Exhibit 99.1

 

Contact:		Richard A. Lechleiter
		Executive Vice President and Chief Financial Officer
		(502) 596-7734

KINDRED HEALTHCARE THIRD QUARTER RESULTS

EXCEED COMPANY’S GUIDANCE

 

 

Company Reports $0.14 per Diluted Share from Continuing Operations

Compared to Earnings Guidance Range of Breakeven to $0.05

 

 

Company Raises 2009 EPS Range to $1.48 to $1.53 from $1.35 to $1.45

Company Provides Fourth Quarter 2009 EPS Guidance Range of $0.30 to $0.35

 

 

Company Provides Initial 2010 EPS Guidance Range of $1.20 to $1.35

Management Cites Weakness in 2010 Nursing Center Medicare and Medicaid Rates

LOUISVILLE, Ky. (November 2, 2009) – Kindred Healthcare, Inc. (the “Company”) (NYSE:KND) today announced its operating results for the third quarter ended September 30, 2009.

Third Quarter Highlights:

 

•

Consolidated revenues rose 6% to $1.1 billion

 

•

Each operating division reported revenue growth compared to last year

 

•

Diluted earnings per share reported at $0.14 compared to last year’s $0.05

 

•

Hospital operating income grew 21% in the third quarter

 

•

Both reported and same-store admissions grew 4% compared to last year’s third quarter

 

•

Nursing center results were in line with expectations

 

•

Revenue quality mix improved to 58.1% from 56.6% in the third quarter of 2008

 

•

Peoplefirst rehabilitation services reported continued revenue growth and productivity gains

 

•

Quarterly revenues were up 15% from last year’s third quarter; operating income grew 47%

 

•

Financial liquidity strengthened during the quarter

 

•

Third quarter operating cash flows surged to $53 million from $7 million last year

 

•

Accounts receivable days outstanding declined to 56.8 from 63.0 at September 30, 2008

 

•

Long-term debt, net of excess cash, declined to $220 million at September 30, 2009 compared to $329 million at September 30, 2008

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Continuing Operations

Consolidated revenues for the third quarter ended September 30, 2009 totaled $1.1 billion, an increase of 6% from last year’s third quarter. Income from continuing operations for the third quarter of 2009 totaled $5.4 million or $0.14 per diluted share compared to $2.1 million or $0.05 per diluted share in the third quarter last year.

As expected, the Company recorded a $1.7 million or $0.04 per diluted share favorable income tax adjustment in the third quarter of 2009. This adjustment was included in the Company’s previously issued third quarter earnings guidance.

Operating results for the third quarter of 2008 included certain items that, in the aggregate, reduced net income by $2.3 million or $0.06 per diluted share.

For the nine months ended September 30, 2009, consolidated revenues increased 5% to $3.2 billion compared to the first nine months of 2008. Income from continuing operations totaled $46.3 million or $1.18 per diluted share for the first nine months of 2009 compared to $38.8 million or $0.98 per diluted share in the same period a year ago.

Consolidated operating results for the first nine months of 2008 included certain items that, in the aggregate, increased net income by approximately $1.7 million or $0.04 per diluted share.

Discontinued Operations

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.

In the third quarter of 2009, the Company reported breakeven results from discontinued operations compared to a loss of $1.3 million or $0.03 per diluted share in the third quarter of 2008.

For the first nine 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 $4.4 million or $0.11 per diluted share in the first nine months of 2008.

In the third quarter of 2008, the Company recorded a net loss of $22.1 million or $0.56 per diluted share related to the closure of a hospital. Operating results for the first nine months of 2009 included a loss on the divestiture of discontinued operations totaling $24.0 million or $0.61 per diluted share compared to a net loss of $19.3 million or $0.49 per diluted share for the first nine months of 2008.

Management Commentary

Paul J. Diaz, President and Chief Executive Officer of the Company, remarked, “We are pleased to report solid third quarter performance in each of our three operating divisions. Our efforts to improve the quality of our services and better manage costs during the weakest seasonal period of the year led to better overall execution compared to both our expectations and the third quarter last year. Our improved operational focus also has resulted in more consistent overall operating results over the past four quarters.”

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Commenting on the Company’s third quarter operations, Mr. Diaz noted, “Growth in hospital operating income was driven primarily by 11% growth in non-government admissions and favorable commercial pricing as we continued to demonstrate the value of our hospital services to commercial payors. Our nursing center revenues grew 3% 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 47% compared to the third quarter last year. Furthermore, our focus on cost management across the organization was a significant factor in our third quarter success.”

Mr. Diaz further noted, “The significant growth in operating cash flows in the first nine months of this year, driven primarily by strong accounts receivable collections, has allowed us to fund our ongoing capital spending programs, our hospital development projects and the development of our transitional care centers and units in selected nursing centers. At the same time, we have reduced our outstanding revolving credit borrowings, net of excess cash, by over $100 million in the last twelve months. Looking forward, we will continue to focus on maximizing cash flows to fund our growth initiatives and reduce our leverage.”

