Kindred Announces Definitive Agreement to Divest Skilled Nursing Facility Business
Total Value to Kindred Will Approximate
Net Value to Kindred Will Approximate
Following Previously Announced
Kindred’s Annual Rent Expense Will Be Reduced By Approximately
Annual Capital Expenditures Will Be Reduced By Approximately
Noncontrolling Interests Payments Will Be Reduced By Approximately
and Hospital-Based Sub-Acute Units
Kindred Expects Phased Transaction Closings to Begin in the Third
Quarter of 2017
and Be Completed by Year End 2017
As previously disclosed, 36 of the skilled nursing facilities (the
“Ventas Properties”) are currently leased from
Kindred expects to realize net value of approximately
Mr. Breier added, “The exit and sale of our nursing center operations significantly enhances shareholder value, shifts attention to our higher margin and faster growing businesses, and advances our efforts to transform Kindred’s strategy. Upon completion of this transaction, we believe Kindred’s capital structure, leverage profile and operating performance will all be markedly improved.”
Mr. Breier concluded, “We believe that BlueMountain and the associated new operators will be strong partners in providing leadership for these buildings going forward. We are proud to report that since announcing our divestiture plans, our Nursing Center Division has maintained high standards of care and patient satisfaction, while delivering stable operating results. On behalf of the Kindred Board of Directors and management team, I thank all of our caregivers for their hard work and dedication to our patients, residents and their families throughout this process. We appreciate their continued commitment as we execute a smooth transition.”
Discontinued Operations Accounting Commentary
The Company anticipates that substantially all of its skilled nursing
facility business, and the contribution margin from applicable RehabCare
contracts servicing the Company’s skilled nursing facility business,
will move to discontinued operations when reporting second quarter
results in August, at which time the Company intends to provide updated
guidance and adjust prior periods to reflect the anticipated sale. The
Company estimates this accounting change will reduce second quarter
reported core earnings before interest, income taxes, depreciation,
amortization and rent (“EBITDAR”) from continuing operations by
The Company notes these amounts assume that no RehabCare contracts
servicing the Company’s skilled nursing facility business are retained.
Discontinued operations accounting rules do not allow the associated
contribution margins from these contracts to be reported as continuing
operations unless contracts for those facilities are signed with the new
operators. The Company historically has retained approximately half of
such contracts in similar divestitures and anticipates similar contract
retention levels for this transaction. The Company expects this will
result in approximately $10 million(2) of incremental
annual core EBITDAR performance (approximately
The Company further notes that, due to the requirements of discontinued
operations accounting, these figures do not include the benefit of
Other Transaction Items
The transaction is subject to customary conditions to closing, including the receipt of all licensure, regulatory and other approvals. Kindred expects that the closings for the transaction will occur in phases as regulatory and other approvals are received. Kindred expects that the initial closing will occur in the third quarter of 2017 and that all of the closings will be completed by year end.
This press release includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include, but are not limited to, all statements regarding the Company’s ability to exit the skilled nursing facility business and the expected timing of such exit, including the receipt of all required regulatory approvals and the satisfaction of the closing conditions for the transaction, as well as the Company’s ability to realize the anticipated benefits, sale proceeds, cost savings and strategic gains from the transaction, all statements regarding the Company’s expected future financial position, results of operations, cash flows, dividends, financing plans, business strategy, budgets, capital expenditures, competitive positions, growth opportunities, plans and objectives of management, government investigations, regulatory matters, and statements containing words such as “anticipate,” “approximate,” “believe,” “plan,” “estimate,” “expect,” “project,” “could,” “would,” “should,” “will,” “intend,” “hope,” “may,” “potential,” “upside,” and other similar expressions. Statements in this press release concerning the Company’s business outlook or future economic performance, anticipated profitability, revenues, expenses, dividends or other financial items, and product or services line growth, and expected outcome of government investigations and other regulatory matters, together with other statements that are not historical facts, are forward-looking statements that are estimates reflecting the best judgment of the Company based upon currently available information.
Such forward-looking statements are inherently uncertain, and
stockholders and other potential investors must recognize that actual
results may differ materially from the Company’s expectations as a
result of a variety of factors. 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 is unable to predict or control, that may cause the Company’s
actual results, performance, or plans to differ materially from any
future results, performance or plans expressed or implied by such
forward-looking statements. These statements involve risks,
uncertainties, and other factors detailed from time to time in the
Company’s Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K filed with the
Many of these factors are beyond the Company’s control. The Company cautions investors that any forward-looking statements made by the Company are not guarantees of future performance. 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.
The Company’s deferred tax assets are subject to a full valuation allowance under generally accepted accounting principles (“GAAP”) and the cash benefit is subject to the Company generating taxable income over the carryforward period.
All forward-looking non-GAAP financial measures used to provide the Company’s 2017 second quarter outlook are provided only on a non-GAAP basis. This is due to the inherent difficulty of forecasting the timing or amount of items that would be included in the most directly comparable forward-looking GAAP financial measures. As a result, reconciliation of the forward-looking non-GAAP financial measures to GAAP is not available without unreasonable effort and the Company is unable to access the probable significance of the unavailable information. The Company calculates core EBITDAR and core diluted earnings per share by excluding charges related to impairments, business interruption settlements, restructuring charges, debt amendment costs, executive or restructuring-related severance, retirement and retention costs, restructuring-related facility closing charges, and material transaction, integration, litigation, and research and development costs.
Approximately $30 million of such amount relates to the estimated operating results of the Company’s skilled nursing facility business and approximately $5 million relates to the estimated contribution margin from the Company’s RehabCare contracts serving the Company’s skilled nursing facility business.
Revenues for the last twelve months ended March 31, 2017.
Kindred Healthcare, Inc.
Todd Flowers, 502-596-6569