Kindred Healthcare, Inc. (KND)

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Kindred Healthcare, Inc. (KND)

Q4 2013 Results Earnings Conference Call

February 21, 2014 10:00 a.m. ET


Paul Diaz - Chief Executive Officer

Benjamin Breier - President and Chief Operating Officer

Stephen Farber - Executive Vice President, Chief Financial Officer

John Lucchese - Senior Vice President and Corporate Controller

Hank Robinson - Senior Vice President, Tax and Treasurer

Pat Watson - Corporate Communications


A.J. Rice - UBS

Joshua Raskin - Barclays

Rob Mains - Stifel Nicolaus

Christian Rigg - Susquehanna Financial Group

Frank Morgan - RBC Capital Markets

Gary Lieberman - Wells Fargo

Gary Taylor - Citi

Kevin Fischbeck - Bank of America Merrill Lynch



Good day, everyone, and welcome to this Kindred Healthcare 4Q '13 Conference Call. Today's call is being recorded. At this time for opening remarks and introductions, I would like to turn the call over to Mr. Pat Watson with Corporate Communications. Please go ahead, sir.

Pat Watson

Thank you and good morning. Welcome to the Kindred Healthcare fourth quarter conference call. This is Pat Watson with Corporate Communications.

Before the company's presentation, I would like to read a 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 fourth 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 and core free cash flows, 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,

It is now my pleasure to introduce the participants in today's call. Paul Diaz, Chief Executive Officer; Ben Breier, President and Chief Operating Officer; Stephen Farber, Executive Vice President and Chief Financial Officer; John Lucchese, Senior Vice President and Corporate Controller; and Hank Robinson, Senior Vice President, Tax and Treasurer. Mr. Diaz will begin the call.

Paul Diaz

Thank you, Pat, and good morning everyone. In our November conference call we detailed the significant steps that we have taken to aggressively reposition the company in the context of healthcare reform, the growing demand for integrated post-acute care at a local level, and the clear preference by consumers and payers for more patient centered home-based care model.

In particular, we made a significant move to exit a number of non-strategic nursing centers that were underperforming and not critical to our Integrated Care market strategy. At the same time, we accelerated development of our home health and hospice business Kindred at Home, which now has annualized revenues exceeding $350 million, 209 sites of service and over 6,300 employees. Kindred at Home is a part of Kindred's new Care Management division which was formed in August of 2013. The goal of the Care Management division is to improve care transitions and patient outcomes by further developing Kindred's capabilities to deliver integrated care across various care settings

New division will grow Kindred at Home health and hospice business, test new delivery and risk-based payment model and develop capability to support Kindred's Integrated Care market and the continued care strategy. These capabilities include physician coverage across sites of service, care managers for smooth care transition, information sharing and IT connectivity, and tools to ensure appropriate patient placement and condition specific clinical programs and outcome measures. While our repositioning path over the last few years has been operationally challenging, today we are in dramatically better place in terms of the quality of our ongoing asset base and we believe the trajectory of our business prospects are much improved.

We now have an industry leading hospital business with annual revenues in excess of $2.5 billion. Our second largest business, RehabCare, the high performing rehabilitation therapy division with nearly $1.3 billion in annual revenues and consistent, solid operating performance. Our smaller but clearly more promising today, nursing center division, with over 300 facilities when I began with the company in 2002, is now just over 100 facilities and $1.1 billion in revenues but is much better strategically positioned. And our growing Care Management division including Kindred at Home, as I said, has grown to over $350 million in annualized revenues and we expect significant growth in this division going forward.

We are also well positioned to execute on the second phase of our repositioning plan, the growth phase. In the fourth quarter we acquired Senior Home Care, a premier provider of 47 home health locations in Florida and Louisiana, and entered into an agreement to acquire real estate of nine previously leased nursing centers that will further reduce our rent obligation and improve our overall capital structure. We continue to evaluate various opportunities to redeploy our management capabilities, industry-leading infrastructure and financial resources as we move forward with the growth part of our plan.

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