Sun Healthcare Group, Inc. (NASDAQ: SUNH) today announced its
operating results for the second quarter ended June 30, 2012.
Highlights of continuing operations:
- consolidated revenues were $457.1 million for the quarter, down
2.9 percent as compared to the same period in 2011;
- consolidated normalized adjusted EBITDAR was $56.2 million for
the quarter representing a normalized adjusted EBITDAR margin of
12.3 percent; and
- normalized earnings per share was $0.15 for the quarter.
Segment Updates
Revenue from Sun's inpatient services business totaled $405.1
million in the second quarter, down $13.4 million, or 3.2 percent,
from the second quarter of 2011. The year-over-year decrease in
revenues resulted principally from the reduction in Medicare rates
as mandated by the CMS Final Rule and implemented on October 1,
2011. Overall patient volumes remained stable at 87.2 percent
occupancy for the quarter, consistent with occupancy in both the
year-over-year and sequential quarters. The decrease in revenues
further resulted in a decrease in adjusted EBITDAR for inpatient
services, partially offset by the company's ongoing cost mitigation
activities. Adjusted EBITDAR for the quarter was $66.3 million,
down $10.9 million or 14.1 percent from the prior year second
quarter, while adjusted EBITDAR margin for the quarter was 16.4
percent, down 200 basis points from the prior year second
quarter.
As previously disclosed, the Company classified certain
operations within its inpatient services business as discontinued.
Financial results from these operations are reflected in
discontinued operations in Sun's income statement and excluded from
its discussion of ongoing operations. Discontinued operations
include eight skilled nursing centers and one assisted living
center located in the Oklahoma and Rhode Island markets.
Discontinued operations include the losses incurred from operating
those discontinued centers. The Company is seeking to sell the
discontinued centers to unaffiliated third-party operators.
Included in the inpatient services business segment are $15.9
million of revenues from SolAmor, Sun's hospice division, which
experienced year-over-year revenue growth of $1.0 million or 6.5
percent in the quarter. SolAmor's adjusted EBITDAR was $3.8 million
in the second quarter and adjusted EBITDAR margin was 24.2
percent.
SunDance, Sun's rehabilitation therapy services business,
reported second-quarter revenues of $62.0 million, adjusted EBITDAR
of $4.0 million and an adjusted EBITDAR margin of 6.4 percent, up
40 basis points year over year. Ongoing changes to SunDance's
therapy-delivery processes in response to the CMS Final Rule
continued to mitigate the rule's impact.
CareerStaff, Sun's medical staffing services business, reported
revenues of $23.5 million, up 3.6 percent year over year, adjusted
EBITDAR of $2.0 million and adjusted EBITDAR margin of 8.6 percent,
up 60 basis points year over year. On a sequential quarter basis,
CareerStaff experienced 2.7 percent revenue growth while billable
hours increased on both a sequential quarter and year-over-year
basis for the second quarter in a row.
Cash Flow
At June 30, 2012, Sun had $43.6 million in cash and cash
equivalents and $89.2 million of long-term debt. During the second
quarter, Sun generated cash flow from operations of $7.0 million
and used $7.9 million of cash for capital investments. On a
normalized basis, operating cash flow for the quarter was $12.9
million after adding back the $5.9 million of Medicaid funds which
were temporarily held back by Massachusetts in June 2012 but which
were subsequently received by Sun in July 2012.
Transaction Update; Withdrawal of
Guidance
The Company filed its definitive proxy statement concerning the
transaction with Genesis HealthCare with the Securities and
Exchange Commission on July 24, 2012. The Company has commenced
mailing the proxy statement to stockholders of the Company and will
hold a special stockholders meeting concerning the transaction on
September 5, 2012. As previously announced, the closing is expected
to occur in the fall. In connection with the transaction, the
Company incurred $1.8 million of transaction costs through the six
months ended June 30, 2012, which were primarily comprised of legal
fees and financial advisory fees. Due to the pending transaction
with Genesis HealthCare, the Company is withdrawing its 2012
financial guidance. As previously announced, the Company will not
hold a quarterly conference call to discuss its second-quarter
results.
Additional Information and Where to Find
It
In connection with the proposed transaction with Genesis
HealthCare, the Company has filed a proxy statement and other
relevant documents concerning the transaction with the Securities
and Exchange Commission ("SEC"). Investors and stockholders of the
Company are urged to read the definitive proxy statement and other
relevant documents because they will contain important information
about the transaction. Copies of these documents may be obtained
free of charge by making a request to the Company's Investor
Relations Department either in writing to Sun Healthcare Group,
Inc., 101 Sun Avenue, N.E., Albuquerque, New Mexico 87109, or by
telephone to (505) 468-2341. In addition, documents filed with the
SEC by the Company may be obtained free of charge at the SEC's
website at www.sec.gov or by clicking on "SEC Filings" on the
Company's website at www.sunh.com.
