Sun Healthcare Group, Inc. Reports Second Quarter Earnings; Skilled Mix Growth Continues to Drive Results
SOURCE:
Sun Healthcare Group, Inc.
2008-08-06 15:30:00
Sun Healthcare Group, Inc. Reports Second Quarter Earnings; Skilled Mix Growth Continues to Drive Results
IRVINE, CA–(EMWNews – August 6, 2008) – Sun Healthcare Group, Inc. (
announced results for the second quarter ended June 30, 2008.
Consolidated Results
Total net revenue for the quarter ended June 30, 2008, was $454.2
million, up 5.6 percent compared to $430.0 million for the same period one
year ago. On a normalized basis, income from continuing operations for the
quarter ended
June 30, 2008, was $11.1 million, up 44.2 percent compared to $7.7 million
of normalized income from continuing operations for the same period one
year ago. Normalized diluted earnings per share from continuing operations
for the quarter ended June 30, 2008, was $0.25 compared to $0.18 for the
same period one year ago.
(Dollars in thousands) Quarter Ended June 30,
--------------------
2008 2007
--------- ---------
Revenue $ 454,192 $ 429,979
Depreciation and amortization 9,818 9,659
Interest expense, net 13,643 11,999
Income from continuing operations 12,727 10,634
(Loss) income from discontinued operations (3,042) 2,406
--------- ---------
--------- ---------
Net income $ 9,685 $ 13,040
========= =========
--------- ---------
Diluted earnings per share $ 0.22 $ 0.30
========= =========
--------- ---------
EBITDAR $ 63,430 $ 58,882
========= =========
Margin - EBITDAR 14.0% 13.7%
========= =========
EBITDAR normalized $ 60,780 $ 53,791
========= =========
Margin - EBITDAR normalized 13.4% 12.5%
========= =========
--------- ---------
--------- ---------
EBITDA $ 44,673 $ 38,020
========= =========
Margin - EBITDA 9.8% 8.8%
========= =========
EBITDA normalized $ 42,023 $ 32,929
========= =========
Margin - EBITDA normalized 9.3% 7.7%
========= =========
--------- ---------
--------- ---------
Income from continuing operations - normalized $ 11,137 $ 7,725
========= =========
Diluted earnings per share - normalized $ 0.25 $ 0.18
========= =========
--------- ---------
--------- ---------
Net income - normalized $ 7,873 $ 8,152
========= =========
Diluted earnings per share - normalized $ 0.18 $ 0.19
========= =========
Normalized results for the quarter ended June 30, 2008, include
pre-tax adjustments for $3.0 million of income from adjustments of prior
period self-insurance reserves ($0.4 million of which were related to
discontinued operations). Normalized results for the quarter ended June 30,
2007, include pre-tax adjustments for $9.0 million of income from
adjustments of prior period self-insurance reserves ($3.0 million of which
were related to discontinued operations),
a $0.9 million charge related to integration costs associated with the
acquisition of Harborside Healthcare Corporation (“Harborside”) and a $0.6
million charge associated with the refinancing of debt agreements.
On a normalized basis, comparing the quarter ended June 30, 2008, to the
same period in 2007:
-- revenue increased $24.2 million, or 5.6 percent;
-- EBITDAR increased $7.0 million, or 13.0 percent;
-- EBITDAR margin improved 90 basis points to 13.4 percent;
-- EBITDA increased $9.1 million, or 27.6 percent;
-- EBITDA margin improved 160 basis points to 9.3 percent; and
-- income from continuing operations increased $3.4 million, or 44.2
percent.
Commenting on the results, Richard K. Matros, chairman and chief executive
officer of Sun, stated, “We continue to generate strong operating results
and are achieving our goals regarding improving same store margins. Our
second quarter produced our highest margins to date, and our margin growth
continues to be one of the strongest in the industry. Our positive
operating results were somewhat tempered by the severe flood damage to our
center in Terre Haute, Indiana. I am very proud of how our employees
quickly responded to this natural disaster to ensure a safe evacuation of
all residents and employees from the center in a responsible and caring
manner.”
As a result of the flood damage, operating results for the Terre Haute
center have been reclassified to discontinued operations for all periods
presented, and a related $1.8 million pre-tax impairment charge was
recorded in the quarter. In addition, during the quarter a lease of a
Tennessee nursing center was not renewed. Operating results for this center
have also been reclassified to discontinued operations for all periods
presented. The combined quarterly impact of the reclassification of both
the Terre Haute center and the Tennessee center on the previously reported
2007 second quarter was a $4.6 million decrease in revenue, a $0.8 million
decrease in EBITDAR and a $0.7 million decrease in EBITDA.
On July 1, 2008, Sun received $9.5 million in cash proceeds from the
sale of two stand-alone hospitals. The sale was recorded in the second
quarter and resulted in a pre-tax loss of $2.7 million to discontinued
operations.
