Attached files

file filename
8-K - 8-K - Genesis Healthcare, Inc.a15-16217_28k.htm
EX-99.2 - EX-99.2 - Genesis Healthcare, Inc.a15-16217_2ex99d2.htm

Exhibit 99.1

 

 

FOR IMMEDIATE RELEASE

 

Genesis HealthCare Contact:

Investor Relations

610-925-2000

 

GENESIS HEALTHCARE

REPORTS SECOND QUARTER 2015 RESULTS

 

·                              Strong Second Quarter Performance With Pro Forma(1) Adjusted:

 

·                                          EBITDAR of $198.0 Million

 

·                                          EBITDA of $76.6 Million

 

·                                          Diluted EPS of $0.14

 

·                              Solid Pro Forma(1) EBITDAR and EBITDA Growth of 5.8% and 10.0%, Respectively

 

KENNETT SQUARE, PA — (August 6, 2015) — Genesis HealthCare (Genesis, or the Company) (NYSE:GEN), one of the largest post-acute care providers in the United States, today announced operating results for the quarter and six month periods ended June 30, 2015.

 

Highlights

 

·                  Previously announced expense reductions yield $9.0 million of savings in the quarter and $15.5 million of savings through the first six months of 2015; on track to realize $30 to $40 million in 2015;

 

·                  Skilled Healthcare integration continues as planned; approximately $3.0 million of transaction synergies realized in the second quarter and $4.0 million through the first six months of 2015; on track to realize $13 million in 2015;

 

·                  Controllable routine costs were well managed across all business lines; therapist efficiency of 70% improves 60bp over the prior year second quarter;

 

·                  On July 1st, Genesis closed on 91 previously announced new therapy contract starts and a 22- outpatient rehab site acquisition;

 

·                  During the quarter, Genesis announced the planned acquisition of Revera Inc.’s 24 skilled nursing facilities and contract rehabilitation business for $240 million; the deal is on track to close by year end, subject to additional due diligence, regulatory and licensing approvals, and other customary conditions;

 

“Second quarter earnings exceeded our expectations as we executed a smooth integration of the Skilled Healthcare business and continued to make excellent progress regarding Skilled merger synergies and cost savings initiatives,” comments George V. Hager, Jr., Chief Executive Officer of Genesis. “With our performance to date, we are already on a trajectory to exceed the mid-point of our earnings guidance for 2015.  Looking ahead, although we expect industry dynamics to remain challenging to the top line, we anticipate our planned cost reductions, recent and expected acquisition growth initiatives, and planned refinancing activities to allow us to grow our free cash flow meaningfully.”

 



 

Second Quarter 2015 Results

(Unaudited)

 

 

 

Three months ended June 30,
2015

 

Three months ended June 30,
2014

 

Pro Forma(1) Non-GAAP
Growth

 

 

 

 

 

Pro Forma(1)

 

 

 

Pro Forma(1)

 

 

 

 

 

(IN THOUSANDS, EXCEPT PER SHARE DATA)

 

GAAP

 

Non-GAAP

 

GAAP

 

Non-GAAP

 

Dollars

 

Percentage

 

Net Revenues / Adjusted Net Revenues

 

$

1,419,475

 

$

1,410,261

 

$

1,200,651

 

$

1,403,225

 

$

7,036

 

0.5

%

EBITDAR / Adjusted EBITDAR

 

184,008

 

197,974

 

161,599

 

187,100

 

10,874

 

5.8

%

EBITDA / Adjusted EBITDA

 

145,049

 

76,557

 

128,690

 

69,602

 

6,955

 

10.0

%

Fully Diluted EPS / Adjusted Fully Diluted EPS

 

(0.20

)

0.14

 

Not applicable as Genesis was privately held

 

 

 

 

Six months ended June 30, 2015

 

Six months ended June 30, 2014

 

Pro Forma(1) Non-GAAP
Growth

 

 

 

 

 

Pro Forma(1)

 

 

 

Pro Forma(1)

 

 

 

 

 

(IN THOUSANDS, EXCEPT PER SHARE DATA)

 

GAAP

 

Non-GAAP

 

GAAP

 

Non-GAAP

 

Dollars

 

Percentage

 

Net Revenues / Adjusted Net Revenues

 

$

2,762,476

 

$

2,812,787

 

$

2,387,195

 

$

2,795,486

 

$

17,301

 

0.6

%

EBITDAR / Adjusted EBITDAR

 

359,355

 

383,339

 

309,854

 

361,749

 

21,590

 

6.0

%

EBITDA / Adjusted EBITDA

 

283,977

 

142,778

 

244,146

 

129,550

 

13,228

 

10.2

%

Fully Diluted EPS / Adjusted Fully Diluted EPS

 

(1.58

)

0.21

 

Not applicable as Genesis was privately held

 

 


(1) To facilitate comparisons, pro forma results for the three and six months ended June 30, 2015 and 2014 were prepared on a basis assuming the combination of Skilled Healthcare and Genesis HealthCare occurred at the beginning of the respective period presented rather than as of February 2, 2015, which is the actual date of the combination. See reconcilition of pro forma results to GAAP results in the tables in this release.

 

Assuming Genesis and Skilled Healthcare were fully combined in all periods presented, Genesis’ adjusted revenue of $1.410 billion in the second quarter of 2015 would have increased $7.0 million or 0.5% over the prior year quarter.  Revenue growth in the second quarter of 2015 was negatively impacted $9.0 million by the divestiture of three facilities and $7.6 million due to the loss of therapy contracts.  Both elements of divested revenue were considered in the Company’s full year guidance.  As reported GAAP basis revenue of $1.419 billion in the second quarter of 2015 increased $218.8 million or 18.2% over the prior year quarter, principally due to the combination with Skilled Healthcare in February 2015.

 

Assuming Genesis and Skilled Healthcare were fully combined in all periods presented, Genesis’ adjusted revenue of $2.813 billion in the six months ended June 30, 2015 would have increased $17.3 million or 0.6% over the prior year period.  Revenue growth in the six months ended June 30, 2015 was negatively impacted $18.0 million by the divestiture of three facilities and by $16.6 million due to the loss of therapy contacts.  Both elements of divested revenue were considered in the Company’s full year guidance.  As reported GAAP basis revenue of $2.762 billion in the in the six months ended June 30, 2015 would have increased $375.3 million or 15.7% over the prior year period, principally due to the combination with Skilled Healthcare in February 2015.

 

Assuming Genesis and Skilled Healthcare were combined in all periods presented, adjusted EBITDAR of $198.0 million in the second quarter of 2015 would have increased $10.9 million or 5.8% over the prior year quarter. Adjusted EBITDAR growth in the second quarter of 2015 was driven by $9.0 million of planned cost reductions and approximately $3.0 million of Skilled Healthcare transaction synergies. GAAP basis loss from continuing operations of $33.2 million in the second quarter of 2015 increased $2.4 million or 7.6% over the prior year quarter.

 

Assuming Genesis and Skilled Healthcare were combined in all periods presented, adjusted EBITDAR of $383.3 million in the six months ended June 30, 2015 would have increased $21.6 million or 6.0% over the prior year period. Adjusted EBITDAR growth in the six months ended June 30, 2015 was driven by $15.5 million of planned cost reductions and approximately $4.0 million of Skilled Healthcare transaction synergies. GAAP basis loss from continuing operations of $151.6 million in the six months

 

2



 

ended June 30, 2015 increased $79.9 million over the prior year period principally due to $88.7 million of transaction costs incurred in the Skilled combination and other transactions, offset by the incremental earnings generated by the combined business.

 

Business Development, Acquisitions and Divestitures

 

During the second quarter of 2015, as previously announced, Genesis closed a transaction to acquire two PowerBack-like buildings in Texas.  One facility in Richardson, TX was lease financed.  The other is in San Antonio, TX, and was purchased by Genesis for $13 million, including $8 million of assumed HUD debt.  Genesis intends to convert these facilities to the PowerBack Rehabilitation brand over the next several months.

