UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant
to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 9, 2014
KINDRED HEALTHCARE, INC.
(Exact name of registrant as specified in its charter)
|
|
|
|
|
Delaware |
|
001-14057 |
|
61-1323993 |
(State or other jurisdiction
of incorporation or organization) |
|
(Commission
File Number) |
|
(IRS Employer
Identification No.) |
680 South Fourth Street
Louisville, Kentucky
(Address of principal executive offices)
40202-2412
(Zip Code)
Registrants telephone number, including area code: (502) 596-7300
Not Applicable
(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:
x |
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)) |
Item 7.01. Regulation FD Disclosure
On October 9, 2014, Kindred Healthcare, Inc. (Kindred or the Company) and Gentiva Health Services, Inc.
(Gentiva) issued a joint press release regarding the matter disclosed in Item 8.01 of this Current Report on Form 8-K. A copy of such joint press release is attached hereto as Exhibit 99.1.
In connection with the execution of the Merger Agreement and the proposed Merger (each as defined below), the Kindred management team will
discuss the pending transaction with analysts and investors on a conference call today at 9:00 a.m. (Eastern Time). Interested parties can participate in the conference by dialing (866) 610-1072 (U.S.) or (973) 935-2840 (International),
conference code 14669615, five to 10 minutes prior to the start of the call. A live webcast will also be accessible on www.kindredhealthcare.com. A copy of a presentation regarding the proposed transaction, which was made available by Kindred
on October 9, 2014, is attached hereto as Exhibit 99.2 and is available on Kindreds website at www.kindredhealthcare.com under the heading investors.
Exhibit 99.1 and Exhibit 99.2 are being furnished under Item 7.01 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 such exhibits be deemed incorporated by reference in any filing made by Kindred under
the Securities Act of 1933, as amended (the Securities Act), or the Exchange Act.
2
Item 8.01 Other Events
On October 9, 2014, Kindred entered into an Agreement and Plan of Merger (the Merger Agreement) among Gentiva, Kindred and Kindred
Healthcare Development 2, Inc. (Merger Sub), providing for the acquisition of Gentiva by Kindred. Subject to the terms and conditions of the Merger Agreement, which has been approved by the boards of directors of the respective parties,
Merger Sub will be merged with and into Gentiva (the Merger), with Gentiva continuing as the surviving company in the Merger and a wholly owned subsidiary of Kindred.
3
***********
Forward-Looking Statements
Certain statements contained herein contain forward-looking statements within the meaning of Section 27A of the Securities Act and
Section 21E of the Exchange Act. These forward-looking statements include, but are not limited to, statements regarding the Companys proposed business combination transaction with Gentiva (including financing of the proposed transaction
and the benefits, results, effects and timing of a transaction), all statements regarding the Companys (and the Company and Gentivas combined) 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, and statements containing the words such as anticipate, approximate,
believe, plan, estimate, expect, project, could, would, should, will, intend, may, potential,
upside, and other similar expressions. Statements contained herein concerning the business outlook or future economic performance, anticipated profitability, revenues, expenses, dividends or other financial items, and product or services
line growth of the Company (and the combined businesses of the Company and Gentiva), 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, performance or plans with
respect to Gentiva 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 discussed below and detailed from time to
time in the Companys filings with the Securities and Exchange Commission (the SEC).
Risks and uncertainties related to
the proposed merger include, but are not limited to, the risk that Gentivas stockholders do not approve the merger, potential adverse reactions or changes to business relationships resulting from the announcement or completion of the merger,
uncertainties as to the timing of the merger, adverse effects on the Companys stock price resulting from the announcement or completion of the merger, competitive responses to the announcement or completion of the merger, the risk that
healthcare regulatory, licensure or other approvals and financing required for the consummation of the merger are not obtained or are obtained subject to terms and conditions that are not anticipated, costs and difficulties related to the
integration of Gentivas businesses and operations with the Companys businesses and operations, the inability to obtain, or delays in obtaining, cost savings and synergies from the merger, uncertainties as to whether the completion of the
merger or any transaction will have the accretive effect on the Companys earnings or cash flows that it expects, unexpected costs, liabilities, charges or expenses resulting from the merger, litigation relating to the merger, the inability to
retain key personnel, and any changes in general economic and/or industry-specific conditions.
In addition to the factors set forth
above, other factors that may affect the Companys plans, results or stock price are set forth in the Companys Annual Report on Form 10-K and in its reports on Forms 10-Q and 8-K.
4
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.
Additional Information
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or
approval. This communication may be deemed to be solicitation material in respect of the proposed merger between the Company and Gentiva. In connection with the proposed merger, the Company intends to file a registration statement on Form S-4,
containing a proxy statement/prospectus, with the SEC. SHAREHOLDERS OF GENTIVA ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE PROXY STATEMENT/PROSPECTUS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED
MERGER. Investors and security holders will be able to obtain copies of the proxy statement/prospectus as well as other filings containing information about the Company and Gentiva, without charge, at the SECs website, www.sec.gov.
Those documents, when filed, as well as the Companys other public filings with the SEC, may be obtained without charge at the Companys website at www.kindredhealthcare.com.
Participants in Solicitation
The
Company and its directors and executive officers, and Gentiva and its directors and executive officers, may be deemed to be participants in the solicitation of proxies from the holders of Gentiva common stock in respect of the proposed merger.
Information about the directors and executive officers of the Company is set forth in the proxy statement for the Companys 2014 Annual Meeting of Shareholders, which was filed with the SEC on April 3, 2014. Information about the directors
and executive officers of Gentiva is set forth in the proxy statement for Gentivas 2014 Annual Meeting of Shareholders, which was filed with the SEC on March 25, 2014. Investors may obtain additional information regarding the interest of
such participants by reading the proxy statement/prospectus regarding the proposed merger when it becomes available.
