Sun Healthcare Group, Inc. (NASDAQ: SUNH) today announced its
operating results for the third quarter ended Sept. 30, 2012.
Highlights of continuing operations:
- consolidated revenues were $460.5 million for the quarter;
- consolidated normalized adjusted EBITDAR was $57.9 million for
the quarter representing a normalized adjusted EBITDAR margin of
12.6 percent; and
- normalized earnings per share was $0.17 for the quarter.
Transaction Update The closing date for
the Company's pending transaction with Genesis HealthCare LLC has
not yet been finalized but is expected to occur in December 2012,
subject to receipt of a few remaining regulatory approvals and the
satisfaction of customary closing conditions. In connection with
the pending transaction, the Company incurred $2.9 million of
transaction costs through the nine months ended Sept. 30, 2012,
which were primarily comprised of legal fees and financial advisory
fees. The Company will not hold a quarterly conference call to
discuss its third-quarter results.
Commenting on the expected completion of the transaction,
William A. Mathies, Sun's chairman and chief executive officer,
stated, "I am extremely proud of our thousands of caregivers and
employees, who have maintained their focus on providing
high-quality care for our patients and residents throughout the
transaction process while continuing to execute toward our
operational goals for this year. As we enter into our merger with
Genesis HealthCare, I'm confident that we bring skills, dedication,
and capabilities that will contribute to the success of the
combined company."
Segment Updates Sun's inpatient services
business produced revenue in the third quarter totaling $409.8
million, down $8.3 million, or 2.0 percent, from the third quarter
of 2011. The decrease in year-over-year revenues resulted
principally from the reduction in Medicare rates as mandated by the
CMS Final Rule and implemented in the prior year on Oct. 1, 2011.
Inpatient services adjusted EBITDAR for the quarter was $66.3
million, down $8.4 million, or 11.2 percent, from the prior year
third quarter, and adjusted EBITDAR margin for the quarter was 16.2
percent, down 170 basis points from the prior year third
quarter.
Sun's hospice division, SolAmor, is included in Sun's inpatient
services business segment and produced revenue in the third quarter
of $15.7 million, up $0.8 million, or 5.6 percent, from the third
quarter of 2011. SolAmor's adjusted EBITDAR was $3.9 million in the
third quarter and adjusted EBITDAR margin was 24.6 percent.
Sun's rehabilitation therapy services business, SunDance,
reported third-quarter revenues of $60.9 million, adjusted EBITDAR
of $4.5 million and an adjusted EBITDAR margin of 7.4 percent, up
310 basis points year over year.
Sun's medical staffing services business, CareerStaff, reported
third-quarter revenues of $22.1 million, up 1.7 percent year over
year, adjusted EBITDAR of $1.6 million and an adjusted EBITDAR
margin of 7.2 percent.
Cash Flow At Sept. 30, 2012, Sun had $63.8
million in cash and cash equivalents and $88.9 million of long-term
debt. During the third quarter, Sun generated cash flow from
operations of $26.4 million and used net cash of $5.9 million for
capital investments.
About Sun Healthcare Group, Inc. Sun
Healthcare Group, Inc. (NASDAQ: SUNH) is a healthcare services
company, serving principally the senior population, with
consolidated annual revenues in excess of $1.9 billion and
approximately 28,000 employees in 46 states. Sun's services are
provided through its subsidiaries: as of Sept. 30, 2012, SunBridge
Healthcare and its subsidiaries' continuing operations include 158
skilled nursing centers, 13 combined skilled nursing, assisted and
independent living centers, 10 assisted living centers, two
independent living centers and seven mental health centers with an
aggregate of 21,324 licensed beds in 23 states; SunDance
Rehabilitation provides rehabilitation therapy services to
affiliated and non-affiliated centers in 36 states; CareerStaff
Unlimited provides medical staffing services in 40 states; and
SolAmor Hospice provides hospice services in 11 states. For more
information, go to www.sunh.com.
Forward-looking Statements Statements made
in this release that are not historical facts are "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," "hope,"
"intend," "may" and similar expressions. Forward-looking statements
in this release include the Company's expectations regarding the
closing of the transaction with Genesis Healthcare. Factors that
could cause actual results to differ are identified in filings made
by the Company with the Securities and Exchange Commission and
include changes in Medicare and Medicaid reimbursements, including
with respect to the CMS Final Rule, and the Company's ability to
mitigate the impact of such changes; the impact that healthcare
reform legislation will have on the Company's business; the ability
to maintain the occupancy rates and payor mix at the Company's
healthcare centers; potential liability for losses not covered by,
or in excess of, insurance; the effects of government regulations
and investigations; the ability of the Company to collect its
accounts receivable on a timely basis; the amount of the Company's
indebtedness; covenants in debt agreements and leases that may
restrict the Company's activities, including the Company's ability
to make acquisitions and incur more indebtedness on favorable
terms; the impact of the economic downturn on the business;
increasing labor costs and the shortage of qualified healthcare
personnel; the Company's ability to receive increases in
reimbursement rates from government payors to cover increased
costs; delays in or failure to satisfy required conditions to the
closing of the proposed merger with Genesis Healthcare, including
the receipt of required regulatory approvals with respect to the
transaction; failure to consummate or delay in consummating the
transaction for other reasons; and disruption from the transaction
making it more difficult to maintain relationships with customers
and employees. More information on factors that could affect the
Company's business and financial results are included in Sun's
filings made with the Securities and Exchange Commission, including
its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q,
copies of which are available on Sun's web site, www.sunh.com.
There may be additional risks of which the Company is presently
unaware or that it currently deems immaterial.
