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
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.
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.
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.
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.
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.
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, 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, 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,
INC. Condensed Consolidated and Business Segment Data
(Unaudited) (In thousands, except per share amounts)
Second quarter 2016 Quarters 2017
Quarters % 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, INC.
Condensed Consolidated and Business Segment Data (Continued)
(Unaudited) (In thousands, except statistics)
Second quarter 2016 Quarters
2017 Quarters % 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, INC. Condensed Business
Segment Data (Unaudited)
Second quarter 2016 Quarters 2017
Quarters % 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, INC. Condensed Business
Segment Data (Continued) (Unaudited)
Second quarter 2016 Quarters
2017 Quarters % 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, INC.
Condensed Business Segment Data (Continued)
(Unaudited)
Second
quarter 2016 Quarters 2017 Quarters % 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.
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.
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, 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, 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:
Second quarter
2016 Quarters 2017 Quarters % 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:
Second
quarter 2016 Quarters 2017 Quarters % 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:
Second quarter 2016 Quarters 2017
Quarters % 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, INC. Reconciliation of
GAAP Results to Non-GAAP Measures (Continued)
(Unaudited) (In thousands, except per share amounts)
Three months ended June 30, 2017 Charges
Deferred Business RehabCare tax
Before As interruption Collection
Impairment Restructuring valuation
charges reported settlements Litigation
charges charges allowance Total
(“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 Gentiva Business
transaction Before As interruption
Litigation Impairment Research and Debt
Restructuring and charges reported
settlements contingency charges
development amendment charges
integration Total
(“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, INC. Reconciliation of GAAP
Results to Non-GAAP Measures (Continued) (Unaudited) (In
thousands, except per share amounts)
Six months
ended June 30, 2017 Charges Deferred
Business RehabCare tax Before As
interruption Collection Impairment
Restructuring valuation charges
reported settlements Litigation charges
charges allowance Total
(“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 Gentiva Business
transaction Before As interruption
Litigation Impairment Research and Debt
Restructuring and charges reported
settlements contingency charges
development amendment charges
integration Total
(“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, INC. Reconciliation of
GAAP Results to Non-GAAP Measures (Continued)
(Unaudited) (In thousands, except per share amounts)
Three
months ended March 31, 2017 Charges Deferred
tax Before As Impairment
Restructuring valuation charges
reported charges charges allowance
Total
(“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
Diluted earnings (loss) per common share $ (0.05 ) $
0.01
Diluted shares used in computing earnings
(loss) per common share
87,085 87,744
Three months ended March 31,
2016 Charges Gentiva Business
transaction Before As interruption
Litigation Impairment Research and
Restructuring and charges reported
settlements contingency charges