5
Item 9.01. Financial Statements and Exhibits
(d) Exhibits
|
|
|
Exhibit
No. |
|
Description of Exhibit |
|
|
99.1 |
|
Press release, dated October 9, 2014. |
|
|
99.2 |
|
Investor Presentation Materials, dated October 9, 2014. |
6
SIGNATURES
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. |
|
|
|
October 9, 2014 |
|
By: |
|
/s/ Joseph L. Landenwich |
|
|
|
|
Name: Joseph L. Landenwich |
|
|
|
|
Title: Co-General Counsel and Corporate Secretary |
7
Exhibit 99.1
KINDRED AND GENTIVA REACH DEFINITIVE AGREEMENT
CREATING NATION-WIDE INTEGRATED CARE DELIVERY SYSTEM
PREFERRED BY CONSUMERS AND PAYORS
Combination Will Help Transform the American Healthcare Delivery System
by Providing Patient-Centered, Coordinated Care at Home and Across the Continuum of Care
Combined Company Will Have Pro Forma Annual Revenues
of Approximately $7.1 Billion1 and Operating Income of $1.0 Billion1
Transaction Expected to be Immediately and Significantly Accretive to
Kindred Earnings
and Cash Flows2, with More Than $70 Million of Expected
Synergies, Accelerating Kindreds Growth
and Creating Significant Value for the Shareholders of Both Companies
LOUISVILLE, Ky. and ATLANTA (October 9, 2014) Kindred Healthcare, Inc. (Kindred or the Company) (NYSE:KND) and Gentiva
Health Services, Inc. (Gentiva) (NASDAQ:GTIV) today announced that the companies have entered into a definitive merger agreement under which Kindred will acquire all of the outstanding shares of Gentiva common stock for $19.50 per share
in a combination of cash and stock. The agreement was unanimously approved by the boards of directors of both companies.
Under the terms
of the agreement, Gentiva shareholders will receive $14.50 per share in cash and $5.00 of Kindred common stock (which equates to 0.257 shares of Kindred common stock based upon an agreed upon fixed exchange ratio). The transaction is valued at $1.8
billion, including the assumption of net debt. The companies expect the closing of the transaction to occur in the first quarter of 2015.
The combination of Kindred and Gentiva will further enhance Kindreds industry leading position as the Nations premier post-acute
and rehabilitation services provider and make Kindred at Home the largest and most geographically diversified Home Health and Hospice organization in the United States. The combined company will:
|
|
|
Serve more than one million patients per year; |
|
|
|
Employ approximately 109,000 individuals, making it the 78th largest private employer and the 4th largest
healthcare employer in the United States; |
|
|
|
Be the largest operator of long-term acute care hospitals and inpatient rehabilitation facilities in the United States, as well as the Nations largest provider of rehabilitation, home health and hospice services
and one of the leading sub-acute and skilled nursing providers; |
|
|
|
Deliver pro forma annual revenues of approximately $7.1 billion; and |
|
|
|
Generate pro forma operating income (EBITDAR), including expected cost synergies, of $1.0 billion. |
1 |
Pro forma revenues and Operating Income (EBITDAR) were computed by combining the mid point of 2014 guidance for Kindred as provided on August 6, 2014 (see enclosed reconciliation) and 2014 current average analyst
consensus estimates for Gentiva. In addition, pro forma EBITDAR includes full run rate expected cost synergies of $70 million, and estimated annualized rent expense of $41 million based on Gentivas second quarter of 2014. EBITDAR is
defined as earnings before interest, income taxes, depreciation, amortization and rent. |
2 |
Exclusive of transaction and integration costs. |
- MORE -
Strategic Benefits of the Combination
|
|
|
Positions Kindred to Help Shape the American Healthcare Delivery System: Through Kindreds Continue the Care strategy, the combined company will deliver patient-centered, coordinated care across the full
continuum from the hospital to the home. This integrated model is preferred by consumers as well as payors, including Affordable Care Organizations and Managed Care Organizations, as it improves quality, clinical outcomes and patient
satisfaction while reducing costs. |
|
|
|
Builds on Kindreds Industry Leadership: The combined company will advance Kindreds leadership in integrated post-acute care, including long-term acute care, rehabilitation services, skilled nursing,
home health and hospice care. |
|
|
|
Enhances Scale to Address Increasing Demand for Integrated Health Care and Expands Presence in Kindreds Integrated Care Markets: The Gentiva footprint overlaps in 20 of 23 of Kindreds current and
targeted Integrated Care Markets, which are among the top 30 Metropolitan Statistical Areas in the United States. Kindred expects this will create significant benefits for patients from improved care transitions and potential revenue synergies for
the Company from referrals across the combined care delivery platform. |
|
|
|
Greater Employee Opportunity: This combination creates an even stronger workforce by uniting the talented employees of Kindred and Gentiva, who share a commitment to high-quality and compassionate patient care.
Kindred and Gentiva employees will benefit from being part of a stronger, larger company and the greater career and professional development opportunities created by the transaction. |
Financial Benefits of the Combination
|
|
|
Significantly Increases Size and Scale, Diversifies Revenue Mix, and Enhances Revenue and Margin Growth Profiles: On a pro forma basis, the combined company is expected to generate annual revenues of
approximately $7.1 billion and EBITDAR, including expected synergies, of $1.0 billion. Kindreds revenue and margin growth profiles will also be significantly enhanced by the combination. |
|
|
|
Immediately and Significantly Accretive: Kindred expects the acquisition of Gentiva will be immediately and significantly accretive to earnings and operating cash flows, exclusive of transaction and integration
costs. Kindred expects the acquisition to be approximately $0.40 to $0.60 accretive to pro forma earnings, and pro forma operating cash flows of $350 million to $400 million (before capital expenditures, dividends and changes in working capital)3, both on a run rate basis, once Gentiva is fully integrated and expected synergies are fully realized in the second full year following the closing. On this same basis, following the combined
companys expected annual maintenance capital expenditures of $120 million to $130 million, Kindred expects pro forma cash flows (before growth capital expenditures, dividends and changes in working capital) of $230 million to $270 million.
|
|
|
|
Substantial Cost and Revenue Synergies: Kindred has identified approximately $70 million of annual cost and operating synergies and expects to achieve the full run rate within two years of closing, of which
approximately $35 million is expected to be achieved in the first year following the |
3 |
Based upon 2014 net income guidance for Kindred as provided on August 6, 2014 and 2014 current average analyst consensus estimates for Gentiva
and adding back depreciation and amortization per Kindreds 2014 guidance and adding back annualized six months ended June 30, 2014 depreciation and amortization for Gentiva and annualized stock-based compensation and deferred financing
cost amortization for both Kindred and Gentiva. In addition, expected full run rate estimated cost synergies, net of income taxes, of $42 million ($70 million full run rate annual costs and operating synergies less income taxes of $28 million) are
included. |
- MORE -
|
closing. Kindred expects the majority of cost synergies to be achieved through combining information technology functions, merging supply chains and eliminating redundant public company expenses.