 

Effective July 1, 2015, as previously announced, Genesis Rehab Services (GRS) signed 91 new therapy contracts with four key customers and acquired 22 outpatient sites.  GRS now provides contract therapy services for more than 1,700 locations across 46 states, the District of Columbia and China. The new contracts are expected to contribute an additional $7.5 million in annual EBITDAR and was considered in the Company’s full year guidance.

 

During the second quarter, Genesis announced the planned acquisition of Revera Inc.’s 24 skilled nursing facilities and contract rehabilitation business for $240 million.  Genesis has substantially completed its due diligence period and confirms the acquisition is on track to close by year end, subject to additional due diligence, regulatory and licensing approvals, and other customary conditions.  This acquisition is expected to be accretive to 2016 earnings and increase the Company’s fixed charge coverage.  On a pro forma basis, after considering the expected repurchase of 21 currently leased facilities, the Revera transaction will increase Genesis’ facility ownership from 15% to 23%.

 

Genesis continues to strategically look to monetize non-core assets and either redeploy the capital to investments providing greater return to shareholders or to repay Genesis’ most expensive debt. Over the next nine months, Genesis looks to sell certain of its non-core assets having the potential to produce $100 million to $150 million of net cash proceeds.

 

2015 Guidance

 

The Company reaffirms its previously announced 2015 adjusted EBITDAR guidance of $755.0 million to $770.0 million and adjusted EBITDA of $267.6 million to $282.6 million.  In connection with further refinement to projected depreciation and amortization expense, the Company is adjusting its previous 2015 net income from continuing operations on a diluted basis from a range of $0.29 to $0.34 per share to a revised range of $0.34 to $0.39 per share.

 

The 2015 guidance is based on 154.6 million diluted weighted average common shares outstanding and common stock equivalents on a fully exchanged basis. The Company’s earnings guidance was prepared on a pro forma basis to reflect full year estimates assuming the operations of Skilled Healthcare were combined with those of Genesis HealthCare as of January 1, 2015.

 

Conference Call

 

Genesis HealthCare will hold a conference call at 8:30 a.m. Eastern Time on Friday, August 7, 2015 to discuss financial results for the first quarter.  Investors can access the conference call by calling (855) 849-2198 or live via a listen-only webcast through the Genesis web site at http://www.genesishcc.com/investor-relations/, where a replay of the call will also be posted for one year.

 

3



 

About Genesis HealthCare

 

Genesis HealthCare (NYSE: GEN) is a holding company with subsidiaries that, on a combined basis, comprise one of the nation’s largest post-acute care providers with more than 500 skilled nursing centers and assisted/senior living communities in 34 states nationwide. Genesis subsidiaries also supply rehabilitation and respiratory therapy to more than 1,600 healthcare providers in 46 states, the District of Columbia and China.  References made in this release to “Genesis,” “the Company,” “we,” “us” and “our” refer to Genesis HealthCare and each of its wholly-owned companies. Visit our website at www.genesishcc.com.

 

Forward-Looking Statements

 

This release includes “forward-looking statements” within the meaning of the federal securities laws, including the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements contain words such as “may,” “will,” “project,” “might,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “continue,” “pursue, “plans” or “prospect,” or the negative or other variations thereof or comparable terminology. They include, but are not limited to, statements about Genesis’ expectations and beliefs regarding its future financial performance, its anticipated synergy cost savings from the Skilled Healthcare combination, anticipated operating expense reductions, anticipated acquisitions, anticipated divestitures, anticipated development opportunities and anticipated deleveraging opportunities. These forward-looking statements are based on current expectations and projections about future events, including the assumptions stated in this release, and there can be no assurance that they will be achieved or occur, in whole or in part, in the timeframes anticipated by the Company or at all.

 

Investors are cautioned that forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that cannot be predicted or quantified and, consequently, the actual performance of Genesis may differ materially from that expressed or implied by such forward-looking statements.

 

These risks and uncertainties include, but are not limited to the following:

 

·      reductions in Medicare reimbursement rates, or changes in the rules governing the Medicare program could have a material adverse effect on our revenue, financial condition and results of operations;

·      continued efforts of federal and state governments to contain growth in Medicaid expenditures could adversely affect our revenue and profitability;

·      recent federal government proposals could limit the states’ use of provider tax programs to generate revenue for their Medicaid expenditures, which could result in a reduction in our reimbursement rates under Medicaid;

·      revenue we receive from Medicare and Medicaid is subject to potential retroactive reduction;

·      our success is dependent upon retaining key executive and personnel;

·      health reform legislation could adversely affect our revenue and financial condition;

·      annual caps that limit the amounts that can be paid for outpatient therapy services rendered to any Medicare beneficiary may negatively affect our results of operations;

·      we are subject to a Medicare cap amount for our hospice business. Our net patient service revenue and profitability could be adversely affected by limitations on Medicare payments;

·      we are subject to extensive and complex laws and government regulations. If we are not operating in compliance with these laws and regulations or if these laws and regulations change, we could be required to make significant expenditures or change our operations in order to bring our facilities and operations into compliance;

·      we face inspections, reviews, audits and investigations under federal and state government programs and contracts. These audits could have adverse findings that may negatively affect our business;

·      significant legal actions, which are commonplace in our professions, could subject us to increased operating costs and substantial uninsured liabilities, which would materially and adversely affect our results of operations, liquidity and financial condition;

·      insurance coverage may become increasingly expensive and difficult to obtain for health care companies, and our self-insurance may expose us to significant losses;

·      we may be unable to reduce costs to offset decreases in our patient census levels or other expenses completely;

·      future acquisitions may use significant resources, may be unsuccessful and could expose us to unforeseen liabilities;

·      we lease a significant number of our facilities and may experience risks relating to lease termination, lease extensions and special charges;

·      our substantial indebtedness could adversely affect our financial health and prevent us from fulfilling our financial obligations;

·      following the combination of FC-GEN Operations Investment LLC and Skilled Healthcare Group, Inc., we may

 

4



 

not be able to continue to successfully integrate our operations, which could adversely affect us and the market price of our common stock;

·      we have incurred substantial costs and expect to incur additional transaction and integration costs in connection with the combination of FC-GEN Operations Investment LLC and Skilled Healthcare Group, Inc;

·      the holders of a majority of the voting power of Genesis’ common stock have entered into a voting agreement, and the control group’s interests may conflict with yours;

·      some of our directors are significant stockholders or representatives of significant stockholders, which may result in the diversion of corporate opportunities and other potential conflicts; and

·      we are a “controlled company” within the meaning of NYSE rules and, as a result, qualify for and rely on exemptions from certain corporate governance requirements.

 

The Company’s Annual Report on Form 10-K for the year ended December 31, 2014, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings with the U.S. Securities and Exchange Commission, including the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2015 when it is filed, discuss the foregoing risks as well as other important risks and uncertainties of which investors should be aware. Any forward-looking statements contained herein are made only as of the date of this release. Genesis disclaims any obligation to update the forward-looking statements. Investors are cautioned not to place undue reliance on these forward-looking statements.

 

Note Regarding Use of Non-GAAP Financial Measures

 

For a discussion of the reasons why the Company utilizes non-GAAP financial measures and believes that the presentation of such measures provides useful information to investors regarding the Company’s financial condition and results of operations, see the Current Report on Form 8-K furnished to the U.S. Securities and Exchange Commission on August 6, 2015.

