Genesis HealthCare Reports Fourth Quarter And Fiscal Year End 2015 Results

22 Feb, 2016, 21:00 ET from Genesis HealthCare

KENNETT SQUARE, Pa., Feb. 22, 2016 /PRNewswire/ -- 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 fourth quarter and fiscal year ended December 31, 2015.  Overall results are consistent with the preliminary results issued by the Company on January 25, 2016.

Highlights

  • Fiscal 2015 Pro forma Adjusted EBITDA of $249.7 million grew 11.6% over the prior year and fourth quarter 2015 Pro Forma Adjusted EBITDA of $39.7 million grew 14.2% over the prior year quarter;
  • Fiscal 2015 Pro forma Adjusted EBITDAR margins of approximately 13.0% grew 60 bps over fiscal year 2014;
  • Fiscal 2015 fixed charge coverage ratio of 1.31x grew from 1.20x in fiscal year 2014; fixed charge coverage of 1.35x is anticipated at the mid-point of 2016 guidance;
  • On December 1, 2015, Genesis completed the acquisition of 19 Revera, Inc. skilled nursing facilities and Revera's contract rehabilitation business.

"We are pleased to report EBITDA growth in excess of 10% for the fourth consecutive quarter," commented George V. Hager, Jr., Chief Executive Officer of Genesis. "Despite negative industry pressures, Genesis continues generating positive earnings growth, producing strong free cash flow and improving its fixed charge coverage ratio."

Mr. Hager continued, "As we look ahead, we remain focused on the long-term drivers of our business – providing high-quality, outcome-oriented care, effectively managing our costs, leveraging our scale through strategic growth opportunities and positioning Genesis to succeed in a world that rewards value based providers."

Fourth Quarter and Full Year 2015 Results

Three months ended December 31, 2015

Three months ended  December 31, 2014

Pro Forma1 Non-GAAP Growth 

Pro Forma1

Pro Forma1

(IN THOUSANDS, EXCEPT PER SHARE DATA)

GAAP

 Non-GAAP

GAAP

 Non-GAAP

Dollars

Percentage

Net Revenues / Adjusted Net Revenues

$

1,440,721

$

1,427,223

$

1,193,267

$

1,397,740

$

29,483

2.1%

EBITDAR / Adjusted EBITDAR

155,740

161,031

76,302

153,590

7,441

4.8%

EBITDA / Adjusted EBITDA

118,497

39,682

43,033

34,754

4,928

14.2%

Fully Diluted EPS / Adjusted Fully Diluted EPS

(2.98)

(0.05)

Not applicable as Genesis was privately held

Twelve months ended December 31, 2015

Twelve months ended  December 31, 2014

Pro Forma1 Non-GAAP Growth 

Pro Forma1

Pro Forma1

(IN THOUSANDS, EXCEPT PER SHARE DATA)

GAAP

 Non-GAAP

GAAP

 Non-GAAP

Dollars

Percentage

Net Revenues / Adjusted Net Revenues

$

5,619,224

$

5,645,287

$

4,768,080

$

5,585,152

$

60,135

1.1%

EBITDAR / Adjusted EBITDAR

697,827

733,150

532,537

692,887

40,263

5.8%

EBITDA / Adjusted EBITDA

547,551

249,666

400,639

223,688

25,978

11.6%

Fully Diluted EPS / Adjusted Fully Diluted EPS

(4.96)

0.23

Not applicable as Genesis was privately held

1 - To facilitate comparisons, pro forma results for the three and twelve months ended December 31, 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 reconciliation 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 $1,427.2 million in the fourth quarter of 2015 would have increased $29.5 million or 2.1% over the prior year quarter.  Revenue growth in the fourth quarter of 2015 was positively impacted by approximately $23.0 million due to the acquisition of the 19 Revera facilities on December 1, 2015.  As reported, GAAP basis revenue of $1,440.7 million in the fourth quarter of 2015 increased $247.5 million or 20.7% 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 $5,645.3 million in the full year ended December 31, 2015 would have increased $60.1 million or 1.1% over the prior year period.  As was the case for the fourth quarter, revenue growth in the year ended December 31, 2015 was positively impacted by approximately $23.0 million due to the acquisition of the 19 Revera facilities on December 1, 2015.  As reported, GAAP basis revenue of $5,619.2 million in the year ended December 31, 2015 increased $851.1 million or 17.9% 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 $161.0 million in the fourth quarter of 2015 would have increased $7.4 million or 4.8% over the prior year quarter. GAAP basis loss from continuing operations of $313.0 million in the fourth quarter of 2015 increased $186.1 million principally due to the establishment of a $217.3 million valuation allowance against our net deferred tax assets, as realization of such assets is no longer more likely than not.