In addition, Kindred expects to realize revenue synergies that will improve patient care transitions and choice, and drive volume growth as a result of cross-selling across the combined service platform. Kindred expects annual run rate
revenue synergies of more than $60 million over time, with approximately $20 million to $30 million achievable in the first full year following the closing. |
|
|
|
Enhanced Capital Structure, Strong Cash Flow Profile, Commitment to Deleveraging and Maintaining Moderate Leverage Profile: Kindred will maintain a strong balance sheet with significant cash flow and reduced
capital expenditures and rent burden, giving it the ability to continue paying a meaningful cash dividend while reducing debt. Kindred expects pro forma adjusted net leverage4 will be
approximately 5.5x5 Adjusted Debt to EBITDAR at closing, and to reduce its outstanding indebtedness to below 5.0x6 Adjusted Debt to EBITDAR by
the end of the second full year following closing. Kindred reiterates its commitment to a steady-state target leverage profile of 4.5x to 5.0x Adjusted Debt to EBITDAR. |
Management Commentary
Paul J.
Diaz, Chief Executive Officer of Kindred, said, Over the last eight weeks, we undertook a robust due diligence process and worked closely and constructively with our counterparts at Gentiva to better understand their operations, financial
results and outlook. This process confirmed the compelling strategic rationale and industrial logic of this combination, as well as our belief that this transaction is in the best interests of both companies and our respective shareholders,
patients, employees and business partners. This significantly accretive transaction will generate strong operating cash flows that will allow Kindred to quickly delever and support future growth and return of capital to shareholders. We look forward
to bringing our two companies together to advance our strategy, mission and shared values.
Rodney D. Windley, Executive Chairman of
the Board of Gentiva, said, This merger represents a successful conclusion to a process in which, from the beginning, we have focused on maximizing value for Gentivas shareholders consistent with our Boards responsibilities while
ensuring the future success of the company. The cash and equity structure of the transaction, which represents a 128% premium to Gentiva shares since Kindreds offer became public, provides Gentiva shareholders with immediate value and the
opportunity to participate in the potential growth and value creation of the combined company by virtue of their continued investment in Kindred stock. On behalf of our Board and management team, I would like to express my deep appreciation to our
employees across the country for their dedication and commitment to our patients and the families that we serve each and every day.
Benjamin A. Breier, President and Chief Operating Officer of the Company, said, With Gentiva, we will expand the breadth of our
offerings and our geographic footprint and enhance our presence in Kindreds Integrated Care Markets to drive more efficient and cost-effective coordinated care across more communities. This combination strengthens our ability to serve patients
across the full continuum of care from the hospital to the home. Together we will create the industry leading provider of home based patient-centered care, solidifying our position at the forefront of the care delivery model that is preferred
by patients and payors. As a combined company, we will continue to grow and help shape the American Healthcare Delivery System.
4 |
Pro forma adjusted net leverage is computed by dividing a numerator comprised of estimated long-term debt at closing plus pro forma annual rent expense multiplied by six, less unrestricted cash, by a denominator
comprised of pro forma EBITDAR. Pro forma annual rent expense was computed by combining 2014 guidance for Kindred as provided on August 6, 2014 and estimated annualized rent expense of $41 million based on Gentivas second quarter of 2014.
|
5 |
Includes $35 million of cost synergies expected to be realized in the first full year following closing. |
6 |
Includes $70 million of annual run rate cost synergies expected to be realized in the second full year following closing. |
- MORE -
Mr. Breier added, The combined company has tremendous growth potential and will have
increased financial flexibility to invest in clinical programs, information technology and infrastructure to advance our mission of promoting healing, providing hope, preserving dignity and producing value for every constituent we serve.
Importantly, both companies employees share a similar focus on patient service, and we anticipate a seamless integration. Upon closing, the combined company will embrace the best practices of both organizations, which we expect will create
exciting professional development and career opportunities for many employees. We look forward to welcoming the Gentiva team to the Kindred family and to making even greater strides in clinical innovation and excellence.
Tony Strange, Chief Executive Officer of Gentiva, said, By combining Gentiva and Kindred, we have solidified the importance of home care
in the post-acute care continuum of tomorrow. Kindred and Gentiva will create the largest provider of Integrated Care in America. The combined company has tremendous growth potential and will give Gentiva employees greater opportunities in the
future. We look forward to working together with Kindred to ensure a seamless transition.
Financing Details
Kindred has obtained committed financing from Citi and J.P. Morgan in connection with the pending transaction. Subject to market and other
conditions, the Company expects to finance the acquisition of Gentiva and associated costs through the issuance of $200 million to $300 million of common stock and mandatory convertible equity securities and $1.3 billion to $1.4 billion of unsecured
notes prior to the closing of the acquisition. The Company expects to fund the remaining amounts through its existing line of credit.
Following completion of the transaction, Kindred expects to have approximately 85 million fully diluted shares outstanding, comprised
primarily of approximately 64 million shares outstanding today, approximately 10 million shares to be issued to Gentiva as part of the transaction consideration, and approximately nine million to 12 million shares associated with the
expected offering of common stock and mandatory convertible equity securities.
Operations and Integration
The combined company will continue to be headquartered in Louisville, Kentucky and will maintain a significant, regional presence in Atlanta,
Georgia. The combined home health and hospice businesses will operate within the Kindred at Home division.
Timing and Approvals
The Gentiva acquisition is subject to certain conditions, including the approval by the stockholders of Gentiva. Kindred and Gentiva have
already received clearance for the transaction under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
The companies expect to
complete the transaction in the first quarter of 2015.
- MORE -
Advisors
Citi and Guggenheim Securities are acting as financial advisors to Kindred. Cleary Gottlieb Steen & Hamilton LLP is acting as legal
advisor and Gibson, Dunn & Crutcher LLP is serving as special counsel to Kindred.
Barclays and Edge Healthcare Partners are
serving as financial advisors to Gentiva and Greenberg Traurig, LLP is serving as Gentivas legal advisor.
Conference Call and Additional
Presentation Materials
The Kindred management team will be discussing the pending transaction with analysts and investors on a
conference call today at 9:00 a.m. (Eastern Time). Interested parties can participate in the conference by dialing (866) 610-1072 (U.S.) or (973) 935-2840 (International), conference code 14669615, five to 10 minutes prior to the start of
the call. A live webcast will also be accessible on www.kindredhealthcare.com. The conference call webcast will feature accompanying slides, which can be accessed through the Investor Relations section of Kindreds website.
A replay of the conference call will be available for the next 30 days and can be accessed by dialing (800) 585-8367 (U.S.) or
(404) 537-3406 (International), conference code 14669615. The replay will also be available online at www.kindredhealthcare.com.
