,539 | 91 | ||||||||||
845,363 | 621,384 | |||||||||||
Long-term debt | 1,489,359 | 365,556 | ||||||||||
Professional liability risks | 224,903 | 207,669 | ||||||||||
Deferred tax liabilities | 26,678 | - | ||||||||||
Deferred credits and other liabilities | 189,814 | 111,047 | ||||||||||
Noncontrolling interests-redeemable | 9,626 | - | ||||||||||
Equity: | ||||||||||||
Stockholders' equity: | ||||||||||||
Common stock, $0.25 par value; authorized 175,000 shares; issued 52,112 shares - September 30, 2011 and 39,495 shares - December 31, 2010 |
13,028 | 9,874 | ||||||||||
Capital in excess of par value | 1,135,032 | 828,593 | ||||||||||
Accumulated other comprehensive income (loss) | (1,000 | ) | 135 | |||||||||
Retained earnings | 211,003 | 193,157 | ||||||||||
1,358,063 | 1,031,759 | |||||||||||
Noncontrolling interests-nonredeemable | 31,771 | - | ||||||||||
Total equity | 1,389,834 | 1,031,759 | ||||||||||
Total liabilities and equity | $ | 4,175,577 | $ | 2,337,415 |
KINDRED HEALTHCARE, INC. | |||||||||||||||||||
Condensed Consolidated Statement of Cash Flows | |||||||||||||||||||
(Unaudited) | |||||||||||||||||||
(In thousands) | |||||||||||||||||||
Three months ended | Nine months ended | ||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||||||
Cash flows from operating activities: | |||||||||||||||||||
Net income | $ | 2,026 | $ | 4,926 | $ | 18,170 | $ | 36,067 | |||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: |
|||||||||||||||||||
Depreciation and amortization | 46,947 | 29,167 | 117,367 | 90,140 | |||||||||||||||
Amortization of stock-based compensation costs | 3,505 | 2,593 | 9,611 | 8,114 | |||||||||||||||
Payment of lender fees related to debt issuance | - | - | (46,232 | ) | - | ||||||||||||||
Provision for doubtful accounts | 7,793 | 6,110 | 22,049 | 18,387 | |||||||||||||||
Deferred income taxes | (2,286 | ) | (3,017 | ) | (4,975 | ) | (13,744 | ) | |||||||||||
Impairment charges | 26,712 | - | 26,712 | - | |||||||||||||||
Gain on divestiture of discontinued operations | - | (86 | ) | - | (3 | ) | |||||||||||||
Other | (922 | ) | (2,792 | ) | 1,465 | (1,866 | ) | ||||||||||||
Change in operating assets and liabilities: | |||||||||||||||||||
Accounts receivable | (27,497 | ) | 8,146 | (108,072 | ) | (21,379 | ) | ||||||||||||
Inventories and other assets | 6,304 | (1,088 | ) | 3,649 | (7,574 | ) | |||||||||||||
Accounts payable | (831 | ) | (7,515 | ) | 386 | (15,693 | ) | ||||||||||||
Income taxes | (6,881 | ) | 3,981 | 20,792 | 25,734 | ||||||||||||||
Due to third party payors | 1,143 | 12,123 | 4,698 | 10,099 | |||||||||||||||
Other accrued liabilities | 10,505 | 15,361 | 52,186 | 22,573 | |||||||||||||||
Net cash provided by operating activities | 66,518 | 67,909 | 117,806 | 150,855 | |||||||||||||||
Cash flows from investing activities: | |||||||||||||||||||
Routine capital expenditures | (36,595 | ) | (28,623 | ) | (95,263 | ) | (69,108 | ) | |||||||||||
Development capital expenditures | (44,152 | ) | (20,364 | ) | (69,570 | ) | (40,219 | ) | |||||||||||
Acquisitions, net of cash acquired | (50,928 | ) | (38,379 | ) | (710,907 | ) | (87,869 | ) | |||||||||||
Sale of assets | - | - | 1,714 | - | |||||||||||||||
Purchase of insurance subsidiary investments | (8,867 | ) | (10,566 | ) | (25,904 | ) | (34,684 | ) | |||||||||||
Sale of insurance subsidiary investments | 10,398 | 11,138 | 37,587 | 72,971 | |||||||||||||||
Net change in insurance subsidiary cash and cash equivalents |
(826 | ) | (3,111 | ) | (4,870 | ) | (10,612 | ) | |||||||||||
Change in other investments | - | - | 1,000 | 2 | |||||||||||||||
Other | (663 | ) | 698 | (692 | ) | 1,279 | |||||||||||||
Net cash used in investing activities | (131,633 | ) | (89,207 | ) | (866,905 | ) | (168,240 | ) | |||||||||||
Cash flows from financing activities: | |||||||||||||||||||
Proceeds from borrowings under revolving credit | 533,200 | 457,900 | 1,633,300 | 1,109,900 | |||||||||||||||
Repayment of borrowings under revolving credit | (474,700 | ) | (432,800 | ) | (1,749,800 | ) | (1,092,400 | ) | |||||||||||
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 | (2,545 | ) | (22 | ) | (348,233 | ) | (64 | ) | |||||||||||
Payment of deferred financing costs | (1,855 | ) | (1,361 | ) | (8,715 | ) | (1,414 | ) | |||||||||||
Issuance of common stock | - | - | 3,019 | 35 | |||||||||||||||
Purchase of noncontrolling interests in subsidiaries | (7,292 | ) | - | (7,292 | ) | - | |||||||||||||
Other | 3 | - | 747 | 346 | |||||||||||||||
Net cash provided by financing activities | 46,811 | 23,717 | 766,026 | 16,403 | |||||||||||||||
Change in cash and cash equivalents | (18,304 | ) | 2,419 | 16,927 | (982 | ) | |||||||||||||
Cash and cash equivalents at beginning of period | 52,399 | 12,902 | 17,168 | 16,303 | |||||||||||||||
Cash and cash equivalents at end of period | $ | 34,095 | $ | 15,321 | $ | 34,095 | $ | 15,321 |
KINDRED HEALTHCARE, INC. | |||||||||||||||||||||||||||||||||
Condensed Consolidated Statement of Operations | |||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||
(In thousands, except per share amounts) | |||||||||||||||||||||||||||||||||
2010 Quarters | 2011 Quarters | ||||||||||||||||||||||||||||||||
First | Second | Third | Fourth | First | Second | Third | |||||||||||||||||||||||||||
Revenues | $ | 1,089,837 | $ | 1,081,364 | $ | 1,053,012 | $ | 1,135,484 | $ | 1,192,421 | $ | 1,292,592 | $ | 1,514,062 | |||||||||||||||||||
Salaries, wages and benefits | 627,175 | 612,205 | 613,607 | 652,703 | 678,695 | 765,133 | 900,570 | ||||||||||||||||||||||||||
Supplies | 85,886 | 85,455 | 83,753 | 87,103 | 90,022 | 96,718 | 107,514 | ||||||||||||||||||||||||||
Rent | 88,319 | 88,981 | 89,295 | 90,777 | 91,453 | 95,677 | 105,511 | ||||||||||||||||||||||||||
Other operating expenses | 234,204 | 238,687 | 234,968 | 240,750 | 259,369 | 287,132 | 332,017 | ||||||||||||||||||||||||||
Other income | (3,084 | ) | (2,857 | ) | (2,794 | ) | (2,687 | ) | (2,785 | ) | (2,880 | ) | (2,815 | ) | |||||||||||||||||||
Depreciation and amortization | 31,121 | 29,852 | 29,167 | 31,412 | 32,549 | 37,871 | 46,947 | ||||||||||||||||||||||||||
Interest expense | 1,307 | 1,298 | 1,642 | 2,843 | 5,728 | 23,157 | 25,790 | ||||||||||||||||||||||||||