Earnings Guidance – Continuing Operations

The Company raised 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 $577 million to $581 million. Rent expense is expected to approximate $350 million, while depreciation, amortization and net interest expense are expected to approximate $131 million. Income from continuing operations for 2009 is expected to approximate $58 million to $60 million or $1.48 to $1.53 per diluted share (based upon diluted shares of 38.5 million).

The Company also provided its earnings outlook for the fourth quarter of 2009, estimating diluted earnings per share between $0.30 to $0.35 (based upon diluted shares of 38.5 million).

The Company anticipates that routine capital spending for 2009 will approximate $110 million to $115 million and hospital development capital spending should approximate $45 million to $50 million. Management expects that substantially all of these expenditures will be financed through internal sources.

The Company also provided its initial earnings guidance for 2010. Consolidated revenues are expected to approximate $4.5 billion. Operating income is expected to range from $575 million to $583 million. Rent expense is expected to approximate $364 million, while depreciation, amortization and net interest expense are expected to approximate $128 million. Income from continuing operations for 2010 is expected to approximate $48 million to $54 million or $1.20 to $1.35 per diluted share (based upon diluted shares of 39 million).

The Company anticipates that routine capital spending in 2010 will approximate $115 million to $120 million, hospital development capital spending should approximate $45 million to $50 million and nursing center development capital spending on transitional care centers and units should approximate $25 million to $30 million. Management expects that a substantial portion of these expenditures will be financed through internal sources.

The Company indicated that the earnings guidance for 2009 and 2010 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

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Company also indicated that the earnings guidance does not reflect any material acquisitions or divestitures and does not take into account any other changes in government reimbursements, repurchases of common stock or unusual items.

Mr. Diaz noted, “We remain focused on our strategic operating plan, improving our core operations and adding selectively to our asset base in targeted cluster markets. As we have in the past, we will continue to invest in our people, facilities, clinical programs and information systems to differentiate Kindred as a leading provider of post-acute services. However, we are concerned in the near term with weakness in both Medicare and Medicaid rates in our nursing center business. While we are reviewing a number of mitigation strategies for 2010, we do not believe that we can completely offset weaker government reimbursements in this division. We also would remind investors of the uncertainty associated with various federal healthcare reform proposals, ongoing state budget pressures as well as potential transition issues in the fourth quarter next year related to the new RUGs IV requirements for nursing centers.”

Webcast of Conference Call

As previously announced, investors and the general public can access a live webcast of the third quarter 2009 conference call through a link on the Company’s website at www.kindredhealthcare.com. The conference call will be held November 3, 2009 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: 5654091. 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 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 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) 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; (b) the

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effects of healthcare reform, legislative changes and government regulations, interpretation of regulations and changes in the nature and enforcement of regulations governing the healthcare industry; (c) the impact of the Medicare, Medicaid and SCHIP Extension Act of 2007, including the ability of the Company’s hospitals to adjust to potential LTAC certification, medical necessity reviews and the three-year moratorium on future hospital development; (d) failure of the Company’s facilities to meet applicable licensure and certification requirements; (e) the further consolidation of managed care organizations and other third party payors; (f) the Company’s ability to meet its rental and debt service obligations; (g) the Company’s ability to operate pursuant to the terms of its debt obligations and its master lease agreements with Ventas, Inc. (NYSE:VTR); (h) the condition of the financial markets, including volatility and deterioration in the equity, capital and credit markets, which could limit the availability and terms of debt and equity financing sources to fund the requirements of the Company’s businesses, or which could negatively impact the Company’s investment portfolio; (i) national and regional economic, financial, business and political conditions, including their effect on the availability and cost of labor, credit, materials and other services; (j) the Company’s ability to control costs, particularly labor and employee benefit costs; (k) increased operating costs due to shortages in qualified nurses, therapists and other healthcare personnel; (l) the Company’s ability to attract and retain key executives and other healthcare personnel; (m) 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, including the impact of differences in actuarial assumptions and estimates compared to eventual outcomes; (n) the Company’s ability to successfully reduce (by divestiture of operations or otherwise) its exposure to professional liability claims; (o) 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; (p) the Company’s ability to successfully dispose of unprofitable facilities; (q) events or circumstances which could result in impairment of an asset or other charges; (r) changes in generally accepted accounting principles or practices; and (s) the Company’s ability to maintain an effective system of internal control over financial reporting. Many of these factors are beyond the Company’s control. The Company cautions investors that any forward-looking statements made by the Company are not guarantees of future performance. The Company disclaims any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments.

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 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 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 income from continuing operations provided in the Company’s earnings guidance is included in this press release.