About
Kindred Healthcare
Kindred Healthcare, Inc., a top-150 private employer in the United States, is a FORTUNE 500 healthcare services
company based in Louisville, Kentucky with annual revenues of $5 billion and approximately 63,000 employees in 47 states. At June 30, 2014, Kindred through its subsidiaries provided healthcare services in 2,353 locations, including 97
transitional care hospitals, five inpatient rehabilitation hospitals, 98 nursing centers, 21 sub-acute units, 153 Kindred at Home hospice, home health and non-medical home care locations, 104 inpatient rehabilitation units (hospital-based) and a
contract rehabilitation services business, RehabCare, which served 1,875 non-affiliated facilities. Ranked as one of Fortune magazines Most Admired Healthcare Companies for six 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.
About Gentiva Health Services, Inc.
Gentiva Health Services, Inc. is one of the nations largest providers of home health, hospice and community care services, delivering
innovative, high quality care to patients across the United States. Gentiva is a single source for skilled nursing; physical, occupational, speech and neurorehabilitation services; hospice services; social work; nutrition; disease management
education; help with daily living activities; and other therapies and services.
- MORE -
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. These forward-looking statements include, but are not limited to, statements regarding the Companys proposed business combination transaction with Gentiva (including
financing of the proposed transaction and the benefits, results, effects and timing of a transaction), all statements regarding the Companys (and the Companys and Gentivas combined) 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, and statements containing the words such as
anticipate, approximate, believe, plan, estimate, expect, project, could, would, should, will, intend,
may, potential, upside, and other similar expressions. Statements in this press release concerning the business outlook or future economic performance, anticipated profitability, revenues, expenses, dividends or
other financial items, and product or services line growth of the Company (and the combined businesses of the Company and Gentiva), 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, performance or plans with respect to Gentiva 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
discussed below and detailed from time to time in the Companys filings with the Securities and Exchange Commission (the SEC).
Risks and uncertainties related to the proposed merger include, but are not limited to, the risk that Gentivas stockholders do not
approve the merger, potential adverse reactions or changes to business relationships resulting from the announcement or completion of the merger, uncertainties as to the timing of the merger, adverse effects on the Companys stock price
resulting from the announcement or completion of the merger, competitive responses to the announcement or completion of the merger, the risk that healthcare regulatory, licensure or other approvals and financing required for the consummation of the
merger are not obtained or are obtained subject to terms and conditions that are not anticipated, costs and difficulties related to the integration of Gentivas businesses and operations with the Companys businesses and operations, the
inability to obtain, or delays in obtaining, cost savings and synergies from the merger, uncertainties as to whether the completion of the merger or any transaction will have the accretive effect on the Companys earnings or cash flows that it
expects, unexpected costs, liabilities, charges or expenses resulting from the merger, litigation relating to the merger, the inability to retain key personnel, and any changes in general economic and/or industry-specific conditions.
In addition to the factors set forth above, other factors that may affect the Companys plans, results or stock price are set forth in
the Companys Annual Report on Form 10-K and in its reports on Forms 10-Q and 8-K.
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.
- MORE -
Additional Information
This press release does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation
of any vote or approval. This communication may be deemed to be solicitation material in respect of the proposed merger between the Company and Gentiva. In connection with the proposed merger, Gentiva and the Company intend to file a registration
statement on Form S-4, containing a proxy statement/prospectus, with the SEC. SHAREHOLDERS OF GENTIVA ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE PROXY STATEMENT/PROSPECTUS, BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED MERGER. Investors and security holders will be able to obtain copies of the proxy statement/prospectus as well as other filings containing information about the Company and Gentiva, without charge, at the SECs
website, www.sec.gov. Those documents, when filed, as well as the Companys other public filings with the SEC, may be obtained without charge at the Companys website at www.kindredhealthcare.com.
Participants in Solicitation
The
Company and its directors and executive officers, and Gentiva and its directors and executive officers, may be deemed to be participants in the solicitation of proxies from the holders of Gentiva common stock in respect of the proposed merger.
Information about the directors and executive officers of the Company is set forth in the proxy statement for the Companys 2014 Annual Meeting of Shareholders, which was filed with the SEC on April 3, 2014. Information about the directors
and executive officers of Gentiva is set forth in the proxy statement for Gentivas 2014 Annual Meeting of Shareholders, which was filed with the SEC on March 25, 2014. Investors may obtain additional information regarding the interest of
such participants by reading the proxy statement/prospectus regarding the proposed merger when it becomes available.
- MORE -
Reconciliation of Non-GAAP Measures
This presentation includes a financial measure referred to as operating income, or earnings before interest, income taxes, depreciation,
amortization and rent (EBITDAR). Kindreds management uses EBITDAR as a meaningful measure of operational performance in addition to other measures. Kindred uses EBITDAR to assess the relative performance of its operating divisions
as well as the employees that operate these businesses. In addition, Kindred believes this measurement is important because securities analysts and investors use this measurement to compare Kindreds performance to other companies in the
healthcare industry. Kindred believes that income from continuing operations is the most comparable generally accepted accounting principle (GAAP) measure. Readers of Kindreds financial information should consider income from
continuing operations as an important measure of Kindreds financial performance because it provides the most complete measure of its performance. EBITDAR 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. A reconciliation of Kindreds August 6, 2014 guidance to income from continuing operations is below. The pro forma EBITDAR total of $1 billion included in this press
release includes a 2014 EBITDAR estimate of $232 million for Gentiva, which is based upon Gentivas 2014 current average analyst consensus estimates. In addition, pro forma EBITDAR includes full run rate expected cost synergies of $70 million
from the transaction.