Sun realized $3.2 million in synergies in the second quarter from the
integration of Harborside’s operations. To date, these synergies have
aggregated $14.1 million. Management expects to complete the 2008 year by
achieving synergies closer to its high-end estimate of $15.0 million.
Inpatient Business
For its core inpatient business, on a normalized basis comparing the
quarter ended June 30, 2008, to the same period in 2007:
Quarter ended June 30, 2008:
-- revenue increased $21.8 million, or 5.7 percent, to $402.9 million
from $381.1 million;
-- net segment EBITDAR increased $5.9 million, or 9.1 percent, to $71.3
million from $65.4 million;
-- net segment EBITDAR margin for 2008 was 17.7 percent compared to 17.2
percent in 2007;
-- net segment EBITDA increased $8.1 million, or 18.1 percent, to $52.9
million from $44.8 million;
-- net segment EBITDA margin for 2008 was 13.1 percent compared to 11.8
percent in 2007;
-- net segment income increased $7.2 million, or 21.2 percent, to $40.9
million from $33.7 million;
-- rehabilitation RUGS utilization increased 180 basis points to 84.2
percent as a percent of total Medicare days; and
-- Rehabilitation Extensive Service (REX) days as a percent of total
Medicare days increased 190 basis points to 39.3 percent.
The revenue gain of $21.8 million in the quarter was primarily
attributed to an:
-- $11.2 million increase in Medicare revenue due principally to Medicare
part A rate growth of 8.2 percent, customer base growth, and part B volume
growth;
-- $8.4 million increase in managed care/commercial insurance revenue due
principally to an increased customer base;
-- $1.3 million increase in Medicaid revenue resulting from rate
improvement of $7.5 million or 4.3 percent partially offset by a $6.2
million impact from a decrease in customer base; and
-- $0.9 million increase in private revenue due principally to improved
rates.
Matros also stated, “I am pleased with the shift in acuity we continue to
experience in our skilled nursing beds. Our skilled mix at quarter end was
20.5 percent, our highest to date. Skilled mix growth and Rehab Recovery
Suites™ continue to be our primary growth drivers. Compared with the
same quarter prior year, our overall dependency on Medicaid declined by 220
basis points to 44.8 percent, our lowest percentage of Medicaid revenues
reported to date.”
Ancillary Businesses
For its rehabilitation and staffing services ancillary businesses,
comparing the quarter ended June 30, 2008, to the same period in 2007:
-- revenue increased $6.2 million, or 10.2 percent, to $66.5 million from
$60.3 million;
-- EBITDA increased $0.7 million, or 14.5 percent, to $5.3 million from
$4.6 million; and
-- EBITDA margin for 2008 was 8.0 percent, up 30 basis points compared to
a margin of 7.7 percent in 2007.
Conference Call
Sun’s senior management will hold a conference call to discuss the
Company’s 2008 second-quarter operating results on Thursday, Aug. 7, 2008,
at 10 a.m. Pacific / 1 p.m. Eastern. To listen to the conference call, dial
(888) 656-7420 and refer to Sun Healthcare Group. A recording of the call
will be available from 4 p.m. Eastern on Aug. 7, 2008, until midnight
Eastern on Aug. 14, 2008, by calling (888) 203-1112 and using access code
6346558.
About Sun Healthcare Group, Inc.
Sun Healthcare Group, Inc., with executive offices in Irvine,
California, owns SunBridge Healthcare Corporation and other affiliated
companies that operate long-term and postacute care centers in many states.
In addition, the Sun Healthcare Group family of companies provides therapy
through SunDance Rehabilitation Corporation, hospice services through
SolAmor Hospice and medical staffing through CareerStaff Unlimited, Inc.
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. Factors that could cause actual results to
differ are identified in the public filings made by the company with the
Securities and Exchange Commission and include changes in Medicare and
Medicaid reimbursements; our ability to maintain the occupancy rates and
payor mix at our long-term care centers; potential liability for losses not
covered by, or in excess of, our insurance; the effects of government
regulations and investigations; the significant amount of our indebtedness,
covenants in our debt agreements that may restrict our activities and our
ability to incur more indebtedness; our ability to integrate the operations
of Harborside Healthcare Corporation and realize anticipated synergies;
increasing labor costs and the shortage of qualified healthcare personnel;
and our ability to receive increases in reimbursement rates from government
payors to cover increased costs. More information on factors that could
affect our business and financial results are included in our public
filings made with the Securities and Exchange Commission, including our
Annual Report on Form 10-K and Quarterly Reports on Forms 10-Q, copies of
which are available on Sun’s web site, www.sunh.com.
The forward-looking statements involve known and unknown risks,
uncertainties and other factors that are, in some cases, beyond our
control. We caution investors that any forward-looking statements made by
Sun are not guarantees of future performance. We disclaim 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 and EBITDAR as used in this press release, and EBITDAM and
EBITDARM as used in the accompanying tables, which are non-GAAP financial
measures, are each reconciled to net income (loss) in the accompanying
tables. In addition, the normalizing adjustments to EBITDA, EBITDAR,
pre-tax income and income from continuing operations discussed in this
press release and shown in the accompanying tables are non-GAAP
adjustments.
