Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 3, 2017

 

 

KINDRED HEALTHCARE, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-14057   61-1323993

(State or other jurisdiction of

incorporation or organization)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

680 South Fourth Street

Louisville, Kentucky

(Address of principal executive offices)

40202

(Zip Code)

Registrant’s telephone number, including area code: (502) 596-7300

Not Applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation to the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company   ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

 

 

 


Item 2.02. Results of Operations and Financial Condition.

On August 3, 2017, Kindred Healthcare, Inc. (the “Company”) issued a press release announcing its financial results for the second quarter ended June 30, 2017. The press release, dated August 3, 2017, is attached as Exhibit 99.1 to this Form 8-K. On August 3, 2017, the Company also made the press release available on its website at www.kindredhealthcare.com.

The information contained herein is being furnished pursuant to Item 2.02 of Form 8-K, “Results of Operations and Financial Condition.” This information shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, nor shall this information be deemed incorporated by reference into any filing made by the Company under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such a filing.

 

Item 7.01. Regulation FD Disclosure.

Incorporated by reference is Exhibit 99.1 attached hereto, a press release issued by the Company on August 3, 2017 announcing its financial results for the second quarter ended June 30, 2017. This information is being furnished under Item 7.01 and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of such section nor shall this information be deemed incorporated by reference into any filing made by the Company under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such a filing.

 

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Exhibit 99.1         Press release dated August 3, 2017.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereto duly authorized.

 

   KINDRED HEALTHCARE, INC.
Date: August 4, 2017    By:   

/s/ Joseph L. Landenwich

      Joseph L. Landenwich
      General Counsel and Corporate Secretary


EXHIBIT INDEX

 

Exhibit

  

Description

99.1    Press release dated August 3, 2017.
EX-99.1

EXHIBIT 99.1

 

LOGO

 

Contact:    Todd Flowers
   Investor Relations
   (502) 596-6569

KINDRED HEALTHCARE REPORTS SECOND QUARTER 2017 RESULTS

Results Adjusted to Reflect Discontinued Operations Accounting Treatment for Skilled Nursing Facility Business

 

 

Consolidated Revenues of $1.53 Billion, GAAP Loss from Continuing Operations of $108 Million(1), GAAP Diluted Loss Per Share from Continuing Operations of $1.36(1) and EBITDAR of $36 Million(2) in the Second Quarter

Results Reflect After-Tax Costs of $136 Million Primarily Related to Non-Cash Impairments of $82 Million and a Non-Cash Deferred Tax Asset Valuation Allowance of $37 Million

Core EBITDAR of $198 Million(3) and Core Diluted EPS from Continuing Operations of $0.19(3) in the Second Quarter

Second Quarter GAAP Operating Cash Flows and Core Operating Cash Flows of $93 Million(3)

and Core Free Cash Flows of $62 Million(3)

Company Updates Outlook for 2017 and 2018

LOUISVILLE, Ky. (August 3, 2017) – Kindred Healthcare, Inc. (“Kindred” or the “Company”) (NYSE:KND) today announced its operating results for the second quarter ended June 30, 2017.

Benjamin A. Breier, President and Chief Executive Officer of the Company, commented, “We are pleased to report strong second quarter operating results in line with expectations. We made solid progress growing our Kindred at Home and Kindred Rehabilitation Services divisions. Strong top line growth and another sequential decline in labor costs drove increased profitability in both businesses. The growth in these businesses, solid cash flow performance and our enterprise-wide cost realignment initiatives position Kindred for future success.”

Mr. Breier continued, “The second quarter was a historical one for Kindred, marked by the execution of the definitive agreement to sell our skilled nursing facility business. After more than two decades of nursing center operations, this announcement clears the way to closing that chapter of Kindred’s story, and turns the page to the future of integrated post-acute care. We expect these sales to be completed by the end of 2017, and believe they will significantly enhance shareholder value and increase our focus on higher margin, faster growing and less capital intensive businesses, all of which will increase the fundamental cash generating capacity of our enterprise.”

Mr. Breier added, “Our Hospital Division continued to advance its mitigation strategy, navigating through its third full quarter of long-term acute care (“LTAC”) patient criteria. Operating results were largely in line with our previously stated expectations. LTAC compliant revenue increased to 88% from 86% in the first quarter. Managed care and commercial volumes increased 8.2% for the second quarter of 2017 on a same-hospital basis as compared to the prior year period.”

Mr. Breier noted, “Kindred’s Hospital Division continues to advance its portfolio optimization initiative with the pending closure of five additional non-strategic LTAC hospitals. As announced earlier this week, Kindred is converting one of those LTAC hospitals in Indianapolis, Indiana into an inpatient rehabilitation facility (“IRF”) joint venture with Community Health Network. We expect to further optimize our LTAC portfolio with additional closures, consolidations and IRF conversions over the coming quarters.”

 

 

(1) Results reflect after-tax costs of $136.4 million or $1.56 per diluted share related to impairment charges, deferred tax asset valuation allowance, RehabCare collection litigation, restructuring charges and business interruption settlements.
(2) Results reflect pretax costs of $162.5 million related to impairment charges, RehabCare collection litigation, restructuring charges and business interruption settlements. As used herein, “EBITDAR” means earnings before interest, income taxes, depreciation, amortization and total rent. See reconciliation of generally accepted accounting principles (“GAAP”) results to non-GAAP results beginning on page 14.
(3) See reconciliation of GAAP results to non-GAAP results beginning on page 14. During the first quarter of 2017, the Company revised its definition of “core” non-GAAP measures. See “Non-GAAP Measures” beginning on page 14 for a discussion regarding the revised definitions. For comparability, core results for 2016 have been revised to conform to the current year presentation.

 

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680 South Fourth Street     Louisville, Kentucky 40202

502.596.7300     www.kindredhealthcare.com


Kindred Healthcare Reports Second Quarter 2017 Results

Page 2

August 3, 2017

 

 

Mr. Breier concluded, “We are very proud of the progress our teammates made over the first half of the year. Advancing our exit from the skilled nursing facility business in its entirety, working through our LTAC patient criteria mitigation strategy, and growing our Kindred at Home and Kindred Rehabilitation Services divisions set the stage for additional progress in the coming quarters. As detailed in the 2017 and 2018 Outlook section below, we expect these efforts to result in financial performance next year of approximately $6.2 billion of revenue, $830 million of Core EBITDAR, $0.80 of Core diluted earnings per share (“EPS”) from continuing operations, and a midpoint expectation of $180 million of Core free cash flows and cash benefits from utilization of net operating losses (“NOLs”)(1). I would like to extend my deep appreciation and sincere thanks to the thousands of caregivers and teammates whose contribution is critical to improving the lives of the more than one million patients we care for each year.”

All financial and statistical information included in this earnings release reflects the continuing operations of the Company’s businesses for all periods presented unless otherwise indicated. As a result of developments in the second quarter of 2017 related to the planned divestiture of the Company’s skilled nursing facility business, the operating results, direct overhead and losses associated with this business were classified, for accounting purposes, as discontinued operations for all periods presented. These changes include the transfer of profits from applicable RehabCare contracts servicing the Company’s skilled nursing facility business to discontinued operations, but do not include any allocations of indirect overhead related to the skilled nursing facility business. In addition, the Company has reclassified certain retained businesses and expenses previously reported in the Nursing Center Division to other business segments in continuing operations for all periods presented.

Second Quarter Consolidated Results(2):

 

    Consolidated revenues were $1.53 billion, a 4.6% year-over-year decrease, primarily attributable to the impact of the transition to LTAC patient criteria and the sale or closure of 16 LTAC hospitals primarily during the second half of 2016. GAAP loss from continuing operations was $108.2 million compared to income of $28.0 million in the same period a year ago, primarily due to a $129.7 million pretax increase in impairment charges, a deferred tax asset valuation allowance of $36.7 million, a $25.3 million pretax charge for certain RehabCare contract terminations for non-payment and related collection litigation (“RehabCare Collection Litigation”) and the impact of LTAC patient criteria. Core EBITDAR declined to $198.0 million compared to $228.2 million in the same period of 2016, primarily due to LTAC patient criteria and the sale or closure of the 16 LTAC hospitals noted above.

 

    GAAP operating cash flows were $92.7 million compared to $135.2 million for the same period a year ago. Core operating cash flows were $92.3 million compared to $126.3 million for the same period a year ago. Core free cash flows were $62.4 million compared to $83.3 million in the same period a year ago. GAAP operating cash flows, Core operating cash flows and Core free cash flows declined compared to the prior year period primarily due to LTAC patient criteria and an increase in net working capital in the second quarter of 2017 compared to the prior year period.

 

    GAAP diluted loss per share from continuing operations was $1.36 as compared to GAAP diluted EPS from continuing operations of $0.21 a year ago. This decrease was primarily due to an increase in impairment charges, a deferred tax asset valuation allowance of $36.7 million, a provision for the RehabCare Collection Litigation and LTAC patient criteria. Core diluted EPS from continuing operations was $0.19 as compared to $0.33 for the same period last year. The decline in Core diluted EPS was primarily attributable to LTAC patient criteria.

 

    The Company recorded a pretax $134.6 million non-cash impairment charge in the second quarter to reflect the write-off of the full carrying value of RehabCare trade name and customer contract intangible assets based upon various factors, including the estimated reduction in earnings resulting from the previously announced definitive agreement to dispose of the Company’s skilled nursing facility business and the impact of the RehabCare Collection Litigation.

Second Quarter Segment Results(2)(3):

Our Kindred at Home Division, which comprises the Company’s home health, hospice, community care and home-based primary care businesses, recorded second quarter revenues that increased 3.2% over the prior year period to $644.5 million. On a

 

 

(1) See “2017 and 2018 Outlook” below for further details. All forward-looking non-GAAP financial measures are provided only on a non-GAAP basis due to the inherent difficulty of forecasting the timing or amount of items that would be included in the most directly comparable forward-looking GAAP financial measures. As a result, reconciliation of the forward-looking non-GAAP measures to GAAP financial measures is not available without unreasonable effort and the Company is unable to assess the probable significance of the unavailable information.
(2) See reconciliation of GAAP results to non-GAAP results beginning on page 14. During the first quarter of 2017, the Company revised its definition of “core” non-GAAP measures. See “Non-GAAP Measures” beginning on page 14 for a discussion regarding the revised definitions. For comparability, core results for 2016 have been revised to conform to the current year presentation.
(3) See full segment data on pages 9 through 13.