|
|
|
|
|
|
|
|
|
|
|
2014 Earnings Guidance(a) |
|
|
|
As of August 6, 2014 |
|
($ in millions) |
|
Low |
|
|
High |
|
Revenues |
|
$ |
5,100 |
|
|
$ |
5,100 |
|
|
|
|
|
|
|
|
|
|
Operating income (EBITDAR) |
|
$ |
707 |
|
|
$ |
724 |
|
Rent |
|
|
330 |
|
|
|
330 |
|
Depreciation and amortization |
|
|
161 |
|
|
|
161 |
|
Interest, net |
|
|
98 |
|
|
|
98 |
|
|
|
|
|
|
|
|
|
|
Income from continuing operations before income taxes |
|
|
118 |
|
|
|
135 |
|
Provision for income taxes |
|
|
45 |
|
|
|
52 |
|
|
|
|
|
|
|
|
|
|
Income from continuing operations |
|
|
73 |
|
|
|
83 |
|
Earnings attributable to noncontrolling interests |
|
|
(15 |
) |
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to Kindred |
|
|
58 |
|
|
|
68 |
|
Allocation to participating unvested restricted stockholders |
|
|
(2 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
Available to common stockholders |
|
$ |
56 |
|
|
$ |
66 |
|
|
|
|
|
|
|
|
|
|
Earnings per diluted share |
|
$ |
0.96 |
|
|
$ |
1.14 |
|
Shares used in computing earnings per diluted share |
|
|
58.3 |
|
|
|
58.3 |
|
(a) |
The earnings guidance excludes the effect of reimbursement changes, debt refinancing costs, severance, retirement, retention and restructuring costs, litigation costs, transaction costs, any further acquisitions or
divestitures, any impairment charges, and any repurchases of common stock. |
- MORE -
Contacts
For Kindred
|
|
|
Media Susan Moss
Senior Vice President, Marketing and Communications Kindred
Healthcare, Inc. 502-596-7296 or |
|
Investors and Analysts Stephen
Farber Executive Vice President, Chief Financial Officer
Kindred Healthcare, Inc. 502-596-2525 |
Andrew Siegel / Nick Lamplough Joele Frank,
Wilkinson Brimmer Katcher 212-355-4449 |
|
|
For Gentiva
|
|
|
Media Andrea Calise / Ross Lovern
Kekst and Company 212-521-4845 / 4876 |
|
Investors and Analysts Eric Slusser
Executive Vice President, Chief Financial Officer
770-951-6101 eric.slusser@gentiva.com |
- END -
|
Kindred and
Gentiva: A Compelling Opportunity for
American Healthcare and Shareholders
Exhibit 99.2
October 9, 2014 |
|
Forward-Looking Statements
This
presentation
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,
statements
regarding
the
proposed
business
combination
transaction
between
Kindred
Healthcare,
Inc.
(Kindred
or
the
Company)
and
Gentiva
Health
Services,
Inc.
(Gentiva)
(including
financing
of
the
proposed transaction and the benefits, results, effects and timing of a transaction), all
statements regarding Kindreds (and Kindreds and Gentivas combined) 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,
and
statements
containing
the
words
such
as
anticipate,
approximate,
believe,
plan,
estimate,
expect,
project,
could,
would,
should,
will,
intend,
may,
potential,
upside,
and other similar expressions. Statements in this presentation concerning the business outlook
or future economic
performance,
anticipated
profitability,
revenues,
expenses,
dividends
or
other
financial
items,
and
product
or
services
line
growth
of
Kindred
(and
the
combined
businesses
of
Kindred
and
Gentiva),
together
with
other
statements that are not historical facts, are forward-looking statements that are estimates
reflecting the best judgment of Kindred 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 Kindreds 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 Kindred is unable to
predict or control, that may cause Kindreds actual results, performance or plans with
respect to Gentiva 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 discussed below and detailed from
time to time in Kindreds filings with the Securities and Exchange Commission (the SEC).
Risks and uncertainties related to the proposed merger include, but are not limited to, the
risk that Gentivas stockholders do not approve the merger, potential adverse reactions or changes to business relationships resulting from the
announcement or completion of the merger, uncertainties as to the timing of the merger, adverse
effects on Kindreds stock price resulting from the announcement or completion of the merger, competitive responses to the
announcement or completion of the merger, the risk that healthcare regulatory, licensure or
other approvals and financing required for the consummation of the merger are not obtained or are obtained subject to terms and conditions
that are not anticipated, costs and difficulties related to the integration of Gentivas
businesses and operations with Kindreds businesses and operations, the inability to obtain, or delays in obtaining, cost savings and synergies from the
merger,
uncertainties
as
to
whether
the
completion
of
the
merger
or
any
transaction
will
have
the
accretive
effect
Kindreds
earnings
or
cash
flows
that
it
expects,
unexpected
costs,
liabilities,
charges
or
expenses
resulting
from
the
merger, litigation relating to the merger, the inability to retain key personnel, and any
changes in general economic and/or industry-specific conditions. In addition
to the factors set forth above, other factors that may affect Kindreds plans, results or stock price are set forth in Kindreds Annual Report on Form 10-K and in its reports on Forms 10-Q and 8-K.
Many of these factors are beyond Kindreds control. Kindred cautions investors that any
forward-looking statements made by Kindred are not guarantees of future performance. Kindred 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. Kindred
has
provided
information
in
this
presentation
to
compute
certain
non-GAAP
measurements
for
specified
periods.
A
reconciliation
of
the
non-GAAP
measurements
to
the
GAAP
measurements
is
included
in
this
presentation
and
on Kindreds
website
at
www.kindredhealthcare.com
under
the
heading
investors.
Additional Information
This presentation does not constitute an offer to sell or the solicitation of an offer to buy
any securities or a solicitation of any vote or approval. This communication may be deemed to be solicitation material in respect of the proposed
merger
between
Kindred
and
Gentiva.
In
connection
with
the
proposed
merger,
Kindred
intends
to
file
a
registration
statement
on
Form
S-4,
containing
a
proxy
statement/prospectus,
with
the
SEC.
SHAREHOLDERS
OF
GENTIVA
ARE
URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE PROXY
STATEMENT/PROSPECTUS, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED MERGER. Investors and security
holders
will
be
able
to
obtain
copies
of
the
proxy
statement/prospectus
as
well
as
other
filings
containing
information
about
Kindred
and
Gentiva,
without
charge,
at
the
SECs
website,
www.sec.gov
.
Those
documents,
when
filed,
as
well
as
Kindreds
other
public
filings
with
the
SEC,
may
be
obtained
without
charge
at
Kindreds
website
at
www.kindredhealthcare.com.
Participants in Solicitation
Kindred and its directors and executive officers, and Gentiva and its directors and executive
officers, may be deemed to be participants in the solicitation of proxies from the holders of Gentiva common stock in respect of the proposed
merger. Information about the directors and executive officers of Kindred is set forth in the
proxy statement for Kindreds 2014 Annual Meeting of Shareholders, which was filed with the SEC on April 3, 2014. Information about the
directors and executive officers of Gentiva is set forth in the proxy statement for
Gentivas 2014 Annual Meeting of Shareholders, which was filed with the SEC on March 25, 2014. Investors may obtain additional information regarding
the interest of such participants by reading the proxy statement/prospectus regarding the
proposed merger when it becomes available. 2 |
|
Kindred Is
Helping to Shape the Future of American Healthcare
As the U.S. population ages, demand for patient-centered healthcare is growing
rapidly
and Kindred is pioneering an integrated approach to address this
demand
implementing a better model to improve clinical outcomes and patient
safety, smooth care transitions and lower costs
Kindreds Continue
The
Care
strategy delivers the services that patients need
across the full spectrum of care, from transitional inpatient hospitalization,
to post-acute rehab and skilled nursing services, to home health and hospice care
Kindred is growing to implement this strategy and fostering innovation to provide
more patients, in more communities, with high quality, integrated, patient-
centered care in the lowest-cost setting
3
The merger of Kindred and Gentiva accelerates the development of this integrated
approach to patient care, creating significant value for both companies patients,
employees and shareholders |
|
Transaction
Summary (1)
EBITDAR, or operating income, is defined as earnings before interest, income taxes,
depreciation, amortization and rent. EBITDAR was
computed by combining the mid point of 2014 guidance for Kindred
as provided on August 6, 2014 (see enclosed reconciliation) and
2014
current average analyst consensus estimates for Gentiva.