Any documents filed by Sun with the SEC may be obtained free of charge
at the SEC’s web site at www.sec.gov. In addition, investors and
stockholders of Sun may obtain free copies of the documents filed with the
SEC by contacting Sun’s investor relations department at (505) 468-2341
(TDD users, please call (505) 468-4458) or by sending a written request to
Investor Relations, Sun Healthcare Group, Inc. 101 Sun Avenue N.E.,
Albuquerque, N.M. 87109. You may also read and copy any reports, statements
and other information filed by Sun with the SEC at the SEC public reference
room at Room 1580, 100 F Street, N.E., Washington, D.C. 20549. Please call
the SEC at (800) SEC-0330 or visit the SEC’s web site for further
information.
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
June 30, December 31,
2008 2007
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 68,369 $ 55,832
Restricted cash 34,850 37,365
Accounts receivable, net 201,587 188,882
Prepaid expenses and other assets 28,902 13,290
Assets held for sale 4,218 9,924
Deferred tax assets 33,268 35,354
------------ ------------
Total current assets 371,194 340,647
Property and equipment, net 587,432 585,972
Intangible assets, net 54,640 57,044
Goodwill 324,277 324,277
Restricted cash, non-current 3,281 3,829
Deferred tax assets 45,707 51,892
Other assets 6,317 10,165
------------ ------------
Total assets $ 1,392,848 $ 1,373,826
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 51,379 $ 52,836
Accrued compensation and benefits 59,118 61,956
Accrued self-insurance obligations, current 46,423 48,646
Income taxes payable 3,397 3,000
Liabilities held for sale 78 3,181
Other accrued liabilities 60,822 58,002
Current portion of long-term debt and
capital lease obligations:
Company obligations 11,325 28,480
Clipper partnerships 859 825
------------ ------------
Total current liabilities 233,401 256,926
Accrued self-insurance obligations, net of
current portion 108,578 106,534
Long-term debt and capital lease obligations,
net of current portion:
Company obligations 669,843 651,403
Clipper partnerships 48,120 48,560
Unfavorable lease obligations, net 17,282 18,960
Other long-term liabilities 47,820 44,717
------------ ------------
Total liabilities 1,125,044 1,127,100
Minority interest 1,167 470
Stockholders' equity:
Preferred stock of $.01 par value,
authorized 10,000,000 shares, no shares
were issued and outstanding as of June 30,
2008 and December 31, 2007 - -
Common stock of $.01 par value, authorized
125,000,000 shares, 43,197,359 and
43,016,042 shares issued and outstanding as
of June 30, 2008 and December 31, 2007,
respectively 432 430
Additional paid-in capital 602,457 600,199
Accumulated deficit (333,708) (351,970)
Accumulated other comprehensive loss, net (2,544) (2,403)
------------ ------------
266,637 246,256
------------ ------------
Total liabilities and stockholders'
equity $ 1,392,848 $ 1,373,826
============ ============
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, June 30,
2008 2007
------------ -------------
(unaudited) (unaudited)
Total net revenues $ 454,192 $ 429,979
------------ -------------
Costs and expenses:
Operating salaries and benefits 253,498 242,021
Self-insurance for workers' compensation and
general and professional liability insurance 11,892 7,959
Operating administrative costs 12,944 10,497
Other operating costs 93,354 89,922
Center rent expense 18,757 20,862
General and administrative expenses 16,111 17,297
Depreciation and amortization 9,818 9,659
Provision for losses on accounts receivable 2,963 3,401
Interest, net of interest income of $569 and
$1,136, respectively 13,643 11,999
Loss on sale of assets, net - 3
Total costs and expenses 432,980 413,620
------------ -------------
Income before income taxes and discontinued
operations 21,212 16,359
Income tax expense 8,485 5,725
------------ -------------
Income from continuing operations 12,727 10,634
------------ -------------
Discontinued operations:
(Loss) income from discontinued operations,
net of related taxes (1,235) 2,059
(Loss) gain on disposal of discontinued
operations, net of related taxes (1,807) 347
------------ -------------
(Loss) income from discontinued operations, net (3,042) 2,406
------------ -------------
Net income $ 9,685 $ 13,040
============ =============
Basic income per common and common equivalent
share:
Income from continuing operations $ 0.29 $ 0.25
(Loss) income from discontinued operations,
net (0.07) 0.05
------------ -------------
Net income $ 0.22 $ 0.30
============ =============
Diluted income per common and common equivalent
share:
Income from continuing operations $ 0.29 $ 0.24
(Loss) income from discontinued operations,
net (0.07) 0.06
------------ -------------
Net Income $ 0.22 $ 0.30
