Kindred Healthcare, Inc. (KND)

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Kindred Healthcare (KND)

Q1 2014 Earnings Call

May 08, 2014 10:00 am ET


Paul J. Diaz - Chief Executive Officer, Director and Member of Strategic Development Committee

Benjamin A. Breier - President and Chief Operating Officer

Stephen D. Farber - Chief Financial Officer and Executive Vice President


Kevin M. Fischbeck - BofA Merrill Lynch, Research Division

Joshua R. Raskin - Barclays Capital, Research Division

Christian Rigg - Susquehanna Financial Group, LLLP, Research Division

Brandon Fazio - UBS Investment Bank, Research Division

Chad Vanacore - Stifel, Nicolaus & Company, Incorporated, Research Division

Ryan K. Halsted - Wells Fargo Securities, LLC, Research Division



Good day, everyone, and welcome to this Kindred Healthcare 1Q '14 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. Eddie Jones with Corporate Communications. Please go ahead.

Unknown Executive

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 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 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 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; and Stephen Farber, Executive Vice President and Chief Financial Officer. Mr. Diaz will begin the call.

Paul J. Diaz

Thank you, Eddie, and good morning, everyone. Last night, we announced a solid start to the year, with core diluted EPS of $0.32, in line with our expectations. In addition, we reaffirmed our core earnings and free cash flow guidance for 2014.

Like most providers of health care, some macro headwinds continued this quarter, with a challenging admission environment for hospitals and nursing center businesses and the final quarter of impacts of sequestration, broadly, and MPPR in our Rehab business. Despite these challenges -- and I guess we could also complain about the weather -- our clinicians and operators delivered improved outcomes for our patients, and we saw sequential margin improvement in each of our businesses. We are very excited about and very pleased with the start to our year.

Before commenting further on our results and our opportunities going forward, I'd like Ben to discuss our operations and for Stephen to make a few comments on our recent refinancing. Ben?

Benjamin A. Breier

Thanks, Paul, and good morning, everyone. Let me start as I usually do, by first thanking the more than 63,000 teammates that we have here at Kindred. Certainly, without their passion and their commitment for caring for our more than 0.5 million patients annually, nothing else for us would be possible.

As Paul noted, we're very pleased with how our year is starting out. Let me give some color on our -- on the performance of our operating divisions, each of which reported sequential improvement in operating income and margin as we move forward from the repositioning of our businesses that was completed in the fourth quarter of last year.

I'll start first in the RehabCare division, where we continue to see momentum from 2013 into this quarter. Despite the headwinds of sequestration, Part B CAHPS and MPPR that was thrown its way April 1 of last year, the team delivered both operating income and margin growth on a year-over-year basis. RehabCare's consistent ability to execute is a testament to Pat Henry, our division president, and their entire team of -- dedicated team of nearly 22,000 therapists throughout the country.

In addition to solid operating performance metrics around productivity and efficiency, RehabCare is off to a terrific start with respect to organic sales growth. The team drove significant new facility growth with 45 net new SRS or Nursing Center contracts and 7 new signed HRS or hospital rehab service agreements. We're very excited about RehabCare's continued growth going forward.

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