In addition, pro forma EBITDAR includes full run rate expected cost synergies of $70
million
,
and
estimated
annualized
rent
expense
for
Gentiva
of
$41
million.
(2)
Excludes one-time integration costs.
(3)
Pro forma Adjusted Debt to EBITDAR leverage was computed by dividing a numerator comprised of
estimated long-term debt at closing plus pro forma annual rent expense multiplied by
six, less unrestricted cash, by a denominator comprised of pro forma EBITDAR. Purchase
Price
$19.50 / share comprising $14.50 in cash and $5.00 in common stock
$1.8 billion total consideration, including assumption of net debt
$5.00 in Kindred common stock equates to 0.257 shares of Kindred
common stock based on the
agreed to fixed exchange ratio
Financial Profile
Pro Forma combined company revenues of approximately $7.1 billion and Operating Income or
EBITDAR
(1)
of $1.0 billion
Combination will enhance Kindreds Revenue and Margin Growth Profile
Accretion
Immediately and significantly accretive to Kindreds Earnings and Operating Cash Flows
(exclusive of transaction and integration costs)
Synergies
$70 million in expected cost synergies within two years with approximately $35 million
expected in first full year following the closing
(2)
Revenue synergies of more than $60 million expected over time
(approximately $20
$30 million expected in the first full year following the closing)
Financing
Fully committed financing from Citi and J.P. Morgan
Expect to use a combination of debt, equity and mandatory convertibles to maintain pro forma
Adjusted Debt to EBITDAR leverage
(3)
of approximately 5.5x at closing, assuming half of $70 million
run rate expected cost synergies
Expected Closing
Q1 2015
Already received Hart-Scott-Rodino clearance
4
Kindred to acquire Gentiva for $1.8 billion in a combination of cash and stock
Already received Hart-Scott-Rodino clearance |
|
Combination
Creates One of the Nations Premier Healthcare Services Providers
5
Leadership Among Premium Healthcare Service Providers
2014 Wall Street
Consensus Revenue
($ in billions)
Pro Forma
Post Acute Providers
Alternate Site Providers
(1)
As of June 30, 2014.
(2)
Per
Kindred
2014
guidance
as
provided
on
August
6,
2014
and
2014
current
average
analyst
consensus
estimates
for Gentiva.
(3)
Internal company data.
(4)
Twelve months ended (LTM) as of June 30, 2014 and pro forma for Skilled Healthcare
merger. (4)
$7.1
$5.5
$3.8
$3.1
$2.4
$6.4
$12.7
$4.4
IPCM
DVA
AMSG
SCAI
The acquisition of Gentiva further strengthens Kindreds ability to serve
patients across the full continuum of care
($ in millions)
Kindred
Gentiva
Pro Forma
States
(1)
47
40
47
Locations
(1)
2,353
495
2,848
Employees
(1)
63,000
46,000
109,000
Revenue Guidance/Consensus
$5.1 billion
(2)
$2.0 billion
(2)
$7.1 billion
Patients Per Year
(3)
500,000
550,000
1,050,000
$1.2
$2.7
$1.6 |
|
Revenues
$352 MM
Total States
13
Average Daily Census
16,100
Total Sites of Service
202
Home Health
142
Hospice
38
Personal Care
22
Total Caregivers
(3)
5,000
Revenues
$2.0 B
Total States
40
Average Daily Census
110,000
Total Sites of Service
495
Home Health
294
Hospice
166
Community Care
35
Total Caregivers
(3)
39,500
Revenues
$2.3 B
Total States
41
Average Daily Census
126,100
Total Sites of Service
697
Home Health
436
Hospice
204
Community Care
57
Total Caregivers
44,500
Kindred at Home
Pro Forma Company
Combination
creates largest
home health and
hospice system in
the United States
(1)
Annualized based upon revenues for the three months ended June 30, 2014
(divisional revenues before intercompany eliminations).
(2)
Current average analyst consensus estimate for 2014.
(3)
As of June 30, 2014.
(4)
Internal company data for Kindred and investor presentation for Gentiva.
6
Kindred at Home
Gentiva
Gentiva
(4)
(3)
(3)
(2)
(3)
(4)
(3)
(1) |
|
Strategic and
Financial Rationale Expands and enhances presence in Kindreds Integrated Care
Markets, driving coordinated care in a more efficient and cost-effective manner
preferred by consumers and payors
Diversifies Kindreds business and revenue mix and delivers substantial cost and
revenue synergies that allow for investment to improve care management and
career opportunities for employees
Creates shareholder value through significant and immediate accretion to both
earnings and cash flows (exclusive of transaction and integration costs)
7
Enhances Kindreds industry leading position as the Nations premier
post-acute and rehabilitation services provider and creates the largest and
most geographically diversified Home Health and Hospice organization in the United
States Enhances Kindreds revenue and margin growth
profile, increases financial flexibility, lowers cost of capital, reduces rent
and CapEX as a percent of revenue, generating free cash flows to quickly delever
while supporting a meaningful dividend |
|
Helping to
shape the evolution of the
American Healthcare
Delivery System
by improving patient
outcomes, smoothing
care transitions and
lowering costs,
by transitioning
patients home at the
highest level of
wellness
8
Combination Places Patient-Centered Integrated Care
(and Kindreds Continue
the
Care
Strategy)
at the Forefront of Healthcare Reform |
|
Creating Value
for Patients, Payors, Teammates and Shareholders Succeed in The Core
Reposition Portfolio
Aggressively Grow
Kindred at Home,
RehabCare and Assisted
Living Businesses
Develop Care
Management
Capabilities
Advance Integrated
Care Market Strategy
Improve Capital
Structure and Enhance
Shareholder Returns
People Services
Quality and Clinical
Outcomes
Organic Growth
Manage Cost and
Capital
In Integrated Care
Markets
Redeploy Capital to
Higher Margin
Businesses
Operationalize
Continue
The
Care
Support New Risk-
Based Payment
Systems
Partner with
Hospitals, Payors
and ACOs
Continue to Delever
Acquire Facility Real
Estate
Grow Dividend
Optimizes
patient
transition and
improves
clinical
outcomes
Further builds
capabilities in
Integrated
Care Markets
and improves
margin profile
Gentiva is one
of the largest
and most
respected
providers of
home health
and hospice
services in U.S.