============ =============
Weighted average number of common and
common equivalent shares outstanding:
Basic 43,188 42,993
Diluted 43,928 43,735
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, June 30,
2008 2007
------------ ------------
(unaudited) (unaudited)
Total net revenues $ 907,757 $ 689,701
------------ ------------
Costs and expenses:
Operating salaries and benefits 509,913 392,985
Self-insurance for workers' compensation
and general and professional liability
insurance 26,862 18,059
Operating administrative costs 24,883 18,086
Other operating costs 187,453 141,272
Center rent expense 37,412 34,136
General and administrative expenses 32,696 30,131
Depreciation and amortization 19,462 13,530
Provision for losses on accounts receivable 6,312 5,488
Interest, net of interest income of $1,114
and $2,325, respectively 28,074 14,061
(Gain) loss on sale of assets, net (76) 10
Total costs and expenses 872,991 667,758
------------ ------------
Income before income taxes and discontinued
operations 34,766 21,943
Income tax expense 13,906 7,680
------------ ------------
Income from continuing operations 20,860 14,263
------------ ------------
Discontinued operations:
(Loss) income from discontinued operations,
net of related taxes (729) 2,703
Loss on disposal of discontinued
operations, net of related taxes (1,869) (3)
------------ ------------
(Loss) income from discontinued operations, net (2,598) 2,700
------------ ------------
Net income $ 18,262 $ 16,963
============ ============
Basic income per common and common equivalent
share:
Income from continuing operations $ 0.48 $ 0.33
(Loss) income from discontinued operations,
net (0.06) 0.06
------------ ------------
Net income $ 0.42 $ 0.39
============ ============
Diluted income per common and common equivalent
share:
Income from continuing operations $ 0.47 $ 0.33
(Loss) income from discontinued operations,
net (0.06) 0.06
------------ ------------
Net Income $ 0.41 $ 0.39
============ ============
Weighted average number of common and
common equivalent shares outstanding:
Basic 43,122 42,951
Diluted 44,034 43,761
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the For the
Three Months Three Months
Ended Ended
June 30, June 30,
2008 2007
------------ ------------
(unaudited) (unaudited)
Cash flows from operating activities:
Net income $ 9,685 $ 13,040
Adjustments to reconcile net income to net
cash provided by operating activities,
including discontinued operations:
Depreciation and amortization 9,883 9,809
Amortization of favorable and unfavorable
lease intangibles (488) (196)
Provision for losses on accounts receivable 3,210 3,737
Loss (gain) on sale of assets, including
discontinued operations, net 1,807 (347)
Impairment charge for discontinued
operation 1,800 -
Stock-based compensation expense 1,368 943
Deferred taxes 6,442 -
Minority interest 590 50
Other 79 (111)
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable (3,951) (7,187)
Restricted cash 3,058 896
Prepaid expenses and other assets (1,856) 15,312
Assets and liabilities held for sale (516) -
Accounts payable (1,528) (2,918)
Accrued compensation and benefits (4,020) 7,875
Accrued self-insurance obligations (2,130) (5,982)
Income taxes payable 1,121 4,961
Other accrued liabilities (10,173) 14,452
Other long-term liabilities 3,676 (3,571)
------------ ------------
Net cash provided by operating activities 18,057 50,763
------------ ------------
Cash flows from investing activities:
Capital expenditures (10,223) (7,705)
Purchase of leased real estate (727) (30,236)
Proceeds from sale of assets held for sale 180 2,251
Acquisitions (6) (368,515)
Accrued acquisition costs, net - 3,585
------------ ------------
Net cash used for investing activities (10,776) (400,620)
------------ ------------
Cash flows from financing activities:
Net borrowings under Credit Agreement - 5,000
Principal payments of long-term debt and
capital lease obligations (22,115) (4,651)
Borrowings under long-term debt and capital
lease obligations 20,290 327,000
Proceeds from issuance of common stock 31 92
Distribution of partnership equity - (255)
Release of third-party collateral - 25,640
Distribution of minority interest - (57)
Deferred financing costs - (18,045)
------------ ------------
Net cash (used for) provided by financing
activities (1,794) 334,724
------------ ------------
Net increase (decrease) in cash and cash
equivalents 5,487 (15,133)
Cash and cash equivalents at beginning of
period 62,882 99,670
------------ ------------
Cash and cash equivalents at end of period $ 68,369 $ 84,537
============ ============
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the For the
Six Months Six Months
Ended Ended
June 30, June 30,
2008 2007
------------ ------------