 

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Kindred Healthcare Reports Second Quarter 2017 Results

Page 3

August 3, 2017

 

 

Second Quarter Segment Results(1)(2)(3)(Continued):

same-store basis, home health admissions increased 2.8% and episodic admissions were flat while same-store hospice admissions declined 3.0% over the prior year period. Segment adjusted operating income and Core EBITDAR increased 1.9% and 1.3%, respectively, for the second quarter of 2017 as compared to the prior year period. Home health direct labor costs per visit declined 3.0% and hospice direct labor costs per patient day declined 1.8% in the second quarter of 2017 both as compared to the first quarter of 2017.

Kindred’s Hospital Division second quarter revenues declined to $540.8 million from $645.4 million in the prior year period primarily due to the elimination of approximately $70 million of revenue related to the sale or closure of the 16 LTAC hospitals primarily during the second half of 2016, the impact of LTAC patient criteria and a 2.0% decline in same-hospital admissions compared to last year. For the second quarter of 2017, approximately 88% (92% excluding Texas LTAC hospitals) of same-hospital revenue came from LTAC compliant patients, which include all patients except Medicare site neutral patients, an increase from approximately 86% (89% excluding Texas LTAC hospitals) in the first quarter of 2017. Same-hospital managed care and commercial volumes increased 8.2% in the second quarter of 2017 compared to the prior year period. Segment adjusted operating income and Core EBITDAR for the second quarter declined to $91.6 million and $90.6 million, respectively, compared to $127.5 million for both Segment adjusted operating income and Core EBITDAR a year ago. The declines were primarily due to the elimination of approximately $8 million of Segment adjusted operating income and Core EBITDAR related to the sale or closure of the 16 LTAC hospitals noted above, the impact of LTAC patient criteria, and increases in labor and other costs.

Kindred Rehabilitation Services increased second quarter revenues by 2.2% to $369.3 million as compared to $361.3 million in the prior year period. Segment adjusted operating income decreased to $36.1 million as compared to $58.1 million in the prior year period, primarily as a result of the RehabCare Collection Litigation. Core EBITDAR increased to $61.4 million as compared to $58.1 million in the prior year period. The Kindred Hospital Rehabilitation Services segment achieved revenue growth of 4.3% to $178.4 million, and Segment adjusted operating income and Core EBITDAR both grew to $53.4 million, an increase of 5.3% compared to the same period a year ago, as a result of the development of new IRFs and a 6.7% increase in revenue per discharge while same-IRF discharges were flat compared to prior year. RehabCare revenues increased 0.4% to $190.9 million for the second quarter. RehabCare Segment adjusted operating income (loss) decreased to a loss of $17.3 million compared to income of $7.4 million in the prior year period, primarily due to the RehabCare Collection Litigation. RehabCare Core EBITDAR increased 8.7% to $8.0 million primarily due to cost reduction initiatives and efforts to terminate unprofitable contracts, partially offset by census decline and wage rate pressure.

Discontinued Operations – Loss on Divestiture of Skilled Nursing Facility Business

During the second quarter of 2017, the Company recorded $288.8 million of pretax charges related to the planned divestiture of its skilled nursing facility business, including a $262.3 million lease termination accrual, $18.0 million of transaction costs and $8.5 million of retention costs.

2017 and 2018 Outlook(4)

All forward-looking non-GAAP financial measures used to provide “2017 Outlook” and “2018 Outlook” (collectively, “Outlook”) are provided only on a non-GAAP basis. This is due to the inherent difficulty of forecasting the timing or amount of items that would be included in the most directly comparable forward-looking GAAP financial measures. As a result, reconciliation of the forward-looking non-GAAP financial measures to GAAP financial measures is not available without unreasonable effort and the Company is unable to assess the probable significance of the unavailable information.

The Company’s Outlook does not take into account the effect of any reimbursement changes, any further acquisitions or divestitures, and any further issuances or repurchases of common stock.

 

 

(1) See reconciliation of GAAP results to non-GAAP results beginning on page 14. During the first quarter of 2017, the Company revised its definition of “core” non-GAAP measures. See “Non-GAAP Measures” beginning on page 14 for a discussion regarding the revised definitions. For comparability, core results for 2016 have been revised to conform to the current year presentation.
(2) See same-hospital and full segment data on pages 9 through 13.
(3) For each of the Company’s segments, Segment adjusted operating income (loss) is a measure of performance used by the Company’s chief operating decision makers in accordance with “Accounting Standard Codification 280 – Segment Reporting.” The Company defines Segment adjusted operating income (loss) as EBITDAR, excluding litigation contingency expense, impairment charges, restructuring charges, transaction costs, and the allocation of support center overhead.
(4) See Forward-Looking Statements beginning on page 14.

 

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Kindred Healthcare Reports Second Quarter 2017 Results

Page 4

August 3, 2017

 

 

2017 and 2018 Outlook(1)(Continued):

Stephen D. Farber, Executive Vice President and Chief Financial Officer of Kindred, commented, “As a reminder, when the Company established its 2017 Outlook, it included a midpoint expectation for 2017 Core EBITDAR of $930 million, with a range of $910 million to $950 million. As discussed above, the Company is now reflecting its skilled nursing facility business in discontinued operations. For consistency, this change would require that the Company’s previous 2017 Core EBITDAR Outlook be adjusted by approximately $140 million(2).”

Mr. Farber noted, “There are additional factors that should be considered with updating expectations for our 2017 performance. For example, we expect roughly $30 million of benefit, on a full-year basis, from various cost reduction efforts and anticipated new RehabCare contracts signed in connection with the sale of the skilled nursing facility business. We expect the full amount of these items to benefit 2018, but the impact on 2017 is completely dependent on the timing of multiple transaction closings, which are uncertain but expected to occur in phases over the remainder of 2017. Also as discussed above, we are closing five additional LTAC hospitals, including the conversion of an LTAC hospital to an IRF, each of which has uncertain timing, lease termination, wind-down and other costs. These and other items will have both positive and negative impacts on Kindred’s reported results for the balance of 2017.”

Mr. Farber continued, “For the second half of 2017, we expect our third quarter to follow normal seasonal trends, making it the softest quarter of the year. Due to ongoing and widely reported inpatient volume trends, as well as continued labor pressure in our Hospital Division, the Company is expecting to finish the year towards the lower end of its previous outlook range.”

Mr. Farber concluded, “Given the complexity and uncertain timing of these items over the next several months, it is not practical to update our 2017 Outlook and we are limiting our commentary for the balance of 2017 to the items discussed above. As such, we are focusing on updating and expanding our outlook for 2018. The items identified above should be largely complete and incorporated on a run-rate basis in Kindred’s results by the end of 2017, and estimates for these items are reflected in the Company’s 2018 Outlook below.”

For the 2018 Outlook, Kindred anticipates:

 

    Annual revenues at the midpoint of approximately $6.2 billion;

 

    Core EBITDAR at the midpoint of approximately $830 million; and

 

    Core diluted EPS from continuing operations at the midpoint of approximately $0.80.

In determining these items, Kindred utilized the following 2018 estimates:

 

    Total rent expense of approximately $300 million;

 

    Depreciation and amortization expense of approximately $100 million;

 

    Interest expense of approximately $245 million, including $17 million of amortization of deferred financing fees;

 

    Noncontrolling interest expense of approximately $45 million to $50 million;

 

    An effective book tax rate of approximately 34%;

 

    Weighted average shares outstanding of approximately 90.0 million; and

 

    Routine capital expenditures of approximately $60 million.

Please note:

 

    Annual revenues have been adjusted from approximately $6.3 billion in the previous 2018 Outlook to $6.2 billion in the current 2018 Outlook primarily to reflect the impact of recent and anticipated LTAC hospital closures and consolidations;

 

    Core EBITDAR has been adjusted from $840 million in the previous 2018 Outlook to $830 million in the current 2018 Outlook to reflect recent and anticipated LTAC hospital closures and consolidations. Since these hospitals have similar levels of Core EBITDAR and lease expense, the simultaneous elimination of Core EBITDAR and lease expense are expected to have an immaterial impact on Core earnings before income taxes, depreciation and amortization, and Core diluted EPS from continuing operations; and

 

 

(1) See Forward-Looking Statements beginning on page 14.
(2) Reflects the impact of Core EBITDAR of the skilled nursing facility business reclassified to discontinued operations, its direct overhead, as well as the profits from applicable RehabCare contracts servicing the skilled nursing facilities being sold.

 

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Kindred Healthcare Reports Second Quarter 2017 Results

Page 5

August 3, 2017

 

 

2017 and 2018 Outlook(1)(Continued):

 

    Core EBITDAR includes an estimated $30 million contribution, as noted above, from forecasted cost savings and new RehabCare contract signings anticipated in connection with the sale of the Company’s skilled nursing facility business.

Cash Flow(1)

Mr. Farber commented, “Cash flow is a primary focus for Kindred. We are very pleased with our strong second quarter cash flow performance that was in line with our expectations, and enabled us to reduce funded debt by $48 million during the quarter. We finished the quarter with excellent liquidity, with $157 million drawn on our $900 million revolving credit facility. After the sale of the skilled nursing facility business, we anticipate Kindred will have approximately $800 million of NOLs. As we have previously discussed, these NOLs should offset approximately 90% of book tax estimates for many years, and significantly augment cash generation. Combining Core free cash flows plus tax-related cash flows from utilizing Kindred’s NOLs, we expect cash results for 2018 on this basis at a midpoint expectation of $180 million.”

Conference Call

As previously announced, investors and the general public may access a live webcast of the second quarter 2017 conference call through a link on the Company’s website at http://investors.kindredhealthcare.com. The conference call will be held on August 4 at 9:00 a.m. (Eastern Time).

A telephone replay of the conference call will become available at approximately 12:00 p.m. on August 4 by dialing (719) 457-0820, access code: 4930738. The phone replay will be available through August 14 and the online replay will be available through September 4.

Forward-Looking Statements and Non-GAAP Reconciliations

See page 14 for important disclosures regarding the Company’s forward-looking statements and the non-GAAP financial reconciliations that follow.