Improves
patient care
and positions
Kindred for
future risk
based
payment
models
Positions
Kindred as
partner of
choice for
hospitals,
payors,
physicians and
ACOs
Significantly
accretive to
earnings and
cash flows
Improves
capital
structure
6
1
2
3
4
5
Acquisition Aligns with Kindreds Five-Year Strategic Plan
9 |
|
Kindred with Gentiva Creates Multiple Platforms for Growth
$2.5 billion Revenues
(3)
$2.3 billion Pro Forma
Revenues
(5)
$1.3 billion Revenues
(3)
$1.1 billion Revenues
(3)
*
(1)
Ranking based on revenues.
(2)
Ranking from Provider
magazine June 20, 2014 issue.
(3)
Revenues for the twelve months ended June 30, 2014 (divisional revenues
before intercompany eliminations).
*Combined with Gentiva
#1 Operator of Transitional
Care Hospitals
(1)
#1 Operator of
Home Health and Hospice
(1)
#1 Operator of
Rehabilitation Services
(1)
#8 Operator of
Skilled Nursing Facilities
(2)
10
(4)
As of June 30, 2014.
(5)
Includes Kindred at Home annualized revenues for the three months ended June 30, 2014
and from 2014 current average analyst consensus estimates for Gentiva.
97 Transitional Care
Hospitals
(4)
7,145 licensed beds
(4)
5 Inpatient Rehabilitation
Hospitals with 215 licensed
beds
(4)
697 sites of service in
41 states
(4)
151 in Kindreds
Integrated Care Markets
(4)
44,500 caregivers
serving 126,100
patients on a daily basis
(4)
2,237 sites of service
served through 23,058
therapists
(4)
Including 104 hospital-
based acute
rehabilitation units
(4)
47 Transitional Care
Centers (Sub-Acute
facilities licensed as SNFs)
12 Hospital-Based Sub-
Acute Units
(4)
13 Nursing and
Rehabilitation Centers
(with Transitional Care Units)
38 Skilled Nursing Centers
(Traditional SNFs)
(4)
(4)
(4) |
|
Expands and
Enhances Presence in Kindreds Integrated Care Markets
Favorable
geographic
fit
overlap
in
20
of
23
current
and
targeted
Integrated
Care
Markets
which are
among the top 30 MSAs in the United States
Significant
patient
opportunity
for
improved
care
transitions
and
choice
provides
revenue
synergies
from referrals across the combined care delivery platform
Source:
Kindred and Gentiva filings and investor presentations.
Note :
As of June 30, 2014.
Transitional Care Hospitals (97)
Inpatient Rehabilitation Hospitals (5)
Nursing and Rehabilitation Centers (98)
Kindred at Home Locations (153)
Hospital-Based Inpatient Rehabilitation Units (104)
RehabCare External Customers (1,875)
National and Regional Support Centers
Gentiva Locations (495)
Integrated Care Markets (23)
11
National presence
across 47 states |
|
Diversifies Service Offerings and Revenue Mix
Community Care
Kindred at Home
Home Health
Hospice
12
Deepens our care management capabilities and enables us to better
serve our patients while lowering costs and improving clinical
outcomes
Rehabilitation
Hospital
Nursing Center
GTIV:
KND:
(1)
Divisional revenues before intercompany eliminations.
(2)
Per Gentiva SEC filings.
(3)
Gentiva platform consolidates into Kindred at Home.
48%
21%
25%
6%
54%
37%
9%
35%
16%
18%
31%
Revenue Mix
(LTM 6/30/14)
Gentiva
(2)
Kindred
Standalone
(1)
Pro Forma
(3) |
|
Enhances Growth
Profile (1)
Based upon current average analyst consensus estimates for 2014 and 2015 for both Kindred and
Gentiva, including $60 million of annual run rate revenue synergies.
(2)
Based upon mid point of 2014 earnings guidance for Kindred as of
August 6, 2014 and based upon current average analyst
consensus estimates for Gentiva (includes EBITDA impact of full run rate of $70 million of
expected cost synergies). Combination enhances Kindreds Revenue and Margin Growth
Profiles 2014 -2015 Revenue Growth
(1)
13
2014 EBITDA Margin
(2) |
|
14
($ Millions)
Year 1
Year 2+
$35
$70
$20-$30
$60+
Synergies are Significant and Achievable
The acquisition creates significant value for patients and shareholders, and is also
expected to create exciting career development and advancement opportunities
for the employees of both companies
Corporate overhead
Supply chain
Information technology
Opportunity for volume growth through cross-
selling opportunities to Gentiva patients across
Kindred and Gentiva's combined service
platform
Ability to leverage platform for more
efficient operations, including cost
savings available in:
Synergies driven by topline growth from the
combined company
Expected Cost Synergies
Expected Revenue Synergies |
|
Combined Company
Overview Kindred and Gentiva Pro Forma
Mid Point of 2014 Guidance/Consensus
($ in millions)
Kindred
(1)
Gentiva
(2)
Expected
Synergies
(3)
Pro Forma
Revenue
$5,100
$1,986
$7,086
EBITDAR
716
232
$70
1,018
EBITDAR Margin
14.0%
11.7%
14.4%
Rent
330
41
371
% of revenue
6.5%
2.1%
5.2%
EBITDA
386
191
70
647
EBITDA Margin
7.6%
9.6%
9.1%
(1)
Based upon mid point of guidance for Kindred as of August 6, 2014. Guidance excludes the
effect of reimbursement changes, debt refinancing costs, severance, retirement,
retention and restructuring costs, litigation costs, transaction costs, any further
acquisitions or divestitures, and any impairment charges.
