GENESIS HEALTHCARE ENTERS INTO AN AGREEMENT FOR LONG TERM LEASE AND PURCHASE OPTION WITH SANDY RIVER HEALTH SYSTEM IN MAINE5/10/2006
Kennett Square, PA -- 05/10/2006 --
Genesis HealthCare (GHC) (NASDAQ:GHCI) today announced that it signed an agreement to enter into lease and purchase option agreements with Sandy River Health System, a premier long term care provider that operates 11 facilities in the State of Maine. The closing of the agreement is subject to pending regulatory and licensing approvals, and other customary conditions. Genesis expects to close the transaction by calendar year-end, providing approximately three quarters of earnings accretion for Fiscal 2007.
Upon closing, GHC would lease 11 Sandy River nursing and residential care facilities for ten years, subject to two five year renewal options, for annual lease payments totaling approximately $5 million. Additionally, GHC would pay approximately $16 million in cash in exchange for tangible operating assets and a fixed price purchase option totaling $53 million, exercisable in 2026. The transaction would be recorded as a capital lease, with assets of $57.5 million and liabilities of $40.0 million.
The Sandy River Health System operates 748 skilled nursing and 220 residential care beds and currently employs 1,525 full and part-time employees. Sandy River’s annual revenue totaled approximately $65 million for the period ended December 31, 2005. A small home care and related services business may be included in the transaction.
“We are excited about adding the high-quality Sandy River facilities to the Genesis portfolio and expanding our footprint into a contiguous state,” states George V. Hager, Jr., Genesis Chairman and Chief Executive Officer. “We view this transaction as a natural extension to our already substantial presence in New England.”
“Genesis HealthCare is an excellent fit for the Sandy River Health System,” states Sandy River President Michael Tyler. “Genesis shares our commitment to clinical quality and customer satisfaction, and we are excited to join the Genesis team.”
About Genesis HealthCare Corporation
GHC is one of the nation's largest long-term care providers with over 200 skilled nursing centers and assisted living residences in 12 eastern states. GHC also supplies contract rehabilitation therapy to over 650 healthcare providers in 18 states and the District of Columbia.
Statements made in this release, our website and in our other public filings and releases, which are not historical facts contain "forward-looking" statements (as defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties and are subject to change at any time. These forward-looking statements may include, but are not limited to, statements containing words such as "anticipate," "believe," "plan," "estimate," "expect," "intend," "may," “target,” “appears” and similar expressions. Such forward looking statements include, without limitation, closure or timing of the Sandy River transaction, expected reimbursement rates, including RUGs changes, our net operating loss carryforwards, our 2006 effective tax rate, agency labor utilization, wage rates, debt repayments, share repurchases, provider tax assessments, changes in state Medicaid rates, our plans to improve the operating performance of our Rehabilitation services segment and progress to date, the extent and effectiveness of our facilities renovation program, levels of lease expense, interest expense, depreciation expense, capital spending, and our anticipated results of operations for fiscal 2006. Factors that could cause actual results to differ materially include, but are not limited to, the following: costs, changes in the reimbursement rates or methods of payment from Medicare or Medicaid, or the implementation of other measures to reduce reimbursement for our services; efforts of third party payors to control costs; the impact of federal and state regulations; changes in payor mix and payment methodologies; competition in our business; an increase in insurance costs and potential liability for losses not covered by, or in excess of, our insurance; competition for and availability of qualified staff in the healthcare industry; our ability to control operating costs, and generate sufficient cash flow to meet operational and financial requirements; and an economic downturn or changes in the laws affecting our business in those markets in which we operate.
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