Assuming Genesis and Skilled Healthcare were combined in all periods presented, adjusted EBITDAR of $733.2 million in the year ended December 31, 2015 would have increased $40.3 million or 5.8% over the prior year period. GAAP basis loss from continuing operations of $525.5 million in the year ended December 31, 2015 increased $284.4 million over the prior year period principally due to the establishment of the $217.3 million deferred tax valuation allowance previously noted, with the balance due to transaction costs incurred in the Skilled Healthcare combination and other transactions.

Recurring free cash flow in the year ended December 31, 2015 was approximately $58.0 million, derived from adjusted EBITDA of $249.7 million less $77.0 million of cash interest, $70.0 million of recurring capital expenditures and $45.0 million of recurring cash taxes. Recurring free cash flow in the year ended December 31, 2014 was approximately $33.0 million.

Business Development, Acquisitions and Divestitures

During the fourth quarter, Genesis completed its previously announced acquisition of 19 Revera skilled nursing facilities (15 facilities acquired and four facilities leased) and its contract rehabilitation business for approximately $158.0 million.  Genesis expects to acquire the real estate of five additional facilities for approximately $40.0 million upon receipt of regulatory approvals in the state of Vermont, which are still pending. Genesis has committed financing to complete the Revera transaction. In the meantime, Genesis is managing the operations of the five Vermont facilities.  The acquisition, excluding consolidation of the Vermont facilities, is expected to contribute $220.0 million and $24.0 million of year-over-year net revenue and EBITDA, respectively, in 2016.

On January 1, 2016, Genesis sold 18 Assisted Living Facilities in Kansas for $67 million and used the sale proceeds to repay $54.2 million of real estate bridge loan debt. The 18 facilities had 807 beds and aggregate revenue and EBITDA of approximately $23.0 million and $7.3 million, respectively, in 2015.

Genesis continues to look to monetize other non-strategic assets that are expected to generate $100 million to $150 million of after tax cash proceeds.  Genesis intends to use non-strategic asset sale proceeds to repay indebtedness. 

Financing Activities

The Company is focused on two near term capital strengthening priorities:  refinancing approximately $440.0 million of real estate bridge loans by the end of 2016 with lower cost HUD guaranteed mortgages or other permanent financing; and reducing the Company's overall indebtedness with a combination of non-strategic asset sale proceeds and free cash flow.

"Refinancing real estate bridge loans with more attractive long-term financing will serve to extend maturities significantly and grow our fixed charge coverage," notes Genesis Chief Financial Officer, Tom DiVittorio.  "Our HUD financing activities are on track and we expect to close on the first series of loans near the end of the first quarter of 2016."

2016 Guidance

The Company reaffirms its previously announced 2016 adjusted net revenue guidance of $5,700.0 million to $5,800.0 million,  adjusted EBITDAR guidance of $765.0 million to $795.0 million, adjusted EBITDA guidance of $267.0 million to $297.0 million, and adjusted net income guidance from continuing operations on a diluted basis of $0.19 to $0.29 per share.   

Recurring free cash flow in 2016 is projected to be approximately $64.0 million.  Projected recurring free cash flow is derived from the mid-point of the Company's 2016 adjusted EBITDA guidance of $282.0 million further adjusted by projected cash interest of $81.0 million, recurring capital expenditures of $85.0 million and cash taxes of $52.0 million.  Cash income taxes assume tax depreciation and amortization expense of approximately $72.0 million and a tax rate of 40%, which further assumes all outstanding stock units are exchanged for common stock.

