Health & Fitness
Health and Fitness
Health and Fitness
Thu, October 29, 2009
Wed, October 28, 2009
Tue, October 27, 2009 Sun Healthcare Group, Inc. Reports Third-Quarter Earnings and Normalized EPS of $0.25
IRVINE, CA--(Marketwire - October 27, 2009) - Sun Healthcare Group, Inc. (
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. (
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.
