SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 1, 2018
KINDRED HEALTHCARE, INC.
(Exact name of registrant as specified in its charter)
(State or other jurisdiction
of incorporation or organization)
680 South Fourth Street
(Address of principal executive offices)
Registrants telephone number, including area code: (502) 596-7300
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation to the registrant under any of the following provisions:
|☐||Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)|
|☐||Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)|
|☐||Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))|
|☐||Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))|
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
|Item 7.01.||Regulation FD Disclosure.|
As previously announced, on December 19, 2017, Kindred Healthcare, Inc. (Kindred or the Company) entered into an Agreement and Plan of Merger (the Merger Agreement) with Kentucky Hospital Holdings, LLC, a Delaware limited liability company, Kentucky Homecare Holdings, Inc., a Delaware corporation, and Kentucky Homecare Merger Sub, Inc. (Merger Sub). Subject to the terms and conditions of the Merger Agreement, Merger Sub will be merged with and into Kindred (the Merger), with Kindred continuing as the surviving company in the Merger.
In connection with the financing of the proposed Merger, the Company expects to distribute preliminary financing materials to potential lenders and investors. The Company is disclosing certain of the information included in the preliminary financing materials that will be provided to such potential lenders and investors (the Preliminary Financing Information), which information is furnished as Exhibit 99.1 to this Current Report and shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liability of such section, nor shall this information be deemed incorporated by reference into any filing made by the Company under the Securities Act of 1933, as amended (the Securities Act), or the Exchange Act, except as expressly set forth by specific reference in such a filing.
The Preliminary Financing Information is summary information that should be considered in the context of the Companys filings with the Securities and Exchange Commission (the SEC) and other public announcements that the Company may make by press release or otherwise from time to time. While the Company may elect to update the Preliminary Financing Information in the future to reflect events and circumstances occurring or existing after the date of this Current Report, the Company specifically disclaims any obligation to do so, except as may be required by law. By furnishing the Preliminary Financing Information with this Current Report, the Company makes no admission as to the materiality of any information in the Preliminary Financing Information.
|Item 8.01.||Other Events.|
On June 1, 2018, Kindred made available the Preliminary Financing Information.
|Item 9.01.||Financial Statements and Exhibits.|
|99.1||Excerpts from Preliminary Financing Information|
Forward Looking Statements
Certain statements contained herein includes forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements are often identified by words such as anticipate, approximate, believe, plan, estimate, expect, project, could, would, should, will, intend, hope, may, potential, upside, seek, continue and other similar expressions.
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. 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, performance, or plans to differ materially from any future results, performance or plans expressed or implied by such forward-looking statements. Risks and uncertainties related to the Merger include, but are not limited to, the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement; the failure of the parties to satisfy conditions to completion of the Merger, including the failure of the parties to obtain required regulatory approvals; the risk that regulatory or other approvals are delayed or are subject to terms and conditions that are not anticipated; changes in the business or operating prospects of the Company or its businesses; changes in health care and other laws and regulations; the impact of the announcement of, or failure to complete, the Merger on our relationships with employees, customers, vendors and other business partners; and potential or actual litigation. In addition, these statements involve risks, uncertainties, and other factors detailed from time to time in the Companys Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K filed with the SEC.
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.
