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Kindred Healthcare Announces Fourth Quarter Results And Plans For Ventas Lease Renewals

Kindred Healthcare, Inc. (“Kindred” or the “Company”) (NYSE:KND) today announced its operating results for the fourth quarter and year ended December 31, 2011 as well as its intentions with respect to the renewal of facility leases with its primary landlord, Ventas, Inc. (“Ventas”) (NYSE:VTR). The Company’s consolidated financial statements include the operating results of RehabCare Group, Inc. (“RehabCare”) since the closing of the acquisition on June 1, 2011.

Highlights (operating data adjusted to exclude certain items):
  • Favorable impact of RehabCare acquisition negated by fourth quarter regulatory changes
    • Initial quarter under new RUGs IV and rehabilitation therapy rule changes more challenging than expected
    • Annual impact of new Medicare rules now estimated at $150 million
  • Fourth quarter consolidated continuing operations key metrics compared to last year
    • Revenues grew 34% to $1.5 billion
    • Operating income rose 25% to $200 million
    • Income from continuing operations fell 35% to $14 million
    • Diluted earnings per share declined 50% to $0.27
  • Fourth quarter operating summary
    • Hospital revenues rose 40%; same-store revenues increased 5% while admissions rose 4%
    • Medicare cuts materially hampered nursing center and rehabilitation therapy results
    • Home health and hospice business reported strong results
  • Company continues to generate significant operating cash flows
    • Excluding transaction-related payments, full year operating cash flows grew 11% to $238 million
  • Company reduces 2012 earnings guidance
    • RehabCare synergy estimate rises to $70 million from $62 million
    • Company expects to implement $50 million to $55 million of additional cost reductions
  • Company expects non-renewal of seven Ventas bundles containing 64 facilities in April 2013
    • Future growth prospects for these facilities considered limited
    • Many of the facilities do not align with the Company’s operating plan and cluster market strategy
    • Expected 2013 EPS dilution of $0.10 to $0.15 from these divestitures considered manageable
    • Divestitures will improve the Company’s capital structure over the long term

Fourth Quarter Results

Continuing Operations

Consolidated revenues for the fourth quarter ended December 31, 2011 increased 34% to $1.5 billion compared to $1.1 billion in the same period in 2010. The Company reported a loss from continuing operations for the fourth quarter of 2011 of $72.8 million or $1.42 per diluted share compared to income of $19.7 million or $0.50 per diluted share in the fourth quarter of 2010. Operating results for the fourth quarter of 2011 included asset impairment charges, transaction-related costs and a loss on a hospital divestiture that reduced income from continuing operations by $86.7 million or $1.69 per diluted share. Operating results for the fourth quarter of 2010 included transaction-related costs that reduced income from continuing operations by $1.6 million or $0.04 per diluted share.

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