About Kindred Healthcare

Kindred Healthcare, Inc., a top-100 private employer in the United States, is a FORTUNE 500 healthcare services company based in Louisville, Kentucky with annual revenues of approximately $6.1 billion(2). At June 30, 2017, Kindred’s continuing operations, through its subsidiaries, had approximately 88,100 employees providing healthcare services in 2,540 locations in 45 states, including 81 LTAC hospitals, 19 inpatient rehabilitation hospitals, 19 sub-acute units, 614 Kindred at Home home health, hospice and non-medical home care sites of service, 102 inpatient rehabilitation units (hospital-based) and contract rehabilitation service businesses which served 1,705 non-affiliated sites of service. Ranked as one of Fortune magazine’s Most Admired Healthcare Companies for eight years, 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. You can also follow us on Twitter and Facebook.

 

 

(1) See Forward-Looking Statements beginning on page 14.
(2) Revenues from continuing operations for the last twelve months ended June 30, 2017.

 

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Kindred Healthcare Reports Second Quarter 2017 Results

Page 6

August 3, 2017

 

 

KINDRED HEALTHCARE, INC.

Condensed Consolidated Statement of Operations

(Unaudited)

(In thousands, except per share amounts)

 

     Three months ended     Six months ended  
     June 30,     June 30,  
     2017     2016     2017     2016  

Revenues

   $ 1,532,022     $ 1,605,374     $ 3,067,740     $ 3,205,862  
  

 

 

   

 

 

   

 

 

   

 

 

 

Salaries, wages and benefits

     833,703       842,840       1,673,516       1,678,420  

Supplies

     77,784       89,151       157,885       178,210  

Building rent

     64,861       67,025       129,517       133,010  

Equipment rent

     8,861       11,211       17,748       21,369  

Other operating expenses

     182,161       167,607       340,985       333,334  

General and administrative expenses

     266,156       283,610       541,659       586,894  

Other income

     (2,287     (505     (2,257     (2,338

Litigation contingency expense

     —         930       —         2,840  

Impairment charges

     135,829       6,131       136,303       13,919  

Restructuring charges

     5,050       798       15,056       2,750  

Depreciation and amortization

     25,651       33,198       55,471       66,752  

Interest expense

     60,801       58,053       120,129       115,542  

Investment income

     (2,228     (486     (2,737     (722
  

 

 

   

 

 

   

 

 

   

 

 

 
     1,656,342       1,559,563       3,183,275       3,129,980  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before income taxes

     (124,320     45,811       (115,535     75,882  

Provision (benefit) for income taxes

     (16,116     17,851       (13,882     28,261  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations

     (108,204     27,960       (101,653     47,621  

Discontinued operations, net of income taxes:

        

Income from operations

     8,870       9,437       17,701       15,031  

Gain (loss) on divestiture of operations

     (294,039     (83     (300,205     179  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from discontinued operations

     (285,169     9,354       (282,504     15,210  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     (393,373     37,314       (384,157     62,831  

Earnings attributable to noncontrolling interests:

        

Continuing operations

     (10,791     (8,847     (21,274     (16,698

Discontinued operations

     (4,954     (4,678     (9,435     (9,343
  

 

 

   

 

 

   

 

 

   

 

 

 
     (15,745     (13,525     (30,709     (26,041
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) attributable to Kindred

   $ (409,118   $ 23,789     $ (414,866   $ 36,790  
  

 

 

   

 

 

   

 

 

   

 

 

 

Amounts attributable to Kindred stockholders:

        

Income (loss) from continuing operations

   $ (118,995   $ 19,113     $ (122,927   $ 30,923  

Income (loss) from discontinued operations

     (290,123     4,676       (291,939     5,867  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (409,118   $ 23,789     $ (414,866   $ 36,790  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings (loss) per common share:

        

Basic:

        

Income (loss) from continuing operations

   $ (1.36   $ 0.22     $ (1.41   $ 0.35  

Discontinued operations:

        

Income from operations

     0.04       0.05       0.10       0.07  

Gain (loss) on divestiture of operations

     (3.36     —         (3.44     —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from discontinued operations

     (3.32     0.05       (3.34     0.07  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (4.68   $ 0.27     $ (4.75   $ 0.42  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted:

        

Income (loss) from continuing operations

   $ (1.36   $ 0.21     $ (1.41   $ 0.35  

Discontinued operations:

        

Income from operations

     0.04       0.05       0.10       0.06  

Gain (loss) on divestiture of operations

     (3.36     —         (3.44     —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from discontinued operations

     (3.32     0.05       (3.34     0.06  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (4.68   $ 0.26     $ (4.75   $ 0.41  
  

 

 

   

 

 

   

 

 

   

 

 

 

Shares used in computing earnings (loss) per common share:

        

Basic

     87,506       86,836       87,297       86,713  

Diluted

     87,506       87,500       87,297       87,374  

Cash dividends declared and paid per common share

   $ —       $ 0.12     $ 0.12     $ 0.24  


Kindred Healthcare Reports Second Quarter 2017 Results

Page 7

August 3, 2017

 

 

KINDRED HEALTHCARE, INC.

Condensed Consolidated Balance Sheet

(Unaudited)

(In thousands, except per share amounts)

 

     June 30,     December 31,  
     2017     2016  
ASSETS     

Current assets:

    

Cash and cash equivalents

   $ 130,047     $ 137,061  

Insurance subsidiary investments

     97,076       108,966  

Accounts receivable less allowance for loss

     1,224,442       1,172,078  

Inventories

     21,951       22,438  

Income taxes

     5,718       10,067  

Assets held for sale

     282,341       289,450  

Other

     61,990       63,693  
  

 

 

   

 

 

 
     1,823,565       1,803,753  

Property and equipment

     1,537,821       1,531,598  

Accumulated depreciation

     (938,054     (912,978
  

 

 

   

 

 

 
     599,767       618,620  

Goodwill

     2,427,668       2,427,074  

Intangible assets less accumulated amortization

     623,454       770,108  

Insurance subsidiary investments

     207,427       204,929  

Other

     296,088       288,240  
  

 

 

   

 

 

 

Total assets

   $ 5,977,969     $ 6,112,724  
  

 

 

   

 

 

 
LIABILITIES AND EQUITY     

Current liabilities:

    

Accounts payable

   $ 180,618     $ 203,925  

Salaries, wages and other compensation

     372,090       397,486  

Due to third party payors

     28,177       41,320  

Professional liability risks

     55,330       65,284  

Accrued lease termination fees

     267,804       5,224  

Other accrued liabilities

     281,984       264,512  

Long-term debt due within one year

     21,539       27,977  
  

 

 

   

 

 

 
     1,207,542       1,005,728  

Long-term debt

     3,303,539       3,215,062  

Professional liability risks

     310,516       295,311  

Deferred tax liabilities

     185,960       201,808  

Deferred credits and other liabilities

     354,361       353,294  

Equity:

    

Stockholders’ equity:

    

Common stock, $0.25 par value; authorized 175,000 shares; issued 87,025 shares—June 30, 2017 and 85,166 shares - December 31, 2016

     21,756       21,291  

Capital in excess of par value

     1,705,228       1,710,231  

Accumulated other comprehensive income

     1,836       1,573  

Accumulated deficit

     (1,335,410     (920,544
  

 

 

   

 

 

 
     393,410       812,551  

Noncontrolling interests

     222,641       228,970  
  

 

 

   

 

 

 

Total equity

     616,051       1,041,521  
  

 

 

   

 

 

 

Total liabilities and equity

   $ 5,977,969     $ 6,112,724  
  

 

 

   

 

 

 


Kindred Healthcare Reports Second Quarter 2017 Results

Page 8

August 3, 2017

 

 

KINDRED HEALTHCARE, INC.

Condensed Consolidated Statement of Cash Flows

(Unaudited)

(In thousands)

 

     Three months ended     Six months ended  
     June 30,     June 30,  
     2017     2016     2017     2016  

Cash flows from operating activities:

        

Net income (loss)

   $ (393,373   $ 37,314     $ (384,157   $ 62,831  

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

        

Depreciation expense

           26,005       34,435             56,305       68,392  

Amortization of intangible assets

     4,360       5,957       9,020       12,783  

Amortization of stock-based compensation costs

     4,855       5,639       7,987       10,043  

Amortization of deferred financing costs

     4,352       3,708       8,484       7,275  

Payment of capitalized lender fees related to debt amendment

     —         (7,333     (5,403     (7,333

Provision for doubtful accounts

     35,966       9,221       47,184       20,946  

Deferred income taxes

     (17,047     17,802       (15,820     29,298  

Impairment charges

     136,415       6,131       137,572       13,919  

(Gain) loss on divestiture of discontinued operations

     294,039       83       300,205       (179

Other

     762       656       6,812       959  

Change in operating assets and liabilities:

        

Accounts receivable

     (13,390     (13,229     (99,223     (101,121

Inventories and other assets

     1,939       (10,161     (2,518     (15,393

Accounts payable

     2,187       23,077       (22,310     12,456  

Income taxes

     2,058       707       4,349       853  

Due to third party payors

     (6,304     351       (13,143     (4,492

Other accrued liabilities

     9,845       20,850       (35,313     (106,369
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by operating activities

     92,669       135,208       31       4,868  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from investing activities:

        

Routine capital expenditures

     (17,396     (28,724     (29,337     (46,830

Development capital expenditures

     (5,857     (8,707     (11,296     (18,726

Acquisitions, net of cash acquired

     (3,500     (1,372     (6,650     (27,711

Acquisition deposits

     —         —         —         18,489  

Sale of assets

     —         142       —         1,223  

Purchase of insurance subsidiary investments

     (68,300     (20,154     (90,608     (52,995

Sale of insurance subsidiary investments

     49,077       15,713       67,776       46,603  

Net change in insurance subsidiary cash and cash equivalents

     27,113       13,201       33,525       23,159  

Net change in other investments

     (273     583       (244     (33,398

Other

     (108     792       46       (1,127
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash used in investing activities

     (19,244     (28,526     (36,788     (91,313
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash flows from financing activities:

        