The Company and its directors, executive officers and certain
employees may be deemed to be participants in the solicitation of
proxies from the Company's stockholders in respect of the
transaction. Information concerning the ownership of the Company's
securities by the Company's directors and executive officers is
included in their SEC filings on Forms 3, 4 and 5, and additional
information is also available in the Company's definitive proxy
statement in connection with the proposed transaction.
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 June 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 21,349 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 all
statements regarding the expected continuing effect of the
Company's cost-mitigation and therapy-delivery plans to mitigate
the impact on the Company's business of the CMS Final Rule and 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 and approval of the acquisition by the Company's
stockholders; 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
June 30, 2012 June 30, 2011
------------- -------------
Revenue $ 457,142 $ 470,575
Center rent expense 36,522 35,750
Depreciation and amortization 8,504 7,629
Interest expense, net 4,429 4,854
Pre-tax income 4,874 19,339
Income tax expense 1,901 7,894
Income from continuing operations 2,973 11,445
Loss from discontinued operations (3,953) (1,499)
------------- -------------
Net (loss) income $ (980) $ 9,946
============= =============
Diluted (loss) income per share $ (0.04) $ 0.38
============= =============
----------------------------------------------------------------------------
Adjusted EBITDAR $ 54,329 $ 67,739
Margin - Adjusted EBITDAR 11.9% 14.4%
Adjusted EBITDAR normalized $ 56,167 $ 67,739
Margin - Adjusted EBITDAR normalized 12.3% 14.4%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Adjusted EBITDA $ 17,807 $ 31,989
Margin - Adjusted EBITDA 3.9% 6.8%
Adjusted EBITDA normalized $ 19,645 $ 31,989
Margin - Adjusted EBITDA normalized 4.3% 6.8%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Pre-tax income continuing operations -
normalized $ 6,712 $ 19,339
Income tax expense - normalized $ 2,618 $ 7,894
Income from continuing operations - normalized $ 4,094 $ 11,445
Diluted earnings per share from continuing
operations - normalized $ 0.15 $ 0.44
----------------------------------------------------------------------------
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
Six Months Six Months
Ended Ended
June 30, 2012 June 30, 2011
------------- -------------
Revenue $ 915,635 $ 936,883
Center rent expense 72,899 71,442
Depreciation and amortization 16,934 15,077
Interest expense, net 8,839 9,853
Pre-tax income 7,921 35,575
Income tax expense 3,089 14,512
Income from continuing operations 4,832 21,063
Loss from discontinued operations (5,599) (3,005)
------------- -------------
Net (loss) income $ (767) $ 18,058
============= =============
Diluted (loss) income per share $ (0.03) $ 0.70
============= =============
----------------------------------------------------------------------------
Adjusted EBITDAR $ 106,593 $ 132,250
Margin - Adjusted EBITDAR 11.6% 14.1%
Adjusted EBITDAR normalized $ 108,431 $ 132,250
Margin - Adjusted EBITDAR normalized 11.8% 14.1%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Adjusted EBITDA $ 33,694 $ 60,808
Margin - Adjusted EBITDA 3.7% 6.5%
Adjusted EBITDA normalized $ 35,532 $ 60,808
Margin - Adjusted EBITDA normalized 3.9% 6.5%
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Pre-tax income continuing operations -
normalized $ 9,759 $ 35,575
Income tax expense - normalized $ 3,806 $ 14,512
Income from continuing operations - normalized $ 5,953 $ 21,063
Diluted earnings per share from continuing
operations - normalized $ 0.22 $ 0.81
----------------------------------------------------------------------------
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)
June 30, December 31,
2012 2011
----------- --------------
(unaudited) (unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 43,648 $ 57,908
Restricted cash 14,330 15,706
Accounts receivable, net 212,831 202,229
Prepaid expenses and other assets 27,093 29,075
Assets held for sale 4,537 -
Deferred tax assets 63,018 63,170
----------- --------------
Total current assets 365,457 368,088
Property and equipment, net 145,673 148,298
Intangible assets, net 33,991 35,294
Goodwill 34,905 34,496
Restricted cash, non-current 354 353
Deferred tax assets 124,382 123,974
Other assets 43,152 45,163
----------- --------------
Total assets $ 747,914 $ 755,666
=========== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 44,603 $ 55,888
Accrued compensation and benefits 63,878 61,101
Accrued self-insurance obligations, current
portion 57,628 57,810