Investment (income) loss | (877 | ) | 377 | (403 | ) | (342 | ) | (495 | ) | (257 | ) | (37 | ) | ||||||||||||||||||||
1,064,051 | 1,053,998 | 1,049,235 | 1,102,559 | 1,154,536 | 1,302,551 | 1,515,497 | |||||||||||||||||||||||||||
Income (loss) from continuing operations | |||||||||||||||||||||||||||||||||
before income taxes | 25,786 | 27,366 | 3,777 | 32,925 | 37,885 | (9,959 | ) | (1,435 | ) | ||||||||||||||||||||||||
Provision (benefit) for income taxes | 10,631 | 11,230 | (1,323 | ) | 13,170 | 15,609 | (3,419 | ) | (2,342 | ) | |||||||||||||||||||||||
Income (loss) from continuing operations | 15,155 | 16,136 | 5,100 | 19,755 | 22,276 | (6,540 | ) | 907 | |||||||||||||||||||||||||
Discontinued operations, net of income taxes: | |||||||||||||||||||||||||||||||||
Income (loss) from operations | (154 | ) | 87 | (260 | ) | 1,125 | (179 | ) | 587 | 1,119 | |||||||||||||||||||||||
Gain (loss) on divestiture of operations | (137 | ) | 54 | 86 | (456 | ) | - | - | - | ||||||||||||||||||||||||
Income (loss) from discontinued operations | (291 | ) | 141 | (174 | ) | 669 | (179 | ) | 587 | 1,119 | |||||||||||||||||||||||
Net income (loss) | 14,864 | 16,277 | 4,926 | 20,424 | 22,097 | (5,953 | ) | 2,026 | |||||||||||||||||||||||||
(Earnings ) loss attributable to noncontrolling interests | - | - | - | - | - | 421 | (241 | ) | |||||||||||||||||||||||||
Income (loss) attributable to Kindred | $ | 14,864 | $ | 16,277 | $ | 4,926 | $ | 20,424 | $ | 22,097 | $ | (5,532 | ) | $ | 1,785 | ||||||||||||||||||
Amounts attributable to Kindred stockholders: | |||||||||||||||||||||||||||||||||
Income (loss) from continuing operations | $ | 15,155 | $ | 16,136 | $ | 5,100 | $ | 19,755 | $ | 22,276 | $ | (6,119 | ) | $ | 666 | ||||||||||||||||||
Income (loss) from discontinued operations | (291 | ) | 141 | (174 | ) | 669 | (179 | ) | 587 | 1,119 | |||||||||||||||||||||||
Net income (loss) | $ | 14,864 | $ | 16,277 | $ | 4,926 | $ | 20,424 | $ | 22,097 | $ | (5,532 | ) | $ | 1,785 | ||||||||||||||||||
Earnings (loss) per common share: | |||||||||||||||||||||||||||||||||
Basic: | |||||||||||||||||||||||||||||||||
Income (loss) from continuing operations | $ | 0.38 | $ | 0.41 | $ | 0.13 | $ | 0.50 | $ | 0.56 | $ | (0.14 | ) | $ | 0.01 | ||||||||||||||||||
Discontinued operations: | |||||||||||||||||||||||||||||||||
Income (loss) from operations | - | - | (0.01 | ) | 0.03 | - | 0.01 | 0.02 | |||||||||||||||||||||||||
Gain (loss) on divestiture of operations | - | - | - | (0.01 | ) | - | - | - | |||||||||||||||||||||||||
Net income (loss) | $ | 0.38 | $ | 0.41 | $ | 0.12 | $ | 0.52 | $ | 0.56 | $ | (0.13 | ) | $ | 0.03 | ||||||||||||||||||
Diluted: | |||||||||||||||||||||||||||||||||
Income (loss) from continuing operations | $ | 0.38 | $ | 0.41 | $ | 0.13 | $ | 0.50 | $ | 0.55 | $ | (0.14 | ) | $ | 0.01 | ||||||||||||||||||
Discontinued operations: | |||||||||||||||||||||||||||||||||
Income (loss) from operations | - | - | (0.01 | ) | 0.03 | - | 0.01 | 0.02 | |||||||||||||||||||||||||
Gain (loss) on divestiture of operations | - | - | - | (0.01 | ) | - | - | - | |||||||||||||||||||||||||
Net income (loss) | $ | 0.38 | $ | 0.41 | $ | 0.12 | $ | 0.52 | $ | 0.55 | $ | (0.13 | ) | $ | 0.03 | ||||||||||||||||||
Shares used in computing earnings (loss) per common share: |
|||||||||||||||||||||||||||||||||
Basic | 38,626 | 38,756 | 38,778 | 38,790 | 39,035 | 43,231 | 51,329 | ||||||||||||||||||||||||||
Diluted | 38,859 | 38,914 | 38,838 | 39,089 | 39,543 | 43,231 | 51,406 |
KINDRED HEALTHCARE, INC. | ||||||||||||||||||||||||||||||||||||
Condensed Business Segment Data | ||||||||||||||||||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||||||||||||||
(In thousands) | ||||||||||||||||||||||||||||||||||||
2010 Quarters | 2011 Quarters | |||||||||||||||||||||||||||||||||||
First | Second | Third | Fourth | First | Second | Third | ||||||||||||||||||||||||||||||
Revenues: | ||||||||||||||||||||||||||||||||||||
Hospital division | $ | 507,062 | $ | 493,401 | $ | 465,198 | $ | 507,660 | $ | 558,974 | $ | 593,425 | $ | 684,781 | ||||||||||||||||||||||
Nursing center division | 539,321 | 542,215 | 539,914 | 566,435 | 567,472 | 568,199 | 571,226 | |||||||||||||||||||||||||||||
Rehabilitation division: | ||||||||||||||||||||||||||||||||||||
Skilled nursing rehabilitation services | 98,997 | 101,148 | 103,807 | 117,325 | 122,656 | 172,074 | 267,993 | |||||||||||||||||||||||||||||
Hospital rehabilitation services | 21,147 | 20,913 | 20,436 | 21,182 | 22,490 | 38,291 | 69,811 | |||||||||||||||||||||||||||||
120,144 | 122,061 | 124,243 | 138,507 | 145,146 | 210,365 | 337,804 | ||||||||||||||||||||||||||||||
1,166,527 | 1,157,677 | 1,129,355 | 1,212,602 | 1,271,592 | 1,371,989 | 1,593,811 | ||||||||||||||||||||||||||||||
Eliminations: | ||||||||||||||||||||||||||||||||||||
Skilled nursing rehabilitation services | (56,464 | ) | (56,279 | ) | (56,841 | ) | (57,084 | ) | (57,946 | ) | (58,691 | ) | (59,221 | ) | ||||||||||||||||||||||
Hospital rehabilitation services | (20,226 | ) | (20,034 | ) | (19,502 | ) | (20,034 | ) | (21,225 | ) | (20,706 | ) | (20,528 | ) | ||||||||||||||||||||||
(76,690 | ) | (76,313 | ) | (76,343 | ) | (77,118 | ) | (79,171 | ) | (79,397 | ) | (79,749 | ) | |||||||||||||||||||||||
$ | 1,089,837 | $ | 1,081,364 | $ | 1,053,012 | $ | 1,135,484 | $ | 1,192,421 | $ | 1,292,592 | $ | 1,514,062 | |||||||||||||||||||||||
Income (loss) from continuing operations: | ||||||||||||||||||||||||||||||||||||
Operating income (loss): | ||||||||||||||||||||||||||||||||||||
Hospital division | $ | 95,440 | $ | 91,790 | $ | 75,784 | $ | 97,343 | $ | 108,385 | $ | 108,465 | $ | 122,599 | (a) | |||||||||||||||||||||
Nursing center division | 70,614 | 76,529 | 69,363 | 86,912 | 87,350 | 93,532 | 65,982 | (a) | ||||||||||||||||||||||||||||
Rehabilitation division: | ||||||||||||||||||||||||||||||||||||
Skilled nursing rehabilitation services | 9,537 | 9,307 | 9,486 | 5,307 | 9,149 | 15,531 | 28,682 | |||||||||||||||||||||||||||||
Hospital rehabilitation services | 5,146 | 4,793 | 4,728 | 4,302 | 5,332 | 8,033 | 15,606 | |||||||||||||||||||||||||||||
14,683 | 14,100 | 14,214 | 9,609 | 14,481 | 23,564 | 44,288 | ||||||||||||||||||||||||||||||
