LOUISVILLE, Ky. (May 2, 2012) — Kindred Healthcare Inc.’s (NYSE: KND) consolidated revenues rose 33 percent to $1.6 billion in the first quarter of 2012, the company announced Tuesday. The company’s consolidated financial statements include the operating results of RehabCare Group Inc. since the closing of the acquisition on June 1, 2011.
Kindred Healthcare Inc. is a healthcare services company based in Louisville with annual revenues of $6 billion and approximately 76,100 employees in 46 states.
First quarter highlights
• RehabCare acquisition added $364 million in current period revenues.
• RehabCare synergy plan continues to track toward $70 million annual goal
• Hospital results were bolstered by the RehabCare acquisition, volume growth and cost efficiencies; reported admissions grew 40 percent from last year; same-facility admissions grew 2 percent; operating income grew 48 percent to $161 million.
• Despite growth in nursing center admissions and improved cost management, reimbursement pressures and declining lengths of stay drove operating declines; nursing center revenues declined 4 percent from last year’s first quarter; operating income declined 25 percent to $66 million
• While recent Medicare changes impaired rehabilitation division’s operating margins compared to last year, operating margins improved from the fourth quarter of 2011; successful RehabCare integration activities continue
• Home health and hospice division reported significant revenue and operating income growth
First quarter results
Continuing operations
Consolidated revenues for the first quarter ended March 31, 2012 rose 33 percent to $1.6 billion compared to $1.2 billion in the first quarter last year. Income from continuing operations for the first quarter of 2012 totaled $18.1 million or $0.35 per diluted share compared to $22.3 million or $0.55 per diluted share in the first quarter last year.
First quarter 2012 operating results included certain pretax charges of $4.6 million related to costs incurred in connection with the closing of a regional office and a long-term acute care (LTAC) hospital and transaction-related costs, the effect of which reduced income from continuing operations by $2.8 million or $0.05 per diluted share.
First quarter 2011 operating results included certain charges that reduced income from continuing operations by $4.0 million or $0.10 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 have been classified as discontinued operations in the Company’s consolidated statement of operations for all historical periods.
Management commentary
“We reported a good start to the year, having successfully stabilized our operations following the significant Medicare reimbursement cuts that took effect in the fourth quarter of 2011,” said Paul J. Diaz, President and Chief Executive Officer of the company. “Each of our four operating divisions is focused on the achievement of our clinical and financial goals for 2012 as we continue to execute on our strategic operating plan. Our first quarter results are consistent with our annual earnings expectations and reflect early success in our operating efficiency initiatives and continued realization of synergies in connection with the RehabCare acquisition.”
During the first quarter, the company opened a new 46-bed free-standing inpatient rehabilitation hospital in suburban Houston and signed contracts to manage two acute rehabilitation units. It also acquired a previously leased hospital in southern California for $50 million and deposited $17 million toward the purchase of another leased hospital in Cleveland, Diaz said.
“In addition, projects to expand and upgrade LTAC hospitals in Dayton, Ohio, and Charleston, S.C., as well as the replacement of an inpatient rehabilitation hospital in Austin, Texas, are proceeding in line with our plans,” he said.
Earnings guidance — continuing operations
The company maintained its earnings guidance for 2012. The earnings guidance provided by the Company excludes the effect of (1) any costs associated with the closing of a regional office and a LTAC hospital, (2) any transaction-related charges, (3) any other reimbursement changes, (4) any acquisitions or divestitures, (5) any impairment charges, or (6) any repurchases of common stock.
Kindred expects consolidated revenues for 2012 to approximate $6.3 billion. Operating income, or earnings before interest, income taxes, depreciation, amortization and rent, is expected to range from $868 million to $884 million. Rent expense is expected to approximate $432 million, while depreciation and amortization should approximate $199 million. Net interest expense is expected to approximate $107 million. The company expects to report income from continuing operations for 2012 between $73 million to $83 million or $1.35 to $1.55 per diluted share (based upon diluted shares of 52.5 million).
Kindred also indicated that it expects cash flows from operations in 2012 to range from $240 million to $260 million. Routine capital expenditures in 2012 are expected to range from $130 million to $140 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 projects related to the replacement, expansion and upgrade of its hospitals in Dayton, Ohio, Charleston, S.C., and Austin, Texas, will be completed at an aggregate additional cost of approximately $23 million through 2013 (these expenditures are not included in the routine capital spending estimates discussed above).
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