Other accrued liabilities 47,638 43,139
Current portion of long-term debt and capital
lease obligations 967 1,017
----------- --------------
Total current liabilities 214,714 218,955
Accrued self-insurance obligations, net of
current portion 155,048 157,267
Long-term debt and capital lease obligations,
net of current portion 88,242 88,768
Unfavorable lease obligations, net 5,880 7,110
Other long-term liabilities 56,107 58,110
----------- --------------
Total liabilities 519,991 530,210
Stockholders' equity:
Preferred stock of $.01 par value, authorized
3,333 shares, zero shares were issued and
outstanding as of June 30, 2012 and December
31, 2011 - -
Common stock of $.01 par value, authorized
41,667 shares, 25,535 and 25,146 shares
issued and outstanding as of June 30, 2012
and December 31, 2011, respectively 255 251
Additional paid-in capital 730,242 726,861
Accumulated deficit (501,194) (500,427)
Accumulated other comprehensive loss, net (1,380) (1,229)
----------- --------------
227,923 225,456
----------- --------------
Total liabilities and stockholders' equity $ 747,914 $ 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
June 30, 2012 June 30, 2011
------------- -------------
(unaudited) (unaudited)
Total net revenues $ 457,142 $ 470,575
------------- -------------
Costs and expenses:
Operating salaries and benefits 259,506 263,461
Self-insurance for workers' compensation and
general and professional liability
insurance 13,190 14,541
Operating administrative costs 11,703 13,305
Other operating costs 95,429 92,159
Center rent expense 36,522 35,750
General and administrative expenses 16,048 14,952
Depreciation and amortization 8,504 7,629
Provision for losses on accounts receivable 5,099 4,418
Interest, net of interest income of $67 and
$82, respectively 4,429 4,854
Transaction costs 1,838 -
Restructuring costs - 167
------------- -------------
Total costs and expenses 452,268 451,236
------------- -------------
Income before income taxes and discontinued
operations 4,874 19,339
Income tax expense 1,901 7,894
------------- -------------
Income from continuing operations 2,973 11,445
------------- -------------
Loss from discontinued operations, net (3,953) (1,499)
------------- -------------
Net (loss) income $ (980) $ 9,946
============= =============
Basic loss per common and common equivalent
share:
Income from continuing operations $ 0.11 $ 0.44
Loss from discontinued operations, net (0.15) (0.06)
------------- -------------
Net (loss) income $ (0.04) $ 0.38
============= =============
Diluted loss per common and common equivalent
share:
Income from continuing operations $ 0.11 $ 0.44
Loss from discontinued operations, net (0.15) (0.06)
------------- -------------
Net (loss) income $ (0.04) $ 0.38
============= =============
Weighted average number of common and common
equivalent shares outstanding:
Basic 27,039 26,146
Diluted 27,039 26,187
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS
(in thousands, except per share data)
For the For the
Six Months Six Months
Ended Ended
June 30, 2012 June 30, 2011
------------- -------------
(unaudited) (unaudited)
Total net revenues $ 915,635 $ 936,883
------------- -------------
Costs and expenses:
Operating salaries and benefits 520,595 525,943
Self-insurance for workers' compensation and
general and professional liability
insurance 28,507 29,098
Operating administrative costs 24,110 26,372
Other operating costs 191,995 183,294
Center rent expense 72,899 71,442
General and administrative expenses 32,089 30,331
Depreciation and amortization 16,934 15,077
Provision for losses on accounts receivable 9,908 9,595
Interest, net of interest income of $135 and
$140, respectively 8,839 9,853
Transaction costs 1,838 -
Restructuring costs - 303
------------- -------------
Total costs and expenses 907,714 901,308
------------- -------------
Income before income taxes and discontinued
operations 7,921 35,575
Income tax expense 3,089 14,512
------------- -------------
Income from continuing operations 4,832 21,063
------------- -------------
Loss from discontinued operations, net (5,599) (3,005)
------------- -------------
Net (loss) income $ (767) $ 18,058
============= =============
Basic loss per common and common equivalent
share:
Income from continuing operations $ 0.18 $ 0.81
Loss from discontinued operations, net (0.21) (0.11)
------------- -------------
Net (loss) income $ (0.03) $ 0.70
============= =============
Diluted loss per common and common equivalent
share:
Income from continuing operations $ 0.18 $ 0.81
Loss from discontinued operations, net (0.21) (0.11)
------------- -------------
Net (loss) income $ (0.03) $ 0.70
============= =============
Weighted average number of common and common
