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Kindred Healthcare First Quarter Results Exceed Company's Guidance

May 4, 2009
Company Reports $0.57 per Diluted Share from Continuing Operations Compared to Last Year’s $0.42

First Quarter EPS Guidance Range was $0.40 to $0.50

Company Maintains 2009 EPS Range of $1.35 to $1.45

Company Provides Second Quarter 2009 EPS Guidance of $0.28 to $0.38

Louisville, KY (May 4, 2009) – Kindred Healthcare, Inc. (the “Company”) (NYSE:KND) today announced its operating results for the first quarter ended March 31, 2009. 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 rose 3% to $1.1 billion
    - Each operating division reported revenue growth compared to last year
  • Diluted earnings per share grew 36% to $0.57 compared to last year’s $0.42
    - Earnings growth was driven by operating income growth in all three divisions and lower corporate overhead
    - Consolidated operating income grew 7% to $157 million
    - First quarter capital-related costs were flat with the first quarter of 2008
  • Hospital operating margins improved
    - Reported admissions declined 2% from last year partly resulting from leap year in 2008
    - Same-store aggregate admissions declined 1%
    - Same-store non-government admissions grew 12%
  • Nursing center results were in line with expectations despite softer volumes
    - Revenue mix and overall occupancy were relatively unchanged from last year
    - Annualized employee turnover declined to 38% from 48% in the first quarter of 2008
  • Peoplefirst operating income grew 35% in the quarter
    - Revenue growth and productivity improvements drove $4 million increase in operating income

First Quarter Results

Continuing Operations

Consolidated revenues for the first quarter ended March 31, 2009 rose 3% to $1.1 billion. Income from continuing operations for the first quarter of 2009 totaled $22.4 million or $0.57 per diluted share compared to $16.5 million or $0.42 per diluted share in the first quarter last year.

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 2009, the Company reported income from discontinued operations totaling $0.4 million or $0.01 per diluted share compared to a loss of $1.8 million or $0.05 per diluted share in the first quarter of 2008.

Other Quarterly Information

During the first quarter of 2009, the Company received a distribution of $34 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 first quarter results illustrate how our continued focus on our employees, patients and residents can create additional shareholder value through better operational execution. Our first quarter operating income grew by approximately $11 million or 7% compared to the same period last year as we reported solid operational improvements in each of our three divisions. Because our capital-related costs were relatively unchanged in the period, we reported 36% growth in earnings per diluted share compared to last year’s first quarter.”

Mr. Diaz further commented, “While our hospital and nursing center volumes were somewhat soft in the first quarter, we did a better job of managing our costs, particularly contract labor and premium pay, in line with our patient census levels. In Peoplefirst rehabilitation services, we saw solid revenue growth combined with impressive productivity gains that produced 35% growth in first quarter operating income compared to last year.”

Commenting on the Company’s financial position, Mr. Diaz noted, “Our first quarter 2009 operating cash flows were well ahead of last year as we continued to improve our accounts receivable collections. As a result, our accounts receivable balance at March 31, 2009 was relatively unchanged from a year ago while days of revenue in accounts receivable declined by 2%. In addition, we continued to maintain higher cash balances to further enhance our financial strength in a generally difficult credit market.”

With respect to the Company’s ongoing development activities, Mr. Diaz remarked, “We are continuing to develop five additional hospitals that will open over the next couple of years, and we are reviewing other opportunities to acquire nursing and rehabilitation centers in strategic markets.”

2009 Earnings Guidance – Continuing Operations

The Company maintained its 2009 earnings guidance for continuing operations. The Company expects consolidated revenues for 2009 to approximate $4.4 billion. Operating income, or earnings before interest, income taxes, depreciation, amortization and rent, is expected to range from $582 million to $588 million. Rent expense is expected to approximate $355 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 second quarter of 2009, estimating income from continuing operations to range from $11 million to $15 million or $0.28 to $0.38 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 share between break-even and $0.10 for the period.

The Company indicated that the earnings guidance for continuing operations reflects the anticipated impact of (a) proposed rules issued by the Centers for Medicare and Medicaid Services (“CMS”) on May 1, 2009 related to payment rates for long-term acute care (“LTAC”) hospitals and nursing centers and (b) the Company’s transactions with Ventas, Inc. (“Ventas”) (NYSE:VTR) announced on April 30, 2009 to renew certain leases and to acquire six under-performing leased nursing centers for resale. 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 2009 conference call through a link on Kindred’s website at The conference call will be held May 5, 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 May 5 by dialing (719) 457-0820, access code: 8854864. The replay will be available through May 13.

Investor Day

As previously announced, the Company will host its second annual Investor Day on Wednesday, May 6 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 or at

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 following the event.

Investors interested in attending the event should contact Ms. Teresa Kappner by email: 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) 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 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; (c) the effects of healthcare reform and government regulations, interpretation of regulations and changes in the nature and enforcement of regulations governing the healthcare industry; (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; (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.

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 40 states. At March 31, 2009, Kindred through its subsidiaries provided healthcare services in 661 locations, including 82 long-term acute care hospitals, 228 skilled nursing centers and a contract rehabilitation services business, Peoplefirst rehabilitation services, which served 351 non-affiliated facilities. Ranked first in Fortune magazine’s 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

Click here to view the 1st Quarter Results, including all charts.

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