The forward-looking statements involve known and unknown risks,
uncertainties and other factors that are, in some cases, beyond the
Company's control. Sun cautions investors that any forward-looking
statements made by Sun are not guarantees of future performance and
are only made as of the date of this release. Sun 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.
EBITDA, adjusted EBITDA, adjusted EBITDAR and free cash flow, as
used in this press release and in the accompanying tables, which
are non-GAAP financial measures, are each reconciled to their
respective GAAP-recognized financial measures in the accompanying
tables.
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
KEY INCOME STATEMENT FIGURES
CONSOLIDATED
(in thousands, except per share data)
For the For the
Three Months Three Months
Ended Ended
September 30, September 30,
2012 2011
------------- -------------
Revenue $ 460,470 $ 468,676
Center rent expense 36,647 35,952
Depreciation and amortization 8,654 8,163
Interest expense, net 4,458 4,834
Pre-tax income 6,921 (305,172)
Income tax expense 2,932 2,203
Income (loss) from continuing operations 3,989 (307,375)
Loss from discontinued operations (2,702) (2,031)
------------- -------------
Net income (loss) $ 1,287 $ (309,406)
============= =============
Diluted (loss) income per share $ 0.05 $ (11.81)
============= =============
----------------------------------------------------------------------------
Adjusted EBITDAR $ 56,869 $ 64,103
Margin - Adjusted EBITDAR 12.4% 13.7%
Adjusted EBITDAR normalized $ 57,902 $ 64,103
Margin - Adjusted EBITDAR normalized 12.6% 13.7%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Adjusted EBITDA $ 20,222 $ 28,151
Margin - Adjusted EBITDA 4.4% 6.0%
Adjusted EBITDA normalized $ 21,255 $ 28,151
Margin - Adjusted EBITDA normalized 4.6% 6.0%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Pre-tax income continuing operations -
normalized $ 7,954 $ 14,345
Income tax expense - normalized $ 3,335 $ 4,951
Income from continuing operations - normalized $ 4,619 $ 9,394
Diluted earnings per share from continuing
operations - normalized $ 0.17 $ 0.36
----------------------------------------------------------------------------
See definitions of Adjusted EBITDA and Adjusted EBITDAR in the table
"Reconciliation of Net Loss to Adjusted EBITDA and Adjusted EBITDAR."
See normalizing adjustments in the table "Normalizing Adjustments - Quarter
Comparison."
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
KEY INCOME STATEMENT FIGURES
CONSOLIDATED
(in thousands, except per share data)
For the For the
Nine Months Nine Months
Ended Ended
September 30, September 30,
2012 2011
------------- -------------
Revenue $ 1,376,105 $ 1,405,558
Center rent expense 109,546 107,394
Depreciation and amortization 25,588 23,241
Interest expense, net 13,297 14,688
Pre-tax income 14,842 (269,596)
Income tax expense 6,021 16,715
Income (loss) from continuing operations 8,821 (286,311)
Loss from discontinued operations (8,301) (5,036)
------------- -------------
Net income (loss) $ 520 $ (291,347)
============= =============
Diluted (loss) income per share $ 0.02 $ (11.19)
============= =============
----------------------------------------------------------------------------
Adjusted EBITDAR $ 163,462 $ 196,355
Margin - Adjusted EBITDAR 11.9% 14.0%
Adjusted EBITDAR normalized $ 166,333 $ 196,355
Margin - Adjusted EBITDAR normalized 12.1% 14.0%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Adjusted EBITDA $ 53,916 $ 88,961
Margin - Adjusted EBITDA 3.9% 6.3%
Adjusted EBITDA normalized $ 56,787 $ 88,961
Margin - Adjusted EBITDA normalized 4.1% 6.3%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Pre-tax income continuing operations -
normalized $ 17,713 $ 49,921
Income tax expense - normalized $ 7,141 $ 19,463
Income from continuing operations - normalized $ 10,572 $ 30,458
Diluted earnings per share from continuing
operations - normalized $ 0.40 $ 1.17
----------------------------------------------------------------------------
See definitions of Adjusted EBITDA and Adjusted EBITDAR in the table
"Reconciliation of Net Loss to Adjusted EBITDA and Adjusted EBITDAR."
See normalizing adjustments in the table "Normalizing Adjustments - Quarter
Comparison."