(unaudited) (unaudited)
Cash flows from operating activities:
Net income $ 18,262 $ 16,963
Adjustments to reconcile net income to net
cash provided by operating activities,
including discontinued operations:
Depreciation and amortization 19,600 13,765
Amortization of favorable and unfavorable
lease intangibles (991) (409)
Provision for losses on accounts receivable 6,511 6,260
Loss (gain) on sale of assets, including
discontinued operations, net 1,792 13
Impairment charge for discontinued
operation 1,800 -
Stock-based compensation expense 2,333 1,694
Deferred taxes 8,271 -
Minority interest 697 50
Other 79 (112)
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable (19,452) (9,237)
Restricted cash 3,063 1,617
Prepaid expenses and other assets (7,190) 9,291
Assets and liabilities held for sale (1,044) -
Accounts payable (3,126) (6,843)
Accrued compensation and benefits (2,906) 6,209
Accrued self-insurance obligations (179) (6,828)
Income taxes payable 1,591 7,387
Other accrued liabilities (3,645) 15,681
Other long-term liabilities 5,355 (3,167)
------------ ------------
Net cash provided by operating activities 30,821 52,334
------------ ------------
Cash flows from investing activities:
Capital expenditures (16,139) (14,955)
Purchase of leased real estate (727) (30,236)
Proceeds from sale of assets held for sale 3,957 5,489
Acquisitions (313) (368,515)
Accrued acquisition costs, net - 3,585
------------ ------------
Net cash used for investing activities (13,222) (404,632)
------------ ------------
Cash flows from financing activities:
Net borrowings under Credit Agreement - 5,006
Principal payments of long-term debt and
capital lease obligations (25,199) (34,798)
Borrowings under long-term debt and capital
lease obligations 20,290 327,000
Proceeds from issuance of common stock 70 665
Distribution of partnership equity (223) (511)
Release of third-party collateral - 25,640
Distribution of minority interest - (57)
Deferred financing costs - (18,045)
------------ ------------
Net cash (used for) provided by financing
activities (5,062) 304,900
------------ ------------
Net increase (decrease) in cash and cash
equivalents 12,537 (47,398)
Cash and cash equivalents at beginning of
period 55,832 131,935
------------ ------------
Cash and cash equivalents at end of period $ 68,369 $ 84,537
============ ============
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO EBITDA(M) and EBITDAR(M)
(in thousands)
For the For the
Three Months Three Months
Ended Ended
June 30, 2008 June 30, 2007
------------- -------------
(unaudited) (unaudited)
Total net revenues $ 454,192 $ 429,979
------------- -------------
Net income $ 9,685 $ 13,040
------------- -------------
Income from continuing operations 12,727 10,634
Income tax expense 8,485 5,725
Loss on sale of assets, net - 3
Net segment income $ 21,212 $ 16,362
Interest, net 13,643 11,999
Depreciation and amortization 9,818 9,659
------------- -------------
EBITDA $ 44,673 $ 38,020
Center rent expense 18,757 20,862
------------- -------------
EBITDAR $ 63,430 $ 58,882
Operating administrative costs 12,944 10,497
General and administrative expenses 16,111 17,297
------------- -------------
Total operating and general and admin expenses 29,055 27,794
EBITDAM $ 73,728 $ 65,814
EBITDARM $ 92,485 $ 86,676
EBITDA is defined as earnings before income (loss) on discontinued
operations, income taxes, loss (gain) on sale of assets, net, interest,
net, depreciation and amortization. EBITDAM is defined as EBITDA before
operating and general and administrative expenses. EBITDAR is defined as
EBITDA before facility rent expense. EBITDARM is defined as EBITDAR before
operating and general and administrative expenses. EBITDA, EBITDAM,
EBITDAR and EBITDARM 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. EBITDA, EBITDAM, EBITDAR and
EBITDARM are commonly used as analytical indicators within the healthcare
industry and also serve as measures of leverage capacity and debt service
ability. EBITDA, EBITDAM, EBITDAR and EBITDARM should not be considered as
measures of financial performance under generally accepted accounting
principles. As the items excluded from EBITDA, EBITDAM, EBITDAR and
EBITDARM are significant components in understanding and assessing
financial performance, EBITDA, EBITDAM, EBITDAR and EBITDARM should not be
considered in isolation or as alternatives to net income (loss), 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
EBITDA, EBITDAM, EBITDAR and EBITDARM are not measurements determined in
accordance with U.S. generally accepted accounting principles and are thus
susceptible to varying calculations, EBITDA, EBITDAM, EBITDAR and EBITDARM
as presented may not be comparable to other similarly titled measures of
other companies.