development charges integration Total
(“core”) (a)
Income from continuing operations: Segment adjusted
operating income: Kindred at Home: Home health $ 66,941 $ (1,138 )
$ - $ - $ - $ - $ - $ (1,138 ) $ 65,803 Hospice 24,866
- - - - -
- - 24,866 91,807
(1,138 ) - - - -
- (1,138 ) 90,669
Hospital division 136,416 - - - - - - - 136,416 Kindred
Rehabilitation Services: Kindred Hospital Rehabilitation Services
48,119 - - - - - - - 48,119 RehabCare 6,036 -
- - - - -
- 6,036 54,155 -
- - - - -
- 54,155 Support center expenses
(72,022 ) - - - 863 - - 863 (71,159 ) Litigation contingency
expense (1,910 ) - 1,025 - - - - 1,025 (885 ) Impairment charges
(7,788 ) - - 7,788 - - - 7,788 - Restructuring charges (1,701 ) - -
- - 1,701 - 1,701 - Transaction costs (1,685 ) - - - - - 1,603
1,603 (82 ) Building rent (65,985 ) - - - - - - - (65,985 )
Equipment rent (10,158 ) - - - - - - - (10,158 ) Restructuring
charges - rent (251 ) - - - - 251 - 251 - Depreciation and
amortization (33,554 ) - - - - - - - (33,554 ) Interest, net
(57,253 ) - - - -
- - - (57,253 )
Income from continuing operations before
income taxes
30,071 (1,138 ) 1,025 7,788 863 1,952 1,603 12,093 42,164 Provision
for income taxes 10,410 (397 ) 358
2,719 301 681 560
4,222 14,632 19,661 $ (741 ) $ 667 $ 5,069
$ 562 $ 1,271 $ 1,043 $ 7,871 27,532
Noncontrolling interests (7,851 ) (7,851 ) Income
attributable to Kindred $ 11,810 $ 19,681
Diluted earnings per common share $ 0.13 $ 0.22
Diluted shares used in computing earnings
per common share
87,249 87,249
__________
(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, INC. Reconciliation of GAAP
Results to Non-GAAP Measures (Continued) (Unaudited) (In
thousands, except per share amounts)
Three months ended September
30, 2016 Charges Gentiva Deferred
transaction tax Before As
Impairment Research and Restructuring
and valuation charges reported
charges development charges integration
allowance Total
(“core”) (a)
Income (loss) from continuing operations: Segment adjusted
operating income: Kindred at Home: Home health $ 75,073 $ - $ - $ -
$ - $ - $ - $ 75,073 Hospice 31,326 -
- - - -
- 31,326 106,399 -
- - - -
- 106,399 Hospital
division 83,940 - - - - - - 83,940 Kindred Rehabilitation
Services: Kindred Hospital Rehabilitation Services 49,759 - - - - -
- 49,759 RehabCare 4,224 - -
- - - -
4,224 53,983 -
- - - -
- 53,983 Support center expenses
(62,823 ) - 3,288 - - - 3,288 (59,535 ) Impairment charges (297,276
) 297,276 - - - - 297,276 - Restructuring charges (22,813 ) - -
22,813 - - 22,813 - Transaction costs (2,982 ) - - - 1,250 - 1,250
(1,732 ) Building rent (66,946 ) - - - 272 - 272 (66,674 )
Equipment rent (9,911 ) - - - - - - (9,911 ) Restructuring charges
- rent (58,650 ) - - 58,650 - - 58,650 - Depreciation and
amortization (32,995 ) - - - - - - (32,995 ) Interest, net
(58,059 ) - - - -
- - (58,059 )
Income (loss) from continuing operations
before income taxes
(368,133 ) 297,276 3,288 81,463 1,522 - 383,549 15,416 Provision
for income taxes 285,003 52,052
1,234 30,573 571 (366,470
) (282,040 ) 2,963 (653,136 ) 245,224 2,054
50,890 951 366,470 665,589 12,453 Noncontrolling interests
(9,574 ) (288 ) - - -
- (288 ) (9,862 ) Income (loss)
attributable to Kindred $ (662,710 ) $ 244,936 $ 2,054
$ 50,890 $ 951 $ 366,470 $ 665,301
$ 2,591 Diluted earnings (loss) per common
share $ (7.63 ) $ 0.03
Diluted shares used in computing earnings
(loss) per common share
86,869 87,529
Three months ended December
31, 2016 Charges Gentiva Deferred
Business transaction tax Before
As interruption Impairment Research and
Restructuring and valuation charges
reported settlements charges
development charges integration
allowance Total
(“core”) (a)
Income (loss) from continuing operations: Segment adjusted
operating income: Kindred at Home: Home health $ 61,487 $ (302 ) $
- $ - $ - $ - $ - $ (302 ) $ 61,185 Hospice 28,805
(1,137 ) - - -