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
September 30, 2012 December 31, 2011
------------------ ------------------
(unaudited) (unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 63,801 $ 57,908
Restricted cash 14,252 15,706
Accounts receivable, net 199,787 202,229
Prepaid expenses and other assets 27,323 29,075
Assets held for sale 4,946 -
Deferred tax assets 61,629 63,170
------------------ ------------------
Total current assets 371,738 368,088
Property and equipment, net 143,288 148,298
Intangible assets, net 33,358 35,294
Goodwill 34,905 34,496
Restricted cash, non-current 354 353
Deferred tax assets 125,409 123,974
Other assets 40,792 45,163
------------------ ------------------
Total assets $ 749,844 $ 755,666
================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 47,427 $ 55,888
Accrued compensation and benefits 58,212 61,101
Accrued self-insurance
obligations, current portion 58,273 57,810
Other accrued liabilities 47,602 43,139
Current portion of long-term debt
and capital lease obligations 944 1,017
------------------ ------------------
Total current liabilities 212,458 218,955
Accrued self-insurance obligations,
net of current portion 158,224 157,267
Long-term debt and capital lease
obligations, net of current portion 87,989 88,768
Unfavorable lease obligations, net 5,268 7,110
Other long-term liabilities 55,500 58,110
------------------ ------------------
Total liabilities 519,439 530,210
Stockholders' equity:
Preferred stock of $.01 par value,
authorized 3,333 shares, zero
shares were issued and
outstanding as of September 30,
2012 and December 31, 2011 - -
Common stock of $.01 par value,
authorized 41,667 shares, 25,538
and 25,146 shares issued and
outstanding as of September 30,
2012 and December 31, 2011,
respectively 255 251
Additional paid-in capital 731,473 726,861
Accumulated deficit (499,907) (500,427)
Accumulated other comprehensive
loss, net (1,416) (1,229)
------------------ ------------------
230,405 225,456
------------------ ------------------
Total liabilities and
stockholders' equity $ 749,844 $ 755,666
================== ==================
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share data)
For the For the
Three Months Three Months
Ended Ended
September 30, September 30,
2012 2011
------------- -------------
(unaudited) (unaudited)
Total net revenues $ 460,470 $ 468,676
------------- -------------
Costs and expenses:
Operating salaries and benefits 259,379 263,932
Self-insurance for workers' compensation and
general and professional liability
insurance 15,237 14,545
Operating administrative costs 10,635 12,962
Other operating costs 97,619 93,705
Center rent expense 36,647 35,952
General and administrative expenses 14,447 14,825
Depreciation and amortization 8,654 8,163
Provision for losses on accounts receivable 5,250 4,604
Interest, net of interest income of $94 and
$103, respectively 4,458 4,834
Transaction costs 1,034 -
Loss on sale of assets, net 189 809
Restructuring costs - 2,426
Loss on asset impairment - 317,091
------------- -------------
Total costs and expenses 453,549 773,848
------------- -------------
Income (loss) before income taxes and
discontinued operations 6,921 (305,172)
Income tax expense 2,932 2,203
------------- -------------
Income (loss) from continuing operations 3,989 (307,375)
------------- -------------
Loss from discontinued operations, net (2,702) (2,031)
------------- -------------
Net income (loss) $ 1,287 $ (309,406)
============= =============
Basic loss per common and common equivalent
share:
Income (loss) from continuing operations $ 0.15 $ (11.73)
Loss from discontinued operations, net (0.10) (0.08)
------------- -------------
Net income (loss) $ 0.05 $ (11.81)
============= =============
Diluted loss per common and common equivalent
share:
Income (loss) from continuing operations $ 0.15 $ (11.73)
Loss from discontinued operations, net (0.10) (0.08)
------------- -------------
Net income (loss) $ 0.05 $ (11.81)
============= =============
Weighted average number of common and common
equivalent shares outstanding:
Basic 27,082 26,203
Diluted 27,082 26,203
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share data)
For the For the
Nine Months Nine Months
Ended Ended
September 30, September 30,
2012 2011
------------- -------------
(unaudited) (unaudited)
Total net revenues $ 1,376,105 $ 1,405,558
------------- -------------
Costs and expenses:
Operating salaries and benefits 779,976 789,874
Self-insurance for workers' compensation and
general and professional liability
insurance 43,744 43,643
Operating administrative costs 34,744 39,333
Other operating costs 289,614 276,999
Center rent expense 109,546 107,394
General and administrative expenses 46,537 45,156
Depreciation and amortization 25,588 23,241
Provision for losses on accounts receivable 15,157 14,198
Interest, net of interest income of $229 and
$243, respectively 13,297 14,688
Transaction costs 2,871 -
Loss on sale of assets, net 189 809
Restructuring costs - 2,728
Loss on asset impairment - 317,091
------------- -------------
Total costs and expenses 1,361,263 1,675,154
------------- -------------
Income (loss) before income taxes and
discontinued operations 14,842 (269,596)
Income tax expense 6,021 16,715
------------- -------------
Income (loss) from continuing operations 8,821 (286,311)
------------- -------------
Loss from discontinued operations, net (8,301) (5,036)
------------- -------------
Net income (loss) $ 520 $ (291,347)
============= =============
Basic loss per common and common equivalent
share:
Income (loss) from continuing operations $ 0.33 $ (11.00)
Loss from discontinued operations, net (0.31) (0.19)
------------- -------------
Net income (loss) $ 0.02 $ (11.19)
============= =============
Diluted loss per common and common equivalent
share:
Income (loss) from continuing operations $ 0.33 $ (11.00)
Loss from discontinued operations, net (0.31) (0.19)
------------- -------------
Net income (loss) $ 0.02 $ (11.19)
============= =============
Weighted average number of common and common
equivalent shares outstanding:
Basic 26,732 26,038
Diluted 26,732 26,038
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the For the
Three Months Three Months
Ended Ended
September 30, September 30,
2012 2011
------------- -------------
(unaudited) (unaudited)
Cash flows from operating activities:
Net income (loss) $ 1,287 $ (309,406)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities, including discontinued
operations:
Depreciation and amortization 8,654 8,335
Amortization of favorable and unfavorable
lease intangibles (507) (492)
Provision for losses on accounts
receivable 5,403 4,975
Loss on sale of assets, including
discontinued operations, net 188 1,925
Loss on asset impairment - 317,091
Stock-based compensation expense 1,233 2,359
Deferred taxes 386 (105)
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable 7,641 23
Restricted cash 78 52
Prepaid expenses and other assets 1,800 (1,600)
Accounts payable 2,756 1,595
Accrued compensation and benefits (5,666) (11,717)
Accrued self-insurance obligations 3,821 3,618
Other accrued liabilities (36) 2,104
Other long-term liabilities (667) (880)
------------- -------------
Net cash provided by operating
activities 26,371 17,877
------------- -------------
Cash flows from investing activities:
Capital expenditures (6,722) (14,190)
Proceeds from sale of assets 781 1,809
------------- -------------
Net cash used for investing activities (5,941) (12,381)
------------- -------------
Cash flows from financing activities:
Principal repayments of long-term debt and
capital lease obligations (277) (2,806)
------------- -------------
Net cash used for financing activities (277) (2,806)
------------- -------------
Net increase in cash and cash equivalents 20,153 2,690
Cash and cash equivalents at beginning of
period 43,648 88,489
------------- -------------
Cash and cash equivalents at end of period $ 63,801 $ 91,179
============= =============
----------------------------------------------------------------------------
Reconciliation of net cash provided by
operating activities to free cash flow:
Net cash provided by operating activities $ 26,371 $ 17,877
Capital expenditures (6,722) (14,190)
------------- -------------
Free cash flow $ 19,649 $ 3,687
============= =============
----------------------------------------------------------------------------
Free cash flow is defined as net cash flow provided by operating activities
less cash used for capital expenditures.