 

###

 

5



 

GENESIS HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE DATA)

 

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$

1,419,475

 

$

1,200,651

 

$

2,762,476

 

$

2,387,195

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and benefits

 

820,926

 

717,215

 

1,611,659

 

1,438,477

 

Other operating expenses

 

348,236

 

269,603

 

660,797

 

533,149

 

General and administrative costs

 

44,983

 

35,980

 

86,516

 

71,844

 

Provision for losses on accounts receivable

 

22,113

 

17,080

 

45,509

 

35,596

 

Lease expense

 

38,959

 

32,909

 

75,378

 

65,708

 

Depreciation and amortization expense

 

53,605

 

48,930

 

113,538

 

96,430

 

Interest expense

 

126,385

 

109,900

 

247,698

 

218,650

 

Loss on extinguishment of debt

 

 

181

 

3,234

 

680

 

Investment income

 

(431

)

(436

)

(847

)

(1,379

)

Transaction costs

 

2,642

 

1,298

 

88,710

 

3,547

 

Other loss (income)

 

50

 

(667

)

(7,560

)

(667

)

Equity in net income of unconsolidated affiliates

 

(360

)

(390

)

(513

)

(346

)

 

 

 

 

 

 

 

 

 

 

Loss before income tax benefit

 

(37,633

)

(30,952

)

(161,643

)

(74,494

)

Income tax benefit

 

(4,419

)

(96

)

(10,067

)

(2,850

)

Loss from continuing operations

 

(33,214

)

(30,856

)

(151,576

)

(71,644

)

Loss from discontinued operations, net of taxes

 

(1,722

)

(1,176

)

(1,610

)

(4,370

)

 

 

 

 

 

 

 

 

 

 

Net loss

 

(34,936

)

(32,032

)

(153,186

)

(76,014

)

Less net loss (income) attributable to noncontrolling interests

 

15,750

 

(224

)

21,434

 

(409

)

 

 

 

 

 

 

 

 

 

 

Net loss attributable to Genesis Healthcare, Inc.

 

$

(19,186

)

$

(32,256

)

$

(131,752

)

$

(76,423

)

 

 

 

 

 

 

 

 

 

 

Loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding for basic and diluted loss from continuing operations per share

 

89,211

 

49,865

 

82,279

 

49,865

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted net loss per common share:

 

 

 

 

 

 

 

 

 

Loss from continuing operations attributable to Genesis Healthcare, Inc.

 

$

(0.20

)

$

(0.63

)

$

(1.58

)

$

(1.44

)

Loss from discontinued operations

 

(0.02

)

(0.02

)

(0.02

)

(0.09

)

Net loss attributable to Genesis Healthcare, Inc.

 

$

(0.22

)

$

(0.65

)

$

(1.60

)

$

(1.53

)

 

6



 

GENESIS HEALTHCARE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(IN THOUSANDS)

 

 

 

June 30, 2015

 

December 31, 2014

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and equivalents

 

$

82,963

 

$

87,548

 

Accounts receivable, net of allowances for doubtful accounts

 

753,563

 

605,830

 

Other current assets

 

142,302

 

202,808

 

Total current assets

 

978,828

 

896,186

 

Property and equipment, net of accumulated depreciation

 

3,995,294

 

3,493,250

 

Identifiable intangible assets, net of accumulated amortization

 

225,945

 

173,112

 

Goodwill

 

431,515

 

169,681

 

Other long-term assets

 

471,796

 

409,179

 

Total assets

 

$

6,103,378

 

$

5,141,408

 

 

 

 

 

 

 

Liabilities and Stockholders’ Deficit:

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable and accrued expenses

 

$

360,956

 

$

320,339

 

Accrued compensation

 

226,745

 

192,838

 

Other current liabilities

 

162,661

 

147,405

 

Total current liabilities

 

750,362

 

660,582

 

Long-term debt

 

1,031,626

 

525,728

 

Capital lease obligations

 

1,044,208

 

1,002,762

 

Financing obligations

 

2,965,326

 

2,911,200

 

Other long-term liabilities

 

556,398

 

498,626

 

Stockholders’ deficit

 

(244,542

)

(457,490

)

Total liabilities and stockholders’ deficit

 

$

6,103,378

 

$

5,141,408

 

 

GENESIS HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(IN THOUSANDS)

 

 

 

Six months ended June 30,

 

 

 

2015

 

2014

 

 

 

 

 

 

 

Net cash (used in) provided by operating activities

 

$

(7,729

)

$

36,361

 

Net cash used in investing activities

 

(28,867

)

(47,495

)

Net cash provided by financing activities

 

32,011

 

1,348

 

 

 

 

 

 

 

Net decrease in cash and equivalents

 

(4,585

)

(9,786

)

Beginning of period

 

87,548

 

61,413

 

End of period

 

$

82,963

 

$

51,627

 

 

7



 

GENESIS HEALTHCARE, INC.

RECONCILIATION OF NET (LOSS) INCOME TO EBITDA, EBITDAR, ADJUSTED EBITDA AND ADJUSTED EBITDAR

(UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE DATA)

 

 

 

 

As reported

 

Adjustments

 

 

 

As adjusted

 

 

 

 

 

 

 

Newly acquired
or constructed

 

 

 

 

 

 

 

 

 

Three months
ended June 30,
2015

 

Conversion to
cash basis
leases (a)

 

businesses with
start-up losses
(b)

 

Other
adjustments (c)

 

Total
adjustments

 

Three months
ended June 30,
2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$

1,419,475

 

$

 

$

(8,982

)

$

(232

)

$

(9,214

)

$

1,410,261

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and benefits

 

820,926

 

 

(5,447

)

 

(5,447

)

815,479

 

Other operating expenses

 

348,236

 

 

(4,183

)

(11,220

)

(15,403

)

332,833

 

General and administrative costs

 

44,983

 

 

 

(2,079

)

(2,079

)

42,904

 

Provision for losses on accounts receivable

 

22,113

 

 

(251

)

 

(251

)

21,862

 

Lease expense

 

38,959

 

84,437

 

(1,979

)

 

82,458

 

121,417

 

Depreciation and amortization expense

 

53,605

 

(34,197

)

(199

)

 

(34,396

)

19,209

 

Interest expense

 

126,385

 

(103,980

)

(8

)

 

(103,988

)

22,397

 

Other income

 

50

 

 

 

(50

)

(50

)

 

Investment income

 

(431

)

 

 

 

 

(431

)

Transaction costs

 

2,642

 

 

 

(2,642

)

(2,642

)

 

Equity in net income of unconsolidated affiliates

 

(360

)

 

 

 

 

(360

)

(Loss) income before income tax benefit

 

$

(37,633

)

$

53,740

 

$

3,085

 

$

15,759

 

$

72,584

 

$

34,951

 

Income tax (benefit) expense

 

(4,419

)

12,474

 

716

 

3,658

 

16,848

 

12,429

 

(Loss) income from continuing operations

 

$

(33,214

)

$

41,266

 

$

2,369

 

$

12,101

 

$

55,736

 

$

22,522

 

Loss from discontinued operations, net of taxes

 

1,722

 

460

 

 

 

460

 

2,182

 

Net (loss) income attributable to noncontrolling interests

 

(15,750

)

15,036

 

863

 

4,409

 

20,308

 

4,558

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to Genesis Healthcare, Inc.

 

$

(19,186

)

$

25,770

 

$

1,506

 

$

7,692

 

$

34,968

 

$

15,782

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

53,605

 

(34,197

)

(199

)

 

(34,396

)

19,209

 

Interest expense

 

126,385

 

(103,980

)

(8

)

 

(103,988

)

22,397

 

Other income

 

50

 

 

 

(50

)

(50

)

 

Transaction costs

 

2,642

 

 

 

(2,642

)

(2,642

)

 

Income tax (benefit) expense

 

(4,419

)

12,474

 

716

 

3,658

 

16,848

 

12,429

 

Loss from discontinued operations, net of taxes

 

1,722

 

460

 

 

 

460

 

2,182

 

Net (loss) income attributable to noncontrolling interests

 

(15,750

)

15,036

 

863

 

4,409

 

20,308

 

4,558

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA / Adjusted EBITDA

 

$

145,049

 

$

(84,437

)

$

2,878

 

$

13,067

 

$

(68,492

)

$

76,557

 

Lease expense

 

38,959

 

84,437

 

(1,979

)

 

82,458

 

121,417

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDAR / Adjusted EBITDAR

 

$

184,008

 

$

 

$

899

 

$

13,067

 

$

13,966

 

$

197,974

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding for diluted (loss) income from continuing operations per share (d)

 

89,211

 

 

 

 

 

 

 

 

 

153,671

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net (loss) income from continuing operations per share (e)

 

$

(0.20

)

 

 

 

 

 

 

 

 

$

0.14

 

 

See (a), (b), (c), (d) and (e) footnote references contained herein.