Proceeds from borrowings under revolving credit

     309,000       244,300       787,600       778,000  

Repayment of borrowings under revolving credit

     (349,900     (524,600     (693,300     (827,700

Proceeds from issuance of term loan, net of discount

     —         198,100       —         198,100  

Proceeds from other long-term debt

     —         —         —         750  

Repayment of term loan

     (3,508     (3,508     (7,017     (6,511

Repayment of other long-term debt

     (339     (270     (623     (550

Payment of deferred financing costs

     (50     (141     (129     (292

Issuance of common stock in connection with employee benefit plans

     32       —         32       —    

Payment of dividend for mandatory redeemable preferred stock

     (3,065     (2,853     (6,075     (5,654

Dividends paid

     —         (10,225     (10,228     (20,293

Contributions made by noncontrolling interests

     113       1,900       113       6,268  

Distributions to noncontrolling interests

     (12,500     (14,231     (38,301     (30,546

Purchase of noncontrolling interests

     —         —         —         (1,000

Payroll tax payments for equity awards issuance

     (74     (180     (2,329     (2,829
  

 

 

   

 

 

   

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (60,291     (111,708     29,743       87,743  
  

 

 

   

 

 

   

 

 

   

 

 

 

Change in cash and cash equivalents

     13,134       (5,026     (7,014     1,298  

Cash and cash equivalents at beginning of period

     116,913       105,082       137,061       98,758  
  

 

 

   

 

 

   

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 130,047     $ 100,056     $ 130,047     $ 100,056  
  

 

 

   

 

 

   

 

 

   

 

 

 


Kindred Healthcare Reports Second Quarter 2017 Results

Page 9

August 3, 2017

 

 

KINDRED HEALTHCARE, INC.

Condensed Consolidated and Business Segment Data

(Unaudited)

(In thousands, except per share amounts)

 

    2016 Quarters     2017 Quarters     Second quarter
% change v.
 
    First     Second     Third     Fourth     First     Second     prior year  

Condensed consolidated statement of operations data:

 

         

GAAP presentation:

             

Revenues

  $ 1,600,488     $ 1,605,374     $ 1,560,760     $ 1,511,976     $ 1,535,718     $ 1,532,022       (4.6

Operating expenses

    1,403,467       1,390,562       1,760,982       1,353,386       1,364,751       1,498,396       7.8  

Building rent

    65,985       67,025       66,946       64,350       64,656       64,861       (3.2

Equipment rent

    10,158       11,211       9,911       8,649       8,887       8,861       (21.0

Depreciation and amortization

    33,554       33,198       32,995       32,072       29,820       25,651       (22.7

Interest, net

    57,253       57,567       58,059       58,625       58,819       58,573       1.7  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Income (loss) from continuing operations before income taxes

    30,071       45,811       (368,133     (5,106     8,785       (124,320     n/m  

Provision (benefit) for income taxes

    10,410       17,851       285,003       998       2,234       (16,116     n/m  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Income (loss) from continuing operations

    19,661       27,960       (653,136     (6,104     6,551       (108,204     n/m  

Noncontrolling interests

    (7,851     (8,847     (9,574     (8,575     (10,483     (10,791     n/m  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Net income (loss) attributable to Kindred

  $ 11,810     $ 19,113     $ (662,710   $ (14,679   $ (3,932   $ (118,995     n/m  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Diluted EPS

  $ 0.13     $ 0.21     $ (7.63   $ (0.17   $ (0.05   $ (1.36     n/m  

Diluted shares

    87,249       87,500       86,869       86,904       87,085       87,506       —    

Core presentation (a):

             

EBITDAR

  $ 209,114     $ 228,173     $ 183,055     $ 178,040     $ 181,447     $ 198,006       (13.2

Building rent

    65,985       67,025       66,674       64,350       64,656       64,861       (3.2

Equipment rent

    10,158       11,211       9,911       8,649       8,887       8,861       (21.0

Provision for income taxes

    14,632       19,761       2,963       1,006       7,923       11,834       (40.1

Noncontrolling interests

    (7,851     (9,863     (9,862     (8,575     (10,483     (11,111     12.7  

Net income attributable to Kindred

    19,681       29,548       2,591       4,763       859       17,115       (42.1

Core diluted EPS

  $ 0.22     $ 0.33     $ 0.03     $ 0.05     $ 0.01     $ 0.19       (42.4

Diluted shares

    87,249       87,500       87,529       87,641       87,744       88,165       0.8  

Revenues by segment:

             

Kindred at Home:

             

Home health

  $ 430,035     $ 438,556     $ 449,958     $ 444,073     $ 450,831     $ 459,176       4.7  

Hospice

    176,426       185,641       188,575       186,161       179,378       185,281       (0.2
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
    606,461       624,197       638,533       630,234       630,209       644,457       3.2  

Hospital division

    654,098       645,406       588,943       545,864       556,646       540,809       (16.2

Kindred Rehabilitation Services:

             

Kindred Hospital Rehabilitation Services

    167,045       171,095       170,308       171,352       178,115       178,439       4.3  

RehabCare

    198,297       190,169       187,456       186,943       194,354       190,906       0.4  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
    365,342       361,264       357,764       358,295       372,469       369,345       2.2  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
    1,625,901       1,630,867       1,585,240       1,534,393       1,559,324       1,554,611       (4.7

Eliminations

    (25,413     (25,493     (24,480     (22,417     (23,606     (22,589     (11.4
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
  $ 1,600,488     $ 1,605,374     $ 1,560,760     $ 1,511,976     $ 1,535,718     $ 1,532,022       (4.6
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

(a) See reconciliation of GAAP results to non-GAAP results beginning on page 14. During the first quarter of 2017, the Company revised its definitions of “core” non-GAAP measures. See “Non-GAAP Measures” beginning on page 14 for a discussion regarding the revised definitions. For comparability, core results for 2016 have been revised to conform to the current year presentation.

n/m = not meaningful.


Kindred Healthcare Reports Second Quarter 2017 Results

Page 10

August 3, 2017

 

 

KINDRED HEALTHCARE, INC.

Condensed Consolidated and Business Segment Data (Continued)

(Unaudited)

(In thousands, except statistics)

 

    2016 Quarters     2017 Quarters     Second quarter
% change v.
 
    First     Second     Third     Fourth     First     Second     prior year  

Segment adjusted operating income (loss):

             

Kindred at Home:

             

Home health

  $ 66,941     $ 76,030     $ 75,073     $ 61,487     $ 63,750     $ 76,592       0.7  

Hospice

    24,866       31,329       31,326       28,805       27,581       32,784       4.6  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
    91,807       107,359       106,399       90,292       91,331       109,376       1.9  

Hospital division

    136,416       127,510       83,940       93,778       93,438       91,580       (28.2

Kindred Rehabilitation Services:

             

Kindred Hospital Rehabilitation Services

    48,119       50,729       49,759       49,728       51,760       53,422       5.3  

RehabCare

    6,036       7,363       4,224       1,032       4,932       (17,301     (335.0
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
    54,155       58,092       53,983       50,760       56,692       36,121       (37.8

Core EBITDAR by segment (a):

             

Kindred at Home:

             

Home health

  $ 65,803     $ 75,859     $ 75,073     $ 61,185     $ 63,750     $ 75,797       (0.1

Hospice

    24,866       31,329       31,326       27,668       27,581       32,784       4.6  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
    90,669       107,188       106,399       88,853       91,331       108,581       1.3  

Hospital division

    136,416       127,510       83,940       93,148       93,438       90,572       (29.0

Kindred Rehabilitation Services:

             

Kindred Hospital Rehabilitation Services

    48,119       50,729       49,759       49,728       51,760       53,422       5.3  

RehabCare

    6,036       7,363       4,224       1,032       4,932       8,003       8.7  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
    54,155       58,092       53,983       50,760       56,692       61,425       5.7  

Support center expenses

    (71,159     (64,265     (59,535     (54,334     (60,014     (62,572     (2.6

Litigation contingency expense

    (885     (180     —         —         —         —      

Transaction costs

    (82     (172     (1,732     (387     —         —      
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
  $ 209,114     $ 228,173     $ 183,055     $ 178,040     $ 181,447     $ 198,006       (13.2
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Segment adjusted operating income (loss) margin:

             

Kindred at Home:

             

Home health

    15.6       17.3       16.7       13.8       14.1       16.7       (0.6

Hospice

    14.1       16.9       16.6       15.5       15.4       17.7       0.8  

Kindred at Home

    15.1       17.2       16.7       14.3       14.5       17.0       (0.2

Hospital division

    20.9       19.8       14.3       17.2       16.8       16.9       (2.9

Kindred Rehabilitation Services:

             

Kindred Hospital Rehabilitation Services

    28.8       29.6       29.2       29.0       29.1       29.9       0.3  

RehabCare

    3.0       3.9       2.3       0.6       2.5       (9.1     (13.0

Kindred Rehabilitation Services

    14.8       16.1       15.1       14.2       15.2       9.8       (6.3

Core EBITDAR margin by segment (a):

             

Kindred at Home:

             

Home health

    15.3       17.3       16.7       13.8       14.1       16.5       (0.8

Hospice

    14.1       16.9       16.6       14.9       15.4       17.7       0.8  

Kindred at Home

    15.0       17.2       16.7       14.1       14.5       16.8       (0.4

Hospital division

    20.9       19.8       14.3       17.1       16.8       16.7       (3.1

Kindred Rehabilitation Services:

             

Kindred Hospital Rehabilitation Services

    28.8       29.6       29.2       29.0       29.1       29.9       0.3  

RehabCare

    3.0       3.9       2.3       0.6       2.5       4.2       0.3  

Kindred Rehabilitation Services

    14.8       16.1       15.1       14.2       15.2       16.6       0.5  

Consolidated

    13.1       14.2       11.7       11.8       11.8       12.9       (1.3

 

(a) See reconciliation of GAAP results to non-GAAP results beginning on page 14. During the first quarter of 2017, the Company revised its definitions of “core” non-GAAP measures. See “Non-GAAP Measures” beginning on page 14 for a discussion regarding the revised definitions. For comparability, core results for 2016 have been revised to conform to the current year presentation.


Kindred Healthcare Reports Second Quarter 2017 Results

Page 11

August 3, 2017

 

 

KINDRED HEALTHCARE, INC.