Corporate: | ||||||||||||||||||||||||||||||||||||
Overhead | (33,831 | ) | (32,799 | ) | (34,329 | ) | (33,002 | ) | (38,315 | ) | (43,801 | ) | (48,806 | ) | ||||||||||||||||||||||
Insurance subsidiary | (480 | ) | (791 | ) | (783 | ) | (1,099 | ) | (602 | ) | (420 | ) | (750 | ) | ||||||||||||||||||||||
(34,311 | ) | (33,590 | ) | (35,112 | ) | (34,101 | ) | (38,917 | ) | (44,221 | ) | (49,556 | ) | |||||||||||||||||||||||
Transaction costs (b) | (770 | ) | (955 | ) | (771 | ) | (2,148 | ) | (4,179 | ) | (34,851 | ) | (6,537 | ) | ||||||||||||||||||||||
Operating income | 145,656 | 147,874 | 123,478 | 157,615 | 167,120 | 146,489 | 176,776 | |||||||||||||||||||||||||||||
Rent | (88,319 | ) | (88,981 | ) | (89,295 | ) | (90,777 | ) | (91,453 | ) | (95,677 | ) | (105,511 | ) | ||||||||||||||||||||||
Depreciation and amortization | (31,121 | ) | (29,852 | ) | (29,167 | ) | (31,412 | ) | (32,549 | ) | (37,871 | ) | (46,947 | ) | ||||||||||||||||||||||
Interest, net | (430 | ) | (1,675 | ) | (1,239 | ) | (2,501 | ) | (5,233 | ) | (22,900 | ) | (25,753 | ) | ||||||||||||||||||||||
Income (loss) from continuing operations before income taxes |
25,786 | 27,366 | 3,777 | 32,925 | 37,885 | (9,959 | ) | (1,435 | ) | |||||||||||||||||||||||||||
Provision (benefit) for income taxes | 10,631 | 11,230 | (1,323 | ) | 13,170 | 15,609 | (3,419 | ) | (2,342 | ) | ||||||||||||||||||||||||||
$ | 15,155 | $ | 16,136 | $ | 5,100 | $ | 19,755 | $ | 22,276 | $ | (6,540 | ) | $ | 907 | ||||||||||||||||||||||
(a) |
Includes impairment charges of $3.1 million for the hospital division and $23.6 million for the nursing center division. |
|||||||||||||||||||||||||||||||||||
(b) |
Transaction-related charges for the 2010 periods have been reclassified to conform with the current period presentation. |
KINDRED HEALTHCARE, INC. | |||||||||||||||||||||||||||||||||||||||||
Condensed Consolidating Statement of Operations | |||||||||||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||||||||||||
Three months ended September 30, 2011 | |||||||||||||||||||||||||||||||||||||||||
Nursing | Rehabilitation division | ||||||||||||||||||||||||||||||||||||||||
Hospital | center | Skilled nursing | Hospital | Transaction | |||||||||||||||||||||||||||||||||||||
division (a) | division (a) | services | services | Total | Corporate | costs | Eliminations | Consolidated | |||||||||||||||||||||||||||||||||
Revenues | $ | 684,781 | $ | 571,226 | $ | 267,993 | $ | 69,811 | $ | 337,804 | $ | - | $ | - | $ | (79,749 | ) | $ | 1,514,062 | ||||||||||||||||||||||
Salaries, wages and benefits | 316,507 | 272,505 | 227,577 | 49,262 | 276,839 | 33,482 | 1,256 | (19 | ) | 900,570 | |||||||||||||||||||||||||||||||
Supplies | 77,045 | 28,650 | 1,506 | 62 | 1,568 | 251 | - | - | 107,514 | ||||||||||||||||||||||||||||||||
Rent | 52,737 | 49,862 | 2,169 | 95 | 2,264 | 648 | - | - | 105,511 | ||||||||||||||||||||||||||||||||
Other operating expenses | 168,630 | 204,089 | 10,228 | 4,881 | 15,109 | 18,638 | 5,281 | (79,730 | ) | 332,017 | |||||||||||||||||||||||||||||||
Other income | - | - | - | - | - | (2,815 | ) | - | - | (2,815 | ) | ||||||||||||||||||||||||||||||
Depreciation and amortization | 21,612 | 12,655 | 3,023 | 2,372 | 5,395 | 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 | 244,502 | 56,671 | 301,173 | 83,032 | 6,537 | (79,749 | ) | 1,515,497 | ||||||||||||||||||||||||||||||||
Income (loss) from continuing operations before income taxes |
$ | 48,045 | $ | 3,458 | $ | 23,491 | $ | 13,140 | $ | 36,631 | $ | (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 | $ | 296 | $ | 81 | $ | 377 | $ | 12,727 | $ | - | $ | - | $ | 36,595 | |||||||||||||||||||||||
Development | 39,964 | 4,113 | 75 | - | 75 | - | - | - | 44,152 | ||||||||||||||||||||||||||||||||
$ | 52,883 | $ | 14,685 | $ | 371 | $ | 81 | $ | 452 | $ | 12,727 | $ | - | $ | - | $ | 80,747 | ||||||||||||||||||||||||
Three months ended September 30, 2010 | |||||||||||||||||||||||||||||||||||||||||
Nursing | Rehabilitation division | ||||||||||||||||||||||||||||||||||||||||
Hospital | center | Skilled nursing | Hospital | Transaction | |||||||||||||||||||||||||||||||||||||
division | division | services | services | Total | Corporate | costs | Eliminations | Consolidated | |||||||||||||||||||||||||||||||||
Revenues | $ | 465,198 | $ | 539,914 | $ | 103,807 | $ | 20,436 | $ | 124,243 | $ | - | $ | - | $ | (76,343 | ) | $ | 1,053,012 | ||||||||||||||||||||||
Salaries, wages and benefits | 215,590 | 267,665 | 89,923 | 15,040 | 104,963 | 25,403 | - | (14 | ) | 613,607 | |||||||||||||||||||||||||||||||
Supplies | 55,189 | 27,559 | 836 | 24 | 860 | 145 | - | - | 83,753 | ||||||||||||||||||||||||||||||||
Rent | 38,122 | 49,627 | 1,474 | 28 | 1,502 | 44 | - | - | 89,295 | ||||||||||||||||||||||||||||||||
Other operating expenses | 118,635 | 175,327 | 3,562 | 644 | 4,206 | 12,358 | 771 | (76,329 | ) | 234,968 | |||||||||||||||||||||||||||||||
Other income | - | - | - | - | - | (2,794 | ) | - | - | (2,794 | ) | ||||||||||||||||||||||||||||||
Depreciation and amortization | 12,655 | 10,527 | 591 | 77 | 668 | 5,317 | - | - | 29,167 | ||||||||||||||||||||||||||||||||
Interest expense | - | 36 | - | - | - | 1,606 | - | - | 1,642 | ||||||||||||||||||||||||||||||||
Investment income | - | (21 | ) | - | - | - | (382 | ) | - | - | (403 | ) | |||||||||||||||||||||||||||||
440,191 | 530,720 | 96,386 | 15,813 | 112,199 | 41,697 | 771 | (76,343 | ) | 1,049,235 | ||||||||||||||||||||||||||||||||
Income from continuing operations before income taxes |
$ | 25,007 | $ | 9,194 | $ | 7,421 | $ | 4,623 | $ | 12,044 | $ | (41,697 | ) | $ | (771 | ) | $ | - | 3,777 | ||||||||||||||||||||||
Income tax benefit | (1,323 | ) | |||||||||||||||||||||||||||||||||||||||
Income from continuing operations | $ | 5,100 | |||||||||||||||||||||||||||||||||||||||
Capital expenditures, excluding acquisitions (including discontinued operations): |
|||||||||||||||||||||||||||||||||||||||||
Routine | $ | 9,113 | $ | 11,548 | $ | 328 | $ | 23 | $ | 351 | $ | 7,611 | $ | - | $ | - | $ | 28,623 | |||||||||||||||||||||||
Development | 12,900 | 7,464 | - | - | - | - | - | - | 20,364 | ||||||||||||||||||||||||||||||||
