UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2017
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number: 001-14057
KINDRED HEALTHCARE, INC.
(Exact name of registrant as specified in its charter)
|
Delaware |
|
61-1323993 |
|
(State or other jurisdiction of incorporation or organization) |
|
(I.R.S. Employer Identification No.) |
|
680 South Fourth Street Louisville, KY |
|
40202 |
|
(Address of principal executive offices) |
|
(Zip Code) |
(502) 596-7300
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
Large accelerated filer |
|
☒ |
|
Accelerated filer |
|
☐ |
|
Emerging growth company☐ |
|
|
|
|
Non-accelerated filer |
|
☐ |
|
Smaller reporting 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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
|
Class of Common Stock |
|
Outstanding at October 31, 2017 |
|
Common stock, $0.25 par value |
|
86,932,592 shares |
1 of 84
FORM 10-Q
INDEX
|
|
|
Page |
|
PART I. FINANCIAL INFORMATION |
|
|
|
Item 1. |
Financial Statements (Unaudited): |
|
|
|
3 |
|
|
|
4 |
|
|
|
Condensed Consolidated Balance Sheet – September 30, 2017 and December 31, 2016 |
5 |
|
|
6 |
|
|
|
7 |
|
|
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
48 |
|
Item 3. |
80 |
|
|
Item 4. |
81 |
|
|
PART II. OTHER INFORMATION |
|
|
|
Item 1. |
82 |
|
|
Item 2. |
82 |
|
|
Item 6. |
83 |
|
2
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
|
|
Three months ended |
|
|
Nine months ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
|
Revenues |
$ |
1,477,141 |
|
|
$ |
1,563,276 |
|
|
$ |
4,550,841 |
|
|
$ |
4,774,813 |
|
|
Salaries, wages and benefits |
|
830,558 |
|
|
|
867,611 |
|
|
|
2,504,074 |
|
|
|
2,546,031 |
|
|
Supplies |
|
73,344 |
|
|
|
85,469 |
|
|
|
231,229 |
|
|
|
263,679 |
|
|
Building rent |
|
64,422 |
|
|
|
66,946 |
|
|
|
193,939 |
|
|
|
199,956 |
|
|
Equipment rent |
|
8,537 |
|
|
|
9,911 |
|
|
|
26,285 |
|
|
|
31,280 |
|
|
Other operating expenses |
|
155,949 |
|
|
|
167,453 |
|
|
|
496,934 |
|
|
|
500,787 |
|
|
General and administrative expenses (exclusive of depreciation and amortization expense included below) |
|
258,834 |
|
|
|
262,051 |
|
|
|
800,493 |
|
|
|
848,945 |
|
|
Other income |
|
(638 |
) |
|
|
(341 |
) |
|
|
(2,895 |
) |
|
|
(2,679 |
) |
|
Litigation contingency expense |
|
4,000 |
|
|
|
- |
|
|
|
4,000 |
|
|
|
2,840 |
|
|
Impairment charges |
|
- |
|
|
|
297,276 |
|
|
|
136,303 |
|
|
|
311,195 |
|
|
Restructuring charges |
|
16,500 |
|
|
|
81,463 |
|
|
|
31,556 |
|
|
|
84,213 |
|
|
Depreciation and amortization |
|
24,808 |
|
|
|
32,995 |
|
|
|
80,279 |
|
|
|
99,747 |
|
|
Interest expense |
|
61,146 |
|
|
|
59,856 |
|
|
|
181,275 |
|
|
|
175,398 |
|
|
Investment income |
|
(705 |
) |
|
|
(1,797 |
) |
|
|
(3,442 |
) |
|
|
(2,519 |
) |
|
|
|
1,496,755 |
|
|
|
1,928,893 |
|
|
|
4,680,030 |
|
|
|
5,058,873 |
|
|
Loss from continuing operations before income taxes |
|
(19,614 |
) |
|
|
(365,617 |
) |