Condensed Business Segment Data

(Unaudited)

 

    2016 Quarters     2017 Quarters     Second quarter
% change v.
 
    First     Second     Third     Fourth     First     Second     prior year  

Kindred at Home:

             

Home Health:

             

Sites of service (at end of period)

    384       384       395       390       379       377    

Revenue mix %:

             

Medicare

    79.8       79.3       78.1       77.9       76.7       75.7    

Medicaid

    2.1       2.1       2.5       1.9       1.7       1.7    

Commercial and other

    8.4       8.2       8.6       10.6       11.5       11.4    

Commercial paid at episodic rates

    9.7       10.4       10.8       9.6       10.1       11.2    

Episodic revenues ($ 000s)

  $ 325,821     $ 332,193     $ 332,562     $ 323,398     $ 326,881     $ 334,420       0.7  

Total admissions

    88,696       87,084       86,761       87,148       94,510       89,018       2.2  

Same-store total admissions

    87,394       85,922       85,382       86,056       93,922       88,300       2.8  

Total episodic admissions

    71,426       70,212       69,219       67,501       73,270       69,657       (0.8

Same-store total episodic admissions

    70,416       69,317       68,211       66,784       72,911       69,207       (0.2

Medicare episodic admissions

    62,011       60,730       59,823       59,540       62,404       58,575       (3.5

Total episodes

    113,887       113,278       113,256       111,164       114,964       113,579       0.3  

Episodes per admission

    1.59       1.61       1.64       1.65       1.57       1.63       1.2  

Revenue per episode

  $ 2,861     $ 2,933     $ 2,936     $ 2,909     $ 2,843     $ 2,944       0.4  

Hospice:

             

Sites of service (at end of period)

    177       177       185       183       180       177    

Admissions

    13,234       13,149       12,916       12,660       13,649       12,561       (4.5

Same-store admissions

    12,761       12,743       12,541       12,362       13,332       12,363       (3.0

Average length of stay

    92       91       98       100       96       94       3.3  

Patient days

    1,183,908       1,238,584       1,277,125       1,246,152       1,193,061       1,215,619       (1.9

Average daily census

    13,010       13,611       13,882       13,545       13,256       13,358       (1.9

Revenue per patient day

  $ 149     $ 150     $ 148     $ 149     $ 150     $ 152       1.3  

Community Care and other revenues (included in Home Health business segment) ($ 000s)

  $ 66,305     $ 68,229     $ 75,978     $ 74,875     $ 74,095     $ 74,222       8.8  

Kindred Rehabilitation Services:

             

Kindred Hospital Rehabilitation Services:

             

Freestanding IRFs:

             

End of period data:

             

Number of IRFs

    19       19       19       19       19       19    

Number of licensed beds

    969       969       969       995       995       995    

Discharges (a)

    4,448       4,646       4,644       4,671       4,775       4,766       2.6  

Same-hospital discharges (a)

    4,295       4,535       4,546       4,538       4,393       4,517       (0.4

Occupancy % (a)

    70.6       70.6       68.8       66.5       71.4       70.0       (0.8

Average length of stay (a)

    13.2       12.9       12.7       12.6       12.8       12.8       (0.8

Revenue per discharge (a)

  $ 19,731     $ 19,318     $ 19,599     $ 19,486     $ 20,097     $ 20,620       6.7  

Contract services:

             

Sites of service (at end of period):

             

Inpatient rehabilitation units

    104       105       104       102       101       102    

LTAC hospitals

    119       121       120       119       119       116    

Sub-acute units

    7       7       7       5       7       6    

Outpatient units

    139       138       139       132       129       121    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
    369       371       370       358       356       345    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Revenue per site

  $ 211,417     $ 215,798     $ 210,810     $ 220,733     $ 227,100     $ 228,534       5.9  

RehabCare:

             

Sites of service (at end of period)

    1,767       1,759       1,754       1,718       1,703       1,734    

Revenue per site

  $ 112,222     $ 108,113     $ 106,873     $ 108,814     $ 114,125     $ 110,095       1.8  

 

(a) Excludes non-consolidating IRF.


Kindred Healthcare Reports Second Quarter 2017 Results

Page 12

August 3, 2017

 

 

KINDRED HEALTHCARE, INC.

Condensed Business Segment Data (Continued)

(Unaudited)

 

    2016 Quarters     2017 Quarters     Second quarter
% change v.
 
    First     Second     Third     Fourth     First     Second     prior year  

Hospitals (excluding sub-acute units and skilled nursing facility):

             

End of period data:

             

Number of transitional care hospitals

    95       97       94       82       82       81    

Number of licensed beds

    7,089       7,067       6,890       6,107       6,107       6,041    

Revenues (000s)

  $ 643,299     $ 633,695     $ 575,323     $ 530,746     $ 540,280     $ 525,458       (17.1

Revenue mix %:

             

Medicare

    57.8       55.5       54.6       53.5       52.8       50.3    

Medicaid

    4.2       4.2       4.0       4.5       3.9       5.0    

Medicare Advantage

    11.5       12.0       12.1       11.0       12.2       12.3    

Medicaid Managed

    5.6       6.3       7.3       8.0       9.1       9.1    

Commercial insurance and other

    20.9       22.0       22.0       23.0       22.0       23.3    

Patient criteria data:

             

Revenues:

             

Compliant patients

          88.5     86.0     88.3  

Site neutral

          11.5     14.0     11.7  

Revenues per patient day:

             

Compliant patients

        $ 1,853     $ 1,816     $ 1,806    

Site neutral

          926       1,041       1,053    

Total

          1,662       1,645       1,667    

Admissions:

             

Medicare

    8,919       8,253       7,861       7,351       7,529       6,743       (18.3

Medicaid

    463       386       375       336       354       381       (1.3

Medicare Advantage

    1,453       1,382       1,327       1,210       1,354       1,239       (10.3

Medicaid Managed

    733       768       861       787       851       903       17.6  

Commercial insurance and other

    1,871       1,807       1,727       1,488       1,614       1,608       (11.0
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
    13,439       12,596       12,151       11,172       11,702       10,874       (13.7
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Patient days:

             

Medicare

    229,004       219,013       202,482       186,290       187,738       173,916       (20.6

Medicaid

    21,134       19,409       16,781       12,181       13,334       13,333       (31.3

Medicare Advantage

    45,760       47,697       43,241       37,526       41,020       40,555       (15.0

Medicaid Managed

    25,341       27,267       28,534       29,275       32,713       32,635       19.7  

Commercial insurance and other

    62,769       63,009       59,856       54,148       53,695       54,809       (13.0
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
    384,008       376,395       350,894       319,420       328,500       315,248       (16.2
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Average length of stay:

             

Medicare

    25.7       26.5       25.8       25.3       24.9       25.8       (2.8

Medicaid

    45.6       50.3       44.7       36.3       37.7       35.0       (30.4

Medicare Advantage

    31.5       34.5       32.6       31.0       30.3       32.7       (5.2

Medicaid Managed

    34.6       35.5       33.1       37.2       38.4       36.1       1.8  

Commercial insurance and other

    33.5       34.9       34.7       36.4       33.3       34.1       (2.2

Weighted average

    28.6       29.9       28.9       28.6       28.1       29.0       (3.0

Revenues per admission:

             

Medicare

  $ 41,717     $ 42,579     $ 39,945     $ 38,602     $ 37,867     $ 39,219       (7.9

Medicaid

    57,928       69,797       61,338       70,333       60,091       69,304       (0.7

Medicare Advantage

    51,080       55,105       52,363       48,387       48,555       51,958       (5.7

Medicaid Managed

    49,287       51,696       48,631       54,238       57,736       53,159       2.8  

Commercial insurance and other

    71,651       77,193       73,515       82,066       73,750       76,007       (1.5

Weighted average

    47,868       50,309       47,348       47,507       46,170       48,322       (3.9

Revenues per patient day:

             

Medicare

  $ 1,625     $ 1,605     $ 1,551     $ 1,523     $ 1,519     $ 1,521       (5.2

Medicaid

    1,269       1,388       1,371       1,940       1,595       1,980       42.7  

Medicare Advantage

    1,622       1,597       1,607       1,560       1,603       1,587       (0.6

Medicaid Managed

    1,426       1,456       1,467       1,458       1,502       1,471       1.0  

Commercial insurance and other

    2,136       2,214       2,121       2,255       2,217       2,230       0.7  

Weighted average

    1,675       1,684       1,640       1,662       1,645       1,667       (1.0

Medicare case mix index (discharged patients only)

    1.163       1.179       1.172       1.153       1.172       1.171       (0.7

Average daily census

    4,220       4,136       3,814       3,472       3,650       3,464       (16.2

Occupancy %

    68.0       67.5       61.6       64.1       67.6       64.3       (4.7


Kindred Healthcare Reports Second Quarter 2017 Results

Page 13

August 3, 2017

 

 

KINDRED HEALTHCARE, INC.