$ | 22,013 | $ | 19,012 | $ | 328 | $ | 23 | $ | 351 | $ | 7,611 | $ | - | $ | - | $ | 48,987 | ||||||||||||||||||||||||
(a) |
Includes $26.7 million in aggregate of impairment charges in other operating expenses (hospital division - $ 3.1 million and nursing center division - $23.6 million). |
KINDRED HEALTHCARE, INC. | |||||||||||||||||||||||||||||||||||||||||
Condensed Consolidating Statement of Operations (Continued) | |||||||||||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||||||||||
(In thousands) | |||||||||||||||||||||||||||||||||||||||||
Nine months ended September 30, 2011 | |||||||||||||||||||||||||||||||||||||||||
Nursing | Rehabilitation division | ||||||||||||||||||||||||||||||||||||||||
Hospital | center | Skilled nursing | Hospital | Transaction | |||||||||||||||||||||||||||||||||||||
division | division | services | services | Total | Corporate | costs | Eliminations | Consolidated | |||||||||||||||||||||||||||||||||
Revenues | $ | 1,837,180 | $ | 1,706,897 | $ | 562,723 | $ | 130,592 | $ | 693,315 | $ | - | $ | - | $ | (238,317 | ) | $ | 3,999,075 | ||||||||||||||||||||||
Salaries, wages and benefits | 842,829 | 816,022 | 483,996 | 93,996 | 577,992 | 91,502 | 16,122 | (69 | ) | 2,344,398 | |||||||||||||||||||||||||||||||
Supplies | 206,504 | 83,645 | 3,396 | 122 | 3,518 | 587 | - | - | 294,254 | ||||||||||||||||||||||||||||||||
Rent | 137,033 | 148,808 | 5,658 | 156 | 5,814 | 986 | - | - | 292,641 | ||||||||||||||||||||||||||||||||
Other operating expenses | 448,398 | 560,366 | 21,969 | 7,503 | 29,472 | 49,085 | 29,445 | (238,248 | ) | 878,518 | |||||||||||||||||||||||||||||||
Other income | - | - | - | - | - | (8,480 | ) | - | - | (8,480 | ) | ||||||||||||||||||||||||||||||
Depreciation and amortization | 52,462 | 37,486 | 5,121 | 3,288 | 8,409 | 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 | 520,137 | 105,064 | 625,201 | 192,492 | 59,369 | (238,317 | ) | 3,972,584 | ||||||||||||||||||||||||||||||||
Income from continuing operations before income taxes |
$ | 149,686 | $ | 60,552 | $ | 42,586 | $ | 25,528 | $ | 68,114 |
$ |
(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 | $ | 768 | $ | 178 | $ | 946 | $ | 30,718 | $ | - | $ | - | $ | 95,263 | |||||||||||||||||||||||
Development | 54,164 | 15,140 | 266 | - | 266 | - | - | - | 69,570 | ||||||||||||||||||||||||||||||||
$ | 91,036 | $ | 41,867 | $ | 1,034 | $ | 178 | $ | 1,212 | $ | 30,718 | $ | - | $ | - | $ | 164,833 | ||||||||||||||||||||||||
Nine months ended September 30, 2010 | |||||||||||||||||||||||||||||||||||||||||
Nursing | Rehabilitation division | ||||||||||||||||||||||||||||||||||||||||
Hospital | center | Skilled nursing | Hospital | Transaction | |||||||||||||||||||||||||||||||||||||
division (a) | division (a) | services | services | Total | Corporate (a) | costs | Eliminations | Consolidated | |||||||||||||||||||||||||||||||||
Revenues | $ | 1,465,661 | $ | 1,621,450 | $ | 303,952 | $ | 62,496 | $ | 366,448 | $ | - | $ | - | $ | (229,346 | ) | $ | 3,224,213 | ||||||||||||||||||||||
Salaries, wages and benefits | 664,317 | 805,560 | 261,497 | 45,960 | 307,457 | 75,667 | - | (14 | ) | 1,852,987 | |||||||||||||||||||||||||||||||
Supplies | 170,273 | 82,135 | 2,206 | 67 | 2,273 | 413 | - | - | 255,094 | ||||||||||||||||||||||||||||||||
Rent | 113,580 | 148,458 | 4,368 | 79 | 4,447 | 110 | - | - | 266,595 | ||||||||||||||||||||||||||||||||
Other operating expenses | 368,057 | 517,249 | 11,919 | 1,802 | 13,721 | 35,668 | 2,496 | (229,332 | ) | 707,859 | |||||||||||||||||||||||||||||||
Other income | - | - | - | - | - | (8,735 | ) | - | - | (8,735 | ) | ||||||||||||||||||||||||||||||
Depreciation and amortization | 38,218 | 33,825 | 1,672 | 207 | 1,879 | 16,218 | - | - | 90,140 | ||||||||||||||||||||||||||||||||
Interest expense | 3 | 96 | - | - | - | 4,148 | - | - | 4,247 | ||||||||||||||||||||||||||||||||
Investment income | (1 | ) | (56 | ) | (3 | ) | (1 | ) | (4 | ) | (842 | ) | - | - | (903 | ) | |||||||||||||||||||||||||
1,354,447 | 1,587,267 | 281,659 | 48,114 | 329,773 |
122,647 |
2,496 | (229,346 | ) | 3,167,284 | ||||||||||||||||||||||||||||||||
Income from continuing operations before income taxes |
$ | 111,214 | $ | 34,183 | $ | 22,293 | $ | 14,382 | $ | 36,675 |
$ |
(122,647 |
) |
$ | (2,496 | ) | $ | - | 56,929 | ||||||||||||||||||||||
Provision for income taxes | 20,538 | ||||||||||||||||||||||||||||||||||||||||
Income from continuing operations | $ | 36,391 | |||||||||||||||||||||||||||||||||||||||
Capital expenditures, excluding acquisitions (including discontinued operations): |
|||||||||||||||||||||||||||||||||||||||||
Routine | $ | 23,132 | $ | 24,732 | $ | 814 | $ | 85 | $ | 899 | $ | 20,345 | $ | - | $ | - | $ | 69,108 | |||||||||||||||||||||||
Development | 28,883 | 11,336 | - | - | - | - | - | - | 40,219 | ||||||||||||||||||||||||||||||||
$ | 52,015 | $ | 36,068 | $ | 814 | $ | 85 | $ | 899 | $ | 20,345 | $ | - | $ | - | $ | 109,327 | ||||||||||||||||||||||||
(a) |
Includes $2.9 million in aggregate of severance and retirement costs in salaries, wages and benefits (hospital division - $ 1.1 million, nursing center division - $0.5 million and corporate - $1.3 million). |
KINDRED HEALTHCARE, INC. | ||||||||||||||||||
Condensed Business Segment Data | ||||||||||||||||||
(Unaudited) | ||||||||||||||||||
2010 Quarters | 2011 Quarters | |||||||||||||||||
First | Second | Third | Fourth | First | Second | Third | ||||||||||||
Hospital data: | ||||||||||||||||||
End of period data: | ||||||||||||||||||
Number of hospitals: | ||||||||||||||||||
Long-term acute care | 83 | 83 | 83 | 89 | 89 | 120 | 120 | |||||||||||
Inpatient rehabilitation | - | - | - | - | - | 5 | 5 | |||||||||||
83 | 83 | 83 | 89 | 89 | 125 | 125 | ||||||||||||
Number of licensed beds: | ||||||||||||||||||
Long-term acute care | 6,580 | 6,576 | 6,563 | 6,887 | 6,889 | 8,609 | 8,597 | |||||||||||
Inpatient rehabilitation | - | - | - | - | - | 183 | 183 | |||||||||||
6,580 | 6,576 | 6,563 | 6,887 | 6,889 | 8,792 | 8,780 | ||||||||||||
Revenue mix %: | ||||||||||||||||||
Medicare | 56 | 56 | 55 | 58 | 60 | 60 | 60 | |||||||||||
Medicaid | 9 | 9 | 9 | 9 | 8 | 8 | 8 | |||||||||||
