Q3 Earnings Call Flashback

Strange Tony,

Kindred executives spoke to Wall Street analysts about Q3 earnings on November 12, 2017.  At that point the company was deep in buyout discussions with the consortium of Humana and private equity firms TPG Capital and Welsh, Carson, Anderson and Stowe.  November 13-14, 2017 saw Humana's Bruce Broussard meeting with Kindred at Home President David Causby to discuss his role in general with the company.

Kindred executives indicated expected 2018 EBITDA in the Q3 earnings call.  This number is important as the Humana/TPG/WCAS buyout has been expressed as a multiple of this number, 8 times EBITDA.

For the third quarter of 2017, we had core EBITDA of $84 million; and for 2018, we expect core EBITDA to be in the range of $500 million to $530 million, with $515 million at the midpoint.

As we've discussed previously, given our significant balance of NOLs, which we expect to be $550 million to $600 million at the end of this year, we expect our cash income tax payments to be less than 10% of core book tax liability for some time to come.

Oddly TPG and WCAS will be paid 10.5 to 11.5 EBITDA by Humana under their put/call arrangement.  It's not clear how three years of majority private equity ownership increases the value of the company by 31 to 44%, but those are the deal elements. 


Kindred's Ben Brier and other executives were pleased with labor costs in the Q3 earnings call.

Labor cost improvement in Kindred at Home and some of these other items that we've been talking about, we have maybe a quarter or two quarters of it under our belt and you'll see that continue to drive it up to baseline as we annualize.

We made significant progress on our labor cost for our home health business, despite a challenging labor market. Our direct labor cost per visit for this business was down 3.7% from prior year. If you recall, this is an area that had been a significant challenge for us

On the hospice side of the business, core EBITDAR grew 11%, driven by strong revenue per patient day growth of 2.7%, effective cost controls through tight labor management and an ongoing optimization of our branch network.

In communications with employees on the buyout Breier punted benefit and wage changes to summer 2018 and new owners.  He hasn't said a word about negotiations regarding compensation and treatment of employees.  Breier shared that information with the board five days before the announced buyout.

On December 14, 2017 Mr. Breier provided an update on developments in the negotiations relating to compensation and treatment of employees, and updated the Board that, as previously authorized by the Board, both he and David Causby were negotiating term sheets for their future employment with HospitalCo and HomecareCo, respectively. 

The Q3 earnings call indicated Kindred plans to have 1.5 million more shares of stock in 2018.

Moving now to share count, as previously disclosed, we expect fully diluted weighted average share count for 2017 of roughly 88.5 million shares and our 2018 outlook anticipates a weighted average share count of approximately 90 million shares.

I expect board members and executives to garner most of the additional 1.5 million shares.

Here's a nod to the developing Humana deal.

As the managed care and Medicare Advantage environment grows, you'll continue to see us take more Medicare Advantage episodically paid patients.

Medicare Advantage plans are big business for Humana.  And the buyout is big money for Ben Breier (nearly $25 million) and David Causby (over $6.5 million).  Employees not taken out in the pretakeover culling will find our "big money" after summer 2018.

Anonymous (from continuously executive enriched Kindred)