Condensed Business Segment Data (Continued)

(Unaudited)

 

    2016 Quarters     2017 Quarters     Second quarter
% change v.
 
    First     Second     Third     Fourth     First     Second     prior year  

Same-hospital data (a):

             

End of period data:

             

Number of transitional care hospitals

    77       77       77       77       77       77    

Number of licensed beds

    5,894       5,894       5,894       5,894       5,894       5,894    

Revenues (000s)

  $ 557,237     $ 552,040     $ 503,652     $ 516,917     $ 523,704     $ 510,763       (7.5

Revenue mix %:

             

Medicare

    58.1       55.3       54.0       53.0       52.3       50.4    

Medicaid

    3.8       3.9       3.7       4.6       4.1       5.1    

Medicare Advantage

    11.2       11.7       12.2       11.0       12.1       12.0    

Medicaid Managed

    5.8       6.7       7.9       8.2       9.4       9.3    

Commercial insurance and other

    21.1       22.4       22.2       23.2       22.1       23.2    

Patient criteria data:

             

Revenues:

             

Compliant patients

          88.7     85.9     88.4  

Site neutral

          11.3     14.1     11.6  

Revenues per patient day:

             

Compliant patients

        $ 1,860     $ 1,821     $ 1,809    

Site neutral

          924       1,049       1,058    

Total

          1,670       1,650       1,670    

Admissions:

             

Medicare

    7,722       7,100       6,787       7,046       7,225       6,568       (7.5

Medicaid

    395       342       343       336       354       381       11.4  

Medicare Advantage

    1,203       1,128       1,151       1,166       1,307       1,184       5.0  

Medicaid Managed

    632       702       791       787       849       891       26.9  

Commercial insurance and other

    1,543       1,512       1,442       1,434       1,543       1,542       2.0  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
    11,495       10,784       10,514       10,769       11,278       10,566       (2.0
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Patient days:

             

Medicare

    198,076       188,342       174,752       178,964       179,933       168,583       (10.5

Medicaid

    14,670       13,547       12,085       12,175       13,587       13,307       (1.8

Medicare Advantage

    37,960       40,229       38,033       36,496       39,536       38,690       (3.8

Medicaid Managed

    22,421       24,893       26,687       29,284       32,701       32,363       30.0  

Commercial insurance and other

    52,803       53,313       51,153       52,688       51,732       52,818       (0.9
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
    325,930       320,324       302,710       309,607       317,489       305,761       (4.5
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Average length of stay:

             

Medicare

    25.7       26.5       25.7       25.4       24.9       25.7       (3.2

Medicaid

    37.1       39.6       35.2       36.2       38.4       34.9       (11.8

Medicare Advantage

    31.6       35.7       33.0       31.3       30.2       32.7       (8.4

Medicaid Managed

    35.5       35.5       33.7       37.2       38.5       36.3       2.4  

Commercial insurance and other

    34.2       35.3       35.5       36.7       33.5       34.3       (2.9

Weighted average

    28.4       29.7       28.8       28.8       28.2       28.9       (2.6

Revenues per admission:

             

Medicare

  $ 41,951     $ 42,976     $ 40,050     $ 38,855     $ 37,886     $ 39,155       (8.9

Medicaid

    53,157       62,759       54,745       70,243       61,194       68,882       9.8  

Medicare Advantage

    51,858       57,332       53,664       48,813       48,567       51,814       (9.6

Medicaid Managed

    51,511       52,424       50,079       54,280       57,873       53,413       1.9  

Commercial insurance and other

    76,054       81,993       77,444       83,620       74,989       76,792       (6.3

Weighted average

    48,476       51,191       47,903       48,000       46,436       48,340       (5.6

Revenues per patient day:

             

Medicare

  $ 1,635     $ 1,620     $ 1,555     $ 1,530     $ 1,521     $ 1,525       (5.9

Medicaid

    1,431       1,584       1,554       1,939       1,594       1,972       24.5  

Medicare Advantage

    1,643       1,608       1,624       1,560       1,606       1,586       (1.4

Medicaid Managed

    1,452       1,478       1,484       1,459       1,503       1,471       (0.5

Commercial insurance and other

    2,222       2,325       2,183       2,276       2,237       2,242       (3.6

Weighted average

    1,710       1,723       1,664       1,670       1,650       1,670       (3.1

Average daily census

    3,582       3,520       3,290       3,365       3,528       3,360       (4.5

 

(a) All historical statistics have been adjusted to present the ongoing hospital division portfolio excluding four hospitals acquired during the second quarter of 2016. See reconciliation of same-hospital revenues to reported hospital revenues on page 17.


Kindred Healthcare Reports Second Quarter 2017 Results

Page 14

August 3, 2017

 

 

Forward-Looking Statements

This earnings release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, but are not limited to, all statements regarding the Company’s ability to exit the skilled nursing facility business and the expected timing of such exit, including the receipt of all required regulatory approvals and the satisfaction of the closing conditions for the transaction, as well as the Company’s ability to realize the anticipated benefits, sale proceeds, cost savings and strategic gains from this transaction, all statements regarding the Company’s expected future financial position, results of operations, cash flows, dividends, financing plans, business strategy, budgets, capital expenditures, competitive positions, growth opportunities, plans and objectives of management, government investigations, regulatory matters, and statements containing words such as “anticipate,” “approximate,” “believe,” “plan,” “estimate,” “expect,” “project,” “could,” “would,” “should,” “will,” “intend,” “hope,” “may,” “potential,” “upside,” and other similar expressions. Statements in this earnings release concerning the Company’s business outlook or future economic performance, anticipated profitability, revenues, expenses, dividends or other financial items, and product or services line growth, and expected outcome of government investigations and other regulatory matters, together with other statements that are not historical facts, are forward-looking statements that are estimates reflecting the best judgment of the Company based upon currently available information.

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. 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, performance, or plans to differ materially from any future results, performance or plans expressed or implied by such forward-looking statements. These statements involve risks, uncertainties, and other factors detailed from time to time in the Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the Securities and Exchange Commission (the “SEC”).

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.

Non-GAAP Measures

In addition to the results provided in accordance with GAAP, the Company has provided information in this earnings release using certain non-GAAP measures. The use of these non-GAAP measures is not intended to replace the presentation of the Company’s financial results in accordance with GAAP. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in the following pages of this earnings release.

During the first quarter of 2017, the Company revised its definitions of “core” non-GAAP measures. As revised, the Company’s core non-GAAP measures, including core net income attributable to Kindred, core EBITDAR, core diluted EPS, core operating cash flows and core free cash flows, no longer exclude (1) transaction, integration, research and development, and litigation contingency expenses that are not individually material, (2) non-restructuring related facility closing charges, and (3) non-executive or non-restructuring related severance, retirement and retention costs. For comparability, “core” results for 2016 have been revised to conform to the current year presentation.

EBITDAR: The Company defines EBITDAR as earnings before interest, income taxes, depreciation, amortization and total rent, and believes that the presentation of EBITDAR is useful to investors because creditors, securities analysts and investors use EBITDAR to compare the performance of companies in the healthcare industry before consideration of the capital structure of fixed assets and financing costs, which can vary significantly among companies.

For each of the Company’s segments, Segment adjusted operating income (loss) is a measure of performance used by the Company’s chief operating decision makers in accordance with “Accounting Standard Codification 280—Segment Reporting.” In this context, the Company defines Segment adjusted operating income (loss) as EBITDAR, excluding litigation contingency expense, impairment charges, restructuring charges, transaction costs, and the allocation of support center overhead.


Kindred Healthcare Reports Second Quarter 2017 Results

Page 15

August 3, 2017

 

 

Non-GAAP Measures (Continued)

Core Operating Results: The Company calculates core operating results, including core net income attributable to Kindred, core EBITDAR and core diluted EPS, by excluding charges related to impairments, business interruption settlements, restructuring charges, debt amendment costs, executive or restructuring-related severance, retirement and retention costs, restructuring-related facility closing charges, and material transaction, integration, litigation, and research and development costs. The Company believes that the presentation of core operating results provides additional information to investors to facilitate the comparison between periods by excluding certain charges that are not representative of its ongoing operations due to the materiality and nature of the charges. The Company’s management uses core net income attributable to Kindred, core EBITDAR and core diluted EPS as measures of operational performance that are meaningful to investors, and for the measurement of internal incentive compensation goals, in addition to other measures. The Company uses these measures to assess the relative performance and attainment of internal incentive compensation goals of its operating divisions, as well as the employees that operate these businesses. In addition, the Company believes these measures are important, because securities analysts and investors use these measures to compare the Company’s performance to other companies in the healthcare industry.

Same-Hospital Revenues: The same-hospital revenues are calculated by excluding from the Company’s Hospital Division revenues the results from one hospital that closed during the second quarter of 2017, four hospitals acquired in 2016, 15 hospitals sold in 2016, and three hospitals that closed during 2016. The Company believes the presentation of same-hospital revenues provides investors, equity analysts and others with useful information regarding the performance of the Company’s hospital operations that are comparable for the periods presented.

For EBITDAR, core net income attributable to Kindred, and core EBITDAR, the Company believes that income (loss) from continuing operations is the most comparable GAAP measure. For core diluted EPS, the Company believes that GAAP diluted earnings (loss) per share from continuing operations is the most comparable GAAP measure. Readers of the Company’s financial information should consider income (loss) from continuing operations and diluted earnings (loss) per share from continuing operations as important measures of the Company’s financial performance, because they provide the most complete measures of its performance. For same-hospital revenues, the Company believes that reported hospital segment revenues is the most comparable GAAP measure. Readers of the Company’s financial information should consider reported hospital segment revenues as an important measure of the Company’s Hospital Division financial performance because it provides the most complete measure of its performance. Operating results presented on a core basis, as well as a same-hospital basis, should be considered in addition to, not as a substitute for, or superior to, financial measures based upon GAAP as an indicator of operating performance.

Also in this earnings release, the Company provides the financial measures of operating cash flows and free cash flows excluding certain items, which the Company refers to as core operating cash flows and core free cash flows, respectively.

Core Operating Cash Flows: The Company defines core operating cash flows as operating cash flows excluding payments related to business interruption settlements, restructuring charges, debt amendment costs, executive or restructuring-related severance, retirement and retention costs, restructuring-related facility closing charges, and material transaction, integration, litigation, and research and development costs, net of income tax benefits. The Company believes that core operating cash flows provide important information to investors for comparability to other companies that use similar measures. Management uses core operating cash flows to evaluate consolidated operating performance and in making decisions related to acquisitions, development capital expenditures, dividends, long-term debt repayments and other uses.

Core Free Cash Flows: The Company defines core free cash flows as operating cash flows excluding payments related to business interruption settlements, restructuring charges, debt amendment costs, executive or restructuring-related severance, retirement and retention costs, restructuring-related facility closing charges, and material transaction, integration, litigation, and research and development costs, net of income tax benefits but including routine capital expenditures and distributions to noncontrolling interests. The Company believes that core free cash flows provide important information to investors for comparability to other companies that use similar measures. Management uses core free cash flows in making decisions related to acquisitions, development capital expenditures, dividends, long-term debt repayments and other uses.

The Company recognizes that core operating cash flows and core free cash flows are non-GAAP measures and are not intended to replace the presentation of the Company’s cash flows in accordance with GAAP. For core operating cash flows and core free cash flows, the Company believes net cash flows provided by operating activities is the most comparable GAAP measure. Readers of the Company’s financial information should consider net cash flows provided by operating activities as an important measure because it provides the most complete measure of cash provided by operating activities. Core operating cash flows and core free cash flows should be considered in addition to, not as a substitute for, or superior to, financial measures based upon GAAP as an indicator of the Company’s cash flows provided by operating activities.