|
|
(129,189 |
) |
|
|
(284,060 |
) |
|
Provision (benefit) for income taxes |
|
(1,225 |
) |
|
|
283,630 |
|
|
|
(15,107 |
) |
|
|
314,106 |
|
|
Loss from continuing operations |
|
(18,389 |
) |
|
|
(649,247 |
) |
|
|
(114,082 |
) |
|
|
(598,166 |
) |
|
Discontinued operations, net of income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
(13,612 |
) |
|
|
(22,060 |
) |
|
|
(1,871 |
) |
|
|
(10,489 |
) |
|
Gain (loss) on divestiture of operations |
|
(49,663 |
) |
|
|
- |
|
|
|
(349,868 |
) |
|
|
179 |
|
|
Loss from discontinued operations |
|
(63,275 |
) |
|
|
(22,060 |
) |
|
|
(351,739 |
) |
|
|
(10,310 |
) |
|
Net loss |
|
(81,664 |
) |
|
|
(671,307 |
) |
|
|
(465,821 |
) |
|
|
(608,476 |
) |
|
Earnings attributable to noncontrolling interests: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations |
|
(10,960 |
) |
|
|
(9,574 |
) |
|
|
(32,234 |
) |
|
|
(26,272 |
) |
|
Discontinued operations |
|
(3,162 |
) |
|
|
(4,732 |
) |
|
|
(12,597 |
) |
|
|
(14,075 |
) |
|
|
|
(14,122 |
) |
|
|
(14,306 |
) |
|
|
(44,831 |
) |
|
|
(40,347 |
) |
|
Loss attributable to Kindred |
$ |
(95,786 |
) |
|
$ |
(685,613 |
) |
|
$ |
(510,652 |
) |
|
$ |
(648,823 |
) |
|
Amounts attributable to Kindred stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
$ |
(29,349 |
) |
|
$ |
(658,821 |
) |
|
$ |
(146,316 |
) |
|
$ |
(624,438 |
) |
|
Loss from discontinued operations |
|
(66,437 |
) |
|
|
(26,792 |
) |
|
|
(364,336 |
) |
|
|
(24,385 |
) |
|
Net loss |
$ |
(95,786 |
) |
|
$ |
(685,613 |
) |
|
$ |
(510,652 |
) |
|
$ |
(648,823 |
) |
|
Loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
$ |
(0.33 |
) |
|
$ |
(7.58 |
) |
|
$ |
(1.67 |
) |
|
$ |
(7.20 |
) |
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
(0.19 |
) |
|
|
(0.31 |
) |
|
|
(0.17 |
) |
|
|
(0.28 |
) |
|
Gain (loss) on divestiture of operations |
|
(0.57 |
) |
|
|
- |
|
|
|
(4.00 |
) |
|
|
- |
|
|
Loss from discontinued operations |
|
(0.76 |
) |
|
|
(0.31 |
) |
|
|
(4.17 |
) |
|
|
(0.28 |
) |
|
Net loss |
$ |
(1.09 |
) |
|
$ |
(7.89 |
) |
|
$ |
(5.84 |
) |
|
$ |
(7.48 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
$ |
(0.33 |
) |
|
$ |
(7.58 |
) |
|
$ |
(1.67 |
) |
|
$ |
(7.20 |
) |
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
(0.19 |
) |
|
|
(0.31 |
) |
|
|
(0.17 |
) |
|
|
(0.28 |
) |
|
Gain (loss) on divestiture of operations |
|
(0.57 |
) |
|
|
- |
|
|
|
(4.00 |
) |
|
|
- |
|
|
Loss from discontinued operations |
|
(0.76 |
) |
|
|
(0.31 |
) |
|
|
(4.17 |
) |
|
|
(0.28 |
) |
|
Net loss |
$ |
(1.09 |
) |
|
$ |
(7.89 |
) |
|
$ |
(5.84 |
) |
|
$ |
(7.48 |
) |
|
Shares used in computing loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
87,597 |
|
|
|
86,869 |
|
|
|
87,398 |
|
|
|
86,766 |
|
|
Diluted |
|
87,597 |
|
|
|
86,869 |
|
|
|
87,398 |
|
|
|
86,766 |
|
|
Cash dividends declared and paid per common share |
$ |
- |
|
|
$ |
0.12 |
|
|
$ |
0.12 |
|
|
$ |
0.36 |
|
See accompanying notes.