The 2016 guidance assumes 156.1 million diluted weighted average common shares outstanding and common stock equivalents on a fully-exchanged basis.  The 2016 guidance is prepared on the same basis as the Company's non-GAAP financial information and therefore assumes the conversion of leases to cash basis leases and excludes the income or loss of newly acquired or constructed businesses with start-up losses or newly divested businesses.   It also excludes transaction related costs, severance and restructuring costs, regulatory defense and related costs, non-cash stock based compensation expense and non-cash impairment charges.

Conference Call

Genesis HealthCare will hold a conference call at 8:30 a.m. Eastern Time on Tuesday, February 23, 2016 to discuss financial results for the fourth quarter and fiscal year ended 2015.  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. 

2016 RBC Capital Markets Global Healthcare Conference

Genesis also announced today that George V. Hager, Jr., Chief Executive Officer, and Tom DiVittorio, Chief Financial Officer, are scheduled to conduct a fireside chat at the 2016 RBC Capital Markets Global Healthcare Conference on Wednesday, February 24, 2016 at 3:35 p.m. Eastern Time.  A live webcast and replay will also be available on the Company's website at www.genesishcc.com/investor-relations.

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 1,700 healthcare providers in 45 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, anticipated cost management, anticipated acquisitions, anticipated divestitures, anticipated refinancing opportunities and anticipated synergies. 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 revenues, financial condition and results of operations;
  • continued efforts of federal and state governments to contain growth in Medicaid expenditures could adversely affect our revenues 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 executives and personnel;
  • it can be difficult to attract and retain qualified nurses, therapists, healthcare professionals and other key personnel, which, along with a growing number of minimum wage and compensation related regulations, can increase our costs related to these employees;
  • 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 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, such as the Department of Justice, and contracts. These investigations and audits could have adverse findings that may negatively affect our business, including our results of operations, liquidity and financial condition;
  • 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 coverages, including professional liability 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;
  • completed and future acquisitions may use significant resources, may be unsuccessful and could expose us to unforeseen liabilities and integration risks;
  • we lease a significant number of our facilities and may experience risks relating to lease termination, lease expense escalators, lease extensions and special charges;
  • our substantial indebtedness, scheduled maturities and disruptions in the financial markets could affect our ability to obtain financing or to extend or refinance debt as it matures, which could negatively impact our results of operations, liquidity, financial condition and the market price of our common stock;
  • we are subject to numerous covenants and requirements under our various credit and leasing agreements and a breach of any such covenants or requirements could, unless timely and effectively remediated, lead to default and potential cross default under such agreements;
  • the holders of a majority of the voting power of Genesis' common stock have entered into a voting agreement, and the voting group's interests may conflict with the interests of other holders;
  • some of our directors are significant stockholders or representatives of significant stockholders, which may present issues regarding 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 Annual Report on Form 10-K for the year ended December 31, 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 its forward-looking statements or any of the information contained in this release. Investors are cautioned not to place undue reliance on these forward-looking statements.

 

GENESIS HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE DATA)

Three months ended  December 31,

Twelve months ended  December 31,

2015

2014

2015

2014

Net revenues

$

1,440,721

$

1,193,267

$

5,619,224

$

4,768,080

Salaries, wages and benefits

844,527

742,030

3,289,820

2,904,094

Other operating expenses

365,268

311,267

1,358,983

1,109,699

General and administrative costs

44,983

38,876

175,889

147,063

Provision for losses on accounts receivable

31,666

24,789

100,521

77,670

Lease expense

37,243

33,269

150,276

131,898

Depreciation and amortization expense

61,574

48,544

237,617

193,675

Interest expense

131,573

111,953

507,809

442,724

Loss on extinguishment of debt

453

130

1,133

Investment income

(477)

(552)

(1,677)

(3,399)

Other loss (income)

6,121

499

(1,400)

(138)

Transaction costs

4,358

8,070

96,374

13,353

Long-lived asset impairment

28,546

31,399

28,546

31,399

Skilled Healthcare loss contingency expense

31,500

Equity in net (income) loss of unconsolidated affiliates

(986)

555

(2,139)

416

Loss before income tax expense (benefit)

(113,675)

(157,885)

(353,025)

(281,507)

Income tax expense (benefit)

199,317

(34,655)

172,524

(44,022)

Loss from continuing operations

(312,992)

(123,230)

(525,549)

(237,485)

Income (loss) from discontinued operations, net of taxes

352

(8,483)

(1,219)

(14,044)

Net loss

(312,640)

(131,713)

(526,768)

(251,529)

Less net loss (income) attributable to noncontrolling interests

47,149

(1,086)

100,573

(2,456)

Net loss attributable to Genesis Healthcare, Inc.

