Kindred Healthcare, Inc. (the "Company") (NYSE:KND) today announced its operating results for the first quarter ended March 31, 2010. 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.
“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.”
First Quarter Highlights:
- Consolidated revenues rose 2% to $1.1 billion
- Each operating division reported revenue growth compared to last year
- Reported diluted earnings per share totaled $0.38, including $0.06 of certain charges
- Excluding the charges, first quarter earnings were at the high end of the Company's guidance range of $0.35 to $0.45 per diluted share
- Hospital volumes continued to improve
- Reported admissions grew 3% from last year
- Same-facility aggregate admissions grew 3%; same-facility commercial admissions grew 12%
- Volume growth in the quarter was partially offset by softer Medicare and commercial pricing
- Nursing and rehabilitation center admissions grew 5% in the first quarter compared to last year
- Reimbursement rates were generally in line with expectations
- Peoplefirst Rehabilitation continued to demonstrate consistent operating results
- Division signed 28 net additional unaffiliated contracts compared to a loss of three contracts in the first quarter last year
First Quarter Results
Continuing Operations
Consolidated revenues for the first quarter ended March 31, 2010 rose 2% to $1.1 billion. Income from continuing operations for the first quarter of 2010 totaled $15.2 million or $0.38 per diluted share compared to $23.3 million or $0.60 per diluted share in the first quarter last year.
First quarter 2010 operating results included certain pretax charges related to severance and retirement costs of $2.9 million and transaction costs of $0.8 million. The combined effect of these costs reduced income from continuing operations by $2.3 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.
Other Quarterly Information
During the first quarter of 2010, the Company received a distribution of $22 million from its limited purpose insurance subsidiary to be used for general corporate purposes. The distribution, which had no impact on earnings, 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 pleased to report a good start to the year. Our hospital and nursing center admissions growth was solid and we generally did a good job of controlling our costs. However, the softness in reimbursement rates in both of these businesses presents a challenging environment."
Commenting on the Company's financial position, Mr. Diaz noted, "Our first quarter 2010 operating cash flows were in line with our expectations as we continued to focus on our accounts receivable collections. As a result, our accounts receivable balance at March 31, 2010 declined approximately $27 million from a year ago while our revenues continued to grow. As we have previously indicated to investors, we believe that our operating cash flows in 2010 will fund a significant portion of our routine and development capital spending."
With respect to the Company's ongoing development activities, Mr. Diaz remarked, "We are continuing to construct four additional hospitals that will open over the next couple of years, and we acquired a combined 241-bed nursing center/assisted living facility to further expand our presence in the Cleveland market. In other cluster markets, we recently opened a new 74-bed replacement hospital in Houston and began construction of a new 120-bed transitional care center in Indianapolis. We also acquired two hospitals and two nursing centers that were previously leased during the first quarter of 2010. Finally, the ongoing development of our 5 hospital-based subacute units, 32 transitional care centers and 102 transitional care units is on track."
2010 Earnings Guidance - Continuing Operations
The Company maintained its 2010 earnings guidance for continuing operations. The Company expects consolidated revenues for 2010 to approximate $4.5 billion. Operating income, or earnings before interest, income taxes, depreciation, amortization and rent, is expected to range from $571 million to $579 million. Rent expense is expected to approximate $360 million, while depreciation, amortization and net interest expense are expected to approximate $128 million. The Company expects to report income from continuing operations for 2010 between $48 million to $54 million or $1.20 to $1.35 per diluted share (based upon diluted shares of 39 million).
The Company also provided its earnings outlook for the second quarter of 2010, estimating income from continuing operations to range from $12 million to $15 million or $0.30 to $0.40 per diluted share (based upon diluted shares of 39 million).
As previously indicated to investors, the Company continues to believe that the typical seasonal weakness in the third quarter will likely result in earnings per diluted share between break-even and $0.10 for the period.
The Company indicated that the earnings guidance for continuing operations reflects the operating results of $0.38 per diluted share reported in the first quarter as well as the anticipated impact of proposed rules issued by the Centers for Medicare and Medicaid Services ("CMS") in April 2010 related to payment rates for long-term acute care ("LTAC") hospitals effective October 1, 2010. The Company also indicated that the earnings guidance does not reflect any other reimbursement changes, any material acquisitions or divestitures, or 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."
SOURCE Kindred Healthcare, Inc.,
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