equivalent shares outstanding:
Basic 26,542 25,899
Diluted 26,542 25,967
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the For the
Three Months Three Months
Ended Ended
June 30, 2012 June 30, 2011
------------- -------------
(unaudited) (unaudited)
Cash flows from operating activities:
Net (loss) income $ (980) $ 9,946
Adjustments to reconcile net (loss) income
to net cash provided by operating
activities, including discontinued
operations:
Depreciation and amortization 8,504 7,863
Amortization of favorable and unfavorable
lease intangibles (507) (490)
Provision for losses on accounts
receivable 5,341 4,860
Loss on sale of assets, including
discontinued operations, net 69 -
Stock-based compensation expense 1,576 1,352
Deferred taxes 103 7,944
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable (11,428) (7,185)
Restricted cash (6) 18
Prepaid expenses and other assets 573 439
Accounts payable (4,078) (1,582)
Accrued compensation and benefits 7,384 (4,018)
Accrued self-insurance obligations 68 (2,569)
Income taxes payable - (478)
Other accrued liabilities 2,892 (216)
Other long-term liabilities (2,481) (492)
------------- -------------
Net cash provided by operating
activities 7,030 15,392
------------- -------------
Cash flows from investing activities:
Capital expenditures (7,868) (9,319)
Acquisitions, net of cash acquired - (356)
------------- -------------
Net cash used for investing activities (7,868) (9,675)
------------- -------------
Cash flows from financing activities:
Principal repayments of long-term debt and
capital lease obligations (285) (2,800)
------------- -------------
Net cash used for financing activities (285) (2,800)
------------- -------------
Net (decrease) increase in cash and cash
equivalents (1,123) 2,917
Cash and cash equivalents at beginning of
period 44,771 85,572
------------- -------------
Cash and cash equivalents at end of period $ 43,648 $ 88,489
============= =============
----------------------------------------------------------------------------
Reconciliation of net cash provided by
operating activities to free cash flow:
Net cash provided by operating activities $ 7,030 $ 15,392
Capital expenditures (7,868) (9,319)
------------- -------------
Free cash flow $ (838) $ 6,073
============= =============
----------------------------------------------------------------------------
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
Six Months Six Months
Ended Ended
June 30, June 30,
2012 2011
------------ ------------
(unaudited) (unaudited)
Cash flows from operating activities:
Net (loss) income $ (767) $ 18,058
Adjustments to reconcile net (loss) income
to net cash provided by operating
activities, including discontinued
operations:
Depreciation and amortization 17,086 15,544
Amortization of favorable and unfavorable
lease intangibles (1,020) (974)
Provision for losses on accounts
receivable 10,463 10,504
Loss on sale of assets, including
discontinued operations, net 69 -
Stock-based compensation expense 3,808 2,801
Deferred taxes (157) 9,976
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable (21,209) (12,578)
Restricted cash 1,375 (1,928)
Prepaid expenses and other assets 2,325 190
Accounts payable (10,114) (3,501)
Accrued compensation and benefits 2,777 (580)
Accrued self-insurance obligations (2,401) (3,912)
Other accrued liabilities 4,423 (946)
Other long-term liabilities (2,254) (1,218)
------------ ------------
Net cash provided by operating
activities 4,404 31,436
------------ ------------
Cash flows from investing activities:
Capital expenditures (17,829) (18,156)
Acquisitions, net of cash acquired (260) (356)
------------ ------------
Net cash used for investing activities (18,089) (18,512)
------------ ------------
Cash flows from financing activities:
Borrowings of long-term debt
Principal repayments of long-term debt and
capital lease obligations (575) (5,598)
------------ ------------
Net cash used for financing activities (575) (5,598)
------------ ------------
Net decrease in cash and cash equivalents (14,260) 7,326
Cash and cash equivalents at beginning of
period 57,908 81,163
------------ ------------
Cash and cash equivalents at end of period $ 43,648 $ 88,489
============ ============
--------------------------------------------------------------------------
Reconciliation of net cash provided by
operating activities to free cash flow:
Net cash provided by operating activities $ 4,404 $ 31,436
Capital expenditures (17,829) (18,156)
------------ ------------
Free cash flow $ (13,425) $ 13,280
============ ============
--------------------------------------------------------------------------
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 Three Months
Ended Ended
June 30, 2012 June 30, 2011