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About Kindred Healthcare

Kindred Healthcare, Inc. is a healthcare services company, based in Louisville, Kentucky, with annual revenues of over $4 billion and approximately 54,800 employees in 41 states. At September 30, 2009, Kindred through its subsidiaries provided healthcare services in 654 locations, including 82 long-term acute care hospitals, 222 skilled nursing centers and a contract rehabilitation services business, Peoplefirst rehabilitation services, which served 350 non-affiliated facilities. Ranked first in Fortune magazine’s 2009 Most Admired Companies “Health Care: Medical Facilities” category, 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.

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KINDRED HEALTHCARE, INC.

Financial Summary

(Unaudited)

(In thousands, except per share amounts)

 

		Three months ended September 30,							Nine months ended September 30,
		2009			2008				2009				2008
Revenues		$	1,057,488		$	997,129			$	3,200,016			$	3,057,645
Income from continuing operations		$	5,388		$	2,119			$	46,267			$	38,806
Discontinued operations, net of income taxes:
Income (loss) from operations			13			(1,321	)			(1,465	)			(4,369	)
Gain (loss) on divestiture of operations			52			(22,058	)			(23,999	)			(19,346	)
Net income (loss)		$	5,453		$	(21,260	)		$	20,803			$	15,091
Earnings (loss) per common share:
Basic:
Income from continuing operations		$	0.14		$	0.05			$	1.19			$	1.00
Discontinued operations:
Income (loss) from operations			—			(0.03	)			(0.04	)			(0.11	)
Gain (loss) on divestiture of operations			—			(0.57	)			(0.62	)			(0.50	)
Net income (loss)		$	0.14		$	(0.55	)		$	0.53			$	0.39
Diluted:
Income from continuing operations		$	0.14		$	0.05			$	1.18			$	0.98
Discontinued operations:
Income (loss) from operations			—			(0.03	)			(0.04	)			(0.11	)
Gain (loss) on divestiture of operations			—			(0.56	)			(0.61	)			(0.49	)
Net income (loss)		$	0.14		$	(0.54	)		$	0.53			$	0.38
Shares used in computing earnings (loss) per common share:
Basic			38,398			38,034				38,297				37,732
Diluted			38,524			38,894				38,419				38,485

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KINDRED HEALTHCARE, INC.

Condensed Consolidated Statement of Operations

(Unaudited)

(In thousands, except per share amounts)

 

		Three months ended September 30,								Nine months ended September 30,
		2009				2008				2009				2008
Revenues		$	1,057,488			$	997,129			$	3,200,016			$	3,057,645
Salaries, wages and benefits			629,077				597,216				1,865,125				1,776,872
Supplies			82,400				77,766				246,648				236,369
Rent			88,081				84,865				260,164				254,348
Other operating expenses			221,524				207,773				663,684				645,290
Other income			(2,870	)			(4,313	)			(8,565	)			(14,197	)
Depreciation and amortization			31,992				29,174				93,837				90,277
Interest expense			1,741				3,710				6,448				11,538
Investment income			(746	)			(671	)			(3,254	)			(6,253	)
			1,051,199				995,520				3,124,087				2,994,244
Income from continuing operations before income taxes			6,289				1,609				75,929				63,401
Provision (benefit) for income taxes			901				(510	)			29,662				24,595
Income from continuing operations			5,388				2,119				46,267				38,806
Discontinued operations, net of income taxes:
Income (loss) from operations			13				(1,321	)			(1,465	)			(4,369	)
Gain (loss) on divestiture of operations			52				(22,058	)			(23,999	)			(19,346	)
Net income (loss)		$	5,453			$	(21,260	)		$	20,803			$	15,091
Earnings (loss) per common share:
Basic:
Income from continuing operations		$	0.14			$	0.05			$	1.19			$	1.00
Discontinued operations:
Income (loss) from operations			—				(0.03	)			(0.04	)			(0.11	)
Gain (loss) on divestiture of operations			—				(0.57	)			(0.62	)			(0.50	)
Net income (loss)		$	0.14			$	(0.55	)		$	0.53			$	0.39
Diluted:
Income from continuing operations		$	0.14			$	0.05			$	1.18			$	0.98
Discontinued operations:
Income (loss) from operations			—				(0.03	)			(0.04	)			(0.11	)
Gain (loss) on divestiture of operations			—				(0.56	)			(0.61	)			(0.49	)
Net income (loss)		$	0.14			$	(0.54	)		$	0.53			$	0.38
Shares used in computing earnings (loss) per common share:
Basic			38,398				38,034				38,297				37,732
Diluted			38,524				38,894				38,419				38,485

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KINDRED HEALTHCARE, INC.