Free cash flow is used by management to evaluate discretionary cash flow
potentially available for principal repayment and other financing
activities.
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the For the
Nine Months Nine Months
Ended Ended
September 30, September 30,
2012 2011
------------- -------------
(unaudited) (unaudited)
Cash flows from operating activities:
Net income (loss) $ 520 $ (291,347)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities, including discontinued
operations:
Depreciation and amortization 25,740 23,879
Amortization of favorable and unfavorable
lease intangibles (1,527) (1,466)
Provision for losses on accounts
receivable 15,866 15,479
Loss on sale of assets, including
discontinued operations, net 257 1,925
Loss on asset impairment - 317,091
Stock-based compensation expense 5,041 5,160
Deferred taxes 229 9,871
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable (13,568) (12,555)
Restricted cash 1,453 (1,876)
Prepaid expenses and other assets 4,125 (1,410)
Accounts payable (7,358) (1,906)
Accrued compensation and benefits (2,889) (12,298)
Accrued self-insurance obligations 1,420 (294)
Other accrued liabilities 4,386 1,158
Other long-term liabilities (2,920) (2,098)
------------- -------------
Net cash provided by operating
activities 30,775 49,313
------------- -------------
Cash flows from investing activities:
Capital expenditures (24,551) (32,346)
Proceeds from sale of assets 781 1,809
Acquisitions, net of cash acquired (260) (356)
------------- -------------
Net cash used for investing activities (24,030) (30,893)
------------- -------------
Cash flows from financing activities:
Principal repayments of long-term debt and
capital lease obligations (852) (8,404)
------------- -------------
Net cash used for financing activities (852) (8,404)
------------- -------------
Net increase in cash and cash equivalents 5,893 10,016
Cash and cash equivalents at beginning of
period 57,908 81,163
------------- -------------
Cash and cash equivalents at end of period $ 63,801 $ 91,179
============= =============
----------------------------------------------------------------------------
Reconciliation of net cash provided by
operating activities to free cash flow:
Net cash provided by operating activities $ 30,775 $ 49,313
Capital expenditures (24,551) (32,346)
------------- -------------
Free cash flow $ 6,224 $ 16,967
============= =============
----------------------------------------------------------------------------
Free cash flow is defined as net cash flow provided by operating activities
less cash used for capital expenditures.
Free cash flow is used by management to evaluate discretionary cash flow
potentially available for principal repayment and other financing
activities.
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA and ADJUSTED EBITDAR
(in thousands)
For the For the
Three Months Ended Three Months Ended
September 30, 2012 September 30, 2011
------------------ ------------------
(unaudited) (unaudited)
Total net revenues $ 460,470 $ 468,676
------------------ ------------------
Net income (loss) $ 1,287 $ (309,406)
------------------ ------------------
Income (loss) from continuing
operations 3,989 (307,375)
Income tax expense 2,932 2,203
Interest, net 4,458 4,834
Depreciation and amortization 8,654 8,163
------------------ ------------------
EBITDA $ 20,033 $ (292,175)
Loss on sale of assets, net 189 809
Restructuring costs - 2,426
Loss on asset impairment - 317,091
------------------ ------------------
Adjusted EBITDA $ 20,222 $ 28,151
Center rent expense 36,647 35,952
------------------ ------------------
Adjusted EBITDAR $ 56,869 $ 64,103
================== ==================
EBITDA is defined as earnings before loss on discontinued
operations, income taxes, interest, net, depreciation and
amortization. Adjusted EBITDA is defined as EBITDA before
restructuring costs. Adjusted EBITDAR is defined as Adjusted EBITDA
before center rent expense. Adjusted EBITDA and Adjusted EBITDAR
are used by management to evaluate financial performance and
resource allocation for each entity within the operating units and
for the Company as a whole. Adjusted EBITDA and Adjusted EBITDAR
are commonly used as analytical indicators within the healthcare
industry and also serve as measures of leverage capacity and debt
service ability. Adjusted EBITDA and Adjusted EBITDAR should not be
considered as measures of financial performance under generally
accepted accounting principles. As the items excluded from Adjusted
EBITDA and Adjusted EBITDAR are significant components in
understanding and assessing finance performance, Adjusted EBITDA
and Adjusted EBITDAR should not be considered in isolation or as
alternatives to net income, cash flows generated by or used in
operating, investing or financing activities or other financial
statement data presented in the consolidated financial statements
as indicators of financial performance or liquidity. Because
Adjusted EBITDA and Adjusted EBITDAR are not measurements
determined in accordance with U.S. generally accepted accounting
principles and are thus susceptible to varying calculations.
Adjusted EBITDA and Adjusted EBITDAR as presented may not be
comparable to other similarly titled measures of other
companies.
