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Sun Healthcare Group, Inc. Reports Third-Quarter Earnings and Normalized EPS of $0.25
Marketwire
Oct 26, 2009
IRVINE, CA -- (Marketwire) -- 10/27/09 -- Sun Healthcare Group, Inc. (NASDAQ: SUNH) today announced its operating results for the third quarter ended Sept. 30, 2009.
Third-quarter Results:
On a normalized basis, comparing the quarter ended Sept. 30, 2009, to the same period in 2008 (unless otherwise stated):
-- consolidated revenues rose 3.3 percent to $470.9 million;
-- rates continued to drive revenue growth;
-- acuity strategy contributed to rate growth;
-- consolidated EBITDAR increased 5.3 percent to $60.4 million;
-- EBITDAR margin improved 20 basis points to 12.8 percent;
-- consolidated EBITDA increased 8.3 percent to $42.2 million;
-- EBITDA margin improved 50 basis points to 9.0 percent;
-- diluted earnings per share from continuing operations reported at
$0.25, up 19 percent;
-- operating cash flows up 36 percent to $39.8 million;
-- the sole normalizing item in the third quarter was a non-recurring
pretax expense of $0.9 million for restructuring costs, which
consisted principally of employee severance costs;
-- infrastructure restructuring should reduce overhead by
approximately $10.0 million on an annualized basis; and
-- results included $1.0 million of non-recurring project costs
associated with the implementation of the new clinical/billing
platform and labor management system.
Commenting on the Company's third-quarter results, Richard K. Matros, Sun's chairman and chief executive officer, remarked, "It appears that we have weathered the worst of the economic downturn relative to overall occupancy and mix. On a sequential basis, our occupancy improved 20 basis points. Although occupancy was down 80 basis points compared to third quarter of 2008, it is an improvement over the decrease of 130 basis points that we experienced in the second quarter. Our skilled mix was down 20 basis points compared to third quarter of 2008, as compared to the second quarter's year-over-year decline of 100 basis points. As a percent of revenue, skilled mix increased 90 basis points over the third quarter of 2008. September's occupancy edged up to 88.2 percent and has held in October. The Company's operating cash flows for the quarter were strong and our cost controls continue to be solid."
Segment Updates
The year-over-year revenue growth in Sun's inpatient services business (SunBridge) for the quarter of $16.9 million or 4.2 percent was principally driven by skilled rate growth and census expansion in the hospice business (SolAmor). SunBridge's nursing center Medicare rate continued to demonstrate strong acuity growth, as evidenced by the Rehab RUG utilization of 88.9 percent and REX utilization of 42 percent, resulting in an 8.1 percent increase in rates. In addition, SunBridge experienced a 5.4 percent increase in managed care rates. SolAmor's revenues grew 75 percent from $4.1 million to $7.2 million, principally due to growth in census (driven in part by a September 2008 acquisition). SolAmor had its best ever quarter, contributing $1.6 million in EBITDA and a 22.2 percent EBITDA margin. The Oct. 1, 2009 acquisition of Allegiance Hospice will increase the potential of the hospice business line. Overall, inpatient services EBITDA grew $4.5 million year over year along with a 60 basis point improvement in margin, which increased to 12.6 percent for the quarter.
SunDance, Sun's rehabilitation therapy services business, experienced revenue growth of $6.7 million or 17.4 percent in the quarter and EBITDA margin expansion of 110 basis points, which produced a 6.1 percent margin for the quarter. The revenue growth and margin expansion were favorably impacted by 15 percent growth in revenue per contract.
The slow economy continues to impact the demand for temporary medical staffing across the industry. Accordingly, revenues from CareerStaff, Sun's medical staffing services business, were down compared to revenues in the third quarter of 2008. Despite the decline in revenues, CareerStaff experienced EBITDA margin growth of 40 basis points to 9.3 percent for the quarter.
Mr. Matros further stated, "Acuity in our inpatient services business continued to be strong, particularly in our Rehab Recovery Suites ® (RRS) centers, where skilled mix increased 40 basis points to 21.5 percent over the third quarter of 2008. Quality results as measured by both internal and external metrics continued to reflect our commitment to quality of care, and we expect that 2009 will be our best year in terms of these metrics. SolAmor continued its strong performance and will benefit from the recent acquisition of Allegiance Hospice. Through nine months on $19.2 million in revenue, it contributed $3.5 million in EBITDA. CareerStaff, as previously noted, is our hardest-hit business segment and, while revenues have decreased, our management team once again increased margins. SunDance recorded another good quarter and continues to show growth in key metrics."
Conference Call
As previously announced, investors and the general public are invited to listen to a conference call with Sun's senior management on Wednesday, Oct. 28, 2009, at 10 a.m. Pacific / 1 p.m. Eastern, to discuss the Company's earnings for the third quarter of 2009.
To listen to the conference call, dial (800) 768-6490 and refer to Sun Healthcare Group. A recording of the call will be available from 4 p.m. Eastern on Oct. 28, 2009, until midnight Eastern on Nov. 27, 2009, by calling (888) 203-1112 and using access code 5432115.