------------- -------------
(unaudited) (unaudited)
Total net revenues $ 457,142 $ 470,575
------------- -------------
Net (loss) income $ (980) $ 9,946
------------- -------------
Income from continuing operations 2,973 11,445
Income tax expense 1,901 7,894
Interest, net 4,429 4,854
Depreciation and amortization 8,504 7,629
------------- -------------
EBITDA $ 17,807 $ 31,822
Restructuring costs - 167
------------- -------------
Adjusted EBITDA $ 17,807 $ 31,989
Center rent expense 36,522 35,750
------------- -------------
Adjusted EBITDAR $ 54,329 $ 67,739
============= =============
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
Six Months Six Months
Ended Ended
June 30, 2012 June 30, 2011
--------------- ---------------
(unaudited) (unaudited)
Total net revenues $ 915,635 $ 936,883
--------------- ---------------
Net (loss) income $ (767) $ 18,058
--------------- ---------------
Income from continuing operations 4,832 21,063
Income tax expense 3,089 14,512
Interest, net 8,839 9,853
Depreciation and amortization 16,934 15,077
--------------- ---------------
EBITDA $ 33,694 $ 60,505
Restructuring costs - 303
--------------- ---------------
Adjusted EBITDA $ 33,694 $ 60,808
Center rent expense 72,899 71,442
--------------- ---------------
Adjusted EBITDAR $ 106,593 $ 132,250
=============== ===============
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 June 30, 2012
(unaudited)
Rehabili- Elimination
tation Medical of
Inpatient Therapy Staffing Other & Affiliated Consolid-
Services Services Services Corp Seg Revenue ated
-------- -------- -------- -------- ---------- --------
Nonaffiliated
revenue $405,135 $ 29,197 $ 22,804 $ 6 $ - $457,142
Affiliated
revenue - 32,804 719 - (33,523) -
-------- -------- -------- -------- ---------- --------
Total
revenue $405,135 $ 62,001 $ 23,523 $ 6 $ (33,523) $457,142
-------- -------- -------- -------- ---------- --------
Income (loss)
from
continuing
operations $ 22,975 $ 3,551 $ 1,676 $(25,229) $ - $ 2,973
Income tax
expense - - - 1,901 - 1,901
Interest, net (8) - (3) 4,440 - 4,429
Depreciation
and
amortization 7,115 260 187 942 - 8,504
-------- -------- -------- -------- ---------- --------
EBITDA $ 30,082 $ 3,811 $ 1,860 $(17,946) $ - $ 17,807
Restructuring
costs - - - - - -
-------- -------- -------- -------- ---------- --------
Adjusted
EBITDA $ 30,082 $ 3,811 $ 1,860 $(17,946) $ - $ 17,807
Center rent
expense 36,207 145 170 - - 36,522
-------- -------- -------- -------- ---------- --------
Adjusted
EBITDAR $ 66,289 $ 3,956 $ 2,030 $(17,946) $ - $ 54,329
======== ======== ======== ======== ========== ========
Normalized
Adjusted
EBITDA $ 30,082 $ 3,811 $ 1,860 $(16,108) $ - $ 19,645
Normalized
Adjusted
EBITDAR $ 66,289 $ 3,956 $ 2,030 $(16,108) $ - $ 56,167
Adjusted
EBITDA
margin 7.4% 6.1% 7.9% 3.9%
Adjusted
EBITDAR
margin 16.4% 6.4% 8.6% 11.9%
Normalized
Adjusted
EBITDA
margin 7.4% 6.1% 7.9% 4.3%
Normalized
Adjusted
EBITDAR
margin 16.4% 6.4% 8.6% 12.3%
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 Six Months Ended June 30, 2012
(unaudited)
Rehabili- Elimination
tation Medical of
Inpatient Therapy Staffing Other & Affiliated Consolid-
Services Services Services Corp Seg Revenue ated
-------- -------- -------- -------- ---------- --------
Nonaffiliated
revenue $810,923 $ 59,826 $ 44,873 $ 13 $ - $915,635
Affiliated
revenue - 66,267 1,550 - (67,817) -
-------- -------- -------- -------- ---------- --------
Total revenue $810,923 $126,093 $ 46,423 $ 13 $ (67,817) $915,635
-------- -------- -------- -------- ---------- --------
Income (loss)
from continuing
operations $ 42,323 $ 7,313 $ 3,108 $(47,912) $ - $ 4,832
Income tax
expense - - - 3,089 - 3,089
Interest, net (28) - (3) 8,870 - 8,839
Depreciation and
amortization 14,144 511 371 1,908 - 16,934
-------- -------- -------- -------- ---------- --------
EBITDA $ 56,439 $ 7,824 $ 3,476 $(34,045) $ - $ 33,694
Restructuring
costs - - - - - -
-------- -------- -------- -------- ---------- --------
Adjusted EBITDA $ 56,439 $ 7,824 $ 3,476 $(34,045) $ - $ 33,694
Center rent
expense 72,282 279 338 - - 72,899
-------- -------- -------- -------- ---------- --------
Adjusted
EBITDAR $128,721 $ 8,103 $ 3,814 $(34,045) $ - $106,593
======== ======== ======== ======== ========== ========
Normalized
Adjusted
EBITDA $ 56,439 $ 7,824 $ 3,476 $(32,207) $ - $ 35,532
Normalized
Adjusted
EBITDAR $128,721 $ 8,103 $ 3,814 $(32,207) $ - $108,431
Adjusted EBITDA
margin 7.0% 6.2% 7.5% 3.7%
Adjusted EBITDAR
margin 15.9% 6.4% 8.2% 11.6%
Normalized
Adjusted EBITDA
margin 7.0% 6.2% 7.5% 3.9%
Normalized
Adjusted EBITDAR
margin 15.9% 6.4% 8.2% 11.8%
See definitions of EBITDA, Adjusted EBITDA and Adjusted EBITDAR in the table
"Reconciliation of Net Loss to Adjusted EBITDA and Adjusted EBITDAR."