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA and ADJUSTED EBITDAR
(in thousands)
For the For the
Nine Months Ended Nine Months Ended
September 30, 2012 September 30, 2011
------------------ ------------------
(unaudited) (unaudited)
Total net revenues $ 1,376,105 $ 1,405,558
------------------ ------------------
Net income (loss) $ 520 $ (291,347)
------------------ ------------------
Income (loss) from continuing
operations 8,821 (286,311)
Income tax expense 6,021 16,715
Interest, net 13,297 14,688
Depreciation and amortization 25,588 23,241
------------------ ------------------
EBITDA $ 53,727 $ (231,667)
Loss on sale of assets, net 189 809
Restructuring costs - 2,728
Loss on asset impairment - 317,091
------------------ ------------------
Adjusted EBITDA $ 53,916 $ 88,961
Center rent expense 109,546 107,394
------------------ ------------------
Adjusted EBITDAR $ 163,462 $ 196,355
================== ==================
EBITDA is defined as earnings before loss on discontinued
operations, income taxes, interest, net, depreciation and
amortization. Adjusted EBITDA is defined as EBITDA before
restructuring costs. Adjusted EBITDAR is defined as Adjusted EBITDA
before center rent expense. Adjusted EBITDA and Adjusted EBITDAR
are used by management to evaluate financial performance and
resource allocation for each entity within the operating units and
for the Company as a whole. Adjusted EBITDA and Adjusted EBITDAR
are commonly used as analytical indicators within the healthcare
industry and also serve as measures of leverage capacity and debt
service ability. Adjusted EBITDA and Adjusted EBITDAR should not be
considered as measures of financial performance under generally
accepted accounting principles. As the items excluded from Adjusted
EBITDA and Adjusted EBITDAR are significant components in
understanding and assessing finance performance, Adjusted EBITDA
and Adjusted EBITDAR should not be considered in isolation or as
alternatives to net income, cash flows generated by or used in
operating, investing or financing activities or other financial
statement data presented in the consolidated financial statements
as indicators of financial performance or liquidity. Adjusted
EBITDA and Adjusted EBITDAR are not measurements determined in
accordance with U.S. generally accepted accounting principles and
are thus susceptible to varying calculations. Adjusted EBITDA and
Adjusted EBITDAR as presented may not be comparable to other
similarly titled measures of other companies.
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED
EBITDA and ADJUSTED EBITDAR
($ in thousands)
For the Three Months Ended September 30, 2012
(unaudited)
Rehabili- Elimination
tation Medical of
Inpatient Therapy Staffing Other & Affiliated Consoli-
Services Services Services Corp Seg Revenue dated
--------- -------- -------- -------- ----------- --------
Nonaffiliated
revenue $ 409,750 $ 29,032 $ 21,686 $ 2 $ - $460,470
Affiliated
revenue - 31,885 432 - (32,317) -
--------- -------- -------- -------- ----------- --------
Total
revenue $ 409,750 $ 60,917 $ 22,118 $ 2 $ (32,317) $460,470
--------- -------- -------- -------- ----------- --------
Income (loss)
from
continuing
operations $ 22,780 $ 4,068 $ 1,238 $(24,097) $ - $ 3,989
Income tax
expense - - - 2,932 - 2,932
Interest, net (53) - - 4,511 - 4,458
Depreciation
and
amortization 7,276 267 191 920 - 8,654
--------- -------- -------- -------- ----------- --------
EBITDA $ 30,003 $ 4,335 $ 1,429 $(15,734) $ - $ 20,033
Loss on sale
of assets,
net - - - 189 - 189
--------- -------- -------- -------- ----------- --------
Adjusted
EBITDA $ 30,003 $ 4,335 $ 1,429 $(15,545) $ - $ 20,222
Center rent
expense 36,323 154 170 - - 36,647
--------- -------- -------- -------- ----------- --------
Adjusted
EBITDAR $ 66,326 $ 4,489 $ 1,599 $(15,545) $ - $ 56,869
========= ======== ======== ======== =========== ========
Normalized
Adjusted
EBITDA $ 30,003 $ 4,335 $ 1,429 $(14,511) $ - $ 21,256
Normalized
Adjusted
EBITDAR $ 66,326 $ 4,489 $ 1,599 $(14,511) $ - $ 57,903
Adjusted
EBITDA
margin 7.3% 7.1% 6.5% 4.4%
Adjusted
EBITDAR
margin 16.2% 7.4% 7.2% 12.4%
Normalized
Adjusted
EBITDA
margin 7.3% 7.1% 6.5% 4.6%
Normalized
Adjusted
EBITDAR
margin 16.2% 7.4% 7.2% 12.6%
See definitions of EBITDA, Adjusted EBITDA and Adjusted EBITDAR in the
table "Reconciliation of Net Loss to Adjusted EBITDA and Adjusted
EBITDAR."
See normalizing adjustments in the table "Normalizing Adjustments - Quarter
Comparison."