About Sun Healthcare Group, Inc.
The subsidiaries of Sun Healthcare Group, Inc. (NASDAQ: SUNH) provide nursing, rehabilitative and related specialty healthcare services principally to the senior population in the United States. Sun's core business is providing inpatient services, primarily through 184 skilled nursing centers, 14 assisted and independent living centers and eight mental health centers. On a consolidated basis, Sun had annual revenues in 2008 of more than $1.8 billion and approximately 30,000 employees in 46 states. At Sept. 30, 2009, SunBridge centers had 23,289 licensed beds located in 25 states, of which 22,481 were available for occupancy. The company also provides rehabilitation therapy services to affiliated and non-affiliated centers through the SunDance subsidiary, medical staffing services through the CareerStaff Unlimited subsidiary and hospice services through the SolAmor subsidiary.
Forward-Looking Statement
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 healthcare 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 make acquisitions, incur more indebtedness and refinance indebtedness on favorable terms; the impact of the current economic downturn on our business; 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 Forms 10-K and 10-K/A and Quarterly Reports on Form 10-Q and 10-Q/A, 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 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
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,
2009 2008
------------- -------------
Revenue $ 470,893 $ 455,757
Depreciation and amortization 11,460 10,165
Interest expense, net 12,231 13,070
Pre-tax income 17,609 15,707
Income tax expense 7,220 6,286
Income from continuing operations 10,389 9,421
Loss from discontinued operations (731) (817)
------------- -------------
Net income $ 9,658 $ 8,604
============= =============
------------- -------------
Diluted earnings per share $ 0.22 $ 0.19
============= =============
------------- -------------
EBITDAR $ 60,366 $ 57,351
Margin - EBITDAR 12.8% 12.6%
EBITDAR normalized $ 60,366 $ 57,351
Margin - EBITDAR normalized 12.8% 12.6%
------------- -------------
------------- -------------
EBITDA $ 42,172 $ 38,942
Margin - EBITDA 9.0% 8.5%
EBITDA normalized $ 42,172 $ 38,942
Margin - EBITDA normalized 9.0% 8.5%
------------- -------------
------------- -------------
Pre-tax income continuing operations -
normalized $ 18,481 $ 15,707
Income tax expense - normalized $ 7,578 $ 6,286
Income from continuing operations normalized $ 10,903 $ 9,421
Diluted earnings per share - normalized $ 0.25 $ 0.21
Net income - normalized $ 10,172 $ 8,604
Diluted earnings per share - normalized $ 0.23 $ 0.19
------------- -------------
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,
2009 2008
------------- -------------
Revenue $ 1,407,735 $ 1,356,706
Depreciation and amortization 33,336 29,553
Interest expense, net 37,422 41,144
Pre-tax income 55,597 50,218
Income tax expense 22,795 20,119
Income from continuing operations 32,802 30,099
Loss from discontinued operations (2,806) (3,233)
------------- -------------
Net income $ 29,996 $ 26,866
============= =============
------------- -------------
Diluted earnings per share $ 0.68 $ 0.61
============= =============
------------- -------------
EBITDAR $ 182,042 $ 176,163
Margin - EBITDAR 12.9% 13.0%
EBITDAR normalized $ 186,342 $ 174,982
Margin - EBITDAR normalized 13.2% 12.9%
------------- -------------
------------- -------------
EBITDA $ 127,269 $ 120,838
Margin - EBITDA 9.0% 8.9%
EBITDA normalized $ 131,569 $ 119,657
Margin - EBITDA normalized 9.3% 8.8%
------------- -------------
------------- -------------
Pre-tax income continuing operations -
normalized $ 60,769 $ 49,037
Income tax expense - normalized $ 24,916 $ 19,647
Income from continuing operations normalized $ 35,853 $ 29,390
Diluted earnings per share - normalized $ 0.82 $ 0.67
Net income - normalized $ 33,395 $ 25,935
Diluted earnings per share - normalized $ 0.76 $ 0.59
------------- -------------
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
September 30, December 31,
2009 2008
------------- -------------
(unaudited) (unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 117,405 $ 92,153
Restricted cash 25,855 34,676
Accounts receivable, net 210,394 205,620
Prepaid expenses and other assets 23,385 21,456
Assets held for sale - 3,654
Deferred tax assets 58,995 57,261
------------- -------------
Total current assets 436,034 414,820
Property and equipment, net 615,825 603,645
Intangible assets, net 49,299 54,388
Goodwill 327,020 326,808
Restricted cash, non-current 3,313 3,303
Deferred tax assets 115,054 134,807
Other assets 5,042 5,563
------------- -------------
Total assets $ 1,551,587 $ 1,543,334
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 48,005 $ 62,000
Accrued compensation and benefits 65,592 60,660
Accrued self-insurance obligations, current 46,847 45,293
Other accrued liabilities 65,141 56,857
Current portion of long-term debt and
capital lease obligations 27,781 17,865
------------- -------------
Total current liabilities 253,366 242,675
Accrued self-insurance obligations, net of
current portion 114,258 114,557
