Kindred shares skid on lower earnings

Wednesday, March 26, 2003 | 11:37 a.m.

SUN STAFF AND WIRE REPORTS

Shares of Kindred Healthcare Inc. closed lower Tuesday after the nursing-home operator posted fourth-quarter earnings that fell short of Wall Street's expectations.

Louisville, Ky.-based Kindred said net income came to $3.1 million, or 18 cents a share -- far lower than analysts' expectations of 27 cents a share, based on a survey by Thomson First Call.

Kindred operates two Las Vegas hospitals -- at 2250 E. Flamingo Road and 5110 W. Sahara Ave. The company also runs Las Vegas Healthcare & Rehabilitation Center, 2832 S. Maryland Parkway, Torrey Pines Care Center, 1701 S. Torrey Pines Drive, and Kindred Pharmacy Las Vegas, 4755 Nevso Drive.

The fourth-quarter results were also boosted by a $2.3 million gain from a one-time property sale and $1.6 million from changing the way the company accounts for goodwill

In 2001, Kindred reported fourth-quarter profit of $19 million, or 98 cents a share. At the time, the company was operating under bankruptcy protection.

Kindred shares ended the day at $12.64, down $1.90, or 13 percent, on the Nasdaq Stock Market.

Revenue in the latest quarter grew 7 percent to $848 million.

The company blamed the earnings shortfall on higher-than-expected malpractice liability costs and changes in Medicare reimbursement. Management said it will no longer issue financial estimates because of continued uncertainty over these issues.

Concerns about Medicare reimbursement and malpractice liability costs have plagued Kindred's nursing home operations. The company runs more than 300 long-term care hospitals and nursing homes in the United States.

In October, certain Medicare reimbursements expired, and the loss of the payments cut into Kindred's pretax income by $15 million.

Around the same time, Kindred's stock suffered a tremendous sell-off after the company said the cost of covering expenses from patient-care lawsuits would exceed established reserves.

About two-thirds of the additional costs were related to Kindred's nursing home operations in Florida, even though only 6 percent of the company's 290 nursing homes are located there. As a result, Kindred announced plans to divest itself of its 18 Florida nursing homes.