Condensed Consolidated Balance Sheet

(Unaudited)

(In thousands, except per share amounts)

 

		September 30, 2009				December 31, 2008
ASSETS
Current assets:
Cash and cash equivalents		$	45,303			$	140,795
Cash - restricted			6,165				5,104
Insurance subsidiary investments			159,830				196,983
Accounts receivable less allowance for loss			665,360				611,032
Inventories			21,863				22,325
Deferred tax assets			52,796				58,296
Income taxes			22,407				47,257
Other			19,303				20,843
			993,027				1,102,635
Property and equipment			1,491,683				1,392,636
Accumulated depreciation			(742,135	)			(656,676	)
			749,548				735,960
Goodwill			81,223				72,244
Intangible assets less accumulated amortization			64,712				64,367
Assets held for sale			20,733				7,786
Insurance subsidiary investments			50,890				48,610
Deferred tax assets			110,249				100,751
Other			58,527				49,408
		$	2,128,909			$	2,181,761
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	161,505			$	178,246
Salaries, wages and other compensation			296,611				281,542
Due to third party payors			30,827				33,122
Professional liability risks			47,128				55,447
Other accrued liabilities			85,368				76,832
Long-term debt due within one year			84				81
			621,523				625,270
Long-term debt			251,070				349,433
Professional liability risks			208,451				187,804
Deferred credits and other liabilities			104,843				104,279
Stockholders’ equity:
Common stock, $0.25 par value; authorized 175,000 shares; issued 39,074 shares - September 30, 2009 and 38,909 shares - December 31, 2008			9,769				9,727
Capital in excess of par value			817,947				812,141
Accumulated other comprehensive loss			(2,223	)			(3,619	)
Retained earnings			117,529				96,726
			943,022				914,975
		$	2,128,909			$	2,181,761

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KINDRED HEALTHCARE, INC.

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(In thousands)

 

		Three months ended September 30,								Nine months ended September 30,
		2009				2008				2009				2008
Cash flows from operating activities:
Net income (loss)		$	5,453			$	(21,260	)		$	20,803			$	15,091
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			31,992				29,595				94,511				92,269
Amortization of stock-based compensation costs			2,449				2,411				7,548				9,806
Provision for doubtful accounts			7,100				6,877				21,747				22,037
Deferred income taxes			4,286				8,226				(5,221	)			(4,921	)
(Gain) loss on divestiture of discontinued operations			(52	)			22,058				23,999				19,346
Other			(1,428	)			(853	)			(1,192	)			(1,946	)
Change in operating assets and liabilities:
Accounts receivable			(11,934	)			(41,141	)			(76,075	)			(125,287	)
Inventories and other assets			(2,194	)			(422	)			(11,755	)			(4,880	)
Accounts payable			3,876				(2,726	)			(6,392	)			(13,756	)
Income taxes			(7,727	)			(17,796	)			38,374				21,188
Due to third party payors			5,413				14,998				(4,340	)			191
Other accrued liabilities			15,580				7,262				37,841				12,251
Net cash provided by operating activities			52,814				7,229				139,848				41,389
Cash flows from investing activities:
Purchase of property and equipment			(33,975	)			(47,293	)			(112,857	)			(112,153	)
Acquisitions			(8,035	)			(22,419	)			(83,432	)			(48,824	)
Sale of assets			14,019				745				14,019				27,984
Purchase of insurance subsidiary investments			(18,808	)			(25,908	)			(77,480	)			(94,976	)
Sale of insurance subsidiary investments			17,658				22,568				97,677				89,501
Net change in insurance subsidiary cash and cash equivalents			1,177				1,671				16,852				40,099
Change in other investments			2				2				2,002				7,002
Other			(517	)			1,340				3,877				2,628
Net cash used in investing activities			(28,479	)			(69,294	)			(139,342	)			(88,739	)
Cash flows from financing activities:
Proceeds from borrowings under revolving credit			295,600				391,700				952,500				1,119,800
Repayment of borrowings under revolving credit			(319,300	)			(328,800	)			(1,050,800	)			(1,066,500	)
Repayment of long-term debt			(20	)			(19	)			(60	)			(57	)
Repayment of capital lease obligation			—				—				—				(16,268	)
Payment of deferred financing costs			(177	)			(211	)			(604	)			(390	)
Issuance of common stock			568				3,087				568				8,865
Other			4,570				(3,213	)			2,398				(11,682	)
Net cash provided by (used in) financing activities			(18,759	)			62,544				(95,998	)			33,768
Change in cash and cash equivalents			5,576				479				(95,492	)			(13,582	)
Cash and cash equivalents at beginning of period			39,727				18,816				140,795				32,877
Cash and cash equivalents at end of period		$	45,303			$	19,295			$	45,303			$	19,295

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KINDRED HEALTHCARE, INC.