Long-term debt and capital lease obligations,
net of current portion 674,795 707,976
Unfavorable lease obligations, net 13,377 15,514
Other long-term liabilities 57,651 58,903
------------- -------------
Total liabilities 1,113,447 1,139,625
Stockholders' equity:
Preferred stock of $.01 par value,
authorized 10,000,000 shares, no shares
were issued and outstanding as of
September 30, 2009 and December 31, 2008 - -
Common stock of $.01 par value, authorized
125,000,000 shares, 43,738,565 and
43,544,765 shares issued and outstanding
as of September 30, 2009 and December 31,
2008, respectively 437 435
Additional paid-in capital 654,280 650,543
Accumulated deficit (212,686) (242,683)
Accumulated other comprehensive loss, net (3,891) (4,586)
------------- -------------
438,140 403,709
------------- -------------
Total liabilities and stockholders'
equity $ 1,551,587 $ 1,543,334
============= =============
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,
2009 2008
------------- -------------
(unaudited) (unaudited)
Total net revenues $ 470,893 $ 455,757
------------- -------------
Costs and expenses:
Operating salaries and benefits 265,929 259,349
Self-insurance for workers' compensation
and general and professional liability
insurance 14,165 14,527
Operating administrative costs 12,462 12,792
Other operating costs 97,067 94,599
Center rent expense 18,194 18,409
General and administrative expenses 15,586 13,832
Depreciation and amortization 11,460 10,165
Provision for losses on accounts receivable 5,318 3,307
Interest, net of interest income of $106
and $340, respectively 12,231 13,070
Restructuring costs 872 -
------------- -------------
Total costs and expenses 453,284 440,050
------------- -------------
Income before income taxes and discontinued
operations 17,609 15,707
Income tax expense 7,220 6,286
------------- -------------
Income from continuing operations 10,389 9,421
------------- -------------
Discontinued operations:
Loss from discontinued operations, net
of related taxes (712) (163)
Loss on disposal of discontinued
operations, net of related taxes (19) (654)
------------- -------------
Loss from discontinued operations, net (731) (817)
------------- -------------
Net income $ 9,658 $ 8,604
============= =============
Basic income per common and common equivalent
share:
Income from continuing operations $ 0.24 $ 0.22
Loss from discontinued operations, net (0.02) (0.02)
------------- -------------
Net income $ 0.22 $ 0.20
============= =============
Diluted income per common and common
equivalent share:
Income from continuing operations $ 0.24 $ 0.21
Loss from discontinued operations, net (0.02) (0.02)
------------- -------------
Net Income $ 0.22 $ 0.19
============= =============
Weighted average number of common and
common equivalent shares outstanding:
Basic 43,923 43,468
Diluted 44,015 44,478
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,
2009 2008
------------- -------------
(unaudited) (unaudited)
Total net revenues $ 1,407,735 $ 1,356,706
------------- -------------
Costs and expenses:
Operating salaries and benefits 790,804 766,223
Self-insurance for workers' compensation
and general and professional liability
insurance 45,626 40,985
Operating administrative costs 38,231 37,671
Other operating costs 287,376 279,644
Center rent expense 54,773 55,325
General and administrative expenses 48,057 46,529
Depreciation and amortization 33,336 29,553
Provision for losses on accounts receivable 15,599 9,491
Interest, net of interest income of $310
and $1,454, respectively 37,422 41,144
Loss (gain) on sale of assets, net 42 (77)
Restructuring costs 872 -
------------- -------------
Total costs and expenses 1,352,138 1,306,488
------------- -------------
Income before income taxes and discontinued
operations 55,597 50,218
Income tax expense 22,795 20,119
------------- -------------
Income from continuing operations 32,802 30,099
------------- -------------
Discontinued operations:
Loss from discontinued operations, net
of related taxes (2,472) (710)
Loss on disposal of discontinued
operations, net of related taxes (334) (2,523)
------------- -------------
Loss from discontinued operations, net (2,806) (3,233)
------------- -------------
Net income $ 29,996 $ 26,866
============= =============
Basic income per common and common equivalent
share:
Income from continuing operations $ 0.75 $ 0.70
Loss from discontinued operations, net (0.07) (0.08)
------------- -------------
Net income $ 0.68 $ 0.62
============= =============
Diluted income per common and common
equivalent share:
Income from continuing operations $ 0.75 $ 0.68
Loss from discontinued operations, net (0.07) (0.07)
------------- -------------
Net Income $ 0.68 $ 0.61
============= =============
Weighted average number of common and
common equivalent shares outstanding:
Basic 43,807 43,240
Diluted 43,926 44,086
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the For the
Three Three
Months Months
Ended Ended
September September
30, 2009 30, 2008
----------- -----------
(unaudited) (unaudited)
Cash flows from operating activities:
Net income $ 9,658 $ 8,604
Adjustments to reconcile net income to net
cash provided by operating activities,