Medicare Advantage | 10 | 10 | 10 | 9 | 10 | 10 | 10 | |||||||||||
Commercial insurance and other | 25 | 25 | 26 | 24 | 22 | 22 | 22 | |||||||||||
Admissions: | ||||||||||||||||||
Medicare | 7,432 | 7,125 | 6,769 | 7,640 | 8,504 | 8,913 | 11,002 | |||||||||||
Medicaid | 997 | 990 | 1,022 | 1,034 | 1,085 | 1,163 | 1,236 | |||||||||||
Medicare Advantage | 1,129 | 1,106 | 936 | 1,071 | 1,172 | 1,348 | 1,609 | |||||||||||
Commercial insurance and other | 2,262 | 2,048 | 1,978 | 2,020 | 2,282 | 2,290 | 2,669 | |||||||||||
11,820 | 11,269 | 10,705 | 11,765 | 13,043 | 13,714 | 16,516 | ||||||||||||
Admissions mix %: | ||||||||||||||||||
Medicare | 63 | 63 | 63 | 65 | 65 | 65 | 67 | |||||||||||
Medicaid | 8 | 9 | 10 | 9 | 8 | 8 | 7 | |||||||||||
Medicare Advantage | 10 | 10 | 9 | 9 | 9 | 10 | 10 | |||||||||||
Commercial insurance and other | 19 | 18 | 18 | 17 | 18 | 17 | 16 | |||||||||||
Patient days: | ||||||||||||||||||
Medicare | 202,882 | 195,964 | 179,324 | 198,129 | 219,213 | 237,257 | 275,561 | |||||||||||
Medicaid | 47,813 | 45,952 | 48,514 | 46,596 | 45,650 | 45,746 | 48,911 | |||||||||||
Medicare Advantage | 34,524 | 36,000 | 31,186 | 32,868 | 35,639 | 39,503 | 47,819 | |||||||||||
Commercial insurance and other | 75,483 | 70,651 | 70,198 | 69,585 | 70,522 | 72,759 | 83,375 | |||||||||||
360,702 | 348,567 | 329,222 | 347,178 | 371,024 | 395,265 | 455,666 | ||||||||||||
Average length of stay: | ||||||||||||||||||
Medicare | 27.3 | 27.5 | 26.5 | 25.9 | 25.8 | 26.6 | 25.0 | |||||||||||
Medicaid | 48.0 | 46.4 | 47.5 | 45.1 | 42.1 | 39.3 | 39.6 | |||||||||||
Medicare Advantage | 30.6 | 32.5 | 33.3 | 30.7 | 30.4 | 29.3 | 29.7 | |||||||||||
Commercial insurance and other | 33.4 | 34.5 | 35.5 | 34.4 | 30.9 | 31.8 | 31.2 | |||||||||||
Weighted average | 30.5 | 30.9 | 30.8 | 29.5 | 28.4 | 28.8 | 27.6 |
KINDRED HEALTHCARE, INC. | |||||||||||||||||||||||||
Condensed Business Segment Data (Continued) | |||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||
2010 Quarters | 2011 Quarters | ||||||||||||||||||||||||
First | Second | Third | Fourth | First | Second | Third | |||||||||||||||||||
Hospital data (continued): | |||||||||||||||||||||||||
Revenues per admission: | |||||||||||||||||||||||||
Medicare | $ | 38,078 | $ | 38,938 | $ | 37,675 | $ | 38,368 | $ | 39,439 | $ | 40,089 | $ | 37,408 | |||||||||||
Medicaid | 45,738 | 42,774 | 42,910 | 41,704 | 42,432 | 41,576 | 40,720 | ||||||||||||||||||
Medicare Advantage | 45,187 | 46,169 | 48,122 | 44,744 | 46,217 | 42,708 | 43,616 | ||||||||||||||||||
Commercial insurance and other | 56,344 | 59,842 | 61,314 | 61,131 | 54,065 | 56,850 | 57,216 | ||||||||||||||||||
Weighted average | 42,899 | 43,784 | 43,456 | 43,150 | 42,856 | 43,271 | 41,462 | ||||||||||||||||||
Revenues per patient day: | |||||||||||||||||||||||||
Medicare | $ | 1,395 | $ | 1,416 | $ | 1,422 | $ | 1,479 | $ | 1,530 | $ | 1,506 | $ | 1,494 | |||||||||||
Medicaid | 954 | 922 | 904 | 925 | 1,009 | 1,057 | 1,029 | ||||||||||||||||||
Medicare Advantage | 1,478 | 1,418 | 1,444 | 1,458 | 1,520 | 1,457 | 1,468 | ||||||||||||||||||
Commercial insurance and other | 1,688 | 1,735 | 1,728 | 1,775 | 1,749 | 1,789 | 1,832 | ||||||||||||||||||
Weighted average | 1,406 | 1,416 | 1,413 | 1,462 | 1,507 | 1,501 | 1,503 | ||||||||||||||||||
Medicare case mix index (discharged patients only) | 1.21 | 1.21 | 1.19 | 1.17 | 1.21 | 1.22 | 1.17 | ||||||||||||||||||
Average daily census | 4,008 | 3,830 | 3,579 | 3,774 | 4,122 | 4,344 | 4,953 | ||||||||||||||||||
Occupancy % | 68.2 | 66.1 | 62.0 | 64.0 | 68.7 | 65.5 | 62.6 | ||||||||||||||||||
Annualized employee turnover % | 21.8 | 22.6 | 22.3 | 22.0 | 21.2 | 22.1 | 21.4 | ||||||||||||||||||
Nursing and rehabilitation center data: | |||||||||||||||||||||||||
End of period data: | |||||||||||||||||||||||||
Number of facilities: | |||||||||||||||||||||||||
Nursing and rehabilitation centers: | |||||||||||||||||||||||||
Owned or leased | 218 | 219 | 222 | 222 | 220 | 220 | 220 | ||||||||||||||||||
Managed | 4 | 4 | 4 | 4 | 4 | 4 | 4 | ||||||||||||||||||
Assisted living facilities | 6 | 7 | 7 | 7 | 6 | 6 | 6 | ||||||||||||||||||
228 | 230 | 233 | 233 | 230 | 230 | 230 | |||||||||||||||||||
Number of licensed beds: | |||||||||||||||||||||||||
Nursing and rehabilitation centers: | |||||||||||||||||||||||||
Owned or leased | 26,711 | 26,760 | 27,030 | 26,957 | 26,767 | 26,687 | 26,687 | ||||||||||||||||||
Managed | 485 | 485 | 485 | 485 | 485 | 485 | 485 | ||||||||||||||||||
Assisted living facilities | 327 | 463 | 463 | 463 | 413 | 413 | 413 | ||||||||||||||||||
27,523 | 27,708 | 27,978 | 27,905 | 27,665 | 27,585 | 27,585 | |||||||||||||||||||
Revenue mix %: | |||||||||||||||||||||||||
Medicare | 35 | 34 | 33 | 36 | 38 | 37 | 36 | ||||||||||||||||||
Medicaid | 41 | 41 | 41 | 39 | 37 | 38 | 38 | ||||||||||||||||||
Medicare Advantage | 6 | 7 | 7 | 7 | 7 | 7 | 7 | ||||||||||||||||||
Private and other | 18 | 18 | 19 | 18 | 18 | 18 | 19 |
KINDRED HEALTHCARE, INC. | |||||||||||||||||||||||||
Condensed Business Segment Data (Continued) | |||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||
2010 Quarters | 2011 Quarters | ||||||||||||||||||||||||
First | Second | Third | Fourth | First | Second | Third | |||||||||||||||||||
Nursing and rehabilitation center data (continued): | |||||||||||||||||||||||||
Patient days (excludes managed facilities): | |||||||||||||||||||||||||
Medicare | 369,102 | 363,149 | 346,837 | 344,018 | 370,395 | 358,760 | 345,362 | ||||||||||||||||||
Medicaid | 1,312,517 | 1,292,246 | 1,289,643 | 1,287,739 | 1,232,620 | 1,229,517 | 1,255,418 | ||||||||||||||||||
Medicare Advantage | 87,692 | 92,051 | 91,643 | 94,336 | 97,460 | 94,483 | 95,751 | ||||||||||||||||||
Private and other | 397,550 | 415,921 | 437,413 | 453,357 | 425,414 | 435,667 | 436,074 | ||||||||||||||||||
2,166,861 | 2,163,367 | 2,165,536 | 2,179,450 | 2,125,889 | 2,118,427 | 2,132,605 | |||||||||||||||||||
Patient day mix %: | |||||||||||||||||||||||||
Medicare | 17 | 17 | 16 | 16 | 17 | 17 | 16 | ||||||||||||||||||
Medicaid | 61 | 60 | 60 | 59 | 58 | 58 | 59 | ||||||||||||||||||
Medicare Advantage | 4 | 4 | 4 | 4 | 5 | 4 | 5 | ||||||||||||||||||
Private and other | 18 | 19 | 20 | 21 | 20 | 21 | 20 | ||||||||||||||||||