3
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS
(Unaudited)
(In thousands)
|
|
Three months ended |
|
|
Nine months ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
|
Net loss |
$ |
(81,664 |
) |
|
$ |
(671,307 |
) |
|
$ |
(465,821 |
) |
|
$ |
(608,476 |
) |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available-for-sale securities (Note 12): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized investment gains |
|
44 |
|
|
|
278 |
|
|
|
1,453 |
|
|
|
1,461 |
|
|
Reclassification of gains realized in net loss |
|
(45 |
) |
|
|
(1,333 |
) |
|
|
(1,700 |
) |
|
|
(1,202 |
) |
|
Net change |
|
(1 |
) |
|
|
(1,055 |
) |
|
|
(247 |
) |
|
|
259 |
|
|
Interest rate swaps (Note 1): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in unrealized gains (losses) |
|
1,276 |
|
|
|
2,022 |
|
|
|
2,108 |
|
|
|
(3,761 |
) |
|
Reclassification of (gains) losses realized in net loss, net of payments |
|
(182 |
) |
|
|
18 |
|
|
|
(505 |
) |
|
|
411 |
|
|
Net change |
|
1,094 |
|
|
|
2,040 |
|
|
|
1,603 |
|
|
|
(3,350 |
) |
|
Income tax (expense) benefit related to items of other comprehensive income (loss) |
|
- |
|
|
|
(427 |
) |
|
|
- |
|
|
|
1,389 |
|
|
Other comprehensive income (loss) |
|
1,093 |
|
|
|
558 |
|
|
|
1,356 |
|
|
|
(1,702 |
) |
|
Comprehensive loss |
|
(80,571 |
) |
|
|
(670,749 |
) |
|
|
(464,465 |
) |
|
|
(610,178 |
) |
|
Earnings attributable to noncontrolling interests |
|
(14,122 |
) |
|
|
(14,306 |
) |
|
|
(44,831 |
) |
|
|
(40,347 |
) |
|
Comprehensive loss attributable to Kindred |
$ |
(94,693 |
) |
|
$ |
(685,055 |
) |
|
$ |
(509,296 |
) |
|
$ |
(650,525 |
) |
See accompanying notes.
4
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(In thousands, except per share amounts)
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2017 |
|
|
2016 |
|
||
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
130,364 |
|
|
$ |
137,061 |
|
|
Insurance subsidiary investments |
|
98,079 |
|
|
|
108,966 |
|
|
Accounts receivable less allowance for loss of $103,997 ─ September 30, 2017 and $71,070 ─ December 31, 2016 |
|
1,218,200 |
|
|
|
1,172,078 |
|
|
Inventories |
|
21,491 |
|
|
|
22,438 |
|
|
Income taxes |
|
4,983 |
|
|
|
10,067 |
|
|
Assets held for sale |
|
79,051 |
|
|
|
289,450 |
|
|
Other |
|
66,463 |
|
|
|
63,693 |
|
|
|
|
1,618,631 |
|
|
|
1,803,753 |
|
|
|
|
|
|
|
|
|
|
|
Property and equipment |
|
1,686,504 |
|
|
|
1,531,598 |
|
|
Accumulated depreciation |
|
(956,644 |
) |
|
|
(912,978 |
) |
|
|
|
729,860 |
|
|
|
618,620 |
|
|
|
|
|
|
|
|
|
|
|
Goodwill |
|
2,424,831 |
|
|
|
2,427,074 |
|
|
Intangible assets less accumulated amortization of $79,276 ─ September 30, 2017 and $101,612 ─ December 31, 2016 |
|
612,277 |
|
|
|
770,108 |
|
|
Insurance subsidiary investments |
|
184,417 |
|
|
|
204,929 |
|
|
Other |
|
301,735 |
|
|
|
288,240 |
|
|
Total assets (a) |
$ |
5,871,751 |
|
|
$ |
6,112,724 |
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
$ |
176,353 |
|
|
$ |
203,925 |
|
|
Salaries, wages and other compensation |
|
370,213 |
|
|
|
397,486 |
|
|
Due to third party payors |
|
48,791 |
|
|
|
41,320 |
|
|
Professional liability risks |
|
55,668 |
|
|
|
65,284 |
|
|
Accrued lease termination fees |
|
109,113 |
|
|
|
5,224 |
|
|
Other accrued liabilities |
|
264,957 |
|
|
|
264,512 |
|
|
Long-term debt due within one year |
|
18,247 |
|
|
|
27,977 |
|
|
|
|
1,043,342 |
|
|
|
1,005,728 |
|
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
3,302,936 |
|
|
|
3,215,062 |
|
|
Professional liability risks |
|
315,322 |
|
|
|
295,311 |
|
|
Deferred tax liabilities |
|
182,065 |
|
|
|
201,808 |