including discontinued operations:
Depreciation and amortization 11,460 10,202
Amortization of favorable and unfavorable
lease intangibles (474) (452)
Provision for losses on accounts receivable 5,318 3,460
Loss on sale of assets, including
discontinued operations, net 31 539
Stock-based compensation expense 1,476 1,405
Deferred taxes 5,500 5,276
Other - (68)
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable 1,079 1,751
Restricted cash (710) 1,379
Prepaid expenses and other assets 382 (379)
Accounts payable (6,762) (3,983)
Accrued compensation and benefits 4,561 2,522
Accrued self-insurance obligations 4 (3,171)
Income taxes payable - (615)
Other accrued liabilities 9,355 4,296
Other long-term liabilities (1,004) (1,404)
----------- -----------
Net cash provided by operating
activities 39,874 29,362
----------- -----------
Cash flows from investing activities:
Capital expenditures (16,456) (12,393)
Purchase of leased real estate - (8,229)
Proceeds from sale of assets held for sale - 9,840
Acquisitions, net of cash acquired - (7,060)
Insurance proceeds received for damaged
property - 553
----------- -----------
Net cash used for investing activities (16,456) (17,289)
----------- -----------
Cash flows from financing activities:
Borrowings of long-term debt 20,822 -
Principal repayments of long-term debt and
capital lease obligations (22,562) (2,221)
Distribution to non-controlling interest - (130)
Proceeds from issuance of common stock 55 2,342
----------- -----------
Net cash used for financing activities (1,685) (9)
----------- -----------
Net (decrease) increase in cash and cash
equivalents 21,733 12,064
Cash and cash equivalents at beginning of period 95,672 68,369
----------- -----------
Cash and cash equivalents at end of period $ 117,405 $ 80,433
=========== ===========
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the For the
Nine Months Nine Months
Ended Ended
September September
30, 2009 30, 2008
----------- -----------
(unaudited) (unaudited)
Cash flows from operating activities:
Net income $ 29,996 $ 26,866
Adjustments to reconcile net income to net
cash provided by operating activities,
including discontinued operations:
Depreciation and amortization 33,336 29,802
Amortization of favorable and unfavorable
lease intangibles (1,350) (1,443)
Provision for losses on accounts receivable 15,599 9,971
Loss on sale of assets, including
discontinued operations, net 607 2,255
Impairment charge for discontinued operation - 1,800
Stock-based compensation expense 4,385 3,738
Deferred taxes 18,019 13,547
Other - 11
Changes in operating assets and liabilities,
net of acquisitions:
Accounts receivable (20,588) (17,801)
Restricted cash 8,811 4,442
Prepaid expenses and other assets 144 (5,700)
Accounts payable (11,825) (7,113)
Accrued compensation and benefits 4,927 (1,129)
Accrued self-insurance obligations 1,255 (3,406)
Income taxes payable - 976
Other accrued liabilities 8,530 679
Other long-term liabilities 177 4,648
----------- -----------
Net cash provided by operating
activities 92,023 62,143
----------- -----------
Cash flows from investing activities:
Capital expenditures (41,458) (28,532)
Purchase of leased real estate (3,275) (8,956)
Proceeds from sale of assets held for sale 2,174 13,797
Acquisitions, net of cash acquired - (7,373)
Insurance proceeds received for damaged
property - 628
----------- -----------
Net cash used for investing activities (42,559) (30,436)
----------- -----------
Cash flows from financing activities:
Borrowings of long-term debt 20,822 20,290
Principal repayments of long-term debt and
capital lease obligations (44,249) (27,420)
Payment to non-controlling interest (311) (2,035)
Distribution to non-controlling interest (549) (353)
Proceeds from issuance of common stock 75 2,412
----------- -----------
Net cash used for financing activities (24,212) (7,106)
----------- -----------
Net increase in cash and cash equivalents 25,252 24,601
Cash and cash equivalents at beginning of period 92,153 55,832
----------- -----------
Cash and cash equivalents at end of period $ 117,405 $ 80,433
=========== ===========
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO EBITDA and EBITDAR
(in thousands)
For the For the
Three Months Three Months
Ended Ended
September 30, September 30,
2009 2008
-------------- --------------
(unaudited) (unaudited)
Total net revenues $ 470,893 $ 455,757
-------------- --------------
Net income $ 9,658 $ 8,604
-------------- --------------
Income from continuing operations 10,389 9,421
Income tax expense 7,220 6,286
Restructuring costs 872 -
-------------- --------------
Net segment income $ 18,481 $ 15,707
Interest, net 12,231 13,070
Depreciation and amortization 11,460 10,165
-------------- --------------
EBITDA $ 42,172 $ 38,942
Center rent expense 18,194 18,409
-------------- --------------
EBITDAR $ 60,366 $ 57,351
============== ==============
EBITDA is defined as earnings before income (loss) on discontinued
operations, income taxes, loss (gain) on sale of assets, net, restructuring
costs, interest, net, depreciation and amortization. EBITDAR is defined as
EBITDA before facility rent expense. EBITDA and 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.