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO EBITDA(M) and EBITDAR(M)
(in thousands)
For the For the
Six Months Six Months
Ended Ended
June 30,
2008 June 30, 2007
------------ -------------
(unaudited) (unaudited)
Total net revenues $ 907,757 $ 689,701
------------ -------------
Net income $ 18,262 $ 16,963
------------ -------------
Income from continuing operations 20,860 14,263
Income tax expense 13,906 7,680
(Gain) loss on sale of assets, net (76) 10
Net segment income $ 34,690 $ 21,953
Interest, net 28,074 14,061
Depreciation and amortization 19,462 13,530
------------ -------------
EBITDA $ 82,226 $ 49,544
Center rent expense 37,412 34,136
------------ -------------
EBITDAR $ 119,638 $ 83,680
Operating administrative costs 24,883 18,086
General and administrative expenses 32,696 30,131
------------ -------------
Total operating and general and admin expenses 57,579 48,217
EBITDAM $ 139,805 $ 97,761
EBITDARM $ 177,217 $ 131,897
EBITDA is defined as earnings before income (loss) on discontinued
operations, income taxes, loss (gain) on sale of assets, net, interest,
net, depreciation and amortization. EBITDAM is defined as EBITDA before
operating and general and administrative expenses. EBITDAR is defined as
EBITDA before facility rent expense. EBITDARM is defined as EBITDAR before
operating and general and administrative expenses. EBITDA, EBITDAM,
EBITDAR and EBITDARM 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. EBITDA, EBITDAM, EBITDAR and
EBITDARM are commonly used as analytical indicators within the healthcare
industry and also serve as measures of leverage capacity and debt service
ability. EBITDA, EBITDAM, EBITDAR and EBITDARM should not be considered as
measures of financial performance under generally accepted accounting
principles. As the items excluded from EBITDA, EBITDAM, EBITDAR and
EBITDARM are significant components in understanding and assessing
financial performance, EBITDA, EBITDAM, EBITDAR and EBITDARM should not be
considered in isolation or as alternatives to net income (loss), 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
EBITDA, EBITDAM, EBITDAR and EBITDARM are not measurements determined in
accordance with U.S. generally accepted accounting principles and are thus
susceptible to varying calculations, EBITDA, EBITDAM, EBITDAR and EBITDARM
as presented may not be comparable to other similarly titled measures of
other companies.
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF NET SEGMENT INCOME (LOSS) TO EBITDA(M) and EBITDAR(M)
($ in thousands)
For the Three Months Ended June 30, 2008
(unaudited)
Rehabil- Elimina-
itation Medical tion of
Inpatient Therapy Staffing Other & Affiliated Consol-
Services Services Services Corp Seg Revenue idated
-------- -------- -------- -------- -------- --------
Nonaffiliated
revenue $402,945 $ 21,142 $ 30,096 $ 9 $ - $454,192
Affiliated
revenue - 14,462 794 - (15,256) -
-------- -------- -------- -------- -------- --------
Total revenue 402,945 35,604 30,890 9 (15,256) 454,192
Net segment
income (loss) $ 43,516 $ 2,562 $ 2,456 $(27,322) $ - $ 21,212
Interest, net 3,263 - (8) 10,388 - 13,643
Depreciation and
amortization 8,769 132 200 717 - 9,818
-------- -------- -------- -------- -------- --------
EBITDA $ 55,548 $ 2,694 $ 2,648 $(16,217) $ - $ 44,673
Center rent
expense 18,418 99 240 - - 18,757
-------- -------- -------- -------- -------- --------
EBITDAR $ 73,966 $ 2,793 $ 2,888 $(16,217) $ - $ 63,430
Operating and
general and
administrative
expenses 10,382 1,515 1,047 16,111 - 29,055
-------- -------- -------- -------- -------- --------
EBITDAM $ 65,930 $ 4,209 $ 3,695 $ (106) $ - $ 73,728
EBITDARM $ 84,348 $ 4,308 $ 3,935 $ (106) $ - $ 92,485
EBITDA margin 13.8% 7.6% 8.6% 9.8%
EBITDAM margin 16.4% 11.8% 12.0% 16.2%
EBITDAR margin 18.4% 7.8% 9.3% 14.0%
EBITDARM margin 20.9% 12.1% 12.7% 20.4%
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF NET SEGMENT INCOME (LOSS) TO EBITDA(M) and EBITDAR(M)
($ in thousands)
For the Six Months Ended June 30, 2008
(unaudited)
Rehabil- Elimina-
itation Medical tion of
Inpatient Therapy Staffing Other & Affiliated Consol-
Services Services Services Corp Seg Revenue idated
-------- -------- -------- -------- -------- --------
Nonaffiliated
revenue $805,121 $ 42,851 $ 59,764 $ 21 $ - $907,757
Affiliated
revenue - 28,752 1,328 - (30,080) -
-------- -------- -------- -------- -------- --------
Total revenue 805,121 71,603 61,092 21 (30,080) 907,757
Net segment
income (loss) $ 81,425 $ 4,690 $ 4,388 $(55,813) $ - $ 34,690
Interest, net 6,582 (1) (9) 21,502 - 28,074