$

(265,491)

$

(132,799)

$

(426,195)

$

(253,985)

Loss per common share:

Basic and diluted:

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

89,197

49,865

85,755

49,865

Basic and diluted net loss per common share:

Loss from continuing operations attributable to Genesis Healthcare, Inc.

$

(2.98)

$

(2.49)

$

(4.96)

$

(4.81)

Income (loss) from discontinued operations

-

(0.17)

(0.01)

(0.28)

Net loss attributable to Genesis Healthcare, Inc.

$

(2.98)

$

(2.66)

$

(4.97)

$

(5.09)

 

 

GENESIS HEALTHCARE, INC.

SELECTED BALANCE SHEET DATA

(UNAUDITED)

(IN THOUSANDS)

December 31, 2015

December 31, 2014

Cash and cash equivalents

$

61,543

$

87,548

Total assets

6,091,470

5,141,408

Long-term debt, including current maturities

1,230,157

538,246

Total liabilities

6,710,858

5,598,898

 

 

GENESIS HEALTHCARE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(IN THOUSANDS)

Twelve months ended  December 31,

2015

2014

Net cash provided by operating activities (1)

$

8,618

$

107,652

Net cash used in investing activities

(119,384)

(95,675)

Net cash provided by financing activities

84,761

14,158

Net (decrease) increase in cash and equivalents

(26,005)

26,135

Beginning of period

87,548

61,413

End of period

$

61,543

$

87,548

(1) - Net cash provided by operating activities in the twelve months ended December 31, 2015 include approximately $71 million of cash payments for transaction related costs.

 

 

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

Three months  ended  December 31,  2015

Conversion to  cash basis  leases (a)

Newly acquired or  constructed  businesses with  start-up losses and  newly divested  facilities (b)

Other  adjustments (c)

Total  adjustments

Three months  ended  December 31,  2015

Net revenues

$

1,440,721

$

$

(13,498)

$

$

(13,498)

$

1,427,223

Salaries, wages and benefits

844,527

(6,761)

(2,734)

(9,495)

835,032

Other operating expenses

365,268

(6,749)

(68)

(6,817)

358,451

General and administrative costs

44,983

(2,074)

(2,074)

42,909

Provision for losses on accounts receivable

31,666

(403)

(403)

31,263

Lease expense

37,243

86,464

(2,358)

84,106

121,349

Depreciation and amortization expense

61,574

(34,181)

(1,456)

(35,637)

25,937

Interest expense

131,573

(105,662)

(122)

(105,784)

25,789

Other loss (income)

6,121

(16)

(6,105)

(6,121)

Investment income

(477)

(477)

Transaction costs

4,358

(6)

(4,352)

(4,358)

Long-lived asset impairment

28,546

(28,546)

(28,546)

Equity in net income of unconsolidated affiliates

(986)

(986)

(Loss) income before income tax expense (benefit)

$

(113,675)

$

53,379

$

4,373

$

43,879

$

101,631

$

(12,044)

Income tax expense (benefit)

199,317

12,390

1,015

(207,152)

(193,747)

5,570

(Loss) income from continuing operations

$

(312,992)

$

40,989

$

3,358

$

251,031

$

295,378

$

(17,614)

(Income) loss from discontinued operations, net of taxes

(352)

201

201

(151)

Net (loss) income attributable to noncontrolling interests

(47,149)

22,403

(1,007)

16,093

37,489

(9,660)

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

$

(265,491)

$

18,385

$

4,365

$

234,938

$

257,688

$

(7,803)