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|Kindred Healthcare, Inc.|
|June 1, 2018||By:|
|Name:||Joseph L. Landenwich|
|Title:||General Counsel and Corporate Secretary|
Explanation of Kindred Non-GAAP Measures In addition to the results provided in accordance with GAAP, Kindred Healthcare, Inc. (the Company) has provided information in this presentation using certain non-GAAP measures. The use of these non-GAAP measures is not intended to replace the presentation of the Companys financial results in accordance with GAAP. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in the following pages of this presentation. For each of the Companys segments, segment adjusted operating income (loss) is a measure of performance used by the Companys chief operating decision makers in accordance with Accounting Standard Codification 280Segment Reporting. In this context, the Company defines segment adjusted operating income (loss) as earnings before interest, income taxes, depreciation, amortization and total rent for each of the Companys operating segments, excluding litigation contingency expense, impairment charges, restructuring charges, transaction costs, and the allocation of support center overhead. EBITDA: The Company defines EBITDA as earnings before interest, income taxes, depreciation, and amortization, and believes that the presentation of EBITDA is useful to investors because creditors, securities analysts and investors use EBITDA to compare the performance and valuation of companies in the healthcare industry before consideration of non-cash depreciation and amortization expense, and financing costs, which can vary significantly among companies. Core Operating Results: The Company calculates core operating results, including core net income (loss) attributable to Kindred, and core EBITDA, 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. The Company believes that the presentation of core operating results provides additional information to investors to facilitate the comparison between periods by excluding certain charges that are not representative of its ongoing operations due to the materiality and nature of the charges. The Companys management uses core net income (loss) attributable to Kindred, and core EBITDA as measures of operational performance that are meaningful to investors. The Company uses these measures to assess the relative performance of its operating divisions, as well as the employees that operate these businesses. In addition, the Company believes these measures are important, because securities analysts and investors use these measures to compare the Companys performance to other companies in the healthcare industry. Same-Hospital Revenues: The same-hospital revenues are calculated by excluding from the Companys Hospital division revenues the results from two hospitals that closed during the fourth quarter of 2017, four hospitals that closed during the third quarter of 2017, and one hospital that closed during the second quarter of 2017. The Company believes the presentation of same-hospital revenues provides investors, equity analysts and others with useful information regarding the performance of the Companys hospital operations that are comparable for the periods presented. For core net income (loss) attributable to Kindred and core EBITDA, the Company believes that income (loss) from continuing operations is the most comparable GAAP measure. Readers of the Companys financial information should consider income (loss) from continuing operations as an important measure of the Companys financial performance, because it provides the most complete measure of its performance. For same-hospital revenues, the Company believes that reported hospital segment revenues is the most comparable GAAP measure. Readers of the Companys financial information should consider reported hospital segment revenues as an important measure of the Companys Hospital division financial performance because it provides the most complete measure of its revenue performance. Operating results presented on a core basis, as well as a same-hospital basis, should be considered in addition to, not as a substitute for, or superior to, financial measures based upon GAAP as an indicator of operating performance. Also in this presentation, the Company provides the financial measures core free cash flows. Core Free Cash Flows: The Company recognizes that core free cash flows are non-GAAP measures and are not intended to replace the presentation of the Companys cash flows in accordance with GAAP. For core free cash flows, the Company believes net cash flows provided by operating activities is the most comparable GAAP measure. Readers of the Companys financial information should consider net cash flows provided by operating activities as an important measure because it provides the most complete measure of cash provided by operating activities. Core free cash flows should be considered in addition to, not as a substitute for, or superior to, financial measures based upon GAAP as an indicator of the Companys cash flows provided by operating activities.