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED
EBITDA and ADJUSTED EBITDAR
($ in thousands)
For the Nine Months Ended September 30, 2012
(unaudited)
Rehabili-
tation Medical Elimination of
Inpatient Therapy Staffing Other & Affiliated Consoli-
Services Services Services Corp Seg Revenue dated
---------- -------- ------- -------- --------- ----------
Nonaffiliated
revenue $1,220,673 $ 88,858 $66,559 $ 15 $ - $1,376,105
Affiliated
revenue - 98,152 1,982 - (100,134) -
---------- -------- ------- -------- --------- ----------
Total
revenue $1,220,673 $187,010 $68,541 $ 15 $(100,134) $1,376,105
---------- -------- ------- -------- --------- ----------
Income (loss)
from
continuing
operations $ 65,104 $ 11,381 $ 4,345 $(72,009) $ - $ 8,821
Income tax
expense - - - 6,021 - 6,021
Interest, net (81) - (3) 13,381 - 13,297
Depreciation
and
amortization 21,420 778 562 2,828 - 25,588
---------- -------- ------- -------- --------- ----------
EBITDA $ 86,443 $ 12,159 $ 4,904 $(49,779) $ - $ 53,727
Loss on sale
of assets,
net - - - 189 - 189
---------- -------- ------- -------- --------- ----------
Adjusted
EBITDA $ 86,443 $ 12,159 $ 4,904 $(49,401) $ - $ 54,105
Center rent
expense 108,606 432 508 - - 109,546
---------- -------- ------- -------- --------- ----------
Adjusted
EBITDAR $ 195,049 $ 12,591 $ 5,412 $(49,401) $ - $ 163,651
========== ======== ======= ======== ========= ==========
Normalized
Adjusted
EBITDA $ 86,443 $ 12,159 $ 4,904 $(46,530) $ - $ 56,976
Normalized
Adjusted
EBITDAR $ 195,049 $ 12,591 $ 5,412 $(46,530) $ - $ 166,522
Adjusted
EBITDA
margin 7.1% 6.5% 7.2% 3.9%
Adjusted
EBITDAR
margin 16.0% 6.7% 7.9% 11.9%
Normalized
Adjusted
EBITDA
margin 7.1% 6.5% 7.2% 4.1%
Normalized
Adjusted
EBITDAR
margin 16.0% 6.7% 7.9% 12.1%
See definitions of EBITDA, Adjusted EBITDA and Adjusted EBITDAR in the
table "Reconciliation of Net Loss to Adjusted EBITDA and Adjusted
EBITDAR."
See normalizing adjustments in the table "Normalizing Adjustments - Year to
Date Comparison."
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED
EBITDA and ADJUSTED EBITDAR
($ in thousands)
For the Three Months Ended September 30, 2011
(unaudited)
Rehabili- Elimination
tation Medical of
Inpatient Therapy Staffing Other & Affiliated Consoli-
Services Services Services Corp Seg Revenue dated
--------- -------- -------- -------- ----------- ---------
Nonaffiliated
revenue $ 418,097 $ 29,568 $ 20,996 $ 15 $ - $ 468,676
Affiliated
revenue - 32,791 757 - (33,548) -
--------- -------- -------- -------- ----------- ---------
Total
revenue $ 418,097 $ 62,359 $ 21,753 $ 15 $ (33,548) $ 468,676
--------- -------- -------- -------- ----------- ---------
Income
(loss) from
continuing
operations $(285,549) $ 2,296 $ 1,221 $(25,343) $ - $(307,375)
Income tax
expense - - - 2,203 - 2,203
Interest,
net (33) - - 4,867 - 4,834
Depreciation
and
amortization 6,770 236 187 970 - 8,163
--------- -------- -------- -------- ----------- ---------
EBITDA $(278,812) $ 2,532 $ 1,408 $(17,303) $ - $(292,175)
Loss on sale
of assets,
net 809 - - - - 809
Restructuring
costs - - - 2,426 - 2,426
Loss on
asset
impairment 317,091 - - - - 317,091
--------- -------- -------- -------- ----------- ---------
Adjusted
EBITDA $ 39,088 $ 2,532 $ 1,408 $(14,877) $ - $ 28,151
Center rent
expense 35,642 140 170 - - 35,952
--------- -------- -------- -------- ----------- ---------
Adjusted
EBITDAR $ 74,730 $ 2,672 $ 1,578 $(14,877) $ - $ 64,103
========= ======== ======== ======== =========== =========
Adjusted
EBITDA
margin 9.3% 4.1% 6.5% 6.0%
Adjusted
EBITDAR
margin 17.9% 4.3% 7.3% 13.7%
See definitions of EBITDA, Adjusted EBITDA and Adjusted EBITDAR in the
table "Reconciliation of Net Loss to Adjusted EBITDA and Adjusted
EBITDAR."
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED
EBITDA and ADJUSTED EBITDAR
($ in thousands)
For the Nine Months Ended September 30, 2011
(unaudited)
Rehabili-
tation Medical Elimination of
Inpatient Therapy Staffing Other & Affiliated Consoli-
Services Services Services Corp Seg Revenue dated
---------- -------- ------- -------- --------- ----------
Nonaffiliated
revenue $1,250,568 $ 89,645 $65,309 $ 36 $ - $1,405,558
Affiliated
revenue - 98,710 2,079 - (100,789) -
---------- -------- ------- -------- --------- ----------
Total
revenue $1,250,568 $188,355 $67,388 $ 36 $(100,789) $1,405,558
---------- -------- ------- -------- --------- ----------
Income (loss)
from
continuing
operations $ (217,007) $ 8,495 $ 4,082 $(81,881) $ - $ (286,311)
Income tax
expense - - - 16,715 - 16,715
Interest, net (69) - 1 14,756 - 14,688
Depreciation
and
amortization 19,331 689 561 2,660 - 23,241
---------- -------- ------- -------- --------- ----------
EBITDA $ (197,745) $ 9,184 $ 4,644 $(47,750) $ - $ (231,667)
Loss on sale
of assets,
net 809 - - - - 809
Restructuring
costs 302 - - 2,426 - 2,728
Loss on asset
impairment 317,091 - - - - 317,091
---------- -------- ------- -------- --------- ----------
Adjusted
EBITDA $ 120,457 $ 9,184 $ 4,644 $(45,324) $ - $ 88,961
Center rent
expense 106,487 394 513 - - 107,394
---------- -------- ------- -------- --------- ----------
Adjusted
EBITDAR $ 226,944 $ 9,578 $ 5,157 $(45,324) $ - $ 196,355
========== ======== ======= ======== ========= ==========
Adjusted
EBITDA
margin 9.6% 4.9% 6.9% 6.3%
Adjusted
EBITDAR
margin 18.1% 5.1% 7.7% 14.0%
See definitions of EBITDA, Adjusted EBITDA and Adjusted EBITDAR in the
table "Reconciliation of Net Loss to Adjusted EBITDA and Adjusted
EBITDAR."
