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8-K - FORM 8-K - KINDRED HEALTHCARE, INC | d576728d8k.htm |
EXHIBIT 99.1
Contact: | Richard A. Lechleiter |
Executive Vice President and |
Chief Financial Officer |
(502) 596-7734 |
KINDRED HEALTHCARE COMPLETES SALE OF SEVEN NON-STRATEGIC
NURSING CENTERS LOCATED OUTSIDE INTEGRATED CARE MARKETS
FOR APPROXIMATELY $47 MILLION
LOUISVILLE, Ky. (July 31, 2013) Kindred Healthcare, Inc. (the Company or Kindred) (NYSE:KND) today announced that it has sold seven non-strategic nursing centers (the Facilities) for approximately $47 million to affiliates of Signature Healthcare, LLC (Signature). Each of the Facilities is located outside of Kindreds 21 designated Integrated Care Markets.
The Company expects that the after-tax net proceeds from the Signature transaction, including transaction costs and tax benefits, will approximate $47 million. Over time, these proceeds will be reinvested in the Companys Integrated Care Markets.
In the near term, Kindred intends to use the net proceeds to pay down the outstanding balance under its revolving credit facility. At March 31, 2013, the outstanding balance on the Companys $750 million revolving credit facility approximated $350 million. The Company expects the Signature transaction will be slightly dilutive to earnings in 2013.
The Facilities contain 900 licensed nursing center beds. Five of the Facilities are owned and the remaining Facilities are leased. The Facilities generated revenues of approximately $63 million and earnings before interest, income taxes, depreciation and amortization of approximately $7 million (including the allocation of approximately $2 million of overhead costs) for the year ended December 31, 2012. The Facilities had aggregate rent expense of approximately $2 million for the year ended December 31, 2012.
The Company had previously announced its intention to sell eight facilities to Signature but the Company was unable to satisfy all closing conditions for the sale of one facility and elected to remove it from the transaction.
RBC Capital Markets served as the exclusive financial advisor to Kindred on the Signature transaction.
We are pleased to complete this tax-efficient transaction, which further accelerates our repositioning strategy with the goal of improving our long-term growth, profitability and financial position, said Paul J. Diaz, Kindreds Chief Executive Officer. We will continue to sharpen our focus on our Integrated Care Market strategy that enables us to better Continue the Care for our patients and provide high-quality clinical outcomes throughout an entire post-acute episode.
Forward-Looking Statements
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. All statements regarding the Companys expected future financial position, results of operations, cash flows, financing plans, business strategy, budgets, capital expenditures, competitive positions, growth opportunities, plans and objectives of management and statements containing the words such as anticipate, approximate, believe, plan, estimate, expect, project, could, should, will, intend, may and other similar expressions, are forward-looking statements. Statements in this press release concerning the Companys
680 South Fourth Street Louisville, Kentucky 40202
502.596.7300 www.kindredhealthcare.com
Kindred Healthcare Completes Sale of Seven Non-Strategic Nursing Centers Located
Outside Integrated Care Markets for Approximately $47 Million
Page 2
July 31, 2013
business outlook or future economic performance, anticipated profitability, revenues, expenses or other financial items, and product or services line growth, 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 Companys expectations as a result of a variety of factors, including, without limitation, those discussed below. Such forward-looking statements are based upon managements 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 Companys actual results or performance to differ materially from any future results or performance expressed or implied by such forward-looking statements. These statements involve risks, uncertainties and other factors discussed below and detailed from time to time in the Companys filings with the Securities and Exchange Commission.
