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Health care industry

Kindred Healthcare to Transfer Operations of Nine Non-Strategic Nursing Centers

Strategic Insights

— 1 min read

Kindred Healthcare, Inc., a US-based healthcare company, has entered into an agreement with Ventas, Inc. to transition the operations of nine non-strategic nursing centers. The transfer of operations is expected to enhance the company's financial performance by making its lease obligations more manageable and accretive to its earnings per share. The nursing centers, which contain 903 licensed beds, generated approximately $65 million in revenue for the year ended December 31, 2013.

Key Takeaways:

  • Kindred Healthcare will transfer the operations of nine non-strategic nursing centers to new operators, reducing its lease obligations and increasing its financial flexibility.
  • The nursing centers, which contain 903 licensed beds, generated approximately $65 million in revenue for the year ended December 31, 2013.
  • The company will pay an aggregate of $40 million to Ventas in January 2015, which payments are expected to be tax deductible.
  • The transfer of operations will be reflected in discontinued operations through the expiration of the lease term.
  • If the transfers are not completed by December 31, 2015, Kindred's base rent obligations for these facilities will decrease by 50% until the transfers are complete.
  • Paul J. Diaz, Chief Executive Officer of Kindred Healthcare, stated that the company will work cooperatively with Ventas to find suitable tenants for the facilities and effectuate an orderly transition of patients, employees, and operations.
  • The transaction is expected to be nominally accretive to Kindred's consolidated earnings per diluted share in 2014 and its lease-adjusted leverage.

Statistics:

  • The nine nursing centers contain 903 licensed nursing center beds.
  • The nursing centers generated revenues of approximately $65 million for the year ended December 31, 2013.
  • The current annual rent for these facilities approximates $10 million.
  • The company will pay an aggregate of $40 million to Ventas in January 2015.
  • If the transfers are not completed by December 31, 2015, Kindred's base rent obligations for these facilities will decrease by 50%.

Sources:

  • Kindred Healthcare, Inc. (2014) - Form 10-K for the year ended December 31, 2013.
  • Securities and Exchange Commission (SEC).
  • Kindred Healthcare, Inc. (December 29) - News release announcing agreement to transfer operations of nine non-strategic nursing centers.

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