 

8



 

GENESIS HEALTHCARE, INC.

RECONCILIATION OF NET (LOSS) INCOME TO EBITDA, EBITDAR, ADJUSTED EBITDA AND ADJUSTED EBITDAR

(UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE DATA)

 

 

 

As reported

 

Adjustments

 

 

 

As adjusted

 

Non-GAAP as
adjusted

 

Pro forma adjusted

 

 

 

Six months ended
June 30, 2015

 

Conversion to
cash basis
leases (a)

 

Newly acquired
or constructed
businesses with
start-up losses
(b)

 

Other
adjustments (c)

 

Total
adjustments

 

Six months ended
June 30, 2015

 

Skilled Healthcare
Group, Inc. one
month ended
January 31, 2015

 

Six months ended
June 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$

2,762,476

 

$

 

$

(21,365

)

$

388

 

$

(20,977

)

$

2,741,499

 

$

71,288

 

$

2,812,787

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and benefits

 

1,611,659

 

 

(12,513

)

 

(12,513

)

1,599,146

 

43,926

 

1,643,072

 

Other operating expenses

 

660,797

 

 

(9,653

)

(11,220

)

(20,873

)

639,924

 

19,946

 

659,870

 

General and administrative costs

 

86,516

 

 

 

(3,762

)

(3,762

)

82,754

 

 

82,754

 

Provision for losses on accounts receivable

 

45,509

 

 

(251

)

 

(251

)

45,258

 

 

45,258

 

Lease expense

 

75,378

 

168,345

 

(4,928

)

 

163,417

 

238,795

 

1,766

 

240,561

 

Depreciation and amortization expense

 

113,538

 

(67,789

)

(1,443

)

 

(69,232

)

44,306

 

1,998

 

46,304

 

Interest expense

 

247,698

 

(206,314

)

(40

)

 

(206,354

)

41,344

 

2,521

 

43,865

 

Loss on extinguishment of debt

 

3,234

 

 

 

(3,234

)

(3,234

)

 

 

 

Other income

 

(7,560

)

 

 

7,560

 

7,560

 

 

11

 

11

 

Investment income

 

(847

)

 

 

 

 

(847

)

 

(847

)

Transaction costs

 

88,710

 

 

 

(88,710

)

(88,710

)

 

 

 

Equity in net income of unconsolidated affiliates

 

(513

)

 

 

 

 

(513

)

(146

)

(659

)

(Loss) income before income tax benefit

 

$

(161,643

)

$

105,758

 

$

7,463

 

$

99,754

 

$

212,975

 

$

51,332

 

$

1,266

 

$

52,598

 

Income tax (benefit) expense

 

(10,067

)

24,548

 

1,732

 

23,155

 

49,435

 

39,368

 

494

 

39,862

 

(Loss) income from continuing operations

 

$

(151,576

)

$

81,210

 

$

5,731

 

$

76,599

 

$

163,540

 

$

11,964

 

$

772

 

$

12,736

 

Loss from discontinued operations, net of taxes

 

1,610

 

920

 

 

 

920

 

2,530

 

 

2,530

 

Net (loss) income attributable to noncontrolling interests

 

(21,434

)

29,591

 

2,088

 

27,911

 

59,590

 

38,156

 

531

 

38,687

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to Genesis Healthcare, Inc.

 

$

(131,752

)

$

50,699

 

$

3,643

 

$

48,688

 

$

103,030

 

$

(28,722

)

$

241

 

$

(28,481

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

113,538

 

(67,789

)

(1,443

)

 

(69,232

)

44,306

 

1,998

 

46,304

 

Interest expense

 

247,698

 

(206,314

)

(40

)

 

(206,354

)

41,344

 

2,521

 

43,865

 

Loss on extinguishment of debt

 

3,234

 

 

 

(3,234

)

(3,234

)

 

 

 

Other income

 

(7,560

)

 

 

7,560

 

7,560

 

 

11

 

11

 

Transaction costs

 

88,710

 

 

 

(88,710

)

(88,710

)

 

 

 

Income tax (benefit) expense

 

(10,067

)

24,548

 

1,732

 

23,155

 

49,435

 

39,368

 

494

 

39,862

 

Loss from discontinued operations, net of taxes

 

1,610

 

920

 

 

 

920

 

2,530

 

 

2,530

 

Net (loss) income attributable to noncontrolling interests

 

(21,434

)

29,591

 

2,088

 

27,911

 

59,590

 

38,156

 

531

 

38,687

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA / Adjusted EBITDA

 

$

283,977

 

$

(168,345

)

$

5,980

 

$

15,370

 

$

(146,995

)

$

136,982

 

$

5,796

 

$

142,778

 

Lease expense

 

75,378

 

168,345

 

(4,928

)

 

163,417

 

238,795

 

1,766

 

240,561

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDAR / Adjusted EBITDAR

 

$

359,355

 

$

 

$

1,052

 

$

15,370

 

$

16,422

 

$

375,777

 

$

7,562

 

$

383,339

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Loss) income per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding for diluted (loss) income from continuing operations per share (d)

 

82,279

 

 

 

 

 

 

 

 

 

 

 

 

 

153,671

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net (loss) income from continuing operations per share (e)

 

$

(1.58

)

 

 

 

 

 

 

 

 

 

 

 

 

$

0.21

 

 

See (a), (b), (c), (d) and (e) footnote references contained herein.

 

9



 

GENESIS HEALTHCARE, INC.

RECONCILIATION OF NET (LOSS) INCOME TO EBITDA, EBITDAR, ADJUSTED EBITDA AND ADJUSTED EBITDAR

(UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE DATA)

 

 

 

As reported

 

Adjustments

 

 

 

As adjusted

 

Non-GAAP as
adjusted

 

Pro forma adjusted

 

 

 

Three months ended
June 30, 2014

 

Conversion to
cash basis
leases (a)

 

Newly acquired
or constructed
businesses with
start-up losses
(b)

 

Other
adjustments (c)

 

Total
adjustments

 

Three months ended
June 30, 2014

 

Skilled Healthcare
Group, Inc. three
months ended June
30, 2014

 

Three months ended June
30, 2014

 

Net revenues

 

$

1,200,651

 

$

 

$

(4,294

)

$

 

$

(4,294

)

$

1,196,357

 

$

206,868

 

$

1,403,225

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and benefits

 

717,215

 

 

(3,302

)

94

 

(3,208

)

714,007

 

128,515

 

842,522

 

Other operating expenses

 

269,603

 

 

(1,800

)

(714

)

(2,514

)

267,089

 

44,052

 

311,141

 

General and administrative costs

 

35,980

 

 

 

 

 

35,980

 

6,656

 

42,636

 

Provision for losses on accounts receivable

 

17,080

 

 

 

 

 

17,080

 

3,664

 

20,744

 

Lease expense

 

32,909

 

80,317

 

(650

)

 

79,667

 

112,576

 

4,922

 

117,498

 

Depreciation and amortization expense

 

48,930

 

(33,525

)

(22

)

 

(33,547

)

15,383

 

6,034

 

21,417

 

Interest expense

 

109,900

 

(97,660

)

 

 

(97,660

)

12,240

 

7,643

 

19,883

 

Loss (gain) on extinguishment of debt

 