Revenues per patient day: | |||||||||||||||||||||||||
Medicare Part A | $ | 470 | $ | 469 | $ | 468 | $ | 534 | $ | 537 | $ | 544 | $ | 550 | |||||||||||
Total Medicare (including Part B) | 513 | 515 | 519 | 587 | 579 | 589 | 599 | ||||||||||||||||||
Medicaid | 168 | 171 | 171 | 171 | 172 | 173 | 174 | ||||||||||||||||||
Medicare Advantage | 398 | 400 | 405 | 432 | 416 | 420 | 421 | ||||||||||||||||||
Private and other | 238 | 234 | 232 | 228 | 235 | 240 | 243 | ||||||||||||||||||
Weighted average | 249 | 250 | 249 | 260 | 267 | 268 | 268 | ||||||||||||||||||
Average daily census | 24,076 | 23,773 | 23,538 | 23,690 | 23,621 | 23,279 | 23,180 | ||||||||||||||||||
Admissions (excludes managed facilities) | 19,026 | 18,924 | 19,383 | 19,118 | 20,619 | 20,143 | 20,118 | ||||||||||||||||||
Occupancy % | 89.0 | 87.3 | 86.8 | 86.4 | 86.9 | 85.9 | 85.5 | ||||||||||||||||||
Medicare average length of stay | 33.7 | 35.2 | 34.3 | 33.0 | 32.9 | 33.4 | 33.0 | ||||||||||||||||||
Annualized employee turnover % | 36.7 | 38.8 | 39.8 | 39.6 | 37.8 | 39.8 | 40.2 | ||||||||||||||||||
Rehabilitation data: | |||||||||||||||||||||||||
Skilled nursing rehabilitation services: | |||||||||||||||||||||||||
Revenue mix %: | |||||||||||||||||||||||||
Company-operated | 57 | 56 | 55 | 49 | 47 | 34 | 22 | ||||||||||||||||||
Non-affiliated | 43 | 44 | 45 | 51 | 53 | 66 | 78 | ||||||||||||||||||
Sites of service (at end of period) | 554 | 568 | 595 | 635 | 641 | 1,848 | 1,835 | ||||||||||||||||||
Revenue per site | $ | 172,498 | $ | 171,254 | $ | 167,832 | $ | 174,896 | $ | 178,812 | $ | 137,316 | $ | 137,643 | |||||||||||
Therapist productivity % | 83.8 | 84.2 | 82.1 | 78.6 | 80.6 | 81.6 | 80.5 | ||||||||||||||||||
Home health and hospice revenues | $ | 3,434 | $ | 3,875 | $ | 3,947 | $ | 6,266 | $ | 8,038 | $ | 10,828 | $ | 15,419 | |||||||||||
Hospital rehabilitation services: | |||||||||||||||||||||||||
Revenue mix %: | |||||||||||||||||||||||||
Company-operated | 96 | 96 | 95 | 95 | 94 | 54 | 29 | ||||||||||||||||||
Non-affiliated | 4 | 4 | 5 | 5 | 6 | 46 | 71 | ||||||||||||||||||
Sites of service (at end of period): | |||||||||||||||||||||||||
Inpatient rehabilitation units | - | - | - | 1 | 1 | 104 | 102 | ||||||||||||||||||
LTAC hospitals | 85 | 85 | 85 | 91 | 93 | 97 | 99 | ||||||||||||||||||
Sub-acute units | 7 | 7 | 7 | 7 | 8 | 22 | 23 | ||||||||||||||||||
Outpatient units | 10 | 11 | 11 | 12 | 12 | 119 | 114 | ||||||||||||||||||
Other | 2 | 2 | 4 | 4 | 5 | 8 | 7 | ||||||||||||||||||
104 | 105 | 107 | 115 | 119 | 350 | 345 | |||||||||||||||||||
Revenue per site | $ | 203,337 | $ | 199,174 | $ | 190,986 | $ | 184,193 | $ | 188,989 | $ | 199,661 | $ | 202,352 | |||||||||||
Annualized employee turnover % | 12.6 | 14.2 | 15.4 | 14.4 | 14.5 | 17.1 | 16.5 |
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, | |||||||||||||||||||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||||||||||||||||||||||
Basic | Diluted | Basic | Diluted | Basic | Diluted | Basic | Diluted | |||||||||||||||||||||||||||||||
Earnings: | ||||||||||||||||||||||||||||||||||||||
Amounts attributable to Kindred stockholders: | ||||||||||||||||||||||||||||||||||||||
Income from continuing operations: | ||||||||||||||||||||||||||||||||||||||
As reported in Statement of Operations | $ | 666 | $ | 666 | $ | 5,100 | $ | 5,100 | $ | 16,823 | $ | 16,823 | $ | 36,391 | $ | 36,391 | ||||||||||||||||||||||
Allocation to participating unvested restricted stockholders |
(10 | ) | (10 | ) | (91 | ) | (91 | ) | (287 | ) | (284 | ) | (664 | ) | (662 | ) | ||||||||||||||||||||||
Available to common stockholders | $ | 656 | $ | 656 | $ | 5,009 | $ | 5,009 | $ | 16,536 | $ | 16,539 | $ | 35,727 | $ | 35,729 | ||||||||||||||||||||||
Discontinued operations, net of income taxes: | ||||||||||||||||||||||||||||||||||||||
Income (loss) from operations: | ||||||||||||||||||||||||||||||||||||||
As reported in Statement of Operations | $ | 1,119 | $ | 1,119 | $ | (260 | ) | $ | (260 | ) | $ | 1,527 | $ | 1,527 | $ | (327 | ) | $ | (327 | ) | ||||||||||||||||||
Allocation to participating unvested restricted stockholders |
(17 | ) | (17 | ) | 5 | 5 | (26 | ) | (26 | ) | 6 | 6 | ||||||||||||||||||||||||||
Available to common stockholders | $ | 1,102 | $ | 1,102 | $ | (255 | ) | $ | (255 | ) | $ | 1,501 | $ | 1,501 | $ | (321 | ) | $ | (321 | ) | ||||||||||||||||||
Gain on divestiture of operations: | ||||||||||||||||||||||||||||||||||||||
As reported in Statement of Operations | $ | - | $ | - | $ | 86 | $ | 86 | $ | - | $ | - | $ | 3 | $ | 3 | ||||||||||||||||||||||
Allocation to participating unvested restricted stockholders |
- | - | (2 | ) | (2 | ) | - | - | - | - | ||||||||||||||||||||||||||||
Available to common stockholders | $ | - | $ | - | $ | 84 | $ | 84 | $ | - | $ | - | $ | 3 | $ | 3 | ||||||||||||||||||||||
Net income: | ||||||||||||||||||||||||||||||||||||||
As reported in Statement of Operations | $ | 1,785 | $ | 1,785 | $ | 4,926 | $ | 4,926 | $ | 18,350 | $ | 18,350 | $ | 36,067 | $ | 36,067 | ||||||||||||||||||||||
Allocation to participating unvested restricted stockholders |
(27 | ) | (27 | ) | (88 | ) | (88 | ) | (313 | ) | (310 | ) | (658 | ) | (656 | ) | ||||||||||||||||||||||
Available to common stockholders | $ | 1,758 | $ | 1,758 | $ | 4,838 | $ | 4,838 | $ | 18,037 | $ | 18,040 | $ | 35,409 | $ | 35,411 | ||||||||||||||||||||||
Shares used in the computation: | ||||||||||||||||||||||||||||||||||||||
Weighted average shares outstanding - basic computation |
51,329 | 51,329 | 38,778 | 38,778 | 44,577 | 44,577 | 38,720 | 38,720 | ||||||||||||||||||||||||||||||
Dilutive effect of employee stock options | 77 | 60 | 357 | 135 | ||||||||||||||||||||||||||||||||||
Adjusted weighted average shares outstanding - diluted computation |
51,406 | 38,838 | 44,934 | 38,855 | ||||||||||||||||||||||||||||||||||
Earnings per common share: | ||||||||||||||||||||||||||||||||||||||
Income from continuing operations | $ | 0.01 | $ | 0.01 | $ | 0.13 | $ | 0.13 | $ | 0.37 | $ | 0.37 | $ | 0.92 | $ | 0.92 | ||||||||||||||||||||||
Discontinued operations: | ||||||||||||||||||||||||||||||||||||||