(2)
Based upon 2014 current average analyst consensus estimates. Assumes annualized rent of $41
million. (3)
Estimated full run rate of cost synergies expected to be achieved within two years of
close. Excludes one-time transaction and integration costs. 15
|
|
Significant and
Immediate Accretion to Earnings and Cash Flows
16
Acquisition is significantly accretive at the contemplated transaction value and
financing structure on both an EPS and cash flow basis
(exclusive of transaction and integration costs)
(1)
Assumes pro forma share count of 85 million shares reflecting fully diluted shares at end of Q2
2014, share consideration as part of Gentiva transaction and the anticipated equity
offering to finance the transaction. Kindred expects the acquisition to be approximately $0.40 to $0.60 accretive to pro forma earnings, on a run
rate basis, once Gentiva is fully integrated and expected synergies are fully realized in the
second full year following the closing. (2)
Based upon 2014 net income guidance for Kindred as provided on August 6, 2014 and 2014 current
average analyst consensus estimates for Gentiva and adding back depreciation and
amortization per Kindreds 2014 guidance and adding back annualized six months ended June
30, 2014 depreciation and amortization for Gentiva
and annualized stock-based compensation and deferred financing cost amortization for both
Kindred and Gentiva. In addition, expected full run rate estimated cost synergies, net
of income taxes, of $42 million ($70 million full run rate annual costs and operating
synergies less income taxes of $28 million) are included.
EPS Accretion
(1)
$0.40
$0.60
+
Acceleration of cost synergies
+
Increased revenue through clinical
integration
+
Incremental development activity fueled
by combined company cash flows
+
Enhanced managed care and ACO
opportunities from expanded integrated
national platform
Drivers for Potential Upside
Pro Forma Cash Flows ($ millions)
Operating Cash Flows
before dividends, changes
in working capital and
capital expenditures
(2)
$350
$400
Less: Maintenance CapEx
$120
$130
As adjusted
$230
$270
Fully Integrated Run Rate |
|
Key
Highlights Financing Plan
17
Sources
($ millions)
New debt financing
$1,300
$1,400
New equity and mandatory
convertible securities issued
$200
$300
Equity issued to Gentiva
shareholders
~$200
Existing bank revolver draw
~$200
$2,000
Uses
($ millions)
Purchase Gentiva equity
$767
Retire Gentiva debt
~$1,050
Transaction fees & expenses
~$183
$2,000
Aggregate equity financing
approximates purchase price
of Gentiva equity
Expected to issue in aggregate ~$620
$720 million of equity to maintain
reasonable leverage
Expect to have shares outstanding of
~85 million at close
Proactively raised $220 million in
net proceeds from June 2014
equity offering
Will issue Gentiva shareholders
~$200 million in Kindred stock as
part of purchase consideration
Plan to raise ~$200
$300 million
in equity and / or mandatory
convertible securities between
announcement and close |
|
Capital
Structure Improved and Commitment to Delever
18
Deleveraging Profile
Adjusted Debt to EBITDAR
(3)
Target
At Closing
(4)
Year 2
(5)
Commitment to Delever Balance Sheet through Growth and Debt Pay Down
Pro forma adjusted net leverage
expected to be in the mid-5x range at
closing with an expectation to
deleverage quickly to below 5.0x by
Year 2 post closing
Declining Rent Burden as a % of Revenue
(1)
Based upon mid point of 2014 earnings guidance issued on August 6, 2014.
(2)
Based upon 2014 current average analyst consensus estimates for Gentiva. Assumes
annualized rent of $41 million. (3)
Pro forma Adjusted Debt to EBITDAR is computed by dividing a numerator comprised of
estimated long-term debt at closing plus pro forma annual rent expense
multiplied by six, less unrestricted cash, by a denominator comprised of pro
forma EBITDAR.
(4)
Assumes
half
of
full
run
rate
of
expected
cost
synergies,
or
$35
million.
(5)
Assumes full run rate of expected cost synergies, or $70 million.
|
|
Next Steps
Definitive agreement
Required approval by Gentivas shareholders
State and local regulatory approvals required
Already received Hart-Scott-Rodino clearance
Integration
teams
assembled
and
ready
to
be
deployed
immediately
upon
closing
Closing expected in Q1 2015
19 |
|
Appendix
21
*
*
*
*
*
*
*
*
*
* |
|
22
Reconciliation of Non-GAAP Measures
2014 Earnings Guidance (a)
As of August 6, 2014
($ in millions)
Low
High
Revenues
5,100
$
5,100
$
Operating income (EBITDAR)
707
$
724
$
Rent
330
330
EBITDA
377
394
Depreciation and amortization
161
161
Interest, net
98
98
Income from continuing operations before income taxes
118
135
Provision for income taxes
45
52
Income from continuing operations
73
83
Earnings attributable to noncontrolling interests
(15)
(15)
Income from continuing operations attributable to Kindred
58
68
Allocation to participating unvested restricted stockholders
(2)
(2)
Available to common stockholders
56
$
66
$
Earnings per diluted share
0.96
$
1.14
$
Shares used in computing earnings per diluted share
58.3
58.3
(a)
The earnings guidance excludes the effect of reimbursement changes, debt refinancing costs,
severance, or divestitures, any impairment charges, and any repurchases of common
stock. This presentation includes financial measures referred to as operating income, or
earnings before interest, depreciation and amortization ("EBITDA"). Kindred's
management uses operating income, EBITDAR or EBITDA as meaningful measures of
operational performance in addition to other measures. Kindred uses operating income,
EBITDAR or EBITDA to assess the relative performance of its operating divisions as well
as the employees that operate these businesses. In addition, Kindred believes these
measurements are important because securities analysts and investors use these
measurements to compare Kindred's performance to other companies in the healthcare
industry. Kindred believes that income from continuing operations is the most
comparable generally accepted accounting principle ("GAAP") measure. Readers of
Kindred's financial information should consider income from continuing operations as an
important measure of Kindred's financial performance because it provides the most
complete measure of its performance. Operating income, EBITDAR or EBITDA 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. A reconciliation of
Kindred's August 6, 2014 guidance to income from continuing operations is below. The pro forma
EBITDAR total of $1 billion included in this presentation includes a 2014 EBITDAR estimate of
$232 million for Gentiva, which is based upon Gentiva's 2014 current average analyst
consensus estimates. In addition, pro forma EBITDAR includes full run rate expected
cost synergies of $70 million from the transaction. retirement, retention and
restructuring costs, litigation costs, transaction costs, any further acquisitions
income taxes, depreciation, amortization and rent ("EBITDAR") or earnings before
interest, income taxes, |
|
Kindred and
Gentiva: A Compelling Opportunity for
American Healthcare and Shareholders
October 9, 2014 |
Kindred Healthcare (NYSE:KND)
Historical Stock Chart
From Mar 2024 to Apr 2024
Kindred Healthcare (NYSE:KND)
Historical Stock Chart
From Apr 2023 to Apr 2024