EBITDA and EBITDAR are commonly used as analytical indicators within the
healthcare industry and also serve as measures of leverage capacity and
debt service ability. EBITDA and EBITDAR should not be considered as
measures of financial performance under generally accepted accounting
principles. As the items excluded from EBITDA and EBITDAR are significant
components in understanding and assessing financial performance, EBITDA and
EBITDAR 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 and EBITDAR are not measurements determined in
accordance with U.S. generally accepted accounting principles and are thus
susceptible to varying calculations, EBITDA and EBITDAR 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 and EBITDAR
(in thousands)
For the For the
Nine Months Nine Months
Ended Ended
September 30, September 30,
2009 2008
-------------- -------------
(unaudited) (unaudited)
Total net revenues $ 1,407,735 $ 1,356,706
-------------- -------------
Net income $ 29,996 $ 26,866
-------------- -------------
Income from continuing operations 32,802 30,099
Income tax expense 22,795 20,119
Loss (gain) on sale of assets, net 42 (77)
Restructuring costs 872 -
-------------- -------------
Net segment income $ 56,511 $ 50,141
Interest, net 37,422 41,144
Depreciation and amortization 33,336 29,553
-------------- -------------
EBITDA $ 127,269 $ 120,838
Center rent expense 54,773 55,325
-------------- -------------
EBITDAR $ 182,042 $ 176,163
============== =============
EBITDA is defined as earnings before income (loss) on discontinued
operations, income taxes, loss (gain) on sale of assets, net,
restructuring costs, interest, net, depreciation and amortization
EBITDAR is defined as EBITDA before facility rent expense. EBITDA and
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. EBITDA and EBITDAR are commonly used as analytical
indicators within the healthcare industry and also serve as measures of
leverage capacity and debt service ability. EBITDA and EBITDAR should not
be considered as measures of financial performance under generally accepted
accounting principles. As the items excluded from EBITDA and EBITDAR are
significant components in understanding and assessing financial
performance, EBITDA and EBITDAR 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 and EBITDAR are not
measurements determined in accordance with U.S. generally accepted
accounting principles and are thus susceptible to varying calculations,
EBITDA and EBITDAR 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 and EBITDAR
($ in thousands)
For the Three Months Ended September 30, 2009
(unaudited)
Elimination
Rehabilitation Medical of
Inpatient Therapy Staffing Other & Affiliated
Services Services Services Corp Seg Revenue Consolidated
---------- --------- -------- -------- -------- ----------
Nonaffiliated
revenue $ 420,623 $ 26,394 $ 23,864 $ 12 $ - $ 470,893
Affiliated
revenue - 18,592 545 - (19,137) -
---------- --------- -------- -------- -------- ----------
Total
revenue 420,623 44,986 24,409 12 (19,137) 470,893
Net segment
income
(loss) $ 39,330 $ 2,606 $ 2,091 $(25,546) $ - $ 18,481
Interest,
net 3,024 - (1) 9,208 - 12,231
Depreciation
and
amortization 10,483 140 179 658 - 11,460
---------- --------- -------- -------- -------- ----------
EBITDA $ 52,837 $ 2,746 $ 2,269 $(15,680) $ - $ 42,172
Center rent
expense 17,852 119 223 - - 18,194
---------- --------- -------- -------- -------- ----------
EBITDAR $ 70,689 $ 2,865 $ 2,492 $(15,680) $ - $ 60,366
========== ========= ======== ======== ======== ==========
Normalized
EBITDA $ 52,837 $ 2,746 $ 2,269 $(15,680) $ - $ 42,172
Normalized
EBITDAR $ 70,689 $ 2,865 $ 2,492 $(15,680) $ - $ 60,366
EBITDA
margin 12.6% 6.1% 9.3% 9.0%
EBITDAR
margin 16.8% 6.4% 10.2% 12.8%
Normalized
EBITDA
margin 12.6% 6.1% 9.3% 9.0%
Normalized
EBITDAR
margin 16.8% 6.4% 10.2% 12.8%
See definitions of EBITDA and EBITDAR in the table "Reconciliation of
Net Income to EBITDA and EBITDAR".
See normalizing adjustments in the table "Normalizing Adjustments -
Quarter Comparison".