Condensed Consolidated Statement of Operations

(Unaudited)

(In thousands, except per share amounts)

 

		2008 Quarters																2009 Quarters
		First				Second				Third				Fourth				First				Second				Third
Revenues		$	1,034,475			$	1,026,041			$	997,129			$	1,036,219			$	1,069,474			$	1,073,054			$	1,057,488
Salaries, wages and benefits			592,240				587,416				597,216				597,291				615,218				620,830				629,077
Supplies			77,834				80,769				77,766				80,780				80,336				83,912				82,400
Rent			83,623				85,860				84,865				84,325				85,201				86,882				88,081
Other operating expenses			223,973				213,544				207,773				209,093				220,405				221,755				221,524
Other income			(4,717	)			(5,167	)			(4,313	)			(3,210	)			(2,872	)			(2,823	)			(2,870	)
Depreciation and amortization			30,558				30,545				29,174				29,745				30,490				31,355				31,992
Interest expense			4,921				2,907				3,710				3,835				2,478				2,229				1,741
Investment income			(3,247	)			(2,335	)			(671	)			(843	)			(1,475	)			(1,033	)			(746	)
			1,005,185				993,539				995,520				1,001,016				1,029,781				1,043,107				1,051,199
Income from continuing operations before income taxes			29,290				32,502				1,609				35,203				39,693				29,947				6,289
Provision (benefit) for income taxes			12,080				13,025				(510	)			13,549				16,352				12,409				901
Income from continuing operations			17,210				19,477				2,119				21,654				23,341				17,538				5,388
Discontinued operations, net of income taxes:
Income (loss) from operations			(2,520	)			(528	)			(1,321	)			970				(581	)			(897	)			13
Gain (loss) on divestiture of operations			—				2,712				(22,058	)			(1,430	)			—				(24,051	)			52
Net income (loss)		$	14,690			$	21,661			$	(21,260	)		$	21,194			$	22,760			$	(7,410	)		$	5,453
Earnings (loss) per common share:
Basic:
Income from continuing operations		$	0.45			$	0.50			$	0.05			$	0.56			$	0.60			$	0.45			$	0.14
Discontinued operations:
Income (loss) from operations			(0.07	)			(0.01	)			(0.03	)			0.02				(0.02	)			(0.02	)			—
Gain (loss) on divestiture of operations			—				0.07				(0.57	)			(0.04	)			—				(0.62	)			—
Net income (loss)		$	0.38			$	0.56			$	(0.55	)		$	0.54			$	0.58			$	(0.19	)		$	0.14
Diluted:
Income from continuing operations		$	0.44			$	0.49			$	0.05			$	0.55			$	0.60			$	0.45			$	0.14
Discontinued operations:
Income (loss) from operations			(0.06	)			(0.01	)			(0.03	)			0.03				(0.02	)			(0.02	)			—
Gain (loss) on divestiture of operations			—				0.07				(0.56	)			(0.04	)			—				(0.62	)			—
Net income (loss)		$	0.38			$	0.55			$	(0.54	)		$	0.54			$	0.58			$	(0.19	)		$	0.14
Shares used in computing earnings (loss) per common share:
Basic			37,444				37,714				38,034				38,123				38,184				38,307				38,398
Diluted			38,061				38,474				38,894				38,265				38,315				38,415				38,524

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November 2, 2009

 

 

 

KINDRED HEALTHCARE, INC.

Condensed Business Segment Data

(Unaudited)

(In thousands)

 

		2008 Quarters																2009 Quarters
		First				Second				Third				Fourth				First				Second				Third
Revenues:
Hospital division		$	476,167			$	461,064			$	434,774			$	465,317			$	492,509			$	487,145			$	468,069
Health services division			519,543				525,162				521,074				527,518				529,942				537,545				539,217
Rehabilitation division			104,499				106,318				106,796				109,707				117,647				120,450				122,625
			1,100,209				1,092,544				1,062,644				1,102,542				1,140,098				1,145,140				1,129,911
Eliminations			(65,734	)			(66,503	)			(65,515	)			(66,323	)			(70,624	)			(72,086	)			(72,423	)
		$	1,034,475			$	1,026,041			$	997,129			$	1,036,219			$	1,069,474			$	1,073,054			$	1,057,488
Income from continuing operations:
Operating income (loss):
Hospital division		$	96,802			$	85,886			$	64,818			$	97,861			$	100,899			$	91,027			$	78,674
Health services division			73,291				87,962				79,133				81,428				75,574				79,522				73,383
Rehabilitation division			11,486				10,178				7,448				8,959				15,453				13,599				10,912
Corporate:
Overhead			(34,931	)			(33,200	)			(30,937	)			(33,951	)			(34,087	)			(33,586	)			(33,843	)
Insurance subsidiary			(1,503	)			(1,347	)			(1,775	)			(2,032	)			(1,452	)			(1,182	)			(1,769	)
			(36,434	)			(34,547	)			(32,712	)			(35,983	)			(35,539	)			(34,768	)			(35,612	)
Operating income			145,145				149,479				118,687				152,265				156,387				149,380				127,357
Rent			(83,623	)			(85,860	)			(84,865	)			(84,325	)			(85,201	)			(86,882	)			(88,081	)
Depreciation and amortization			(30,558	)			(30,545	)			(29,174	)			(29,745	)			(30,490	)			(31,355	)			(31,992	)
Interest, net			(1,674	)			(572	)			(3,039	)			(2,992	)			(1,003	)			(1,196	)			(995	)
Income from continuing operations before income taxes			29,290				32,502				1,609				35,203				39,693				29,947				6,289
Provision (benefit) for income taxes			12,080				13,025				(510	)			13,549				16,352				12,409				901
		$	17,210			$	19,477			$	2,119			$	21,654			$	23,341			$	17,538			$	5,388

