KINDRED HEALTHCARE FIRST QUARTER RESULTS EXCEED COMPANY’S GUIDANCE
Company Reports $0.39 per Diluted Share from Continuing Operations Compared to Previous EPS Guidance Range of $0.22 to $0.27
Company Raises 2008 EPS Range to $1.40 to $1.50 from $1.25 to $1.35
Company Provides Second Quarter 2008 EPS Guidance of $0.29 to $0.34
Louisville, KY (May 5, 2008) – Kindred Healthcare, Inc.
(the “Company”) (NYSE:KND) today announced its operating results
for the first quarter ended March 31, 2008. All financial and statistical
information included in this press release reflects the continuing operations
of the Company’s businesses for all periods presented unless otherwise
indicated.
First Quarter Highlights:
- Consolidated revenues exceeded $1 billion
- Excluding the institutional pharmacy business that was spun off in July 2007, revenues grew 9% compared to the first quarter of 2007
Diluted earnings per share reported at $0.39
- Higher than expected performance was driven by strong results in all three operating divisions
- The Company’s first quarter EPS guidance range was $0.22 to $0.27 Strong hospital admissions growth
- Reported hospital admissions grew 9% compared to last year’s first quarter
- Same-store aggregate admissions grew 5%
- Same-store non-government admissions grew 18% Continued improvement in nursing center results
- First quarter operating income was up 20% compared to last year’s first quarter
- Revenue quality mix improved to 58.3% from 56.0% in the first quarter of 2007 Continued revenue and contract growth in Peoplefirst rehabilitation services
- Quarterly revenues exceeded $100 million for the first time
- First quarter operating income was up 14% compared to last year’s first quarter
First Quarter Results
Continuing Operations
Consolidated revenues for the first quarter ended March 31, 2008 totaled $1.1 billion, a decline of 4% from last year’s first quarter. The decline was primarily attributable to the July 2007 spin-off of the Company’s institutional pharmacy business (the “Spin-off”). Excluding the institutional pharmacy business, revenues rose approximately 9% in the first quarter of 2008 compared to the same period in 2007. Net income from continuing operations for the first quarter of 2008 totaled $15.0 million or $0.39 per diluted share compared to $16.5 million or $0.41 per diluted share in the first quarter last year. For accounting purposes, the Spin-off was not treated as a discontinued operation. Accordingly, the Company’s historical consolidated results of operations have not been retroactively restated to reflect the Spin-off.
Operating results for the first quarter of 2007 included certain items that, in the aggregate, reduced net income by approximately $2.5 million or $0.06 per diluted share.
Discontinued Operations
During the past few years, the Company has entered into transactions related to the divestiture of unprofitable businesses. For accounting purposes, the historical operating results of these businesses and losses associated with these operations have been classified as discontinued operations in the Company’s consolidated statement of operations for all historical periods.
For the first quarter of 2008, the Company reported a net loss from discontinued operations totaling $0.3 million or $0.01 per diluted share compared to a net loss of $1.4 million or $0.03 per diluted share in the first quarter of 2007.
The Company also reported a $7.3 million net loss related to divestiture transactions that were completed in the first quarter of 2007.
Other Quarterly Information
During the first quarter of 2008, the Company received a distribution of approximately $39 million from its limited purpose insurance subsidiary to be used for general corporate purposes. The distribution resulted primarily from the insurance subsidiary’s improved professional liability underwriting results. These funds were used to repay borrowings under the Company’s revolving credit facility.
Management Commentary
Paul J. Diaz, President and Chief Executive Officer of the Company, remarked,
“We are off to a good start in 2008 based upon solid operating performance
in the first quarter. All three of our operating divisions performed well,
with higher than expected performance for the quarter driven by particularly
strong results in February and March.”
Commenting on the Company’s first quarter operations, Mr. Diaz noted, “Our hospital revenue growth of 6% was driven primarily by overall admissions growth of 9% in the first quarter of 2008 compared to the same period a year ago. On a same-store basis, hospital admissions grew an impressive 5%. Our nursing center quality and customer service improvements contributed to higher occupancy levels and strong operating results, with revenues increasing 10% and operating income increasing 20% compared to last year’s first quarter. We also reported strong growth in Peoplefirst rehabilitation services. Revenues for the quarter exceeded $100 million for the first time and grew 25% from last year, while operating income rose 14%.”
With respect to the Company’s ongoing development activities, Mr. Diaz remarked, “We are continuing to develop seven additional hospitals that will open over the next couple of years, and we are reviewing other opportunities to acquire nursing centers in strategic markets. We also are continuing to make progress toward the divestiture of the 22 facilities we acquired from Ventas, Inc. (“Ventas”) (NYSE:VTR) in 2007. As of March 31, 2008, we had sold 16 of these facilities for $73 million and are confident that we will meet our expected aggregate sales proceeds target of $80 million to $90 million for all 22 facilities.”