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF NET SEGMENT INCOME (LOSS) TO EBITDA and EBITDAR
($ in thousands)
For the Nine Months Ended September 30, 2009
(unaudited)
Elimination
Rehabilitation Medical of
Inpatient Therapy Staffing Other & Affiliated
Services Services Services Corp Seg Revenue Consolidated
---------- --------- -------- -------- -------- ----------
Nonaffiliated
revenue $1,252,310 $ 78,063 $ 77,335 $ 27 $ - $1,407,735
Affiliated
revenue - 55,168 1,668 - (56,836) -
---------- --------- -------- -------- -------- ----------
Total
revenue 1,252,310 133,231 79,003 27 (56,836) 1,407,735
Net segment
income
(loss) $ 119,934 $ 8,606 $ 6,401 $(78,430) $ - $ 56,511
Interest,
net 9,345 (2) (1) 28,080 - 37,422
Depreciation
and
amortization 30,330 399 601 2,006 - 33,336
---------- --------- -------- -------- -------- ----------
EBITDA $ 159,609 $ 9,003 $ 7,001 $(48,344) $ - $ 127,269
Center rent
expense 53,725 348 700 - - 54,773
---------- --------- -------- -------- -------- ----------
EBITDAR $ 213,334 $ 9,351 $ 7,701 $(48,344) $ - $ 182,042
========== ========= ======== ======== ======== ==========
Normalized
EBITDA $ 163,909 $ 9,003 $ 7,001 $(48,344) $ - $ 131,569
Normalized
EBITDAR $ 217,634 $ 9,351 $ 7,701 $(48,344) $ - $ 186,342
EBITDA
margin 12.7% 6.8% 8.9% 9.0%
EBITDAR
margin 17.0% 7.0% 9.7% 12.9%
Normalized
EBITDA
margin 13.1% 6.8% 8.9% 9.3%
Normalized
EBITDAR
margin 17.4% 7.0% 9.7% 13.2%
See definitions of EBITDA and EBITDAR in the table "Reconciliation of
Net Income to EBITDA and EBITDAR".
See normalizing adjustments in the table "Normalizing Adjustments - Year
to Date Comparison".
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF NET SEGMENT INCOME (LOSS) TO EBITDA and EBITDAR
($ in thousands)
For the Three Months Ended September 30, 2008
(unaudited)
Elimination
Rehabilitation Medical of
Inpatient Therapy Staffing Other & Affiliated
Services Services Services Corp Seg Revenue Consolidated
---------- --------- -------- -------- -------- ----------
Nonaffiliated
revenue $ 403,736 $ 22,756 $ 29,256 $ 9 $ - $ 455,757
Affiliated
revenue - 15,562 827 - (16,389) -
---------- --------- -------- -------- -------- ----------
Total
revenue 403,736 38,318 30,083 9 (16,389) 455,757
Net segment
income
(loss) $ 35,821 $ 1,793 $ 2,479 $(24,386) $ - $ 15,707
Interest,
net 3,548 - (5) 9,527 - 13,070
Depreciation
and
amortization 8,980 138 216 831 - 10,165
---------- --------- -------- -------- -------- ----------
EBITDA $ 48,349 $ 1,931 $ 2,690 $(14,028) $ - $ 38,942
Center rent
expense 18,065 100 244 - - 18,409
---------- --------- -------- -------- -------- ----------
EBITDAR $ 66,414 $ 2,031 $ 2,934 $(14,028) $ - $ 57,351
========== ========= ======== ======== ======== ==========
Normalized
EBITDA $ 48,349 $ 1,931 $ 2,690 $(14,028) $ - $ 38,942
Normalized
EBITDAR $ 66,414 $ 2,031 $ 2,934 $(14,028) $ - $ 57,351
EBITDA
margin 12.0% 5.0% 8.9% 8.5%
EBITDAR
margin 16.4% 5.3% 9.8% 12.6%
Normalized
EBITDA
margin 12.0% 5.0% 8.9% 8.5%
Normalized
EBITDAR
margin 16.4% 5.3% 9.8% 12.6%
See definitions of EBITDA and EBITDAR in the table "Reconciliation of
Net Income to EBITDA and EBITDAR".
See normalizing adjustments in the table "Normalizing Adjustments -
Quarter Comparison".
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
RECONCILIATION OF NET SEGMENT INCOME (LOSS) TO EBITDA and EBITDAR
($ in thousands)
For the Nine Months Ended September 30, 2008
(unaudited)
Elimination
Rehabilitation Medical of
Inpatient Therapy Staffing Other & Affiliated
Services Services Services Corp Seg Revenue Consolidated
---------- --------- -------- -------- -------- ----------
Nonaffiliated
revenue $1,202,050 $ 65,607 $ 89,020 $ 29 $ - $1,356,706
Affiliated
revenue - 44,314 2,155 - (46,469) -
---------- --------- -------- -------- -------- ----------
Total
revenue 1,202,050 109,921 91,175 29 (46,469) 1,356,706
Net segment
income
(loss) $ 116,991 $ 6,483 $ 6,866 $(80,199) $ - $ 50,141
Interest,
net 10,130 (1) (14) 31,029 - 41,144
Depreciation
and
amortization 26,311 396 611 2,235 - 29,553
---------- --------- -------- -------- -------- ----------
EBITDA $ 153,432 $ 6,878 $ 7,463 $(46,935) $ - $ 120,838
Center rent
expense 54,308 285 732 - - 55,325
---------- --------- -------- -------- -------- ----------
EBITDAR $ 207,740 $ 7,163 $ 8,195 $(46,935) $ - $ 176,163
========== ========= ======== ======== ======== ==========
Normalized
EBITDA $ 151,729 $ 6,878 $ 7,463 $(46,413) $ - $ 119,657
Normalized
EBITDAR $ 206,037 $ 7,163 $ 8,195 $(46,413) $ - $ 174,982
EBITDA
margin 12.8% 6.3% 8.2% 8.9%
EBITDAR
margin 17.3% 6.5% 9.0% 13.0%
Normalized
EBITDA
margin 12.6% 6.3% 8.2% 8.8%
Normalized
EBITDAR
margin 17.1% 6.5% 9.0% 12.9%
See definitions of EBITDA and EBITDAR in the table "Reconciliation of
Net Income to EBITDA and EBITDAR".
