Kindred Healthcare Second Quarter Results Exceed Company’s Guidance
Company Reports $0.45 per Diluted Share from Continuing Operations Compared to Earnings Guidance Range of $0.28 to $0.38
Out-performance Driven Primarily by Growth in Hospital Commercial Business, Productivity Gains in Peoplefirst Rehabilitation and Improved Cost Controls Across the Organization
Company Maintains 2009 EPS Range of $1.35 to $1.45
Company Provides Third Quarter 2009 EPS Guidance Range of Breakeven to $0.05
Louisville, KY.– Kindred Healthcare, Inc. (the “Company”) (NYSE:KND) today announced its operating results for the second quarter ended June 30, 2009.
Second Quarter Highlights:
* Consolidated revenues rose 5% to $1.1 billion
- Each operating division reported revenue growth compared to last year
* Diluted earnings per share reported at $0.45 compared to last year’s $0.49
-Last year’s second quarter results included income of $0.10 per share related to certain items
Hospital operating income grew 6% in the second quarter
- Both reported and same-store admissions grew 2% compared to last year’s second quarter
- Operating results included approximately $4 million of Medicare reimbursement cuts that became effective on June 3, 2009
Nursing center results in line with expectations
- Revenue quality mix improved to 58.9% from 57.4% in the second quarter of 2008
* Peoplefirst rehabilitation services reported continued revenue growth and productivity gains
- Quarterly revenues were up 13% from last year’s second quarter; operating income grew 34%
* Financial liquidity strengthened during the quarter
- Operating cash flows nearly doubled to $83 million from last year’s second quarter
- Accounts receivable days outstanding declined to 55.0 from 57.3 at June 30, 2008
- $58 million purchase of six unprofitable nursing centers financed primarily through operating cash flows
- Long-term debt, net of excess cash, declined to $253 million at June 30, 2009 compared to $266 million at June 30, 2008
Consolidated revenues for the second quarter ended June 30, 2009 totaled $1.1 billion, an increase of 5% from last year’s second quarter. Income from continuing operations for the second quarter of 2009 totaled $17.5 million or $0.45 per diluted share compared to $19.5 million or $0.49 per diluted share in the second quarter last year.
Operating results for the second quarter of 2008 included certain items that, in the aggregate, increased net income by $4.0 million or $0.10 per diluted share. These items included pretax income of $8.3 million related to the favorable settlement of a prior year nursing center Medicaid cost report dispute and a pretax charge of $1.9 million related to a prior period rent escalator adjustment for ten leased facilities.
For the six months ended June 30, 2009, consolidated revenues increased 4% to $2.1 billion compared to the first half of 2008. Income from continuing operations totaled $40.9 million or $1.05 per diluted share for the first six months of 2009 compared to $36.7 million or $0.94 per diluted share in the same period a year ago.
Consolidated operating results for the first half of 2008 included the items discussed above that increased net income by approximately $4.0 million or $0.10 per diluted share.
During the past several years, the Company has entered into transactions to divest unprofitable businesses. For accounting purposes, the historical operating results of these businesses and gains or losses associated with these operations have been classified as discontinued operations in the Company’s consolidated statement of operations for all historical periods. As previously announced, the Company completed a transaction with Ventas, Inc. (“Ventas”) (NYSE:VTR) on June 30, 2009 in which the Company purchased for resale six unprofitable nursing centers.
In the second quarter of 2009, the Company reported a loss from discontinued operations totaling $0.9 million or $0.02 per diluted share compared to a loss of $0.5 million or $0.01 per diluted share in the second quarter of 2008.
For the first six months of 2009, the Company reported a loss from discontinued operations of $1.5 million or $0.04 per diluted share compared to a loss of $3.0 million or $0.08 per diluted share in the first half of 2008.
In the second quarter of 2009, the Company recorded a net loss of $24.0 million or $0.62 per diluted share related to the divestiture transaction with Ventas. The Company expects to sell the six nursing centers acquired from Ventas and the related operations as soon as practicable and generate approximately $25 million in cash proceeds. In the second quarter of 2008, the Company recorded a net gain of $2.7 million or $0.07 per diluted share related to the divestiture of discontinued operations.
Paul J. Diaz, President and Chief Executive Officer of the Company, remarked, “We are pleased to report solid second quarter performance in each of our three operating divisions. Our efforts to improve the quality of our services and retain and develop our team have enabled us to continue to grow revenues and manage costs in an otherwise difficult operating and reimbursement environment.”
Commenting on the Company’s second quarter operations, Mr. Diaz noted, “Growth in hospital operating income was driven primarily by 12% growth in non-government admissions and favorable commercial pricing as we continued to demonstrate the value of our hospital services to commercial payors. Excluding the favorable prior year Medicaid cost report settlement, our nursing center revenues grew 4% and operating income was in line with our expectations for the quarter. Peoplefirst rehabilitation services continued to achieve solid revenue growth and strong productivity gains that drove operating income growth of 34% compared to the second quarter last year. Furthermore, our focus on cost management across the organization was a major factor in our second quarter success.”
Mr. Diaz further noted, “The significant growth in operating cash flows in the first half of this year has further improved our financial liquidity. Looking forward, we will continue to focus on maximizing cash flows to fund our growth initiatives and reduce our leverage.”
2009 Earnings Guidance – Continuing Operations
The Company maintained its 2009 earnings guidance for continuing operations. The Company expects consolidated revenues for 2009 to approximate $4.3 billion. Operating income, or earnings before interest, income taxes, depreciation, amortization and rent, is expected to range from $578 million to $584 million. Rent expense is expected to approximate $353 million, while depreciation, amortization and net interest expense are expected to approximate $134 million. Income from continuing operations for 2009 is expected to approximate $54 million to $57 million or $1.35 to $1.45 per diluted share (based upon diluted shares of 39 million).
The Company also provided its earnings outlook for the third quarter of 2009, estimating diluted earnings per share between breakeven to $0.05 per diluted share (based upon diluted shares of 39 million). Management’s estimated third quarter earnings range includes the expected impact of a $2 million favorable income tax adjustment.
The Company indicated that the earnings guidance reflects the estimated impact of the final rules issued by the Centers for Medicare and Medicaid Services (“CMS”) on July 31, 2009 related to payment rates for long-term acute care (“LTAC”) hospitals and 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 remain focused on our strategic operating plan and improving our core operations. As in the past, we expect some seasonal weakness in the third quarter, particularly in our hospital business, followed by stronger fourth quarter performance.”
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