Kindred Healthcare Reports Second Quarter 2017 Results

Page 16

August 3, 2017

 

 

KINDRED HEALTHCARE, INC.

Reconciliation of GAAP Results to Non-GAAP Measures

(Unaudited)

(In thousands, except per share amounts and statistics)

In addition to the results provided in accordance with GAAP, the Company has provided information in this earnings release to compute certain non-GAAP measures for the three months ended June 30, 2017 and 2016, and for the six months ended June 30, 2017 and 2016, before certain charges or on a core basis. The charges that were excluded from core operating results are denoted in the tables below.

The income tax benefit associated with the excluded charges, including the deferred tax valuation allowance for the three months and six months ended June 30, 2017, was calculated using an effective income tax rate of 17.0% and 14.3% for the three months ended June 30, 2017 and 2016, respectively, and 19.2% and 24.1% for the six months ended June 30, 2017 and 2016, respectively. The difference in the effective income tax rate compared to the same prior year period is primarily attributable to the deferred tax valuation allowance and, for 2016, the composition of charges that are non-deductible for income tax purposes, including the impairment charges and litigation contingency expense.

 

     Three months ended     Six months ended  
     June 30,     June 30,  
     2017     2016     2017     2016  

Reconciliation of income from continuing operations before charges:

        

As reported:

        

Income (loss) from continuing operations attributable to Kindred

   ($ 118,995   $ 19,113     ($ 122,927   $ 30,923  

Diluted income (loss) per common share from continuing operations

   ($ 1.36   $ 0.21     ($ 1.41   $ 0.35  

Weighted average diluted shares outstanding

     87,506       87,500       87,297       87,374  

Detail of charges:

        

Restructuring charges:

        

Facility/branch divestitures and closings

   ($ 2,842   $ 759     ($ 8,202   $ 418  

Retention and severance costs

     (274     (446     (3,015     (1,370

Transaction costs

     —         (649     —         (1,085
  

 

 

   

 

 

   

 

 

   

 

 

 
     (3,116     (336     (11,217     (2,037

Lease termination costs (charged to rent restructuring charges)

     (1,934     (462     (3,839     (713

Impairment charges

     (135,829     (6,131     (136,303     (13,919

RehabCare Collection Litigation

     (25,304     —         (25,304     —    

Research and development

     —         (3,076     —         (3,939

Litigation contingency expense

     —         (750     —         (1,775

Business interruption settlements

     1,803       171       1,803       1,309  

Debt amendment fees not capitalized

     —         (1,103     —         (1,103

Gentiva transaction costs:

        

Professional and consulting fees

     —         (1,319     —         (2,367

Severance and retention

     —         (355     —         (910
  

 

 

   

 

 

   

 

 

   

 

 

 
     (164,380     (13,361     (174,860     (25,454

Income tax benefit

     64,684       1,910       68,808       6,132  

Deferred tax valuation allowance

     (36,734     —         (35,169     —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Charges net of income taxes

     (136,430     (11,451     (141,221     (19,322

Noncontrolling interests

     320       1,016       320       1,016  
  

 

 

   

 

 

   

 

 

   

 

 

 
     (136,110     (10,435     (140,901     (18,306

Allocation to participating unvested restricted stockholders

     —         248       —         353  
  

 

 

   

 

 

   

 

 

   

 

 

 

Available to common stockholders

   ($ 136,110   ($ 10,187   ($ 140,901   ($ 17,953
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted loss per common share related to charges

   ($ 1.56   ($ 0.12   ($ 1.61   ($ 0.20

Weighted average diluted shares outstanding

     87,506       87,500       87,297       87,374  

Core:

        

Income from continuing operations attributable to Kindred before charges

   $ 17,115     $ 29,548     $ 17,974     $ 49,229  

Diluted earnings per common share from continuing operations before charges (a)

   $ 0.19     $ 0.33     $ 0.20     $ 0.55  

Weighted average diluted shares outstanding used to compute earnings per common share from continuing operations before charges

     88,165       87,500       87,956       87,374  

Reconciliation of effective income tax rate before charges:

        

Effective income tax rate before charges

     29.5     33.4     33.3     33.9

Impact of charges on effective income tax rate

     -16.5     5.6     -21.3     3.3
  

 

 

   

 

 

   

 

 

   

 

 

 

Reported effective income tax rate

     13.0     39.0     12.0     37.2
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(a) For purposes of computing diluted earnings per common share before charges, income from continuing operations before charges was reduced by $0.5 million and $0.7 million for the three months ended June 30, 2017 and 2016, respectively, and by $0.4 million and $1.0 million for the six months ended June 30, 2017 and 2016, respectively, for the allocation of income to participating unvested restricted stockholders.


Kindred Healthcare Reports Second Quarter 2017 Results

Page 17

August 3, 2017

 

 

KINDRED HEALTHCARE, INC.

Reconciliation of GAAP Results to Non-GAAP Measures (Continued)

(Unaudited)

(In thousands)

A reconciliation of revenues for home health for each historical period follows:

 

    2016 Quarters     2017 Quarters     Second quarter
% change v.
 
    First     Second     Third     Fourth     First     Second     prior year  

Home health

  $ 363,730     $ 370,327     $ 373,980     $ 369,198     $ 376,736     $ 384,954       3.9  

Community care and other

    66,305       68,229       75,978       74,875       74,095       74,222    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Reported home health revenues

  $ 430,035     $ 438,556     $ 449,958     $ 444,073     $ 450,831     $ 459,176       4.7  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
A reconciliation of revenues for the Hospital Division for each historical period follows:    
    2016 Quarters     2017 Quarters     Second quarter
% change v.
 
    First     Second     Third     Fourth     First     Second     prior year  

Transitional care hospitals

  $ 643,299     $ 633,695     $ 575,323     $ 530,746     $ 540,280     $ 525,458       (17.1

Sub-acute units and one skilled nursing facility

    10,799       11,711       13,620       15,118       16,366       15,351    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Reported hospital division revenues

  $ 654,098     $ 645,406     $ 588,943     $ 545,864     $ 556,646     $ 540,809       (16.2
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   
A reconciliation of reported hospital revenues to same-hospital revenues for each historical period follows:  
    2016 Quarters     2017 Quarters     Second quarter
% change v.
 
    First     Second     Third     Fourth     First     Second     prior year  

Transitional care hospitals

  $ 643,299     $ 633,695     $ 575,323     $ 530,746     $ 540,280     $ 525,458       (17.1

Hospitals acquired during 2016 (a)

    —         (2,836     (10,655     (9,958     (11,717     (12,470  

Hospitals sold during 2016 (b)

    (71,941     (64,084     (47,098     732       449       (623  

Hospital closed during 2017 (c)

    (5,850     (5,871     (5,010     (4,420     (5,276     (2,159  

Hospitals closed during 2016 (d)

    (8,271     (8,864     (8,908     (183     (32     557    
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Same-hospital revenues

  $ 557,237     $ 552,040     $ 503,652     $ 516,917     $ 523,704     $ 510,763       (7.5
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

(a) Four hospitals acquired during the second quarter of 2016.
(b) Three hospitals sold during the second quarter of 2016 and 12 hospitals sold during the fourth quarter of 2016.
(c) One hospital closed during the second quarter of 2017.
(d) Three hospitals closed during the third quarter of 2016.


Kindred Healthcare Reports Second Quarter 2017 Results

Page 18

August 3, 2017

 

 

KINDRED HEALTHCARE, INC.

Reconciliation of GAAP Results to Non-GAAP Measures (Continued)

(Unaudited)

(In thousands, except per share amounts)

 

    Three months ended June 30, 2017  
          Charges        
    As
reported
    Business
interruption
settlements
    RehabCare
Collection
Litigation
    Impairment
charges
    Restructuring
charges
    Deferred
tax
valuation
allowance
    Total     Before
charges
(“core”) (a)
 

Income (loss) from continuing operations:

               

Segment adjusted operating income (loss):

               

Kindred at Home:

               

Home health

  $ 76,592     $ (795   $ —       $ —       $ —       $ —       $ (795   $ 75,797  

Hospice

    32,784       —         —         —         —         —         —         32,784  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    109,376       (795     —         —         —         —         (795     108,581  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Hospital division

    91,580       (1,008     —         —         —         —         (1,008     90,572  

Kindred Rehabilitation Services:

               

Kindred Hospital Rehabilitation Services

    53,422       —         —         —         —         —         —         53,422  

RehabCare

    (17,301     —         25,304       —         —         —         25,304       8,003  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    36,121       —         25,304       —         —         —         25,304       61,425  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Support center expenses

    (62,572     —         —         —         —         —         —         (62,572

Impairment charges

    (135,829     —         —         135,829       —         —         135,829       —    

Restructuring charges

    (3,116     —         —         —         3,116       —         3,116       —    

Building rent

    (64,861     —         —         —         —         —         —         (64,861

Equipment rent

    (8,861     —         —         —         —         —         —         (8,861

Restructuring charges - rent

    (1,934     —         —         —         1,934       —         1,934       —    

Depreciation and amortization

    (25,651     —         —         —         —         —         —         (25,651

Interest, net

    (58,573     —         —         —         —         —         —         (58,573
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before income taxes

    (124,320     (1,803     25,304       135,829       5,050       —         164,380       40,060  

Provision (benefit) for income taxes

    (16,116     (709     9,957       53,449       1,987       (36,734     27,950       11,834  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    (108,204     (1,094     15,347       82,380       3,063       36,734       136,430       28,226  

Noncontrolling interests

    (10,791     —         (320     —         —         —         (320     (11,111
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) attributable to Kindred

  $ (118,995   $ (1,094   $ 15,027     $ 82,380     $ 3,063     $ 36,734     $ 136,110     $ 17,115  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings (loss) per common share

  $ (1.36               $ 0.19  

Diluted shares used in computing earnings (loss) per common share

    87,506                   88,165  

 

    Three months ended June 30, 2016  
          Charges        
    As
reported
    Business
interruption
settlements
    Litigation
contingency
    Impairment
charges
    Research and
development
    Debt
amendment
    Restructuring
charges
    Gentiva
transaction
and
integration
    Total     Before
charges
(“core”) (a)
 