181

 

 

 

(181

)

(181

)

 

 

 

Other (income) loss

 

(667

)

 

 

667

 

667

 

 

(123

)

(123

)

Investment income

 

(436

)

 

 

 

 

(436

)

 

(436

)

Transaction costs

 

1,298

 

 

 

(1,298

)

(1,298

)

 

 

 

Equity in net income of unconsolidated affiliates

 

(390

)

 

 

 

 

(390

)

(92

)

(482

)

(Loss) income before income tax benefit

 

$

(30,952

)

$

50,868

 

$

1,480

 

$

1,432

 

$

53,780

 

$

22,828

 

$

5,597

 

$

28,425

 

Income tax (benefit) expense

 

(96

)

3,215

 

94

 

91

 

3,400

 

3,304

 

2,447

 

5,751

 

(Loss) income from continuing operations

 

$

(30,856

)

$

47,653

 

$

1,386

 

$

1,341

 

$

50,380

 

$

19,524

 

$

3,150

 

$

22,674

 

Loss (income) from discontinued operations, net of taxes

 

1,176

 

(437

)

 

 

(437

)

739

 

 

739

 

Net loss attributable to noncontrolling interests

 

224

 

 

 

 

 

224

 

 

224

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to Genesis Healthcare, Inc.

 

$

(32,256

)

$

48,090

 

$

1,386

 

$

1,341

 

$

50,817

 

$

18,561

 

$

3,150

 

$

21,711

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

48,930

 

(33,525

)

(22

)

 

(33,547

)

15,383

 

6,034

 

21,417

 

Interest expense

 

109,900

 

(97,660

)

 

 

(97,660

)

12,240

 

7,643

 

19,883

 

Loss (gain) on extinguishment of debt

 

181

 

 

 

(181

)

(181

)

 

 

 

Other (income) loss

 

(667

)

 

 

667

 

667

 

 

(123

)

(123

)

Transaction costs

 

1,298

 

 

 

(1,298

)

(1,298

)

 

 

 

Income tax (benefit) expense

 

(96

)

3,215

 

94

 

91

 

3,400

 

3,304

 

2,447

 

5,751

 

Loss (income) from discontinued operations, net of taxes

 

1,176

 

(437

)

 

 

(437

)

739

 

 

739

 

Net income attributable to noncontrolling interests

 

224

 

 

 

 

 

224

 

 

224

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA / Adjusted EBITDA

 

$

128,690

 

$

(80,317

)

$

1,458

 

$

620

 

$

(78,239

)

$

50,451

 

$

19,151

 

$

69,602

 

Lease expense

 

32,909

 

80,317

 

(650

)

 

79,667

 

112,576

 

4,922

 

117,498

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDAR / Adjusted EBITDAR

 

$

161,599

 

$

 

$

808

 

$

620

 

$

1,428

 

$

163,027

 

$

24,073

 

$

187,100

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding for diluted (loss) income from continuing operations per share (d)

 

49,865

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net (loss) income from continuing operations per share (e)

 

$

(0.63

)

 

 

 

 

 

 

 

 

 

 

 

 

Not calculated

 

 

See (a), (b), (c), (d) and (e) footnote references contained herein.

 

10



 

GENESIS HEALTHCARE, INC.

RECONCILIATION OF NET (LOSS) INCOME TO EBITDA, EBITDAR, ADJUSTED EBITDA AND ADJUSTED EBITDAR

(UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE DATA)

 

 

 

As reported

 

Adjustments

 

 

 

As adjusted

 

Non-GAAP as
adjusted

 

Pro forma adjusted

 

 

 

Six months ended
June 30, 2014

 

Conversion to
cash basis
leases (a)

 

Newly acquired
or constructed
businesses with
start-up losses
(b)

 

Other
adjustments (c)

 

Total
adjustments

 

Six months ended
June 30, 2014

 

Skilled Healthcare
Group, Inc. six
months ended June
30, 2014

 

Six months ended
June 30, 2014

 

Net revenues

 

$

2,387,195

 

$

 

$

(7,178

)

$

1,166

 

$

(6,012

)

$

2,381,183

 

$

414,303

 

$

2,795,486

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and benefits

 

1,438,477

 

 

(5,044

)

(1,706

)

(6,750

)

1,431,727

 

259,934

 

1,691,661

 

Other operating expenses

 

533,149

 

 

(3,052

)

(833

)

(3,885

)

529,264

 

89,012

 

618,276

 

General and administrative costs

 

71,844

 

 

 

 

 

71,844

 

12,300

 

84,144

 

Provision for losses on accounts receivable

 

35,596

 

 

 

 

 

35,596

 

6,478

 

42,074

 

Lease expense

 

65,708

 

157,880

 

(1,085

)

 

156,795

 

222,503

 

9,696

 

232,199

 

Depreciation and amortization expense

 

96,430

 

(65,393

)

(73

)

 

(65,466

)

30,964

 

12,120

 

43,084

 

Interest expense

 

218,650

 

(193,068

)

 

 

(193,068

)

25,582

 

15,639

 

41,221

 

Loss (gain) on extinguishment of debt

 

680

 

 

 

(680

)

(680

)

 

 

 

Other (income) loss

 

(667

)

 

 

667

 

667

 

 

(162

)

(162

)

Investment income

 

(1,379

)

 

 

 

 

(1,379

)

 

(1,379

)

Transaction costs

 

3,547

 

 

 

(3,547

)

(3,547

)

 

 

 

Equity in net income of unconsolidated affiliates

 

(346

)

 

 

 

 

(346

)

(638

)

(984

)

(Loss) income before income tax benefit

 

$

(74,494

)

$

100,581

 

$

2,076

 

$

7,265

 

$

109,922

 

$

35,428

 

$

9,924

 

$

45,352

 

Income tax (benefit) expense

 

(2,850

)

6,357

 

132

 

460

 

6,949

 

4,099

 

4,448

 

8,547

 

(Loss) income from continuing operations

 

$

(71,644

)

$

94,224

 

$

1,944

 

$

6,805

 

$

102,973

 

$

31,329

 

$

5,476

 

$

36,805

 

Loss (income) from discontinued operations, net of taxes

 

4,370

 

(1,964

)

 

 

(1,964

)

2,406

 

 

2,406

 

Net loss attributable to noncontrolling interests

 

409

 

 

 

 

 

409

 

 

409

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income attributable to Genesis Healthcare, Inc.

 

$

(76,423

)

$

96,188

 

$

1,944

 

$

6,805

 

$

104,937

 

$

28,514

 

$

5,476

 

$

33,990

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

96,430

 

(65,393

)

(73

)

 

(65,466

)

30,964

 

12,120

 

43,084

 

Interest expense

 

218,650

 

(193,068

)

 

 

(193,068

)

25,582

 

15,639

 

41,221

 

Loss (gain) on extinguishment of debt

 

680

 

 

 

(680

)

(680

)

 

 

 

Other (income) loss

 

(667

)

 

 

667

 

667

 

 

(107

)

(107

)

Transaction costs

 

3,547

 

 

 

(3,547

)

(3,547

)

 

 

 

Income tax (benefit) expense

 

(2,850

)

6,357

 

132

 

460

 

6,949

 

4,099

 

4,448

 

8,547

 

Loss (income) from discontinued operations, net of taxes

 

4,370

 

(1,964

)

 

 

(1,964

)

2,406

 

 

2,406

 

Net income attributable to noncontrolling interests

 

409

 

 

 

 

 

409

 

 

409

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA / Adjusted EBITDA

 

$

244,146

 

$

(157,880

)

$

2,003

 

$

3,705

 

$

(152,172

)

$

91,974

 

$

37,576

 

$

129,550

 

Lease expense

 

65,708

 

157,880

 

(1,085

)

 

156,795

 

222,503

 

9,696

 

232,199

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDAR / Adjusted EBITDAR

 

$

309,854

 

$

 

$

918

 

$

3,705

 

$

4,623

 

$

314,477

 

$

47,272

 

$

361,749

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding for diluted (loss) income from continuing operations per share (d)

 

49,865

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Diluted net (loss) income from continuing operations per share (e)

 

$

(1.44

)

 

 

 

 

 

 

 

 

 

 

 

 

Not calculated

 

 

See (a), (b), (c), (d) and (e) footnote references contained herein.