Depreciation and
amortization 17,405 258 395 1,404 - 19,462
-------- -------- -------- -------- -------- --------
EBITDA $105,412 $ 4,947 $ 4,774 $(32,907) $ - $ 82,226
Center rent
expense 36,739 185 488 - - 37,412
-------- -------- -------- -------- -------- --------
EBITDAR $142,151 $ 5,132 $ 5,262 $(32,907) $ - $119,638
Operating and
general and
administrative
expenses 19,891 3,132 1,858 32,698 - 57,579
-------- -------- -------- -------- -------- --------
EBITDAM $125,303 $ 8,079 $ 6,632 $ (209) $ - $139,805
EBITDARM $162,042 $ 8,264 $ 7,120 $ (209) $ - $177,217
EBITDA margin 13.1% 6.9% 7.8% 9.1%
EBITDAM margin 15.6% 11.3% 10.9% 15.4%
EBITDAR margin 17.7% 7.2% 8.6% 13.2%
EBITDARM margin 20.1% 11.5% 11.7% 19.5%
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF NET SEGMENT INCOME (LOSS) TO EBITDA(M) and EBITDAR(M)
($ in thousands)
For the Three Months Ended June 30, 2007
(unaudited)
Rehabil- Elimina-
itation Medical tion of
Inpatient Therapy Staffing Other & Affiliated Consol-
Services Services Services Corp Seg Revenue idated
-------- -------- -------- -------- -------- --------
Nonaffiliated
revenue $381,145 $ 20,789 $ 28,018 $ 27 $ - $429,979
Affiliated
revenue - 10,332 1,201 - (11,533) -
-------- -------- -------- -------- -------- --------
Total revenue 381,145 31,121 29,219 27 (11,533) 429,979
Net segment
income (loss) $ 39,663 $ 2,281 $ 2,057 $(27,639) $ - $ 16,362
Interest, net 2,493 - (1) 9,507 - 11,999
Depreciation and
amortization 8,598 135 194 732 - 9,659
-------- -------- -------- -------- -------- --------
EBITDA $ 50,754 $ 2,416 $ 2,250 $(17,400) $ - $ 38,020
Center rent
expense 20,579 53 230 - - 20,862
-------- -------- -------- -------- -------- --------
EBITDAR $ 71,333 $ 2,469 $ 2,480 $(17,400) $ - $ 58,882
Operating and
general and
administrative
expenses 8,457 1,245 794 17,298 - 27,794
-------- -------- -------- -------- -------- --------
EBITDAM $ 59,211 $ 3,661 $ 3,044 $ (102) $ - $ 65,814
EBITDARM $ 79,790 $ 3,714 $ 3,274 $ (102) $ - $ 86,676
EBITDA margin 13.3% 7.8% 7.7% 8.8%
EBITDAM margin 15.5% 11.8% 10.4% 15.3%
EBITDAR margin 18.7% 7.9% 8.5% 13.7%
EBITDARM margin 20.9% 11.9% 11.2% 20.2%
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF NET SEGMENT INCOME (LOSS) TO EBITDA(M) and EBITDAR(M)
($ in thousands)
For the Six Months Ended June 30, 2007
(unaudited)
Rehabil- Elimina-
itation Medical tion of
Inpatient Therapy Staffing Other & Affiliated Consol-
Services Services Services Corp Seg Revenue idated
-------- -------- -------- -------- -------- --------
Nonaffiliated
revenue $596,433 $ 41,469 $ 51,765 $ 34 $ - $689,701
Affiliated
revenue - 20,594 1,388 - (21,982) -
-------- -------- -------- -------- -------- --------
Total revenue 596,433 62,063 53,153 34 (21,982) 689,701
Net segment
income (loss) $ 55,335 $ 3,708 $ 3,470 $(40,560) $ - $ 21,953
Interest, net 4,976 10 14 9,061 - 14,061
Depreciation and
amortization 11,747 251 364 1,168 - 13,530
-------- -------- -------- -------- -------- --------
EBITDA $ 72,058 $ 3,969 $ 3,848 $(30,331) $ - $ 49,544
Center rent
expense 33,604 103 429 - - 34,136
-------- -------- -------- -------- -------- --------
EBITDAR $105,662 $ 4,072 $ 4,277 $(30,331) $ - $ 83,680
Operating and
general and
administrative
expenses 13,763 2,502 1,820 30,132 - 48,217
-------- -------- -------- -------- -------- --------
EBITDAM $ 85,821 $ 6,471 $ 5,668 $ (199) $ - $ 97,761
EBITDARM $119,425 $ 6,574 $ 6,097 $ (199) $ - $131,897
EBITDA margin 12.1% 6.4% 7.2% 7.2%
EBITDAM margin 14.4% 10.4% 10.7% 14.2%
EBITDAR margin 17.7% 6.6% 8.0% 12.1%
EBITDARM margin 20.0% 10.6% 11.5% 19.1%
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
PRO FORMA WITH HARBORSIDE
CONSOLIDATED
INCOME STATEMENTS
(in thousands, except per share data)
PRO FORMA
WITH
AS REPORTED HARBORSIDE
For the For the
Six Months Six Months
Ended Ended
June 30, June 30,
2008 2007
------------ ------------
(unaudited) (unaudited)
Total net revenues $ 907,757 $ 850,600
------------ ------------
Costs and expenses:
Operating salaries and benefits 509,913 481,179
Self-insurance for workers' compensation
and general and professional liability
insurance 26,862 22,114
Operating administrative costs 24,883 21,079
Other operating costs 187,453 179,664
Center rent expense 37,412 41,090
General and administrative expenses 32,696 35,527
Depreciation and amortization 19,462 18,230
Provision for losses on accounts receivable 6,312 13,388
Interest, net of interest income of $1,114
and $2,640, respectively 28,074 18,653
(Gain) loss on sale of assets, net (76) 10
------------ ------------