See normalizing adjustments in the table "Normalizing Adjustments - Year to
Date Comparison."
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED
EBITDA and ADJUSTED EBITDAR
($ in thousands)
For the Three Months Ended June 30, 2011
(unaudited)
Rehabili- Elimination
tation Medical of
Inpatient Therapy Staffing Other & Affiliated Consolid-
Services Services Services Corp Seg Revenue ated
-------- -------- -------- -------- ---------- --------
Nonaffiliated
revenue $418,584 $ 29,979 $ 21,998 $ 14 $ - $470,575
Affiliated
revenue - 33,225 699 - (33,924) -
-------- -------- -------- -------- ---------- --------
Total revenue $418,584 $ 63,204 $ 22,697 $ 14 $ (33,924) $470,575
-------- -------- -------- -------- ---------- --------
Income (loss)
from continuing
operations $ 35,202 $ 3,427 $ 1,462 $(28,646) $ - $ 11,445
Income tax
expense - - - 7,894 - 7,894
Interest, net (31) - - 4,885 - 4,854
Depreciation and
amortization 6,354 227 187 861 - 7,629
-------- -------- -------- -------- ---------- --------
EBITDA $ 41,525 $ 3,654 $ 1,649 $(15,006) $ - $ 31,822
Restructuring
costs 167 - - - - 167
-------- -------- -------- -------- ---------- --------
Adjusted EBITDA $ 41,692 $ 3,654 $ 1,649 $(15,006) $ - $ 31,989
Center rent
expense 35,453 127 170 - - 35,750
-------- -------- -------- -------- ---------- --------
Adjusted
EBITDAR $ 77,145 $ 3,781 $ 1,819 $(15,006) $ - $ 67,739
======== ======== ======== ======== ========== ========
Adjusted EBITDA
margin 10.0% 5.8% 7.3% 6.8%
Adjusted EBITDAR
margin 18.4% 6.0% 8.0% 14.4%
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 Six Months Ended June 30, 2011
(unaudited)
Rehabili- Elimination
tation Medical of
Inpatient Therapy Staffing Other & Affiliated Consolid-
Services Services Services Corp Seg Revenue ated
-------- -------- -------- -------- ---------- --------
Nonaffiliated
revenue $832,471 $ 60,077 $ 44,314 $ 21 $ - $936,883
Affiliated
revenue - 65,920 1,321 - (67,241) -
-------- -------- -------- -------- ---------- --------
Total revenue $832,471 $125,997 $ 45,635 $ 21 $ (67,241) $936,883
-------- -------- -------- -------- ---------- --------
Income (loss)
from continuing
operations $ 68,541 $ 6,199 $ 2,861 $(56,538) $ - $ 21,063
Income tax
expense - - - 14,512 - 14,512
Interest, net (37) - 1 9,889 - 9,853
Depreciation and
amortization 12,560 453 374 1,690 - 15,077
-------- -------- -------- -------- ---------- --------
EBITDA $ 81,064 $ 6,652 $ 3,236 $(30,447) $ - $ 60,505
Restructuring
costs 303 - - - - 303
-------- -------- -------- -------- ---------- --------
Adjusted EBITDA $ 81,367 $ 6,652 $ 3,236 $(30,447) $ - $ 60,808
Center rent
expense 70,845 254 343 - - 71,442
-------- -------- -------- -------- ---------- --------
Adjusted
EBITDAR $152,212 $ 6,906 $ 3,579 $(30,447) $ - $132,250
======== ======== ======== ======== ========== ========
Adjusted EBITDA
margin 9.8% 5.3% 7.1% 6.5%
Adjusted EBITDAR
margin 18.3% 5.5% 7.8% 14.1%
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 Six Months Ended
June 30, June 30,
----------------------- ----------------------
2012 2011 2012 2011
Consolidated
Company
----------------------------------------------------------------------------
Revenues - Non-
affiliated (in
thousands)
Skilled Nursing