See normalizing adjustments in the table "Normalizing Adjustments - Year
to Date Comparison".
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,
----------------------- ---------------------------
2009 2008 2009 2008
Consolidated
Company
Revenues -
Non-
affiliated
(in
thousands)
Inpatient
Services $420,623 $403,736 $1,252,310 $1,202,050
Rehabili-
tation
Therapy
Services 26,394 22,756 78,063 65,607
Medical
Staffing
Services 23,864 29,256 77,335 89,020
Other -
non-core
businesses 12 9 27 29
-------- -------- ---------- ----------
Total $470,893 $455,757 $1,407,735 $1,356,706
======== ======== ========== ==========
Revenue Mix
- Non-
affiliated
(in
thousands)
Medicare $138,105 29% $127,942 28% $ 417,844 30% $ 386,250 28%
Medicaid 189,878 40% 184,453 40% 559,358 40% 542,536 40%
Private
and
Other 114,144 25% 117,375 26% 341,425 24% 348,920 26%
Managed
Care /
Insurance 24,393 5% 22,149 5% 76,591 5% 67,892 5%
Veterans 4,373 1% 3,838 1% 12,517 1% 11,108 1%
-------- --- -------- --- ---------- --- ---------- ---
Total $470,893 100% $455,757 100% $1,407,735 100% $1,356,706 100%
======== === ======== === ========== === ========== ===
Inpatient
Services
Stats
Number of
centers: 206 206 206 206
Number of
available
beds: 22,481 22,516 22,481 22,516
Occupancy
%: 87.9% 88.7% 88.2% 89.0%
Payor Mix
% based
on
patient
days:
Medicare
- SNF
Beds 15.3% 15.7% 15.8% 16.3%
Managed
care /
Ins. -
SNF
Beds 3.9% 3.7% 4.1% 3.9%
-------- -------- ---------- ----------
Total
SNF
skilled
mix 19.2% 19.4% 19.9% 20.2%
-------- -------- ---------- ----------
Medicare 14.0% 14.3% 14.4% 14.8%
Medicaid 60.7% 60.1% 60.5% 59.5%
Private
and
Other 20.7% 21.3% 20.3% 21.3%
Managed
Care /
Insurance 3.6% 3.4% 3.8% 3.5%
Veterans 1.0% 0.9% 1.0% 0.9%
Revenue
Mix % of
revenues:
Medicare
- SNF
Beds 32.2% 31.6% 32.9% 32.3%
Managed
care /
Ins. -
SNF
Beds 6.1% 5.8% 6.4% 5.9%
-------- -------- ---------- ----------
Total
SNF
skilled
mix 38.3% 37.4% 39.3% 38.2%
-------- -------- ---------- ----------
Medicare 31.9% 30.9% 32.4% 31.4%
Medicaid 45.1% 45.7% 44.7% 45.1%
Private
and
Other 16.2% 16.9% 15.8% 17.0%
Managed
Care /
Insurance 5.8% 5.5% 6.1% 5.6%
Veterans 1.0% 1.0% 1.0% 0.9%
Revenues
PPD:
LTC only
Medicare
(Part A) $ 457.79 $ 423.38 $ 454.15 $ 417.23
Medicare
Blended
Rate
(Part A
& B) $ 496.11 $ 456.82 $ 491.94 $ 447.68
Medicaid $ 172.06 $ 167.12 $ 170.86 $ 165.88
Private
and
Other $ 175.29 $ 170.82 $ 175.82 $ 170.58
Managed
Care /
Insuran-
ce $ 371.09 $ 352.17 $ 373.86 $ 347.90
Veterans $ 234.74 $ 220.82 $ 229.95 $ 214.45
Rehab
contracts
Affiliated 121 116 121 116
Non-
affiliated 328 325 328 325
Average
Qtrly
Revenue
per
Contract $ 100.2 $ 86.9 $ 98.9 $ 83.1
(in
thousands)
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
NORMALIZING ADJUSTMENTS - QUARTER COMPARISON
(in thousands, except per share data)
AS REPORTED - 3rd QUARTER 2009
===========================================================
Income
from
Continuing
Opera- Disc Net
Revenue EBITDAR EBITDA Pre-tax tions Ops Income
-------- ------- ------- ------- ------- ------ -------
As Reported
3rd QUARTER
2009 $470,893 $60,366 $42,172 $17,609 $10,389 $ (731) $ 9,658
Percent of
Revenue 12.8% 9.0% 3.7% 2.2% -0.2% 2.1%
Normalizing
Adjustments:
Restructuring
costs - - - 872 514 - 514
-------- ------- ------- ------- ------- ------ -------
Adjusted As
Reported -
3rd QUARTER
2009 $470,893 $60,366 $42,172 $18,481 $10,903 $ (731) $10,172