Total costs and expenses 872,991 830,934
------------ ------------
Income before income taxes and discontinued
operations 34,766 19,666
Income tax expense 13,906 6,860
------------ ------------
Income from continuing operations 20,860 12,806
------------ ------------
Discontinued operations:
(Loss) income from discontinued operations,
net of related taxes (729) 2,293
Loss on disposal of discontinued
operations, net of related taxes (1,869) (3)
------------ ------------
(Loss) income from discontinued operations, net (2,598) 2,290
------------ ------------
Net income $ 18,262 $ 15,096
============ ============
Basic income per common and common equivalent
share:
Income from continuing operations $ 0.48 $ 0.30
(Loss) income from discontinued operations,
net (0.06) 0.05
------------ ------------
Net income $ 0.42 $ 0.35
============ ============
Diluted income per common and common equivalent
share:
Income from continuing operations $ 0.47 $ 0.29
(Loss) income from discontinued operations,
net (0.06) 0.05
------------ ------------
Net Income $ 0.41 $ 0.34
============ ============
Weighted average number of common and
common equivalent shares outstanding:
Basic 43,122 42,951
Diluted 44,034 43,761
Note: The pro forma table above and the pro forma table pages that follow
were prepared as if the acquisition of Harborside Healthcare Corporation,
which closed in April 2007, had occurred on January 1, 2007.
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
PRO FORMA WITH HARBORSIDE
RECONCILIATION OF NET INCOME TO EBITDA(M) and EBITDAR(M)
(in thousands)
PRO FORMA
WITH
AS REPORTED HARBORSIDE
For the For the
Six Months Six Months
Ended Ended
June 30, June 30
2008 2007
------------ -------------
(unaudited) (unaudited)
Total net revenues $ 907,757 $ 850,600
------------ -------------
Net income $ 18,262 $ 15,096
------------ -------------
Income from continuing operations 20,860 12,806
Income tax expense 13,906 6,860
(Gain) loss on sale of assets, net (76) 10
------------ -------------
Net segment income $ 34,690 $ 19,676
Interest, net 28,074 18,653
Depreciation and amortization 19,462 18,230
------------ -------------
EBITDA $ 82,226 $ 56,559
Center rent expense 37,412 41,090
------------ -------------
EBITDAR $ 119,638 $ 97,649
Operating administrative costs 24,883 21,079
General and administrative expenses 32,696 35,527
------------ -------------
Total operating and general and admin expenses 57,579 56,606
EBITDAM $ 139,805 $ 113,165
EBITDARM $ 177,217 $ 154,255
EBITDA is defined as earnings before income (loss) on discontinued
operations, income taxes, loss (gain) on sale of assets, net, interest,
net, depreciation and amortization. EBITDAM is defined as EBITDA before
operating and general and administrative expenses. EBITDAR is defined as
EBITDA before facility rent expense. EBITDARM is defined as EBITDAR before
operating and general and administrative expenses. EBITDA, EBITDAM,
EBITDAR and EBITDARM 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. EBITDA, EBITDAM, EBITDAR and
EBITDARM are commonly used as analytical indicators within the healthcare
industry and also serve as measures of leverage capacity and debt service
ability. EBITDA, EBITDAM, EBITDAR and EBITDARM should not be considered as
measures of financial performance under generally accepted accounting
principles. As the items excluded from EBITDA, EBITDAM, EBITDAR and
EBITDARM are significant components in understanding and assessing
financial performance, EBITDA, EBITDAM, EBITDAR and EBITDARM should not be
considered in isolation or as alternatives to net income (loss), 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
EBITDA, EBITDAM, EBITDAR and EBITDARM are not measurements determined in
accordance with U.S. generally accepted accounting principles and are thus
susceptible to varying calculations, EBITDA, EBITDAM, EBITDAR and EBITDARM
as presented may not be comparable to other similarly titled measures of
other companies.
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
PRO FORMA WITH HARBORSIDE
RECONCILIATION OF NET SEGMENT INCOME (LOSS) TO EBITDA(M) and EBITDAR(M)
($ in thousands)
For the Six Months Ended June 30, 2007
(unaudited)
Rehabil- Elimina-
itation Medical tion of
Inpatient Therapy Staffing Other & Affiliated Consol-
Services Services Services Corp Seg Revenue idated
-------- -------- -------- -------- -------- --------
Nonaffiliated
revenue $755,370 $ 41,469 $ 54,409 $ 34 $ (682) $850,600
Affiliated
revenue - 20,594 1,388 - (21,982) -
--
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