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November 2, 2009

 

 

 

KINDRED HEALTHCARE, INC.

Condensed Business Segment Data (Continued)

(Unaudited)

(In thousands)

 

		2008 Quarters												2009 Quarters
		First			Second			Third			Fourth			First			Second			Third
Rent:
Hospital division		$	35,907		$	37,750		$	36,461		$	36,198		$	36,445		$	36,834		$	37,062
Health services division			46,326			46,611			46,972			46,703			47,274			48,565			49,471
Rehabilitation division			1,358			1,393			1,405			1,399			1,451			1,459			1,495
Corporate			32			106			27			25			31			24			53
		$	83,623		$	85,860		$	84,865		$	84,325		$	85,201		$	86,882		$	88,081
Depreciation and amortization:
Hospital division		$	11,303		$	11,455		$	11,719		$	13,673		$	12,512		$	13,018		$	13,275
Health services division			13,892			13,292			11,536			9,925			11,685			12,038			12,408
Rehabilitation division			387			485			547			546			547			549			584
Corporate			4,976			5,313			5,372			5,601			5,746			5,750			5,725
		$	30,558		$	30,545		$	29,174		$	29,745		$	30,490		$	31,355		$	31,992
Capital expenditures, excluding acquisitions (including discontinued operations):
Hospital division		$	13,556		$	20,022		$	19,736		$	15,903		$	14,330		$	17,730		$	21,110
Health services division			7,135			10,744			19,746			12,468			21,840			11,946			6,371
Rehabilitation division			282			280			271			329			190			172			269
Corporate:
Information systems			3,832			8,616			7,051			6,864			3,453			8,838			6,152
Other			135			258			489			960			173			210			73
		$	24,940		$	39,920		$	47,293		$	36,524		$	39,986		$	38,896		$	33,975

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Page 14

November 2, 2009

 

 

 

KINDRED HEALTHCARE, INC.

Condensed Business Segment Data (Continued)

(Unaudited)

 

		2008 Quarters												2009 Quarters
		First			Second			Third			Fourth			First			Second			Third
Hospital data:
End of period data:
Number of hospitals			81			81			82			82			82			82			82
Number of licensed beds			6,358			6,358			6,428			6,482			6,520			6,520			6,520
Revenue mix %:
Medicare			57			56			54			55			56			55			55
Medicaid			9			9			11			11			10			10			11
Medicare Advantage			8			9			9			10			10			11			9
Commercial insurance and other			26			26			26			24			24			24			25
Admissions:
Medicare			7,920			7,268			6,786			7,054			7,421			7,117			6,875
Medicaid			1,034			1,008			1,148			1,043			1,052			1,053			1,165
Medicare Advantage			901			849			869			968			1,094			1,091			926
Commercial insurance and other			1,814			1,799			1,748			1,727			1,921			1,869			1,969
			11,669			10,924			10,551			10,792			11,488			11,130			10,935
Admissions mix %:
Medicare			68			67			64			65			65			64			63
Medicaid			9			9			11			10			9			9			11
Medicare Advantage			8			8			8			9			9			10			8
Commercial insurance and other			15			16			17			16			17			17			18
Patient days:
Medicare			216,737			210,064			188,832			190,794			197,377			197,203			188,712
Medicaid			50,335			50,676			54,108			53,304			50,868			50,485			53,585
Medicare Advantage			28,453			29,219			28,529			31,744			35,229			36,806			29,912
Commercial insurance and other			66,270			67,847			64,449			63,688			65,509			61,960			65,717
			361,795			357,806			335,918			339,530			348,983			346,454			337,926
Average length of stay:
Medicare			27.4			28.9			27.8			27.0			26.6			27.7			27.4
Medicaid			48.7			50.3			47.1			51.1			48.4			47.9			46.0
Medicare Advantage			31.6			34.4			32.8			32.8			32.2			33.7			32.3
Commercial insurance and other			36.5			37.7			36.9			36.9			34.1			33.2			33.4
Weighted average			31.0			32.8			31.8			31.5			30.4			31.1			30.9
Revenues per admission:
Medicare		$	34,128		$	35,717		$	34,721		$	36,029		$	37,262		$	37,748		$	37,105
Medicaid			41,853			42,271			40,798			50,577			45,160			45,759			43,640
Medicare Advantage			42,167			46,448			45,679			46,305			46,387			46,950			47,597
Commercial insurance and other			68,691			66,385			64,431			65,774			61,286			63,716			59,957
Weighted average			40,806			42,206			41,207			43,117			42,872			43,769			42,805
Revenues per patient day:
Medicare		$	1,247		$	1,236		$	1,248		$	1,332		$	1,401		$	1,362		$	1,352
Medicaid			860			841			866			990			934			954			949
Medicare Advantage			1,335			1,350			1,391			1,412			1,440			1,392			1,473
Commercial insurance and other			1,880			1,760			1,748			1,784			1,797			1,922			1,796
Weighted average			1,316			1,289			1,294			1,370			1,411			1,406			1,385
Medicare case mix index (discharged patients only)			1.12			1.16			1.14			1.17			1.22			1.23			1.19
Average daily census			3,976			3,932			3,651			3,691			3,878			3,807			3,673
Occupancy %			67.9			67.1			62.2			62.1			66.0			64.7			63.6
Annualized employee turnover %			25.0			25.9			25.7			25.2			21.3			22.1			22.8