======== ======= ======= ======= ======= ====== =======
Percent of
Revenue 12.8% 9.0% 3.9% 2.3% -0.2% 2.2%
Diluted EPS:
As Reported $ 0.24 $(0.02) $ 0.22
As Adjusted $ 0.25 $(0.02) $ 0.23
AS REPORTED - 3rd QUARTER 2008
===========================================================
Income
from
Continuing
Opera- Disc Net
Revenue EBITDAR EBITDA Pre-tax tions Ops Income
-------- ------- ------- ------- ------- ------ -------
As Reported -
3rd QUARTER
2008 $455,757 $57,351 $38,942 $15,707 $ 9,421 $ (817) $ 8,604
Percent of
Revenue 12.6% 8.5% 3.4% 2.1% -0.2% 1.9%
Normalizing
Adjustments:
None - - - - - - -
-------- ------- ------- ------- ------- ------ -------
Adjusted As
Reported -
3rd QUARTER
2008 $455,757 $57,351 $38,942 $15,707 $ 9,421 $ (817) $ 8,604
======== ======= ======= ======= ======= ====== =======
Percent of
Revenue 12.6% 8.5% 3.4% 2.1% -0.2% 1.9%
Diluted EPS:
As Reported $ 0.21 $(0.02) $ 0.19
As Adjusted $ 0.21 $(0.02) $ 0.19
See definitions of EBITDA and EBITDAR in the table "Reconciliation of Net
Income to EBITDA and EBITDAR".
Normalizing adjustments are transactions or adjustments not related to
ongoing operations and consists of restructuring costs.
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 2009
============================================================
Income
from
Continuing
Opera- Disc Net
Revenue EBITDAR EBITDA Pre-tax tions Ops Income
---------- -------- -------- ------- ------- ------- -------
As Reported -
Nine
Months
2009 $1,407,735 $182,042 $127,269 $55,597 $32,802 $(2,806) $29,996
Percent of
Revenue 12.9% 9.0% 3.9% 2.3% -0.2% 2.1%
Normalizing
Adjustments:
Restructuring
costs - - - 872 514 - 514
Prior
periods'
self-
insurance
costs - 4,300 4,300 4,300 2,537 348 2,885
---------- -------- -------- ------- ------- ------- -------
Adjusted As
Reported -
Nine Months
2009 $1,407,735 $186,342 $131,569 $60,769 $35,853 $(2,458) $33,395
========== ======== ======== ======= ======= ======= =======
Percent of
Revenue 13.2% 9.3% 4.3% 2.5% -0.2% 2.4%
Diluted EPS:
As Reported $ 0.75 $ (0.07) $ 0.68
As Adjusted $ 0.82 $ (0.06) $ 0.76
AS REPORTED - NINE MONTHS 2008
============================================================
Income
from
Continuing
Opera- Disc Net
Revenue EBITDAR EBITDA Pre-tax tions Ops Income
---------- -------- -------- ------- ------- ------- -------
As Reported -
Nine
Months
2008 $1,356,706 $176,163 $120,838 $50,218 $30,099 $(3,233) $26,866
Percent of
Revenue 13.0% 8.9% 3.7% 2.2% -0.2% 2.0%
Normalizing
Adjustments:
Release of
insurance
reserves
related to
prior
periods - (2,650) (2,650) (2,650) (1,590) (222) (1,812)
Harborside
integration
costs - 1,469 1,469 1,469 881 - 881
---------- -------- -------- ------- ------- ------- -------
Adjusted As
Reported -
Nine Months
2008 $1,356,706 $174,982 $119,657 $49,037 $29,390 $(3,455) $25,935
========== ======== ======== ======= ======= ======= =======
Percent of
Revenue 12.9% 8.8% 3.6% 2.2% -0.3% 1.9%
Diluted EPS:
As Reported $ 0.68 $ (0.07) $ 0.61
As Adjusted $ 0.67 $ (0.08) $ 0.59
See definitions of EBITDA and EBITDAR in the table "Reconciliation of Net
Income to EBITDA and EBITDAR".
Normalizing adjustments are transactions or adjustments not related to
ongoing operations and consist of restructuring costs, prior periods'
self-insurance costs and integration costs related to the Harborside
acquisition.
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.
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