|
|
Deferred credits and other liabilities |
|
497,436 |
|
|
|
353,294 |
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 14) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
|
Stockholders' equity: |
|
|
|
|
|
|
|
|
Common stock, $0.25 par value; authorized 175,000 shares; issued 86,980 shares ─ September 30, 2017 and 85,166 shares ─ December 31, 2016 |
|
21,745 |
|
|
|
21,291 |
|
|
Capital in excess of par value |
|
1,710,480 |
|
|
|
1,710,231 |
|
|
Accumulated other comprehensive income |
|
2,929 |
|
|
|
1,573 |
|
|
Accumulated deficit |
|
(1,431,196 |
) |
|
|
(920,544 |
) |
|
|
|
303,958 |
|
|
|
812,551 |
|
|
Noncontrolling interests |
|
226,692 |
|
|
|
228,970 |
|
|
Total equity |
|
530,650 |
|
|
|
1,041,521 |
|
|
Total liabilities (a) and equity |
$ |
5,871,751 |
|
|
$ |
6,112,724 |
|
|
|
|
(a) |
The Company’s consolidated assets as of September 30, 2017 and December 31, 2016 include total assets of variable interest entities of $404.2 million and $394.1 million, respectively, which can only be used to settle the obligations of the variable interest entities. The Company’s consolidated liabilities as of September 30, 2017 and December 31, 2016 include total liabilities of variable interest entities of $41.8 million and $38.9 million, respectively. See note 1 of the notes to unaudited condensed consolidated financial statements. |
See accompanying notes.
5
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
|
|
Three months ended |
|
|
Nine months ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(81,664 |
) |
|
$ |
(671,307 |
) |
|
$ |
(465,821 |
) |
|
$ |
(608,476 |
) |
|
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense |
|
22,696 |
|
|
|
34,914 |
|
|
|
79,001 |
|
|
|
103,306 |
|
|
Amortization of intangible assets |
|
2,889 |
|
|
|
5,468 |
|
|
|
11,909 |
|
|
|
18,251 |
|
|
Amortization of stock-based compensation costs |
|
5,329 |
|
|
|
3,015 |
|
|
|
13,316 |
|
|
|
13,058 |
|
|
Amortization of deferred financing costs |
|
4,363 |
|
|
|
3,987 |
|
|
|
12,847 |
|
|
|
11,262 |
|
|
Payment of capitalized lender fees related to debt amendment |
|
- |
|
|
|
(42 |
) |
|
|
(5,403 |
) |
|
|
(7,375 |
) |
|
Provision for doubtful accounts |
|
10,327 |
|
|
|
10,009 |
|
|
|
57,511 |
|
|
|
30,955 |
|
|
Deferred income taxes |
|
(3,788 |
) |
|
|
279,172 |
|
|
|
(19,608 |
) |
|
|
308,470 |
|
|
Impairment charges |
|
- |
|
|
|
324,289 |
|
|
|
137,572 |
|
|
|
338,208 |
|
|
(Gain) loss on divestiture of discontinued operations |
|
49,663 |
|
|
|
- |
|
|
|
349,868 |
|
|
|
(179 |
) |
|
Other |
|
9,299 |
|
|
|
6,303 |
|
|
|
16,111 |
|
|
|
7,262 |
|
|
Change in operating assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable |
|
(3,976 |
) |
|
|
(42,832 |
) |
|
|
(103,199 |
) |
|
|
(143,953 |
) |
|
Inventories and other assets |
|
(6,999 |
) |
|
|
11,871 |
|
|
|
(9,517 |
) |
|
|
(3,522 |
) |
|
Accounts payable |
|
(3,903 |
) |
|
|
11,995 |
|
|
|
(26,213 |
) |
|
|
24,451 |
|
|
Income taxes |
|
2,369 |
|
|
|
1,615 |
|
|
|
6,718 |
|
|
|
2,468 |
|
|
Due to third party payors |
|
20,614 |
|
|
|
24,809 |
|
|
|
7,471 |
|
|
|
20,317 |
|
|
Other accrued liabilities |
|
(18,738 |
) |
|
|
33,101 |
|
|
|
(54,051 |
) |
|
|
(73,268 |
) |
|
Net cash provided by operating activities |
|
8,481 |
|
|
|
36,367 |
|
|
|
8,512 |
|
|
|
41,235 |
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Routine capital expenditures |
|
(16,463 |
) |
|
|
(21,873 |
) |
|
|
(45,800 |
) |
|
|
(68,703 |
) |
|
Development capital expenditures |
|
(6,415 |
) |
|
|
(8,386 |
) |
|
|
(17,711 |
) |
|
|
(27,112 |
) |
|
Acquisitions, net of cash acquired |
|
- |