In addition to the factors set forth above, other factors that may affect the Companys plans, results or stock price include, without limitation, (a) the impact of healthcare reform, which will initiate significant changes to the United States healthcare system, including potential material changes to the delivery of healthcare services and the reimbursement paid for such services by the government or other third party payors, including reforms resulting from the Patient Protection and Affordable Care Act and the Healthcare Education and Reconciliation Act (collectively, the ACA) or future deficit reduction measures adopted at the federal or state level. Healthcare reform is affecting each of the Companys businesses in some manner. Potential future efforts in the U.S. Congress to repeal, amend, modify or retract funding for various aspects of the ACA create additional uncertainty about the ultimate impact of the ACA on the Company and the healthcare industry. Due to the substantial regulatory changes that will need to be implemented by the Centers for Medicare and Medicaid Services (CMS) and others, and the numerous processes required to implement these reforms, the Company cannot predict which healthcare initiatives will be implemented at the federal or state level, the timing of any such reforms, or the effect such reforms or any other future legislation or regulation will have on the Companys business, financial position, results of operations and liquidity, (b) the impact of final rules issued by CMS on August 1, 2012 which, among other things, will reduce Medicare reimbursement to the Companys transitional care (TC) hospitals in 2013 and beyond by imposing a budget neutrality adjustment and modifying the short-stay outlier rules, (c) the impact of final rules issued by CMS on July 29, 2011 which significantly reduced Medicare reimbursement to the Companys nursing centers and changed payments for the provision of group therapy services effective October 1, 2011, (d) the impact of the Budget Control Act of 2011 (as amended by the American Taxpayer Relief Act of 2012 (the Taxpayer Relief Act)) which will automatically reduce federal spending by approximately $1.2 trillion split evenly between domestic and defense spending. An automatic 2% reduction on each claim submitted to Medicare began on April 1, 2013, (e) the impact of the Taxpayer Relief Act which, among other things, reduces Medicare payments by 50% for subsequent procedures when multiple therapy services are provided on the same day. At this time, the Company believes that the new rules related to multiple therapy services will reduce the Companys Medicare revenues by $25 million to $30 million on an annual basis, (f) changes in the reimbursement rates or the methods or timing of payment from third party payors, including commercial payors and the Medicare and Medicaid programs, changes arising from and related to the Medicare prospective payment system for long-term acute care (LTAC) hospitals, including potential changes in the Medicare payment rules, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, and changes in Medicare and Medicaid reimbursement for the Companys TC hospitals, nursing centers, inpatient rehabilitation hospitals and home health and hospice operations, and the expiration of the Medicare Part B therapy cap exception process, (g) the effects of additional legislative changes and government regulations, interpretation of regulations and changes in the nature and enforcement of regulations governing the healthcare industry, (h) the ability of the Companys hospitals to adjust to potential LTAC certification and medical necessity reviews, (i) the impact of the Companys significantly increased levels of indebtedness as a result of the RehabCare Group, Inc. acquisition on the Companys funding costs, operating flexibility and ability to fund ongoing operations, development capital expenditures or other strategic acquisitions with additional borrowings, (j) the Companys ability to successfully pursue its development activities, including through acquisitions, and successfully
Kindred Healthcare Completes Sale of Seven Non-Strategic Nursing Centers Located
Outside Integrated Care Markets for Approximately $47 Million
Page 3
July 31, 2013
integrate new operations, including the realization of anticipated revenues, economies of scale, cost savings and productivity gains associated with such operations, as and when planned, including the potential impact of unanticipated issues, expenses and liabilities associated with those activities, (k) the failure of the Companys facilities to meet applicable licensure and certification requirements, (l) the further consolidation and cost containment efforts of managed care organizations and other third party payors, (m) the Companys ability to meet its rental and debt service obligations, (n) the Companys ability to operate pursuant to the terms of its debt obligations, and comply with its covenants thereunder, and its ability to operate pursuant to its master lease agreements with Ventas, Inc. (NYSE:VTR), (o) the condition of the financial markets, including volatility and weakness in the equity, capital and credit markets, which could limit the availability and terms of debt and equity financing sources to fund the requirements of the Companys businesses, or which could negatively impact the Companys investment portfolio, (p) national and regional economic, financial, business and political conditions, including their effect on the availability and cost of labor, credit, materials and other services, (q) the Companys ability to control costs, particularly labor and employee benefit costs, (r) increased operating costs due to shortages in qualified nurses, therapists and other healthcare personnel, (s) the Companys ability to attract and retain key executives and other healthcare personnel, (t) the increase in the costs of defending and insuring against alleged professional liability and other claims and the Companys ability to predict the estimated costs related to such claims, including the impact of differences in actuarial assumptions and estimates compared to eventual outcomes, (u) the Companys ability to successfully reduce (by divestiture of operations or otherwise) its exposure to professional liability and other claims, (v) the Companys ability to successfully dispose of unprofitable facilities, (w) events or circumstances which could result in the impairment of an asset or other charges, such as the impact of Medicare reimbursement regulations that resulted in the Company recording significant impairment charges in 2012 and 2011, (x) changes in generally accepted accounting principles or practices, and changes in tax accounting or tax laws (or authoritative interpretations relating to any of these matters), and (y) the Companys ability to maintain an effective system of internal control over financial reporting. Many of these factors are beyond the Companys 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.
About Kindred Healthcare
Kindred Healthcare, Inc., a top-125 private employer in the United States, is a FORTUNE 500 healthcare services company based in Louisville, Kentucky with annual revenues of $6 billion and approximately 76,000 employees in 46 states. At March 31, 2013, Kindred through its subsidiaries provided healthcare services in 2,169 locations, including 116 transitional care hospitals, six inpatient rehabilitation hospitals, 204 nursing centers, 24 sub-acute units, 101 Kindred at Home hospice, home health and non-medical home care locations, 103 inpatient rehabilitation units (hospital-based) and a contract rehabilitation services business, RehabCare, which served 1,615 non-affiliated facilities. Ranked as one of Fortune magazines Most Admired Healthcare Companies for five years in a row, Kindreds mission is to promote healing, provide hope, preserve dignity and produce value for each patient, resident, family member, customer, employee and shareholder we serve. For more information, go to www.kindredhealthcare.com. You can also follow us on Twitter and Facebook.
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