Income (loss) from operations | 0.02 | 0.02 | (0.01 | ) | (0.01 | ) | 0.03 | 0.03 | (0.01 | ) | (0.01 | ) | ||||||||||||||||||||||||||
Gain on divestiture of operations | - | - | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
Net income | $ | 0.03 | $ | 0.03 | $ | 0.12 | $ | 0.12 | $ | 0.40 | $ | 0.40 | $ | 0.91 | $ | 0.91 | ||||||||||||||||||||||
(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 third quarter and nine months ended September 30, 2011 and 2010 before certain charges or on a core basis. The charges that were excluded from core operating results for the third quarter and nine months ended September 30, 2011 relate to transaction, financing, severance and impairment charges. The charges that were excluded from core operating results for the third quarter ended September 30, 2010 relate to transaction costs. The charges that are excluded from core operating results for the nine months ended September 30, 2010 relate to transaction, severance and retirement costs. |
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The income tax benefit associated with the excluded charges was calculated using an effective income tax rate of 37.2% and 36.8% for the third quarter and nine months ended September 30, 2011, respectively, and an effective income tax rate of 38.5% for the third quarter and nine months ended September 30, 2010. Certain of the excluded charges for the third quarter and nine months ended September 30, 2011 are not deductible for income tax purposes thus resulting in a lower effective income tax rate than the comparable prior year periods. |
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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 third quarter and nine months ended September 30, 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. |
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Three months ended | Nine months ended | ||||||||||||||||||||
September 30, | September 30, | ||||||||||||||||||||
2011 | 2010 | 2011 | 2010 | ||||||||||||||||||
Detail of charges excluded from core operating results: | |||||||||||||||||||||
Transaction costs | ($5,281 | ) | ($771 | ) | ($29,445 | ) | ($2,496 | ) | |||||||||||||
Financing costs (in connection with the RehabCare acquisition) | - | - | (13,802 | ) | - | ||||||||||||||||
Severance and retirement costs | (1,256 | ) | - | (16,122 | ) | (2,906 | ) | ||||||||||||||
Impairment charges | (26,712 | ) | - | (26,712 | ) | - | |||||||||||||||
(33,249 | ) | (771 | ) | (86,081 | ) | (5,402 | ) | ||||||||||||||
Income tax benefit | 12,371 | 297 | 31,708 | 2,080 | |||||||||||||||||
Charges net of income taxes | (20,878 | ) | (474 | ) | (54,373 | ) | (3,322 | ) | |||||||||||||
Allocation to participating unvested restricted stockholders | 314 | 8 | 920 | 60 | |||||||||||||||||
Available to common stockholders | ($20,564 | ) | ($466 | ) | ($53,453 | ) | ($3,262 | ) | |||||||||||||
Weighted average diluted shares outstanding | 51,406 | 38,838 | 44,934 | 38,855 | |||||||||||||||||
Diluted loss per common share related to charges | ($0.40 | ) | ($0.01 | ) | ($1.19 | ) | ($0.08 | ) | |||||||||||||
Reconciliation of adjusted operating income before charges: | |||||||||||||||||||||
Operating income before charges | $ | 210,025 | $ | 124,249 | $ | 562,664 | $ | 422,410 | |||||||||||||
Detail of charges excluded from core operating results: | |||||||||||||||||||||
Transaction costs | (5,281 | ) | (771 | ) | (29,445 | ) | (2,496 | ) | |||||||||||||
Severance and retirement costs | (1,256 | ) | - | (16,122 | ) | (2,906 | ) | ||||||||||||||
Impairment charges | (26,712 | ) | - | (26,712 | ) | - | |||||||||||||||
(33,249 | ) | (771 | ) | (72,279 | ) | (5,402 | ) | ||||||||||||||
Reported operating income | $ | 176,776 | $ | 123,478 | $ | 490,385 | $ | 417,008 | |||||||||||||
Reconciliation of adjusted income from continuing operations before charges: | |||||||||||||||||||||
Amounts attributable to Kindred stockholders: | |||||||||||||||||||||
Income from continuing operations before charges | $ | 21,544 | $ | 5,574 | $ | 71,196 | $ | 39,713 | |||||||||||||
Charges net of income taxes | (20,878 | ) | (474 | ) | (54,373 | ) | (3,322 | ) | |||||||||||||
Reported income from continuing operations | $ | 666 | $ | 5,100 | $ | 16,823 | $ | 36,391 | |||||||||||||
Reconciliation of diluted income per common share from continuing operations before charges: |
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Diluted income per common share before charges (a) | $ | 0.41 | $ | 0.14 | $ | 1.56 | $ | 1.00 | |||||||||||||
Charges net of income taxes as computed above | (0.40 | ) | (0.01 | ) | (1.19 | ) | (0.08 | ) | |||||||||||||
Reported diluted income per common share from continuing operations | $ | 0.01 | $ | 0.13 | $ | 0.37 | $ | 0.92 | |||||||||||||
Weighted average diluted shares outstanding | 51,406 | 38,838 | 44,934 | 38,855 | |||||||||||||||||
Reconciliation of effective income tax rate before charges: | |||||||||||||||||||||
Effective income tax rate before charges | 31.5 | % | 22.6 | % | 36.9 | % | 36.3 | % | |||||||||||||
Impact of charges on effective income tax rate | 131.7 | % | 12.4 | % | 0.3 | % | (0.2 | )% | |||||||||||||
Reported effective income tax rate | 163.2 | % | 35.0 | % | 37.2 | % | 36.1 | % | |||||||||||||
(a) |
For purposes of computing diluted earnings per common share, income from continuing operations before charges was reduced by $0.3 million and $0.1 million for the three months ended September 30, 2011 and 2010, respectively, and $1.2 million and $0.7 million for the nine months ended September 30, 2011 and 2010, respectively, for the allocation of income to participating unvested restricted stockholders. |
KINDRED HEALTHCARE, INC. | ||||||||||||||||||||
Reconciliation of Non-GAAP Measurements to GAAP Results (Continued) | ||||||||||||||||||||
(Unaudited) | ||||||||||||||||||||
(In thousands) | ||||||||||||||||||||