Income from continuing operations:

                   

Segment adjusted operating income:

                   

Kindred at Home:

                   

Home health

  $ 76,030     $ (171   $ —       $ —       $ —       $ —       $ —       $ —       $ (171   $ 75,859  

Hospice

    31,329       —         —         —         —         —         —         —         —         31,329  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    107,359       (171     —         —         —         —         —         —         (171     107,188  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Hospital division

    127,510       —         —         —         —         —         —         —         —         127,510  

Kindred Rehabilitation Services:

                   

Kindred Hospital Rehabilitation Services

    50,729       —         —         —         —         —         —         —         —         50,729  

RehabCare

    7,363       —         —         —         —         —         —         —         —         7,363  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    58,092       —         —         —         —         —         —         —         —         58,092  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Support center expenses

    (68,444     —         —         —         3,076       1,103       —         —         4,179       (64,265

Litigation contingency expense

    (930     —         750       —         —         —         —         —         750       (180

Impairment charges

    (6,131     —         —         6,131       —         —         —         —         6,131       —    

Restructuring charges

    (336     —         —         —         —         —         336       —         336       —    

Transaction costs

    (1,846     —         —         —         —         —         —         1,674       1,674       (172

Building rent

    (67,025     —         —         —         —         —         —         —         —         (67,025

Equipment rent

    (11,211     —         —         —         —         —         —         —         —         (11,211

Restructuring charges - rent

    (462     —         —         —         —         —         462       —         462       —    

Depreciation and amortization

    (33,198     —         —         —         —         —         —         —         —         (33,198

Interest, net

    (57,567     —         —         —         —         —         —         —         —         (57,567
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes

    45,811       (171     750       6,131       3,076       1,103       798       1,674       13,361       59,172  

Provision for income taxes

    17,851       (129     (1,511     4,633       2,324       833       (5,505     1,265       1,910       19,761  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    27,960       (42     2,261       1,498       752       270       6,303       409       11,451       39,411  

Noncontrolling interests

    (8,847     —         —         (1,016     —         —         —         —         (1,016     (9,863
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income attributable to Kindred

  $ 19,113     $ (42   $ 2,261     $ 482     $ 752     $ 270     $ 6,303     $ 409     $ 10,435     $ 29,548  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per common share

  $ 0.21                     $ 0.33  

Diluted shares used in computing earnings per common share

    87,500                       87,500  

 

(a) During the first quarter of 2017, the Company revised its definitions of “core” non-GAAP measures. See “Non-GAAP Measures” beginning on page 14 for a discussion regarding the revised definitions. For comparability, core results for 2016 have been revised to conform to the current year presentation.


Kindred Healthcare Reports Second Quarter 2017 Results

Page 19

August 3, 2017

 

 

KINDRED HEALTHCARE, INC.

Reconciliation of GAAP Results to Non-GAAP Measures (Continued)

(Unaudited)

(In thousands, except per share amounts)

 

    Six months ended June 30, 2017  
          Charges        
    As
reported
    Business
interruption
settlements
    RehabCare
Collection
Litigation
    Impairment
charges
    Restructuring
charges
    Deferred
tax
valuation
allowance
    Total     Before
charges
(“core”) (a)
 

Income (loss) from continuing operations:

               

Segment adjusted operating income (loss):

               

Kindred at Home:

               

Home health

  $ 140,342     $ (795   $ —       $ —       $ —       $ —       $ (795   $ 139,547  

Hospice

    60,365       —         —         —         —         —         —         60,365  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    200,707       (795     —         —         —         —         (795     199,912  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Hospital division

    185,018       (1,008     —         —         —         —         (1,008     184,010  

Kindred Rehabilitation Services:

               

Kindred Hospital Rehabilitation Services

    105,182       —         —         —         —         —         —         105,182  

RehabCare

    (12,369     —         25,304       —         —         —         25,304       12,935  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    92,813       —         25,304       —         —         —         25,304       118,117  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Support center expenses

    (122,586     —         —         —         —         —         —         (122,586

Impairment charges

    (136,303     —         —         136,303       —         —         136,303       —    

Restructuring charges

    (11,217     —         —         —         11,217       —         11,217       —    

Building rent

    (129,517     —         —         —         —         —         —         (129,517

Equipment rent

    (17,748     —         —         —         —         —         —         (17,748

Restructuring charges—rent

    (3,839     —         —         —         3,839       —         3,839       —    

Depreciation and amortization

    (55,471     —         —         —         —         —         —         (55,471

Interest, net

    (117,392     —         —         —         —         —         —         (117,392
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) from continuing operations before income taxes

    (115,535     (1,803     25,304       136,303       15,056       —         174,860       59,325  

Provision (benefit) for income taxes

    (13,882     (709     9,957       53,635       5,925       (35,169     33,639       19,757  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    (101,653     (1,094     15,347       82,668       9,131       35,169       141,221       39,568  

Noncontrolling interests

    (21,274     —         (320     —         —         —         (320     (21,594
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) attributable to Kindred

  $ (122,927   $ (1,094   $ 15,027     $ 82,668     $ 9,131     $ 35,169     $ 140,901     $ 17,974  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings (loss) per common share

  $ (1.41               $ 0.20  

Diluted shares used in computing earnings (loss) per common share

    87,297                   87,956  

 

    Six months ended June 30, 2016  
          Charges        
    As
reported
    Business
interruption
settlements
    Litigation
contingency
    Impairment
charges
    Research
and
development
    Debt
amendment
    Restructuring
charges
    Gentiva
transaction
and
integration
    Total     Before
charges
(“core”) (a)
 

Income from continuing operations:

                   

Segment adjusted operating income:

                   

Kindred at Home:

                   

Home health

  $ 142,971     $ (1,309   $ —       $ —       $ —       $ —       $ —       $ —       $ (1,309   $ 141,662  

Hospice

    56,195       —         —         —         —         —         —         —         —         56,195  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    199,166       (1,309     —         —         —         —         —         —         (1,309     197,857  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Hospital division

    263,926       —         —         —         —         —         —         —         —         263,926  

Kindred Rehabilitation Services:

                   

Kindred Hospital Rehabilitation Services

    98,848       —         —         —         —         —         —         —         —         98,848  

RehabCare

    13,399       —         —         —         —         —         —         —         —         13,399  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    112,247       —         —         —         —         —         —         —         —         112,247  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Support center expenses

    (140,466     —         —         —         3,939       1,103       —         —         5,042       (135,424

Litigation contingency expense

    (2,840     —         1,775       —         —         —         —         —         1,775       (1,065

Impairment charges

    (13,919     —         —         13,919       —         —         —         —         13,919       —    

Restructuring charges

    (2,037     —         —         —         —         —         2,037       —         2,037       —    

Transaction costs

    (3,531     —         —         —         —         —         —         3,277       3,277       (254

Building rent

    (133,010     —         —         —         —         —         —         —         —         (133,010

Equipment rent

    (21,369     —         —         —         —         —         —         —         —         (21,369

Restructuring charges—rent

    (713     —         —         —         —         —         713       —         713       —    

Depreciation and amortization

    (66,752     —         —         —         —         —         —         —         —         (66,752

Interest, net

    (114,820     —         —         —         —         —         —         —         —         (114,820
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes

    75,882       (1,309     1,775       13,919       3,939       1,103       2,750       3,277       25,454       101,336  

Provision for income taxes

    28,261       (634     (473     6,746       1,909       534       (3,538     1,588       6,132       34,393  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    47,621       (675     2,248       7,173       2,030       569       6,288       1,689       19,322       66,943  

Noncontrolling interests

    (16,698     —         —         (1,016     —         —         —         —         (1,016     (17,714
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income attributable to Kindred

  $ 30,923     $ (675   $ 2,248     $ 6,157     $ 2,030     $ 569     $ 6,288     $ 1,689     $ 18,306     $ 49,229  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Diluted earnings per common share

  $ 0.35                     $ 0.55  

Diluted shares used in computing earnings per common share

    87,374                       87,374  

 

(a) During the first quarter of 2017, the Company revised its definitions of “core” non-GAAP measures. See “Non-GAAP Measures” beginning on page 14 for a discussion regarding the revised definitions. For comparability, core results for 2016 have been revised to conform to the current year presentation.


Kindred Healthcare Reports Second Quarter 2017 Results

Page 20

August 3, 2017

 

 

KINDRED HEALTHCARE, INC.

Reconciliation of GAAP Results to Non-GAAP Measures (Continued)

(Unaudited)

(In thousands, except per share amounts)

 

    Three months ended March 31, 2017  
          Charges        
    As
reported
    Impairment
charges
    Restructuring
charges
    Deferred
tax
valuation
allowance
    Total     Before
charges
(“core”)
(a)
 

Income from continuing operations:

           

Segment adjusted operating income:

           

Kindred at Home:

           

Home health

  $ 63,750     $ —       $ —       $ —       $ —       $ 63,750  

Hospice

    27,581       —         —         —         —         27,581  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    91,331       —         —         —         —         91,331  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Hospital division

    93,438       —         —         —         —         93,438  

Kindred Rehabilitation Services:

           

Kindred Hospital Rehabilitation Services

    51,760       —         —         —         —         51,760  

RehabCare

    4,932       —         —         —         —         4,932  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    56,692       —         —         —         —         56,692  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Support center expenses

    (60,014     —         —         —         —         (60,014

Impairment charges

    (474     474       —         —         474       —    

Restructuring charges

    (8,101     —         8,101       —         8,101       —    

Building rent

    (64,656     —         —         —         —         (64,656

Equipment rent

    (8,887     —         —         —         —         (8,887

Restructuring charges - rent

    (1,905     —         1,905       —         1,905       —    

Depreciation and amortization

    (29,820     —         —         —         —         (29,820

Interest, net

    (58,819     —         —         —         —         (58,819
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes

    8,785       474       10,006       —         10,480       19,265  

Provision for income taxes

    2,234       187       3,937       1,565       5,689       7,923  
 

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 
    6,551     $ 287     $ 6,069     $ (1,565   $ 4,791       11,342  
   

 

 

   

 

 

   

 

 

   

 

 

   

Noncontrolling interests

    (10,483             (10,483
 

 

 

           

 

 

 

Income (loss) attributable to Kindred

  $ (3,932           $ 859