|
|
|
(49,329 |
) |
|
|
(6,650 |
) |
|
|
(77,040 |
) |
|
Acquisition deposits |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
18,489 |
|
|
Sale of assets |
|
5,494 |
|
|
|
3,739 |
|
|
|
5,494 |
|
|
|
4,962 |
|
|
Purchase of insurance subsidiary investments |
|
(18,047 |
) |
|
|
(22,427 |
) |
|
|
(108,655 |
) |
|
|
(75,422 |
) |
|
Sale of insurance subsidiary investments |
|
50,087 |
|
|
|
31,875 |
|
|
|
117,863 |
|
|
|
78,478 |
|
|
Net change in insurance subsidiary cash and cash equivalents |
|
(10,053 |
) |
|
|
(14,680 |
) |
|
|
23,472 |
|
|
|
8,479 |
|
|
Net change in other investments |
|
5,088 |
|
|
|
51 |
|
|
|
4,844 |
|
|
|
(33,347 |
) |
|
Other |
|
(81 |
) |
|
|
(150 |
) |
|
|
(35 |
) |
|
|
(1,277 |
) |
|
Net cash provided by (used in) investing activities |
|
9,610 |
|
|
|
(81,180 |
) |
|
|
(27,178 |
) |
|
|
(172,493 |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from borrowings under revolving credit |
|
426,700 |
|
|
|
489,200 |
|
|
|
1,214,300 |
|
|
|
1,267,200 |
|
|
Repayment of borrowings under revolving credit |
|
(427,300 |
) |
|
|
(388,100 |
) |
|
|
(1,120,600 |
) |
|
|
(1,215,800 |
) |
|
Proceeds from issuance of term loan, net of discount |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
198,100 |
|
|
Proceeds from other long-term debt |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
750 |
|
|
Repayment of term loan |
|
(3,508 |
) |
|
|
(3,508 |
) |
|
|
(10,525 |
) |
|
|
(10,019 |
) |
|
Repayment of other long-term debt |
|
(217 |
) |
|
|
(276 |
) |
|
|
(840 |
) |
|
|
(826 |
) |
|
Payment of deferred financing costs |
|
(170 |
) |
|
|
(50 |
) |
|
|
(299 |
) |
|
|
(342 |
) |
|
Issuance of common stock in connection with employee benefit plans |
|
- |
|
|
|
- |
|
|
|
32 |
|
|
|
- |
|
|
Payment of dividend for mandatory redeemable preferred stock |
|
(3,120 |
) |
|
|
(2,904 |
) |
|
|
(9,195 |
) |
|
|
(8,558 |
) |
|
Dividends paid |
|
- |
|
|
|
(10,224 |
) |
|
|
(10,228 |
) |
|
|
(30,517 |
) |
|
Contributions made by noncontrolling interests |
|
- |
|
|
|
4,993 |
|
|
|
113 |
|
|
|
11,261 |
|
|
Distributions to noncontrolling interests |
|
(10,071 |
) |
|
|
(4,694 |
) |
|
|
(48,372 |
) |
|
|
(35,240 |
) |
|
Purchase of noncontrolling interests |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,000 |
) |
|
Payroll tax payments for equity awards issuance |
|
(88 |
) |
|
|
(250 |
) |
|
|
(2,417 |
) |
|
|
(3,079 |
) |
|
Net cash provided by (used in) financing activities |
|
(17,774 |
) |
|
|
84,187 |
|
|
|
11,969 |
|
|
|
171,930 |
|
|
Change in cash and cash equivalents |
|
317 |
|
|
|
39,374 |
|
|
|
(6,697 |
) |
|
|
40,672 |
|
|
Cash and cash equivalents at beginning of period |
|
130,047 |
|
|
|
100,056 |
|
|
|
137,061 |
|
|
|
98,758 |
|
|
Cash and cash equivalents at end of period |
$ |
130,364 |
|
|
$ |
139,430 |
|
|
$ |
130,364 |
|
|
$ |
139,430 |
|
|
Supplemental information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest payments |
$ |
76,085 |
|
|
$ |
73,755 |
|
|
$ |
186,075 |
|
|
$ |
181,227 |
|
|
Income tax payments (refunds) |
|
263 |
|
|
|
1,075 |
|
|
|
(2,054 |
) |
|
|
2,184 |
|
|
Non-cash contributions made by noncontrolling interests |
|
- |
|
|
|
- |
|
|
|
1,150 |
|
|
|
2,800 |
|
|
Non-cash investing activities (see Note 4): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sale proceeds from the SNF Divestiture (as defined) placed in third party escrow |
|
500,572 |
|
|
|
- |
|
|
|
500,572 |
|
|
|
- |
|
|
Payments from third party escrow funds to landlords related to the SNF Divestiture |
|
(500,572 |
) |
|
|
- |
|
|
|
(500,572 |
) |
|
|
- |
|
See accompanying notes.