 

11



 


(a)  Our leases are classified as either operating leases, capital leases or financing obligations pursuant to applicable guidance under U.S. GAAP.  We view the primary provisions and economics of these leases, regardless of their accounting treatment, as being nearly identical.  Virtually all of our leases are structured with triple net terms, have fixed annual rent escalators and have long-term initial maturities with renewal options.  Accordingly, in connection with our evaluation of the financial performance of the Company, we reclassify all of our leases to operating lease treatment and reflect lease expense on a cash basis.  This approach allows us to better understand the relationship in each reporting period of our operating performance, as measured by EBITDAR and Adjusted EBITDAR, to the cash basis obligations to our landlords in that reporting period, regardless of the lease accounting treatment.  This presentation and approach is also consistent with the financial reporting and covenant compliance requirements contained in all of our major lease and loan agreements.  The following table summarizes the reclassification adjustments necessary to present all leases as operating leases on a cash basis.

 

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

(in thousands)

 

Lease expense:

 

 

 

 

 

 

 

 

 

Cash rent - capital leases

 

$

22,923

 

$

22,384

 

$

45,848

 

$

44,394

 

Cash rent - financing obligations

 

64,065

 

61,097

 

126,835

 

119,632

 

Non-cash - operating lease arrangements

 

(2,551

)

(3,164

)

(4,338

)

(6,146

)

Lease expense adjustments

 

$

84,437

 

$

80,317

 

$

168,345

 

$

157,880

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense:

 

 

 

 

 

 

 

 

 

Capital lease accounting

 

$

(9,296

)

$

(9,281

)

$

(18,075

)

$

(18,280

)

Financing obligation accounting

 

(24,901

)

(24,244

)

(49,714

)

(47,113

)

Depreciation and amortization expense adjustments

 

$

(34,197

)

$

(33,525

)

$

(67,789

)

$

(65,393

)

 

 

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

 

 

 

Capital lease accounting

 

$

(26,157

)

$

(25,087

)

$

(51,643

)

$

(49,209

)

Financing obligation accounting

 

(77,823

)

(72,573

)

(154,671

)

(143,859

)

Interest expense adjustments

 

$

(103,980

)

$

(97,660

)

$

(206,314

)

$

(193,068

)

 

 

 

 

 

 

 

 

 

 

Total pre-tax lease accounting adjustments

 

$

(53,740

)

$

(50,868

)

$

(105,758

)

$

(100,581

)

 

(b)  The acquisition and construction of new businesses has become an important element of our growth strategy.  Many of the businesses we acquire have a history of operating losses and continue to generate operating losses in the months that follow our acquisition.  Newly constructed or developed businesses also generate losses while in their start-up phase.  We view these losses as both temporary and an expected component of our long-term investment in the new venture.  We adjust these losses when computing Adjusted EBITDAR and Adjusted EBITDA in order to better evaluate the performance of our core business.  The activities of such businesses are adjusted when computing Adjusted EBITDAR and Adjusted EBITDA until such time as a new business generates positive Adjusted EBITDA.  The operating performance of new businesses are no longer adjusted when computing Adjusted EBITDAR and Adjusted EBITDA beginning the period in which a new business generates positive Adjusted EBITDA and all periods thereafter.  There were seven acquired or newly constructed businesses eliminated from our reported results when computing adjusted results for the three and six months ended June 30, 2015 and 2014, respectively.  The results for the six months ended June 30, 2015 were also adjusted for losses incurred in our rehabilitation services start-up activities in China.

 

(c)  Other adjustments represent costs or gains associated with transactions or events that we do not believe are reflective of our core recurring operating business.  Other adjustments also include the effect of expensing non-cash stock-based compensation related to restricted stock units.  The following items were realized in the periods presented.

 

12



 

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

(in thousands)

 

Severance and restructuring (1)

 

$

720

 

$

(94

)

$

2,379

 

$

1,706

 

Regulatory defense and related costs (2)

 

1,317

 

714

 

1,961

 

1,500

 

New business development costs (3)

 

 

 

 

499

 

Self insurance adjustment (4)

 

10,500

 

 

10,500

 

 

Transaction costs (5)

 

2,642

 

1,298

 

88,710

 

3,547

 

Loss on early extinguishment of debt

 

 

181

 

3,234

 

680

 

Other income (6)

 

50

 

(667

)

(7,560

)

(667

)

Stock based compensation (7)

 

530

 

 

530

 

 

Tax benefit from total adjustments

 

(3,658

)

(91

)

(23,155

)

(460

)

Total other adjustments

 

$

12,101

 

$

1,341

 

$

76,599

 

$

6,805

 

 


(1)  We incurred costs related to the termination, severance and restructuring of certain components of the Company’s business.

 

(2)  We incurred legal defense and other related costs in connection with certain matters in dispute or under appeal with regulatory agencies.

 

(3)  We incurred business development costs in connection with the evaluation and start-up of services outside our existing service offerings.

 

(4) We incurred a self-insured program adjustment for the actuarially developed GLPL and worker’s compensation claims related to policy periods 2014 and prior.  The Company also recorded approximately $3.6 million of incremental development related to the first six months of 2015, which has not been excluded from our non GAAP results.

 

(5)  We incurred costs associated with transactions including the combination with Skilled Healthcare Group, Inc. and other transactions.

 

(6)  We realized a net gain on the sale of certain assets in the six months ended June 30, 2015.

 

(7)  We incurred $0.5 million of non-cash stock-based compensation related to restricted stock units.

 

(d)  Assumes 153.7 million diluted weighted average common shares outstanding and common stock equivalents on a fully exchanged basis.

 

(e)  Pro forma adjusted income from continuing operations per share assumes a calculated tax rate of 40%, and is computed as follows:  Pro forma adjusted income before income taxes of $17.6 million x (1 - 40% tax rate) / 153.7 million diluted weighted average shares on a fully exchanged basis.

 

13


 


 

SKILLED HEALTHCARE GROUP, INC.

RECONCILIATION OF NET (LOSS) INCOME TO EBITDA, EBITDAR, ADJUSTED EBITDA AND ADJUSTED EBITDAR

(UNAUDITED)

(IN THOUSANDS)

 

 

 

GAAP as 

 

 

 

Non-GAAP as

 

GAAP as

 

 

 

Non-GAAP as

 

GAAP as

 

 

 

Non-GAAP as

 

 

 

reported

 

 

 

adjusted

 

reported

 

 

 

adjusted

 

reported

 

 

 

adjusted

 

 

 

One month

 

 

 

One month

 

Three months

 

 

 

Three months

 

Six months

 

 

 

Six months

 

 

 

ended January

 

 

 

ended January

 

ended June

 

 

 

ended June

 

ended June

 

 

 

ended June 30,

 

 

 

31, 2015

 

Adjust

 

31, 2015

 

30, 2014

 

Adjust

 

30, 2014

 

30, 2014

 

Adjust

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$

71,288

 

$

 

$

71,288

 

$

206,979

 

$

(111

)

$

206,868

 

$

414,279

 

$

24

 

$

414,303

 

Salaries, wages and benefits

 

44,842

 

(916

)

43,926

 

128,819

 

(304

)

128,515

 

260,246

 

(312

)

259,934

 

Other operating expenses

 

17,486

 

(345

)

17,141

 

51,990

 

(7,938

)

44,052

 

97,967

 

(8,955

)

89,012

 

General and administrative costs

 

1,516

 

 

 