2008 Earnings Guidance – Continuing Operations
The Company raised its 2008 earnings guidance for continuing operations. The Company expects consolidated revenues for 2008 to approximate $4.2 billion. Operating income, or earnings before interest, income taxes, depreciation, amortization and rents, is expected to range from $571 million to $578 million. Rent expense is expected to approximate $345 million, while depreciation, amortization and net interest expense are expected to approximate $132 million. Net income from continuing operations for 2008 is expected to approximate $55 million to $59 million or $1.40 to $1.50 per diluted share (based upon diluted shares of 39 million).
The Company also provided its earnings outlook for the second quarter of 2008, estimating net income from continuing operations to range from $11 million to $13 million or $0.29 to $0.34 per diluted share (based upon diluted shares of 39 million).
The Company indicated that the earnings guidance reflects (a) the final rule issued by the Centers for Medicare and Medicaid Services (“CMS”) on May 2, 2008 related to payment rates for long-term acute care (“LTAC”) hospitals, (b) interim final regulations issued by CMS on May 1, 2008 related to the implementation of the Medicare, Medicaid and SCHIP Extension Act of 2007, (c) a proposed rule issued by CMS on April 14, 2008 related to the re-weighting of payments under the prospective payment system for LTAC hospitals and (d) a proposed rule issued by CMS on May 1, 2008 related to changes in Medicare payments to nursing centers. The Company also indicated that the earnings guidance does not reflect any material acquisitions or divestitures and does not take into account any repurchases of common stock.
Mr. Diaz noted, “We look forward to continued progress in each
of our operating divisions as we focus on the execution of our strategic
operating plan. As in the past, high satisfaction levels from our patients,
residents, customers, employees and physicians will continue to drive
our operating results and business success.”
Webcast of Conference Call
As previously announced, investors and the general public can access a live webcast of the first quarter 2008 conference call through a link on Kindred’s website at www.kindredhealthcare.com or at www.earnings.com. The conference call will be held May 6, 2008 at 10:00 a.m. Eastern Time.
A telephone replay of the conference call will be available at approximately 12:00 p.m. on May 6 by dialing (719) 457-0820, access code: 1461642. The replay will be available through May 13.
Investor Day
As previously announced, the Company will host its first annual Investor
Day on Wednesday, May 7 in New York City. The event will be webcast live
beginning at 10:00 a.m. (Eastern Time) and conclude at approximately 1:00
p.m.
The webcast of this presentation may be accessed via the Company’s
website at www.kindredhealthcare.com or at www.earnings.com.
Any written materials accompanying the Investor Day presentation will be available on Kindred’s website at the time of the presentation and the webcast and written materials will be archived at www.kindredhealthcare.com following the event.
Investors interested in attending the event should contact Ms. Teresa Kappner by email: teresa.kappner@kindredhealthcare.com or phone: (502) 596-7276.
Forward Looking Statements
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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 Company’s ability to operate pursuant to the terms of its debt obligations and its master leases with Ventas; (b) the Company’s ability to meet its rental and debt service obligations; (c) adverse developments with respect to the Company’s results of operations or liquidity; (d) the Company’s ability to attract and retain key executives and other healthcare personnel; (e) increased operating costs due to shortages in qualified nurses, therapists and other healthcare personnel; (f) the effects of healthcare reform and government regulations, interpretation of regulations and changes in the nature and enforcement of regulations governing the healthcare industry; (g) changes in the reimbursement rates or the methods or timing of payment from third party payors, including 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 nursing centers; (h) 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 and the three-year moratorium on future hospital development; (i) national and regional economic conditions, including their effect on the availability and cost of labor, materials and other services; (j) the Company’s ability to control costs, particularly labor and employee benefit costs; (k) the Company’s ability to successfully pursue its development activities and successfully integrate new operations, including the realization of anticipated revenues, economies of scale, cost savings and productivity gains associated with such operations; (l) the increase in the costs of defending and insuring against alleged professional liability claims and the Company’s ability to predict the estimated costs related to such claims; (m) the Company’s ability to successfully reduce (by divestiture of operations or otherwise) its exposure to professional liability claims; (n) the Company’s ability to successfully dispose of unprofitable facilities, and (o) the Company’s ability to maintain an effective system of internal controls 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.
As noted above, the Company’s earnings guidance includes the financial measure referred to as operating income. 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 net income from continuing operations is the most comparable measure, in relation to generally accepted accounting principles, to operating income. Readers of the Company’s financial information should consider net 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 generally accepted accounting principles as an indicator of operating performance. A reconciliation of the estimated operating income to net income from continuing operations provided in the Company’s earnings guidance is included in this press release.
About Kindred Healthcare
Kindred Healthcare, Inc. (NYSE:KND) is a healthcare services company, based in Louisville, Kentucky, with annual revenues of over $4 billion. At March 31, 2008, Kindred through its subsidiaries provided healthcare services in 646 locations in 40 states, including 84 long-term acute care hospitals, 228 skilled nursing centers and a contract rehabilitation services business, Peoplefirst rehabilitation services, which served 334 non-affiliated facilities. Kindred’s 52,900 employees are committed to providing high quality patient care and outstanding customer service to become the most trusted and respected provider of healthcare services in every community we serve. For more information, go to www.kindredhealthcare.com.
Click here to view the 1st Quarter Results.
CONTACT:
Richard A. Lechleiter
Executive Vice President and Chief Financial Officer
(502) 596-7734