6
KINDRED HEALTHCARE, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – BASIS OF PRESENTATION
Business
Kindred Healthcare, Inc. is a healthcare services company that through its subsidiaries operates a home health, hospice and community care business, transitional care (“TC”) hospitals, inpatient rehabilitation hospitals (“IRFs”), and a contract rehabilitation services business across the United States (collectively, the “Company” or “Kindred”). At September 30, 2017, the Company’s Kindred at Home division primarily provided home health, hospice, and community care services from 609 sites of service in 40 states. The Company’s hospital division operated 77 TC hospitals (certified as long-term acute care (“LTAC”) hospitals under the Medicare program) in 18 states. The Company’s Kindred Rehabilitation Services division operated 19 IRFs and 101 hospital-based acute rehabilitation units (“ARUs”) (certified as IRFs), and provided rehabilitation services primarily in hospitals and long-term care settings in 45 states.
Discontinued operations
The Company has completed several transactions related to the divestiture of unprofitable hospitals and nursing centers to improve its future operating results. The Company is also currently in the process of completing the SNF Divestiture (as defined and described more fully in Note 4). For accounting purposes, the operating results of these businesses and the gains or losses associated with these transactions were classified as discontinued operations in the accompanying unaudited condensed consolidated statement of operations for all periods presented in accordance with the authoritative guidance in effect through December 31, 2014. Effective January 1, 2015, the authoritative guidance modified the requirements for reporting discontinued operations. A disposal is now required to be reported in discontinued operations only if the disposal represents a strategic shift that has (or will have) a major effect on the Company’s operations and financial results. See Notes 4 and 5.
Recently issued accounting requirements
In August 2017, the Financial Accounting Standards Board (the “FASB”) issued authoritative guidance with the objective of improving the financial reporting of hedging relationships under United States generally accepted accounting principles (“GAAP”) to better portray economic results and to simplify the application of the current hedge accounting guidance. The new guidance is effective for annual and interim periods beginning after December 15, 2018 and early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s business, financial position, results of operations or liquidity.
In May 2017, the FASB issued authoritative guidance to provide clarity and reduce diversity in practice when accounting for changes to terms or conditions of a share-based payment award. The new guidance is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s business, financial position, results of operations or liquidity.
In January 2017, the FASB issued authoritative guidance that simplifies the measurement of goodwill impairment to a single-step test. The guidance removes step two of the goodwill impairment test, which required a hypothetical purchase price allocation. The measurement of goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Under the revised guidance, failing step one will always result in goodwill impairment. The new guidance is effective for annual and interim periods beginning after December 15, 2019 and early adoption is permitted. The Company adopted the new guidance on January 1, 2017 on a prospective basis. If the Company fails step one of the goodwill impairment test under the new guidance, the results could materially impact the Company’s financial position and results of operations but not its business or liquidity.
In January 2017, the FASB issued authoritative guidance that revises the definition of a business, which affects accounting for acquisitions, disposals, goodwill impairment, and consolidation. The guidance is intended to help entities evaluate whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The revision provides a more robust framework to use in determining when a set of assets and activities is a business. The new guidance is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s business, financial position, results of operations or liquidity.
In November 2016, the FASB issued authoritative guidance that simplifies the disclosure of restricted cash within the statement of cash flows. The guidance is intended to reduce diversity when reporting restricted cash and requires entities to explain changes in the combined total of restricted and unrestricted balances in the statement of cash flows. The new guidance is effective for annual and interim periods beginning after December 15, 2017 and early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated statement o