1,516

 

7,287

 

(631

)

6,656

 

13,371

 

(1,071

)

12,300

 

Provision for losses on accounts receivable

 

1,289

 

 

1,289

 

3,720

 

(56

)

3,664

 

6,625

 

(147

)

6,478

 

Lease expense

 

1,766

 

 

1,766

 

4,922

 

 

4,922

 

9,696

 

 

9,696

 

Depreciation and amortization expense

 

1,998

 

 

1,998

 

6,034

 

 

6,034

 

12,120

 

 

12,120

 

Interest expense

 

2,521

 

 

2,521

 

7,643

 

 

7,643

 

15,639

 

 

15,639

 

Loss on extinguishment of debt

 

 

 

 

822

 

(822

)

 

822

 

(822

)

 

Impairment of long-lived assets

 

 

 

 

82

 

(82

)

 

82

 

(82

)

 

Other (income) loss

 

11

 

 

11

 

(123

)

 

(123

)

(162

)

 

(162

)

Transaction costs

 

4,638

 

(4,638

)

 

 

 

 

 

 

 

Equity in net income of unconsolidated affiliates

 

(146

)

 

(146

)

(92

)

 

(92

)

(638

)

 

(638

)

Income tax (benefit) expense

 

(1,807

)

2,301

 

494

 

(1,345

)

3,792

 

2,447

 

(3

)

4,451

 

4,448

 

Net (loss) income

 

$

(2,826

)

$

3,598

 

$

772

 

$

(2,780

)

$

5,930

 

$

3,150

 

$

(1,486

)

$

6,962

 

$

5,476

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

1,998

 

 

1,998

 

6,034

 

 

6,034

 

12,120

 

 

12,120

 

Interest expense

 

2,521

 

 

2,521

 

7,643

 

 

7,643

 

15,639

 

 

15,639

 

Loss on extinguishment of debt

 

 

 

 

822

 

(822

)

 

822

 

(822

)

 

Impairment of long-lived assets

 

 

 

 

82

 

(82

)

 

82

 

(82

)

 

Other (income) loss

 

11

 

 

11

 

(123

)

 

 

(123

)

(107

)

 

(107

)

Transaction costs

 

4,638

 

(4,638

)

 

 

 

 

 

 

 

Income tax (benefit) expense

 

(1,807

)

2,301

 

494

 

(1,345

)

3,792

 

2,447

 

(3

)

4,451

 

4,448

 

EBITDA / Adjusted EBITDA

 

4,535

 

1,261

 

5,796

 

10,333

 

8,818

 

19,151

 

27,067

 

10,509

 

37,576

 

Lease expense

 

1,766

 

 

1,766

 

4,922

 

 

4,922

 

9,696

 

 

9,696

 

EBITDAR / Adjusted EBITDAR

 

$

6,301

 

$

1,261

 

$

7,562

 

$

15,255

 

$

8,818

 

$

24,073

 

$

36,763

 

$

10,509

 

$

47,272

 

 

The following adjustments represent costs or gains associated with transactions or events that we do not believe are reflective of Skilled Healthcare Group’s recurring operating business.

 

 

 

One month
ended
January 31,
2015

 

Three
months
ended June
30, 2014

 

Six months
ended June
30, 2014

 

Severance and restructuring

 

$

1,220

 

$

631

 

$

1,071

 

Regulatory defense and related costs

 

41

 

 

 

Exist costs of divested facilities

 

 

(27

)

340

 

Professional fees related to non-routine matters

 

 

7,205

 

7,519

 

Losses at skilled nursing facility not at full operation

 

 

133

 

133

 

Loss on extinguishment of debt

 

 

822

 

822

 

Non-cash stock compensation

 

371

 

876

 

1,446

 

Impairment of long-lived assets

 

 

82

 

82

 

Transaction costs

 

4,267

 

 

 

Tax benefit of total adjustments

 

(2,301

)

(3,792

)

(4,451

)

Total adjustments

 

$

3,598

 

$

5,930

 

$

6,962

 

 

14



 

GENESIS HEALTHCARE, INC.

KEY FINANCIAL PERFORMANCE INDICATORS

(UNAUDITED)

 

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

(In thousands)

 

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

Financial Results

 

 

 

 

 

 

 

 

 

Net revenues

 

$

1,419,475

 

$

1,200,651

 

$

2,762,476

 

$

2,387,195

 

EBITDAR

 

184,008

 

161,599

 

359,355

 

309,854

 

EBITDA

 

145,049

 

128,690

 

283,977

 

244,146

 

Adjusted EBITDAR

 

197,974

 

163,027

 

375,777

 

314,477

 

Adjusted EBITDA

 

76,557

 

50,451

 

136,982

 

91,974

 

Pro forma adjusted EBITDAR

 

197,974

 

187,100

 

383,339

 

361,749

 

Pro forma adjusted EBITDA

 

76,557

 

69,602

 

142,778

 

129,550

 

 

INPATIENT SEGMENT:

 

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Occupancy Statistics - Inpatient

 

 

 

 

 

 

 

 

 

Available licensed beds in service at end of period

 

56,730

 

46,451

 

56,730

 

46,451

 

Available operating beds in service at end of period

 

55,087

 

45,057

 

55,087

 

45,057

 

Available patient days based on licensed beds

 

5,154,768

 

4,231,255

 

9,930,941

 

8,420,379

 

Available patient days based on operating beds

 

4,996,311

 

4,103,685

 

9,625,192

 

8,164,113

 

Actual patient days

 

4,338,337

 

3,675,482

 

8,427,184

 

7,307,551

 

Occupancy percentage - licensed beds

 

84.2

%

86.9

%

84.9

%

86.8

%

Occupancy percentage - operating beds

 

86.8

%

89.6

%

87.6

%

89.5

%

Skilled mix

 

21.8

%

22.2

%

22.3

%

22.2

%

Average daily census

 

47,674

 

40,390

 

46,559

 

40,373

 

 

 

 

 

 

 

 

 

 

 

Revenue per patient day (skilled nursing facilities)

 

 

 

 

 

 

 

 

 

Medicare Part A

 

$

503

 

$

493

 

$

502

 

$

492

 

Medicare total (including Part B)

 

543

 

531

 

538

 

530

 

Insurance

 

454

 

448

 

446

 

447

 

Private and other

 

310

 

319

 

312

 

320

 

Medicaid

 

217

 

213

 

216

 

213

 

Medicaid (net of provider taxes)

 

195

 

193

 

195

 

193

 

Weighted average (net of provider taxes)

 

$

272

 

$

271

 

$

273

 

$

271

 

 

 

 

 

 

 

 

 

 

 

Patient days by payor (skilled nursing facilities)

 

 

 

 

 

 

 

 

 

Medicare

 

573,295

 

537,626

 

1,153,193

 

1,067,923

 

Insurance

 

307,163

 

224,319

 

594,922

 

448,606

 

Total skilled mix days

 

880,458

 

761,945

 

1,748,115

 

1,516,529

 

Private and other

 

277,038

 

239,345

 

563,624

 

480,968

 

Medicaid

 

2,866,194

 

2,434,581

 

5,512,696

 

4,834,342

 

Total Days

 

4,023,690

 

3,435,871

 

7,824,435

 

6,831,839

 

 

 

 

 

 

 

 

 

 

 

Patient days as a percentage of total patient days (skilled nursing facilities)

 

 

 

 

 

 

 

 

 

Medicare

 

14.2

%

15.6

%

14.7

%

15.6

%

Insurance

 

7.6

%

6.5

%

7.6

%

6.6

%

Skilled mix

 

21.8

%

22.1

%

22.3

%

22.2

%

Private and other

 

6.9

%

7.0

%

7.2

%

7.0

%

Medicaid

 

71.3

%

70.9

%

70.5

%

70.8

%

Total

 

100.0

%

100.0

%

100.0

%

100.0

%

 

15



 

GENESIS HEALTHCARE, INC.