Sun Healthcare Group, Inc. and Subsidiaries
Selected Operating Statistics
Continuing Operations
For the For the
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- --------------------------
2012 2011 2012 2011
Consolidated
Company
----------------------------------------------------------------------------
Revenues - Non-
affiliated (in
thousands)
----------------
Skilled Nursing
and similar
facilities $393,560 $402,703 $1,172,804 $1,205,479
Hospice 15,719 14,885 46,491 43,647
Other -
Inpatient
Services 471 509 1,378 1,442
-------- -------- ---------- ----------
Inpatient
Services 409,750 418,097 1,220,673 1,250,568
Rehabilitation
Therapy
Services 29,032 29,568 88,858 89,645
Medical
Staffing
Services 21,686 20,996 66,559 65,309
Other - non-
core
businesses 2 15 15 36
-------- -------- ---------- ----------
Total $460,470 $468,676 $1,376,105 $1,405,558
======== ======== ========== ==========
Revenue Mix -
Non-affiliated
(in thousands)
----------------
Medicare $128,180 28% $149,147 32% $ 397,867 29% $ 454,591 32%
Medicaid 195,441 42% 184,754 39% 570,734 41% 541,977 39%
Private and
Other 106,648 24% 106,541 23% 320,285 24% 324,169 23%
Managed Care /
Insurance 24,568 5% 22,777 5% 71,311 5% 69,133 5%
Veterans 5,633 1% 5,457 1% 15,908 1% 15,688 1%
-------- ---- -------- ---- ---------- ---- ---------- ----
Total $460,470 100% $468,676 100% $1,376,105 100% $1,405,558 100%
======== ==== ======== ==== ========== ==== ========== ====
----------------------------------------------------------------------------
Inpatient
Services Stats
----------------------------------------------------------------------------
Number of
centers: 190 190 190 190
Number of
available
beds: 20,774 20,803 20,774 20,803
Occupancy %: 87.0% 87.2% 87.1% 87.4%
Payor Mix %
based on
patient days:
Medicare -
SNF Beds 13.9% 15.0% 14.6% 15.6%
Managed care
/ Ins. - SNF
Beds 4.1% 3.8% 4.1% 4.0%
-------- -------- ---------- ----------
Total SNF
skilled mix 18.0% 18.8% 18.7% 19.6%
-------- -------- ---------- ----------
Medicare 12.7% 13.7% 13.4% 14.3%
Medicaid 64.2% 62.8% 63.7% 62.3%
Private and
Other 17.9% 18.7% 17.9% 18.5%
Managed Care /
Insurance 3.8% 3.5% 3.7% 3.6%
Veterans 1.4% 1.3% 1.3% 1.3%
Revenue Mix %
of revenues:
Medicare -
SNF Beds 29.1% 33.7% 30.5% 34.6%
Managed care
/ Ins. - SNF
Beds 6.3% 5.8% 6.2% 5.9%
-------- -------- ---------- ----------
Total SNF
skilled mix 35.4% 39.5% 36.7% 40.5%
-------- -------- ---------- ----------
Medicare 30.2% 34.5% 31.5% 35.2%
Medicaid 47.7% 44.2% 46.8% 43.3%
Private and
Other 14.8% 14.6% 14.6% 14.7%
Managed Care /
Insurance 5.9% 5.4% 5.8% 5.5%
Veterans 1.4% 1.3% 1.3% 1.3%
Revenues PPD:
Medicare (Part
A) $ 465.80 $ 520.11 $ 463.52 $ 520.92
Medicare
Blended Rate
(Part A & B) $ 513.99 $ 563.52 $ 509.23 $ 559.86
Medicaid $ 183.16 $ 176.42 $ 180.65 $ 175.21
Medicaid, net
of provider
taxes $ 165.95 $ 160.69 $ 163.50 $ 159.84
Private and
Other $ 189.42 $ 186.05 $ 189.87 $ 190.06
Managed Care /
Insurance $ 387.04 $ 384.33 $ 380.05 $ 377.69
Veterans $ 242.67 $ 257.15 $ 246.28 $ 249.90
----------------------------------------------------------------------------
Rehab contracts
----------------------------------------------------------------------------
Affiliated 178 178 178 178
Non-affiliated 338 343 338 343
Average Qtrly
Revenue per
Contract (in
thousands) $ 118 $ 120 $ 121 $ 121
----------------------------------------------------------------------------
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NORMALIZING ADJUSTMENTS - QUARTER COMPARISON
(in thousands, except per share data)
AS REPORTED - 3rd QUARTER 2012
---------------------------------------------------------
Income
from Net
Adjusted Adjusted Pre- Continuing Disc (Loss)
Revenue EBITDAR EBITDA tax Operations Ops Income
-------- ------- ------- ------ -------- ------- -------
As Reported 3rd
QUARTER 2012 $460,470 $56,869 $20,222 $6,921 $ 3,989 $(2,702) $ 1,287
Percent of Revenue 12.4% 4.4% 1.5% 0.9% -0.6% 0.3%
Normalizing
Adjustments:
------------------
Transaction
costs - 1,033 1,033 1,033 630 - 630
-------- ------- ------- ------ -------- ------- -------
Normalized As
Reported - 3rd
QUARTER 2012 $460,470 $57,902 $21,255 $7,954 $ 4,619 $(2,702) $ 1,917
======== ======= ======= ====== ======== ======= =======
Percent of Revenue 12.6% 4.6% 1.7% 1.0% -0.6% 0.4%
As Reported $ 0.15 $ (0.10) $ 0.05