and similar
facilities $388,810 $403,221 $779,244 $802,775
Hospice 15,869 14,907 30,771 28,762
Other -
Inpatient
Services 456 456 908 934
-------- -------- -------- --------
Inpatient
Services 405,135 418,584 810,923 832,471
Rehabilitation
Therapy
Services 29,197 29,979 59,826 60,077
Medical Staffing
Services 22,804 21,998 44,873 44,314
Other - non-core
businesses 6 14 13 21
-------- -------- -------- --------
Total $457,142 $470,575 $915,635 $936,883
======== ======== ======== ========
Revenue Mix - Non-
affiliated (in
thousands)
Medicare $133,399 29% $154,193 33% $269,688 29% $305,443 33%
Medicaid 188,851 41% 179,578 38% 375,293 41% 357,223 38%
Private and
Other 106,376 24% 108,343 23% 213,636 24% 217,629 23%
Managed Care /
Insurance 23,405 5% 23,347 5% 46,743 5% 46,356 5%
Veterans 5,111 1% 5,114 1% 10,275 1% 10,232 1%
-------- --- -------- --- -------- --- -------- ---
Total $457,142 100% $470,575 100% $915,635 100% $936,883 100%
======== === ======== === ======== === ======== ===
----------------------------------------------------------------------------
Inpatient Services
Stats
----------------------------------------------------------------------------
Number of
centers: 190 190 190 190
Number of
available beds: 20,756 20,820 20,756 20,820
Occupancy %: 87.2% 87.2% 87.2% 87.4%
Payor Mix %
based on
patient days:
Medicare -
SNF Beds 14.8% 15.9% 15.0% 15.9%
Managed care
/ Ins. -
SNF Beds 4.1% 4.0% 4.0% 4.1%
-------- -------- -------- --------
Total SNF
skilled
mix 18.9% 19.9% 19.0% 20.0%
-------- -------- -------- --------
Medicare 13.5% 14.6% 13.7% 14.5%
Medicaid 63.7% 62.0% 63.5% 62.1%
Private and
Other 17.7% 18.4% 17.8% 18.4%
Managed Care /
Insurance 3.8% 3.7% 3.7% 3.7%
Veterans 1.3% 1.3% 1.3% 1.3%
Revenue Mix % of
revenues:
Medicare - SNF
Beds 30.8% 35.2% 31.2% 35.1%
Managed care /
Ins. - SNF
Beds 6.1% 5.9% 6.1% 5.9%
-------- -------- -------- --------
Total SNF
skilled mix 36.9% 41.1% 37.3% 41.0%
-------- -------- -------- --------
Medicare 31.8% 35.8% 32.1% 35.6%
Medicaid 46.6% 42.9% 46.3% 42.9%
Private and
Other 14.6% 14.6% 14.6% 14.8%
Managed Care /
Insurance 5.7% 5.5% 5.7% 5.5%
Veterans 1.3% 1.2% 1.3% 1.2%
Revenues PPD:
Medicare (Part
A) $ 461.80 $ 520.51 $ 462.46 $ 521.31
Medicare Blended
Rate (Part A &
B) $ 508.06 $ 557.95 $ 507.02 $ 558.11
Medicaid $ 180.08 $ 175.49 $ 179.36 $ 174.59
Medicaid, net of
provider taxes $ 162.91 $ 160.19 $ 162.26 $ 159.41
Private and
Other $ 190.00 $ 188.15 $ 190.09 $ 192.13
Managed Care /
Insurance $ 371.57 $ 380.42 $ 376.47 $ 374.50
Veterans $ 245.54 $ 246.89 $ 248.31 $ 246.20
----------------------------------------------------------------------------
Rehab contracts
----------------------------------------------------------------------------
Affiliated 178 179 178 179
Non-affiliated 332 342 332 342
Average Qtrly
Revenue per
Contract (in
thousands) $ 122 $ 121 $ 124 $ 121
----------------------------------------------------------------------------
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NORMALIZING ADJUSTMENTS - QUARTER COMPARISON
(in thousands, except per share data)
AS REPORTED - 2nd QUARTER 2012
-------------------------------------------------------------
Income
from Net
Adjusted Adjusted Pre- Continuing Disc (Loss)