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Page 15

November 2, 2009

 

 

 

KINDRED HEALTHCARE, INC.

Condensed Business Segment Data (Continued)

(Unaudited)

 

		2008 Quarters												2009 Quarters
		First			Second			Third			Fourth			First			Second			Third
Nursing center data:
End of period data:
Number of nursing centers:
Owned or leased			218			218			218			218			218			218			218
Managed			4			4			4			4			4			4			4
			222			222			222			222			222			222			222
Number of licensed beds:
Owned or leased			27,569			27,449			27,422			27,252			27,138			27,138			27,086
Managed			485			485			485			485			485			485			485
			28,054			27,934			27,907			27,737			27,623			27,623			27,571
Revenue mix %:
Medicare			35			35			33			34			35			35			34
Medicaid			42			43			43			43			41			41			42
Medicare Advantage			5			5			5			5			6			6			6
Private and other			18			17			19			18			18			18			18
Patient days (excludes managed facilities):
Medicare			401,468			394,520			365,125			361,977			374,853			375,140			360,009
Medicaid			1,356,401			1,347,763			1,387,819			1,374,670			1,326,654			1,323,157			1,357,596
Medicare Advantage			64,929			68,850			69,655			69,083			80,352			82,652			84,322
Private and other			413,510			406,564			419,071			420,193			403,320			415,510			415,467
			2,236,308			2,217,697			2,241,670			2,225,923			2,185,179			2,196,459			2,217,394
Patient day mix %:
Medicare			18			18			16			16			17			17			16
Medicaid			61			61			62			62			61			60			61
Medicare Advantage			3			3			3			3			4			4			4
Private and other			18			18			19			19			18			19			19
Revenues per patient day:
Medicare Part A		$	428		$	430		$	433		$	455		$	457		$	459		$	464
Total Medicare (including Part B)			461			465			474			497			497			500			508
Medicaid			159			166			163			163			165			167			166
Medicare Advantage			369			373			370			381			380			392			398
Private and other			229			227			230			231			235			232			234
Weighted average			232			237			232			237			243			245			243
Average daily census			24,575			24,370			24,366			24,195			24,280			24,137			24,102
Admissions			18,215			17,634			16,903			17,234			18,166			18,456			17,803
Occupancy %			89.3			89.1			89.2			88.9			89.3			88.9			88.9
Medicare average length of stay			35.2			35.7			36.5			34.8			34.8			35.5			36.3
Annualized employee turnover %			48.2			50.2			51.0			48.9			37.9			39.9			40.2
Rehabilitation data:
Revenue mix %:
Company-operated			65			64			62			61			61			60			59
Non-affiliated			35			36			38			39			39			40			41
Sites of service (at end of period)			650			658			659			655			661			659			660
Revenue per site		$	160,767		$	161,578		$	162,058		$	167,492		$	177,984		$	182,775		$	185,797
Therapist productivity %			81.9			81.3			80.1			82.3			84.8			84.8			83.5
Annualized employee turnover %			13.1			13.5			13.2			13.3			10.9			11.6			13.1

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Page 16

November 2, 2009

 

 

 

KINDRED HEALTHCARE, INC.