Diluted EPS:
As Normalized $ 0.17 $ (0.10) $ 0.07
AS REPORTED - 3rd QUARTER 2011
-----------------------------------------------------------------
Income
from Net
Adjusted Adjusted Pre- Continuing Disc (Loss)
Revenue EBITDAR EBITDA tax Operations Ops Income
-------- ------- ------- --------- --------- ------- ---------
As Reported
- 3rd
QUARTER
2011 $468,676 $64,103 $28,151 $(305,172) $(307,375) $(2,031) $(309,406)
Percent of
Revenue 13.7% 6.0% -65.1% -65.6% -0.4% -66.0%
Normalizing
Adjustments:
----------
Restructur-
ing costs - - - 2,426 1,480 - 1,480
Impairment
of assets - - - 317,091 315,289 - 315,289
-------- ------- ------- --------- --------- ------- ---------
Normalized
As Reported
- 3rd
QUARTER
2011 $468,676 $64,103 $28,151 $ 14,345 $ 9,394 $(2,031) $ 7,363
======== ======= ======= ========= ========= ======= =========
Percent of
Revenue 13.7% 6.0% 3.1% 2.0% -0.4% 1.6%
As
Reported $ (11.73) $ (0.08) $ (11.81)
Diluted EPS:
As
Normalized $ 0.36 $ (0.08) $ 0.28
See definitions of Adjusted EBITDA and Adjusted EBITDAR in the table
"Reconciliation of Net Loss to Adjusted EBITDA and Adjusted EBITDAR."
Normalizing adjustments are transactions or adjustments not related to
ongoing operations and consist of transaction costs associated with the
Company's sale to Genesis Healthcare.
Since normalizing adjustments are not measurements determined in accordance
with U.S. generally accepted accounting principles and are thus susceptible
to varying calculations and interpretations, the information presented
herein may not be comparable to other similarly described information of
other companies.
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NORMALIZING ADJUSTMENTS - YEAR TO DATE COMPARISON
(in thousands, except per share data)
AS REPORTED - NINE MONTHS 2012
---------------------------------------------------------------
Income
from Net
Adjusted Adjusted Pre- Continuing Disc (Loss)
Revenue EBITDAR EBITDA tax Operations Ops Income
---------- -------- ------- ------- --------- ------- ------
As Reported
- Nine
Months
2012 $1,376,105 $163,462 $53,916 $14,842 $ 8,821 $(8,301) $ 520
Percent of
Revenue 11.9% 3.9% 1.1% 0.6% -0.6% 0.0%
Normalizing
Adjustments:
-----------
Transaction
costs - 2,871 2,871 2,871 1,751 - 1,751
---------- -------- ------- ------- --------- ------- ------
Normalized As
Reported -
Nine
Months
2012 $1,376,105 $166,333 $56,787 $17,713 $ 10,572 $(8,301) $2,271
========== ======== ======= ======= ========= ======= ======
Percent of
Revenue 12.1% 4.1% 1.3% 0.8% -0.6% 0.2%
As
Reported $ 0.33 $ (0.31) $ 0.02
Diluted EPS:
As
Normalized $ 0.40 $ (0.32) $ 0.08
AS REPORTED - NINE MONTHS 2011
--------------------------------------------------------------------
Income
from Net
Adjusted Adjusted Pre- Continuing Disc (Loss)
Revenue EBITDAR EBITDA tax Operations Ops Income
---------- -------- ------- --------- --------- ------- ---------
As
Reported -
Nine
Months
2011 $1,405,558 $196,355 $88,961 $(269,596) $(286,311) $(5,036) $(291,347)
Percent
of
Revenue 14.0% 6.3% -19.2% -20.4% -0.4% -20.7%
Normalizing
Adjustments:
-------
Restructur-
ing costs - - - 2,426 1,480 - 1,480
Impair-
ment of
assets - - - 317,091 315,289 - 315,289
---------- -------- ------- --------- --------- ------- ---------
Normalized As
Reported -
Nine
Months
2011 $1,405,558 $196,355 $88,961 $ 49,921 $ 30,458 $(5,036) $ 25,422
========== ======== ======= ========= ========= ======= =========
Percent
of
Revenue 14.0% 6.3% 3.6% 2.2% -0.4% 1.8%
As
Reported $ (11.00) $ (0.19) $ (11.19)
Diluted EPS:
As
Normalized $ 1.17 $ (0.19) $ 0.98
See definitions of Adjusted EBITDA and Adjusted EBITDAR in the table
"Reconciliation of Net Loss to Adjusted EBITDA and Adjusted EBITDAR."
Normalizing adjustments are transactions or adjustments not related to
ongoing operations and consist of transaction costs associated with the
Company's sale to Genesis Healthcare.
Since normalizing adjustments are not measurements determined in accordance
with U.S. generally accepted accounting principles and are thus susceptible
to varying calculations and interpretations, the information presented
herein may not be comparable to other similarly described information of
other companies.
Contact: Investor Inquiries (505) 468-2341
Media Inquiries (505) 468-4582
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