Reconciliation of Non-GAAP Measures ($ in thousands) Year ended December 31 Revenues by segment (a): 2015 2016 2017 Q1 2017 Q1 2018 Kindred at Home: Home health: Home health $ 1,329,548 $ 1,477,235 $ 1,524,346 $ 376,736 $ 3 84,800 Other 10,647 1 3,501 2 1,069 3,568 3 ,576 1,340,195 1 ,490,736 1 ,545,415 380,304 388,376 Community care 238,305 271,886 276,942 7 0,527 65,383 Hospice 656,527 736,803 743,443 179,378 183,628 2,235,027 2 ,499,425 2 ,565,800 630,209 637,387 Kindred Healthcare: Hospital division 2 ,483,376 2 ,434,311 2 ,106,375 556,646 547,630 Kindred Rehabilitation Services: Kindred Hospital Rehabilitation Services: Inpatient rehabilitation facilities 305,492 359,552 388,734 9 5,964 100,683 Hospital contract services 308,829 320,248 315,181 8 2,151 77,536 614,321 679,800 703,915 (b) 178,115 178,219 RehabCare 907,548 776,796 745,467 198,126 172,519 1,521,869 1 ,456,596 1 ,449,382 376,241 350,738 Eliminations (121,054) (97,803) (87,434) (23,606) ( 21,966) 3,884,191 3 ,793,104 3 ,468,323 909,281 876,402 $ 6,119,218 $ 6,292,529 $ 6,034,123 $ 1,539,490 $ 1,513,789 (a) Amounts as restated for discontinued operations as of June 30, 2017. (b) Revenues for this segment are further reconciled below: 2017 Kindred Hospital Rehabilitation Services: Inpatient rehabilitation facilities $ 388,734 Hospital contract services: Acute rehabilitation units 134,591 LTAC contract services 94,611 Outpatient/Medsurge 85,979 315,181 $ 703,915 Appendix2
Reconciliation of Non-GAAP Measures (continued) 2015 2016 2017 Q1 2017 Q1 2018 Reconciliation of income (loss) from continuing operations before charges: As reported (a): Income (loss) from continuing operations attributable to Kindred ($108,946) ($632,535) ($289,377) ($160) $13,515 Depreciation and amortization 129,246 131,819 104,805 2 9,820 2 4,789 Interest, net 229,596 231,504 237,912 5 8,819 6 0,835 Provision (benefit) for income taxes (51,714) 314,262 ( 157,116) 2,234 1,228 Earnings attributable to noncontrolling interests for continuing operations 26,044 3 4,847 4 2,176 1 0,483 1 2,792 EBITDA $224,226 $79,897 ($61,600) $101,196 $113,159 Detail of charges (a): Retirement and severance $5,397 $0 $0 $0 $0 Business interruption settlements(3,378) (1,803) Research and development1 1,520 Debt amendment1,103 RehabCare customer contract litigation 12,8642 3,061 Insurance restructuring 1 0,406 Litigation contingency 137,556 1,775 7,435 Restructuring charges 10,250 3 4,734 4 0,343 8,101 6,931 Transaction costs 106,702 6,306 Impairment charges 24,757 314,729 381,179 4 74Restructuring chargesrent 2,368 6 1,392 4 4,518 1,905 1,178 Lease cancellation charges (included in rent expense) 792 2 72 300,686 428,453 505,139 1 0,480 8,109 Core EBITDA $524,912 $508,350 $443,539 $111,676 $121,268 (a) Amounts as restated for discontinued operations as of June 30, 2017. Year ended December 31, ($ in thousands) Appendix 3
Core EBITDA (a)(b): 2015 2016 2017 Q1 2017 Q1 2018 Kindred at Home: Home health $195,195 $210,080 $208,241 $47,715 $44,260 Other ( 1,879) ( 6,803) ( 3,170) (1,762) ( 1,348) 1 93,316 2 03,277 2 05,071 45,953 42,912 Hospice 92,481 97,750 1 12,217 23,241 24,587 Community Care 29,935 40,215 36,855 9,344 8,303 3 15,732 3 41,242 3 54,143 78,538 75,802 Kindred Healthcare: Hospital division 2 78,392 2 29,394 1 35,069 42,693 55,889 Kindred Rehabilitation Services: Kindred Hospital Rehabilitation Services: Inpatient rehabilitation facilities 69,841 86,117 98,139 24,439 26,461 Hospital contract services 76,719 76,941 69,482 18,523 17,775 1 46,560 1 63,058 1 67,621 42,962 44,236 RehabCare 44,574 29,719 26,332 7,760 3,097 1 91,134 1 92,777 1 93,953 50,722 47,333 4 69,526 4 22,171 3 29,022 93,415 1 03,222 Core EBITDA before Support Center 7 85,258 7 63,413 6 83,165 171,953 1 79,024 Support center (260,346) (255,063) (239,626) (60,277) (57,756) $524,912 $508,350 $443,539 $111,676 $121,268 Adjusted Core EBITDA (c): Kindred at Home: Home health $126,984 $143,253 $145,459 $31,922 $29,128 Other ( 1,879) ( 6,803) ( 3,170) (1,762) ( 1,348) 1 25,105 1 36,450 1 42,289 30,160 27,780 Hospice 54,210 60,256 76,992 14,380 16,097 Community Care 17,178 27,717 25,113 6,390 5,473 1 96,494 2 24,423 2 44,394 50,931 49,350 Kindred Healthcare: Hospital division 1 91,697 1 44,458 55,274 22,621 36,656 Kindred Rehabilitation Services: Kindred Hospital Rehabilitation Services: Inpatient rehabilitation facilities 52,658 69,283 82,324 20,461 22,649 Hospital contract services 65,784 66,228 59,418 15,991 15,349 1 18,443 1 35,511 1 41,741 36,452 37,998 RehabCare 18,279 3,958 2,130 1,672 ( 2,736) 1 36,722 1 39,469 1 43,871 38,124 35,262 3 28,418 2 83,927 1 99,145 60,745 71,918 $524,912 $508,350 $443,539 $111,676 $121,268 (a) See previous page for a reconciliation of the consolidated amount to GAAP income (loss) from continuing operations. (b) Amounts as restated for discontinued operations as of June 30, 2017. Year ended December 31, (c) Adjusted due to the allocation of all support center costs as follows: Hospitals33.3%, Hospital contract services4.2%, IRF6.6%, RehabCare10.1%, Home health26.2%, Hospice14.7% and Community Care4.9%. ($ in thousands) Reconciliation of Non-GAAP Measures (continued) Appendix 4