- - (1,137 ) 27,668
90,292 (1,439 ) -
- - - -
(1,439 ) 88,853 Hospital division 93,778 (630
) - - - - - (630 ) 93,148 Kindred Rehabilitation Services:
Kindred Hospital Rehabilitation Services 49,728 - - - - - - -
49,728 RehabCare 1,032 - -
- - - -
- 1,032 50,760
- - - -
- - - 50,760
Support center expenses (58,627 ) - - 4,293 - - -
4,293 (54,334 ) Impairment charges (3,534 ) - 3,534 - - - - 3,534 -
Restructuring charges (9,884 ) - - - 9,884 - - 9,884 - Transaction
costs (2,166 ) - - - - 1,779 - 1,779 (387 ) Building rent (64,350 )
- - - - - - - (64,350 ) Equipment rent (8,649 ) - - - - - - -
(8,649 ) Restructuring charges - rent (2,029 ) - - - 2,029 - -
2,029 - Depreciation and amortization (32,072 ) - - - - - - -
(32,072 ) Interest, net (58,625 ) - -
- - - -
- (58,625 )
Income (loss) from continuing operations
before income taxes
(5,106 ) (2,069 ) 3,534 4,293 11,913 1,779 - 19,450 14,344
Provision for income taxes 998 (2,381 )
4,067 4,940 13,710 1,674
(22,002 ) 8 1,006 (6,104
) $ 312 $ (533 ) $ (647 ) $ (1,797 ) $ 105 $ 22,002
$ 19,442 13,338 Noncontrolling interests
(8,575 ) (8,575 ) Income (loss) attributable to Kindred $
(14,679 ) $ 4,763 Diluted earnings (loss) per common
share $ (0.17 ) $ 0.05
Diluted shares used in computing earnings
(loss) per common share
86,904 87,641
__________
(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, INC. Reconciliation of GAAP
Results to Non-GAAP Measures (Continued) (Unaudited) (In
thousands)
Three months ended Six months ended June 30,
June 30, 2017 2016 2017 2016
Reconciliation of net cash flows provided
by operating activities to core operating cash flows and core free
cash flows:
Net cash flows provided by operating activities
$
92,669 $ 135,208
$ 31 $ 4,868
Adjustments to remove certain payments
(including payments made for discontinued operations) included in
net cash flows provided by operating activities:
Transaction, severance, research and development, and retention
2,231 6,092
9,217 10,933 Business interruption
settlements
(1,803 ) (171 )
(3,796 )
(1,309 ) Lease termination fees - restructuring
2,035 3,500
4,033 3,500 Capitalized lender fees related to debt
amendment
- 7,333
5,403 7,333 Other debt refinancing
costs (expensed)
- 626
- 626 Litigation
750 1,900
9,286
129,569
3,213 19,280
24,143 150,652
Net cash flows provided by operating
activities excluding certain items before income tax benefit of
certain payments
95,882 154,488
24,174 155,520 Benefit of reduced
income tax payments resulting from certain payments (a)
(3,596 ) (28,224 )
(3,596
) (28,224 )
Net cash flows provided by operating
activities excluding certain items (core operating cash flows)
92,286 126,264
20,578 127,296 Less routine
capital expenditures
(17,396 ) (28,724 )
(29,337 ) (46,830 ) Less distributions to
noncontrolling interests
(12,500 )
(14,231 )
(38,301 ) (30,546 ) Free cash
flows excluding certain items (core free cash flows)
$
62,390 $ 83,309
($47,060
) $ 49,920
__________
(a) The Company has estimated that it will not pay federal
and state income taxes (where state unitary or consolidated tax
returns are allowed) in 2017 due to anticipated loss associated
with the sale of the Company’s skilled nursing facility business.
In 2016, the Company did not pay these taxes as a result of a
consolidated taxable loss. These cash savings in both years are
recognized in GAAP cash flows and offer additional sources of cash
when evaluating the Company’s cash flow generating capability
before certain payments. After the sale of the skilled nursing
facility business, the Company anticipates it will have
approximately $800 million of net operating losses that should
offset approximately 90% of core book tax estimates until
exhausted.
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Kindred Healthcare, Inc.Todd Flowers, 502-596-6569Investor
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