Revenue EBITDAR EBITDA tax Operations Ops Income
-------- ------- ------- ------ -------- ------- -------
As Reported
2nd QUARTER
2012 $457,142 $54,329 $17,807 $4,874 $ 2,973 $(3,953) $ (980)
Percent of
Revenue 11.9% 3.9% 1.1% 0.7% -0.9% -0.2%
Normalizing
Adjustments:
Transaction
costs - 1,838 1,838 1,838 1,121 - 1,121
-------- ------- ------- ------ -------- ------- -------
Normalized As
Reported -
2nd QUARTER
2012 $457,142 $56,167 $19,645 $6,712 $ 4,094 $(3,953) $ 141
======== ======= ======= ====== ======== ======= =======
Percent of
Revenue 12.3% 4.3% 1.5% 0.9% -0.9% 0.0%
Diluted
EPS:
As Reported $ 0.11 $ (0.15) $ (0.04)
As Normalized $ 0.15 $ (0.14) $ 0.01
AS REPORTED - 2nd QUARTER 2011
-------------------------------------------------------------
Income
from
Adjusted Adjusted Pre- Continuing Disc Net
Revenue EBITDAR EBITDA tax Operations Ops Income
-------- -------- -------- ------- -------- ------- ------
As Reported -
2nd QUARTER
2011 $470,575 $ 67,739 $ 31,989 $19,339 $ 11,445 $(1,499) $9,946
Percent of
Revenue 14.4% 6.8% 4.1% 2.4% -0.3% 2.1%
Normalizing
Adjustments:
None - - - - - - -
-------- -------- -------- ------- -------- ------- ------
Normalized As
Reported -
2nd QUARTER
2011 $470,575 $ 67,739 $ 31,989 $19,339 $ 11,445 $(1,499) $9,946
======== ======== ======== ======= ======== ======= ======
Percent of
Revenue 14.4% 6.8% 4.1% 2.4% -0.3% 2.1%
Diluted
EPS:
As Reported $ 0.44 $ (0.06) $ 0.38
As Normalized $ 0.44 $ (0.06) $ 0.38
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 - SIX MONTHS 2012
------------------------------------------------------------
Income
from Net
Adjusted Adjusted Pre- Continuing Disc (Loss)
Revenue EBITDAR EBITDA tax Operations Ops Income
-------- -------- -------- ------ -------- ------- -------
As Reported -
Six Months
2012 $915,635 $106,593 $ 33,694 $7,921 $ 4,832 $(5,599) $ (767)
Percent of
Revenue 11.6% 3.7% 0.9% 0.5% -0.6% -0.1%
Normalizing
Adjustments:
Transaction
costs - 1,838 1,838 1,838 1,121 - 1,121
-------- -------- -------- ------ -------- ------- -------
Normalized As
Reported -
Six Months
2012 $915,635 $108,431 $ 35,532 $9,759 $ 5,953 $(5,599) $ 354
======== ======== ======== ====== ======== ======= =======
Percent of
Revenue 11.8% 3.9% 1.1% 0.7% -0.6% 0.0%
Diluted
EPS:
As Reported $ 0.18 $ (0.21) $ (0.03)
As Normalized $ 0.22 $ (0.21) $ 0.01
AS REPORTED - SIX MONTHS 2011
-------------------------------------------------------------
Income
from
Adjusted Adjusted Pre- Continuing Disc Net
Revenue EBITDAR EBITDA tax Operations Ops Income
-------- -------- -------- ------- -------- ------- -------
As Reported -
Six Months
2011 $936,883 $132,250 $ 60,808 $35,575 $ 21,063 $(3,005) $18,058
Percent of
Revenue 14.1% 6.5% 3.8% 2.2% -0.3% 1.9%
Normalizing
Adjustments:
None - - - - - - -
-------- -------- -------- ------- -------- ------- -------
Normalized As
Reported -
Six Months
2011 $936,883 $132,250 $ 60,808 $35,575 $ 21,063 $(3,005) $18,058
======== ======== ======== ======= ======== ======= =======
Percent of
Revenue 14.1% 6.5% 3.8% 2.2% -0.3% 1.9%
Diluted
EPS:
As Reported $ 0.81 $ (0.11) $ 0.70
As Normalized $ 0.81 $ (0.11) $ 0.70
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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