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Kindred Healthcare (KND)
Q1 2013 Earnings Call
May 02, 2013 10:00 am ET
Charles Edward Jones - Chairman and Principal
Paul J. Diaz - Chief Executive Officer, Director and Chairman of Strategic Development Committee
Richard A. Lechleiter - Chief Financial Officer and Executive Vice President
Benjamin A. Breier - President and Chief Operating Officer
Henry Reukauf - Deutsche Bank AG, Research Division
Ryan K. Halsted - Wells Fargo Securities, LLC, Research Division
Chad Vanacore - Stifel, Nicolaus & Co., Inc., Research Division
Previous Statements by KND
» Kindred Healthcare's CEO Presents at Barclays Global Healthcare Conference (Transcript)
» Kindred Healthcare's CEO Presents at Citi 2013 Global Healthcare Conference (Transcript)
» Kindred Healthcare Management Discusses Q4 2012 Results - Earnings Call Transcript
Charles Edward Jones
Good morning. Welcome to the Kindred Healthcare first quarter conference call. This is Eddie Jones from Corporate Communications. Before the company's presentation, I would like to read the cautionary statement. This conference call includes forward-looking statements as defined in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which involves a number of risks and uncertainties. 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 and its management are unable to predict or control, that may cause the company's actual results or performance to differ materially from any future results or performance expressed or implied by such forward-looking statements.
The company cautions participants that any forward-looking information is not a guarantee of future performance, and that actual results could differ materially from those contained in the forward-looking information. The company refers you to its reports filed with the Securities and Exchange Commission, including the company's Annual Report on Form 10-K, the company's other reports filed periodically with the SEC and its press release regarding the first quarter operating results for a discussion of these forward-looking statements and other factors that could affect these forward-looking statements. Many of these factors are beyond the control of the company and its management. The company cautions investors that any forward-looking statements made by the company are not guarantees of future performance. The information being provided today is as of this date only, and 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. Certain references to operating income, or EBITDAR, as well as other non-GAAP disclosures, have been reconciled to the company's consolidated operating results and are available on the company's website, www.kindredhealthcare.com.
It is now my pleasure to introduce the participants in today's call: Paul Diaz, Chief Executive Officer; Rich Lechleiter, Executive Vice President and Chief Financial Officer; and Ben Breier, President and Chief Operating Officer. Mr. Diaz will begin the call.
Paul J. Diaz
Thank you, Eddie, and good morning, everyone. Last night, we announced a very strong start to the year, with our core diluted earnings per share at $0.49 for the first quarter compared to $0.43 a year earlier. While we continue to work through significant reimbursement and regulatory pressures in each of our businesses, our teams and caregivers generated 6% growth in our consolidated operating income and 14% growth in our continuing operations on a core basis. While Rich and Ben will comment on the specifics of the quarter, we're pleased with our overall operating results as we continue to work to improve the quality of services and clinical outcomes for our patients, succeed in our core operations and position the company for future growth.
Yesterday's earnings announcement follows last week's news that we are accelerating our repositioning strategy through $187 million transaction to sell 17 nonstrategic assets located outside of our integrated care markets at a significant premium to our current trading multiple. You may have also seen Monday's announcement recapping our ongoing development activities in our integrated care markets as we continue to expand our continuum of post-acute care services and our home, health and hospice capabilities. We believe that our first quarter results, which reflects $0.05 of earnings accretion from the divestiture of 19 nursing centers previously leased from Ventas, along with the sale of the 17 nonstrategic assets and our very strong pipeline of development projects, should provide investors with tangible evidence of the long-term benefits of our repositioning strategy, related capital redeployment and opportunities to grow.
Before commenting further on our results and our opportunities going forward, I'd like Rich to recap the financial results, and Ben will provide some additional operational color. Thank you.
Richard A. Lechleiter
Thanks, Paul, good morning, everybody. As Paul said, a very strong start to the year at $0.49 a share on the core versus last year's adjusted $0.43. Year-over-year earnings growth was driven primarily by strong results in our hospital business and our RehabCare division. And as Paul indicated, the reclassification of the 19 Ventas buildings added $0.05 a share to continuing ops EPS and the remaining 35 Ventas facilities will be reclassed to discontinued operations. When the transition's completed at April 30, 42 of the 54 facilities had been transitioned.
Items of note for the quarter, the hospital margins expanded based on better overall rates, flat daily census and, more importantly, flat cost per patient day. In RehabCare, we reduced our employee turnover on an annualized basis by half, raised our productivity by 80 basis points that drove 30% growth in operating income. Acquisitions and organic growth continue to drive home health revenue up 82%, while the operating margins declined a bit sequentially because of some front-loaded costs that won't repeat themselves over the balance of the year. Nursing Center results were disappointing as overall volumes were soft and the Ventas transition has proven more challenging than we had expected.