Earnings (Loss) Per Common Share Reconciliation (a)

(Unaudited)

(In thousands, except per share amounts)

 

		Three months ended September 30,																Nine months ended September 30,
		2009								2008								2009								2008
		Basic				Diluted				Basic				Diluted				Basic				Diluted				Basic				Diluted
Earnings (loss):
Income from continuing operations:
As reported in Statement of Operations		$	5,388			$	5,388			$	2,119			$	2,119			$	46,267			$	46,267			$	38,806			$	38,806
Allocation to participating unvested restricted stockholders			(90	)			(90	)			(46	)			(45	)			(833	)			(830	)			(915	)			(897	)
Available to common stockholders		$	5,298			$	5,298			$	2,073			$	2,074			$	45,434			$	45,437			$	37,891			$	37,909
Discontinued operations, net of income taxes:
Income (loss) from operations:
As reported in Statement of Operations		$	13			$	13			$	(1,321	)		$	(1,321	)		$	(1,465	)		$	(1,465	)		$	(4,369	)		$	(4,369	)
Allocation to participating unvested restricted stockholders			—				—				29				28				26				26				103				101
Available to common stockholders		$	13			$	13			$	(1,292	)		$	(1,293	)		$	(1,439	)		$	(1,439	)		$	(4,266	)		$	(4,268	)
Gain (loss) on divestiture of operations:
As reported in Statement of Operations		$	52			$	52			$	(22,058	)		$	(22,058	)		$	(23,999	)		$	(23,999	)		$	(19,346	)		$	(19,346	)
Allocation to participating unvested restricted stockholders			(1	)			(1	)			475				465				432				431				456				447
Available to common stockholders		$	51			$	51			$	(21,583	)		$	(21,593	)		$	(23,567	)		$	(23,568	)		$	(18,890	)		$	(18,899	)
Net income (loss):
As reported in Statement of Operations		$	5,453			$	5,453			$	(21,260	)		$	(21,260	)		$	20,803			$	20,803			$	15,091			$	15,091
Allocation to participating unvested restricted stockholders			(91	)			(91	)			458				448				(375	)			(373	)			(356	)			(349	)
Available to common stockholders		$	5,362			$	5,362			$	(20,802	)		$	(20,812	)		$	20,428			$	20,430			$	14,735			$	14,742
Shares used in the computation:
Weighted average shares outstanding - basic computation			38,398				38,398				38,034				38,034				38,297				38,297				37,732				37,732
Dilutive effect of employee stock options							126								860								122								753
Adjusted weighted average shares outstanding - diluted computation							38,524								38,894								38,419								38,485
Earnings (loss) per common share:
Income from continuing operations		$	0.14			$	0.14			$	0.05			$	0.05			$	1.19			$	1.18			$	1.00			$	0.98
Discontinued operations:
Income (loss) from operations			—				—				(0.03	)			(0.03	)			(0.04	)			(0.04	)			(0.11	)			(0.11	)
Gain (loss) on divestiture of operations			—				—				(0.57	)			(0.56	)			(0.62	)			(0.61	)			(0.50	)			(0.49	)
Net income (loss)		$	0.14			$	0.14			$	(0.55	)		$	(0.54	)		$	0.53			$	0.53			$	0.39			$	0.38

 

(a)

Earnings (loss) per common share are based upon the weighted average number of common shares outstanding during the respective periods. The diluted calculation of earnings (loss) per common share includes the dilutive effect of stock options. On January 1, 2009, the Company adopted 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 (loss) per common share calculation pursuant to the two-class method.

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November 2, 2009

 

 

 

KINDRED HEALTHCARE, INC.

Reconciliation of Earnings Guidance for 2009 and 2010 - Continuing Operations

(Unaudited)

(In millions, except per share amounts)

 

		Earnings Guidance Ranges (a)
		2009												2010
		As of November 2, 2009						As of August 4, 2009						As of November 2, 2009
		Low			High			Low			High			Low			High
Operating income		$	577		$	581		$	578		$	584		$	575		$	583
Rent			350			350			353			353			364			364
Depreciation and amortization			126			126			126			126			123			123
Interest, net			5			5			8			8			5			5
Income from continuing operations before income taxes			96			100			91			97			83			91
Provision for income taxes			38			40			37			40			35			37
Income from continuing operations			58			60			54			57			48			54
Allocation to participating unvested restricted stockholders			1			1			1			1			1			1
Available to common stockholders		$	57		$	59		$	53		$	56		$	47		$	53
Earnings per diluted share		$	1.48		$	1.53		$	1.35		$	1.45		$	1.20		$	1.35
Shares used in computing earnings per diluted share			38.5			38.5			39.0			39.0			39.0			39.0

 

(a)	The Company indicated that the earnings guidance for continuing operations reflects the estimated impact of the final rules issued by CMS on July 31, 2009 related to payment rates for 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 other changes in government reimbursements, repurchases of common stock or unusual items.