KEY FINANCIAL PERFORMANCE INDICATORS

(UNAUDITED)

 

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

Facilities at end of period

 

 

 

 

 

 

 

 

 

Skilled nursing facilities

 

 

 

 

 

 

 

 

 

Leased

 

384

 

356

 

384

 

356

 

Owned

 

33

 

2

 

33

 

2

 

Joint Venture

 

5

 

5

 

5

 

5

 

Managed *

 

36

 

14

 

36

 

14

 

Total skilled nursing facilities

 

458

 

377

 

458

 

377

 

Total licensed beds

 

55,605

 

45,964

 

55,605

 

45,964

 

 

 

 

 

 

 

 

 

 

 

Assisted living facilities:

 

 

 

 

 

 

 

 

 

Leased

 

29

 

27

 

29

 

27

 

Owned

 

22

 

1

 

22

 

1

 

Joint Venture

 

1

 

1

 

1

 

1

 

Managed

 

4

 

4

 

4

 

4

 

Total assisted living facilities

 

56

 

33

 

56

 

33

 

Total licensed beds

 

3,962

 

2,731

 

3,962

 

2,731

 

Total facilities

 

514

 

410

 

514

 

410

 

 

 

 

 

 

 

 

 

 

 

Total Jointly Owned and Managed– (Unconsolidated)

 

19

 

17

 

19

 

17

 

 

REHABILITATION THERAPY SEGMENT:

 

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

 

2015

 

2014

 

2015

 

2014

 

 

 

 

 

 

 

 

 

 

 

Revenue mix %:

 

 

 

 

 

 

 

 

 

Company-operated

 

39

%

37

%

39

%

37

%

Non-affiliated

 

61

%

63

%

61

%

63

%

Sites of service (at end of period)

 

1,499

 

1,367

 

1,499

 

1,367

 

Revenue per site

 

$

171,570

 

$

176,104

 

$

336,478

 

$

352,856

 

Therapist efficiency %

 

70

%

69

%

70

%

70

%

 


* In 2015, includes 20 facilities located in Texas for which the real estate is owned by Genesis.

 

16



 

GENESIS HEALTHCARE, INC.

RECONCILIATION OF NET (LOSS) INCOME TO EBITDA, EBITDAR, ADJUSTED EBITDA AND ADJUSTED EBITDAR

2015 GUIDANCE - LOW END OF RANGE

(IN THOUSANDS, EXCEPT EPS)

 

 

 

 

 

Adjustments

 

As adjusted

 

 

 

 

 

 

 

Newly acquired or

 

 

 

 

 

 

 

Twelve months
ended December
31, 2015

 

Conversion to
cash basis leases
(a)

 

constructed
businesses with
start-up losses (b)

 

Other adjustments
(c)

 

Twelve months
ended December
31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$

5,684,197

 

$

 

$

(25,759

)

$

 

$

5,658,438

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and benefits

 

3,506,752

 

 

(16,175

)

 

3,490,577

 

Other operating expenses

 

1,427,595

 

 

(11,734

)

 

1,415,861

 

Lease expense

 

157,874

 

334,941

 

(5,383

)

 

487,432

 

Depreciation and amortization expense

 

234,511

 

(137,324

)

(2,675

)

 

94,512

 

Interest expense

 

507,203

 

(421,251

)

 

 

85,952

 

Investment income

 

(2,000

)

 

 

 

(2,000

)

Transaction costs

 

88,989

 

 

 

(88,989

)

 

Equity in net income of unconsolidated affiliates

 

(1,050

)

 

 

 

(1,050

)

(Loss) income before income tax expense

 

$

(235,677

)

$

223,634

 

$

10,208

 

$

88,989

 

$

87,154

 

Income tax expense (benefit)

 

(94,271

)

89,454

 

4,083

 

35,596

 

34,862

 

Income (loss) from continuing operations

 

$

(141,406

)

$

134,180

 

$

6,125

 

$

53,393

 

$

52,292

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share, diluted:

 

$

(0.91

)

 

 

 

 

 

 

$

0.34

 

Weighted-average common shares outstanding, diluted, on a fully exchanged basis

 

154,603

 

 

 

 

 

 

 

154,603

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to Compute EBITDA/Adjusted EBITDA and EBITDAR / Adjusted EBITDAR

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

234,511

 

(137,324

)

(2,675

)

 

94,512

 

Interest expense

 

507,203

 

(421,251

)

 

 

85,952

 

Transaction costs

 

88,989

 

 

 

(88,989

)

 

Income tax expense (benefit)

 

(94,271

)

89,454

 

4,083

 

35,596

 

34,862

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA / Adjusted EBITDA

 

$

595,026

 

$

(334,941

)

$

7,533

 

$

 

$

267,618

 

Lease expense

 

157,874

 

334,941

 

(5,383

)

 

487,432

 

EBITDAR / Adjusted EBITDAR

 

$

752,900

 

$

 

$

2,150

 

$

 

$

755,050

 

 

17



 

GENESIS HEALTHCARE, INC.

RECONCILIATION OF NET (LOSS) INCOME TO EBITDA, EBITDAR, ADJUSTED EBITDA AND ADJUSTED EBITDAR

2015 GUIDANCE - HIGH END OF RANGE

(IN THOUSANDS, EXCEPT EPS)

 

 

 

 

 

Adjustments

 

As adjusted

 

 

 

 

 

 

 

Newly acquired or

 

 

 

 

 

 

 

Twelve months
ended December
31, 2015

 

Conversion to
cash basis leases
(a)

 

constructed
businesses with
start-up losses (b)

 

Other adjustments
(c)

 

Twelve months
ended December
31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Net revenues

 

$

5,764,197

 

$

 

$

(25,759

)

$

 

$

5,738,438

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries, wages and benefits

 

3,554,512

 

 

(16,175

)

 

3,538,337

 

Other operating expenses

 

1,446,798

 

 

(11,734

)

 

1,435,064

 

Lease expense

 

157,874

 

334,941

 

(5,383

)

 

487,432

 

Depreciation and amortization expense

 

235,515

 

(137,324

)

(2,675

)

 

95,516

 

Interest expense

 

508,003

 

(421,251

)

 

 

86,752

 

Investment income

 

(3,000

)

 

 

 

(3,000

)

Transaction costs

 

88,989

 

 

 

(88,989

)

 

Equity in net income of unconsolidated affiliates

 

(2,000

)

 

 

 

(2,000

)

(Loss) income before income tax expense

 

$

(222,494

)

$

223,634

 

$

10,208

 

$

88,989

 

$

100,337

 

Income tax (benefit) expense

 

(88,998

)

89,454

 

4,083

 

35,596

 

40,135

 

Income (loss) from continuing operations

 

$

(133,496

)

$

134,180

 

$

6,125

 

$

53,393

 

$

60,202

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per share, diluted:

 

$

(0.86

)

 

 

 

 

 

 

$

0.39

 

Weighted-average common shares outstanding, diluted, on a fully exchanged basis

 

154,603

 

 

 

 

 

 

 

154,603

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to Compute EBITDA/Adjusted EBITDA and EBITDAR / Adjusted EBITDAR

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization expense

 

235,515

 

(137,324

)

(2,675

)

 

95,516

 

Interest expense

 

508,003

 

(421,251

)

 

 

86,752

 

Transaction costs

 

88,989

 

 

 

(88,989

)

 

Income tax (benefit) expense

 

(88,998

)

89,454

 

4,083

 

35,596

 

40,135

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA / Adjusted EBITDA

 

$

610,013

 

$

(334,941

)

$

7,533

 

$

 

$

282,605

 

Lease expense

 

157,874

 

334,941

 

(5,383

)

 

487,432

 

EBITDAR / Adjusted EBITDAR

 

$

767,887

 

$

 

$

2,150

 

$

 

$

770,037

 

 

18