In addition to the results provided in accordance with GAAP, the Company has provided a non-GAAP measurement which presents operating cash flows for the third quarter and nine months ended September 30, 2011 and 2010 excluding certain payments, net of income tax benefit, or on an adjusted basis. The payments that were excluded from adjusted operating cash flows for the third quarter and nine months ended September 30, 2011 relate to financing, transaction and severance costs, net of income tax benefit. The payments that were excluded from adjusted operating cash flows for the third quarter ended September 30, 2010 relate to transaction costs, net of income tax benefit. The payments that are excluded from adjusted operating cash flows for the nine months ended September 30, 2010 relate to transaction, severance and retirement costs, net of income tax benefit. |
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The income tax benefit associated with the excluded payments was calculated using an effective income tax rate of 33.3% and 36.2% for the third quarter and nine months ended September 30, 2011, respectively, and an effective income tax rate of 38.5% for the third quarter and nine months ended September 30, 2010. Certain of the excluded payments for the third quarter and nine months ended September 30, 2011 are not deductible for income tax purposes thus resulting in a lower effective income tax rate than the comparable prior year periods. |
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This non-GAAP measurement is not intended to replace the presentation of the Company's operating cash flows in accordance with GAAP. The Company believes that the presentation of adjusted operating cash flows provides additional information to investors to facilitate the comparison between periods by excluding certain payments for the third quarter and nine months ended September 30, 2011 and 2010 that the Company believes are not representative of its ongoing operations due to the materiality and nature of the payments. The Company's adjusted operating cash flows also represent a key cash flow measure for the purposes of evaluating cash flows internally. |
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Three months ended | Nine months ended | |||||||||||||||||||
September 30, | September 30, | |||||||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||||||
Reconciliation of net cash flows provided by operating activities to adjusted operating cash flows: |
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Net cash provided by operating activities | $ | 66,518 | $ | 67,909 | $ | 117,806 | $ | 150,855 | ||||||||||||
Adjustments to remove certain payments: | ||||||||||||||||||||
Financing costs: | ||||||||||||||||||||
Capitalized as deferred financing costs | - | - | 46,232 | - | ||||||||||||||||
Charged to interest expense | - | - | 13,074 | - | ||||||||||||||||
Transaction costs | 7,395 | 955 | 29,458 | 1,710 | ||||||||||||||||
Severance and retirement costs | 3,295 | - | 10,265 | 2,689 | ||||||||||||||||
Benefit of reduced income tax payments resulting from financing, transaction, severance and retirement costs |
(2,781 | ) | (297 | ) | (22,118 | ) | (2,080 | ) | ||||||||||||
7,909 | 658 | 76,911 | 2,319 | |||||||||||||||||
Adjusted operating cash flows | $ | 74,427 | $ | 68,567 | $ | 194,717 | $ | 153,174 |
KINDRED HEALTHCARE, INC. | |||||||||||||||||||||||||||||||||||||
Reconciliation of Earnings Guidance for 2011 and 2012 - Continuing Operations | |||||||||||||||||||||||||||||||||||||
(Unaudited) | |||||||||||||||||||||||||||||||||||||
(In millions, except per share amounts) | |||||||||||||||||||||||||||||||||||||
Earnings Guidance Ranges (a) | |||||||||||||||||||||||||||||||||||||
As of November 2, 2011 | As of August 8, 2011 | ||||||||||||||||||||||||||||||||||||
2011 | 2012 | 2011 | 2012 | ||||||||||||||||||||||||||||||||||
Low | High | Low | High | Low | High | Low | High | ||||||||||||||||||||||||||||||
Operating income | $ |
777 |
$ |
780 |
$ | 911 | $ | 928 | $ | 775 | $ | 780 | $ | 911 | $ | 928 | |||||||||||||||||||||
Rent | 400 | 400 | 445 | 445 | 400 | 400 | 445 | 445 | |||||||||||||||||||||||||||||
Depreciation and amortization | 164 | 164 | 200 | 200 | 164 | 164 | 200 | 200 | |||||||||||||||||||||||||||||
Interest, net | 67 | 67 | 110 | 110 | 69 | 69 | 110 | 110 | |||||||||||||||||||||||||||||
Income from continuing operations before income taxes |
146 |
149 |
156 | 173 | 142 | 147 | 156 | 173 | |||||||||||||||||||||||||||||
Provision for income taxes | 55 |
56 |
63 | 69 | 53 | 54 | 63 | 69 | |||||||||||||||||||||||||||||
Income from continuing operations |
91 |
93 |
93 | 104 | 89 | 93 | 93 | 104 | |||||||||||||||||||||||||||||
Earnings attributable to noncontrolling interests |
(1 | ) | (1 | ) | (4 | ) | (4 | ) | (2 | ) | (2 | ) | (4 | ) | (4 | ) | |||||||||||||||||||||
Income attributable to the Company |
90 |
92 |
89 | 100 | 87 | 91 | 89 | 100 | |||||||||||||||||||||||||||||
Allocation to participating unvested restricted stockholders |
(2 | ) | (2 | ) | (2 | ) | (2 | ) | (2 | ) | (2 | ) | (2 | ) | (2 | ) | |||||||||||||||||||||
Available to common stockholders | $ |
88 |
$ |
90 |
$ | 87 | $ | 98 | $ | 85 | $ | 89 | $ | 87 | $ | 98 | |||||||||||||||||||||
Earnings per diluted share | $ |
1.87 |
$ |
1.92 |
$ | 1.65 | $ | 1.85 | $ | 1.80 | $ | 1.90 | $ | 1.65 | $ | 1.85 | |||||||||||||||||||||
Shares used in computing earnings per diluted share |
47.0 | 47.0 | 53.0 | 53.0 | 47.0 | 47.0 | 53.0 | 53.0 | |||||||||||||||||||||||||||||
(a) |
The Company's earnings guidance for continuing operations reflects the anticipated impact of the final rules recently issued by CMS related to payment rates for nursing centers, LTAC hospitals, IRFs and the Company's rehabilitation therapy business, all of which became effective on October 1, 2011. The Company's earnings guidance excludes the effect of (i) any transaction-related charges that have been recorded in prior periods or that may be incurred in the future, (ii) any other reimbursement changes, (iii) any material acquisitions or divestitures, (iv) any impairment charges that have been recorded in prior periods or that may be incurred in the future, or (v) any repurchases of common stock. |
CONTACT:
Kindred Healthcare, Inc.
Richard A. Lechleiter
Executive Vice President and Chief Financial Officer
502-596-7734
KEYWORDS: United States North America Kentucky
INDUSTRY KEYWORDS: Health Hospitals Other Health General Health Managed Care
MEDIA:
Logo |