A reconciliation of combined Kindred Hospital Rehabilitation Services and Centerre revenues for each historical period follows: 2011 2012 2013 2014 2015 2016 2017 Kindred Hospital Rehabilitation Services: Inpatient rehabilitation facilities (IRF) $28,714 $57,204 $65,484 $75,007 $305,492 $359,552 $388,734 Acute rehabilitation units (ARU) 122,381 121,145 120,784 122,941 125,972 130,802 134,591 151,095 178,349 186,268 197,948 431,464 490,354 523,325 All other hospital-based rehabilitation contract services 78,443 178,611 171,584 181,441 182,857 189,446 180,590 229,538 356,960 357,852 379,389 614,321 679,800 703,915 Centerre consolidated IRFs (a) 75,563 90,938 122,666 175,252 Combined Hospital Rehabilitation Services Revenues $305,101 $447,898 $480,518 $554,641 $614,321 $679,800 $703,915 Combined IRF revenues $104,277 $148,142 $188,150 $250,259 $305,492 $359,552 $388,734 (a) For Centerre, only periods prior to acquisition are presented, or prior to January 1, 2015. Year ended December 31, On January 1, 2015, Kindred Healthcare, Inc. acquired Centerre Healthcare Corporation (Centerre) a company dedicated to operating IRFs. Revenues presented are only for the pre-acquisition period, one of which will convert to an inpatient rehabilitation facility. ($ in thousands) Reconciliation of Non-GAAP Measures (continued) Appendix 5
Year ended December 31, Loss from continuing operations: 2017 Segment adjusted operating income: Kindred at Home: Home health $276,218 Hospice 129,273 405,491 Hospital division: Leased hospitals 263,788 Owned hospitals 67,931 Sub-acute units and skilled nursing center 5,768 337,487 Kindred Rehabilitation Services: Kindred Hospital Rehabilitation Services 203,392 RehabCare 6,884 210,276 Support center expenses (249,007) Litigation contingency expense (7,435) Impairment charges (381,179) Restructuring charges (40,343) Building rent (257,516) Equipment rent (34,856) Restructuring chargesrent (44,518) Depreciation and amortization (104,805) Interest, net (237,912) Loss from continuing operations before income taxes (404,317) Income tax benefit (157,116) (247,201) Noncontrolling interests (42,176) Loss attributable to Kindred ($289,377) ($ in thousands) Reconciliation of Non-GAAP Measures (continued) Appendix 6
A reconciliation of revenues for the Hospital Division for each historical period follows: % change v. Q1 2017 Q1 2018 prior year Transitional care hospitals $540,280 $531,407 (1.6) Sub-acute units and one skilled nursing facility 16,366 16,223 Reported hospital division revenues $556,646 $547,630 (1.6) A reconciliation of reported hospital revenues to same-hospital revenues for each historical period follows: % change v. Q1 2017 Q1 2018 prior year Transitional care hospitals $540,280 $531,407 (1.6) Hospitals closed during 2017 (a) ( 26,838) 525 Same-hospital revenues $513,442 $531,932 3.6 (a) One hospital closed during the second quarter of 2017, four hospitals closed during the third quarter of 2017 and two hospitals closed during the fourth quarter of 2017. ($ in thousands) Reconciliation of Non-GAAP Measures (continued) Appendix 7
A reconciliation of Adjusted Core EBITDA with allocation for the Hospital Division for each historical period follows: % change v. Q1 2017 Q1 2018 prior year Transitional care hospitals $23,126 $36,423 57.5 Sub-acute units and one skilled nursing facility (505) 233 Hospital division adjusted core EBITDA (a) $22,621 $36,656 62.0 A reconciliation of hospital Adjusted Core EBITDA with allocation to same-hospital for each historical period follows: % change v. Q1 2017 Q1 2018 prior year Transitional care hospitals $23,126 $36,423 57.5 Hospitals closed during 2017 (b) 184 ( 1,035) Same-hospital adjusted core EBITDA $22,942 $37,458 63.3 (a) See page 6 of the Appendix for a reconciliation of the consolidated amount to GAAP income (loss) from continuing operations and Adjusted Core EBITDA. (b) One hospital closed during the second quarter of 2017, four hospitals closed during the third quarter of 2017 and two hospitals closed during the fourth quarter of 2017, one of which will convert to an inpatient rehabilitation facility. ($ in thousands) Reconciliation of Non-GAAP Measures (continued) Appendix8