Depreciation and amortization expense

61,574

(34,181)

(1,456)

(35,637)

25,937

Interest expense

131,573

(105,662)

(122)

(105,784)

25,789

Other loss (income)

6,121

(16)

(6,105)

(6,121)

Transaction costs

4,358

(6)

(4,352)

(4,358)

Long-lived asset impairment

28,546

(28,546)

(28,546)

Income tax expense (benefit)

199,317

12,390

1,015

(207,152)

(193,747)

5,570

(Income) loss from discontinued operations, net of taxes

(352)

201

201

(151)

Net (loss) income attributable to noncontrolling interests

(47,149)

22,403

(1,007)

16,093

37,489

(9,660)

EBITDA / Adjusted EBITDA

$

118,497

$

(86,464)

$

2,773

$

4,876

$

(78,815)

$

39,682

Lease expense

37,243

86,464

(2,358)

84,106

121,349

EBITDAR / Adjusted EBITDAR

$

155,740

$

$

415

$

4,876

$

5,291

$

161,031

(Loss) income per common share:

Diluted:

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

89,197

153,671

Diluted net loss from continuing operations per share (e)

$

(2.98)

$

(0.05)

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

 

 

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 December 31,  2014

Conversion to  cash basis  leases (a)

Newly acquired or  constructed  businesses with  start-up losses and  newly divested  facilities (b)

Other  adjustments (c)

Three months  ended December 31,  2014

Skilled Healthcare  Group, Inc. three  months ended December 31,  2014

Three months  ended December 31,  2014

Net revenues

$

1,193,267

$

$

(7,815)

$

3,093

$

1,188,545

$

209,195

$

1,397,740

Salaries, wages and benefits

742,030

(7,745)

(565)

733,720

133,630

867,350

Other operating expenses

311,267

(3,575)

(42,238)

265,454

40,510

305,964

General and administrative costs

38,876

38,876

4,176

43,052

Provision for losses on accounts receivable

24,789

24,789

3,213

28,002

Lease expense

33,269

81,801

(1,392)

113,678

5,158

118,836

Depreciation and amortization expense

48,544

(33,702)

(319)

14,523

6,082

20,605

Interest expense

111,953

(99,706)

12,247

7,765

20,012

Loss (gain) on extinguishment of debt

453

(453)

Other loss (income)

499

(499)

(443)

(443)

Investment income

(552)

(552)

(552)

Transaction costs

8,070

(8,070)

Long-lived asset impairment

31,399

(31,399)

Equity in net loss of unconsolidated affiliates

555

555

(221)

334

(Loss) income before income tax (benefit) expense

$

(157,885)

$

51,607

$

5,216

$

86,317

$

(14,745)

$

9,325

$

(5,420)

Income tax (benefit) expense

(34,655)

11,327

1,145

18,946

(3,237)

2,995

(242)

(Loss) income from continuing operations

$

(123,230)

$

40,280

$

4,071

$

67,371

$

(11,508)

$

6,330

$

(5,178)

Loss from discontinued operations, net of taxes

8,483

544

9,027

9,027

Net loss attributable to noncontrolling interests

1,086

1,086

1,086

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

$

(132,799)

$

39,736

$

4,071

$

67,371

$

(21,621)

$

6,330

$

(15,291)

Depreciation and amortization expense

48,544

(33,702)

(319)

14,523

6,082

20,605

Interest expense

111,953

(99,706)

12,247

7,765

20,012

Loss (gain) on extinguishment of debt

453

(453)

Other loss (income)

499

(499)

(443)

(443)

Transaction costs

8,070

(8,070)

Long-lived asset impairment

31,399

(31,399)

Income tax (benefit) expense

(34,655)

11,327

1,145

18,946

(3,237)

2,995

(242)

Loss from discontinued operations, net of taxes

8,483

544

9,027

9,027

Net income attributable to noncontrolling interests

1,086

1,086

1,086

EBITDA / Adjusted EBITDA

$

43,033

$

(81,801)

$

4,897

$

45,896

$

12,025

$

22,729

$

34,754

Lease expense

33,269

81,801

(1,392)

113,678

5,158

118,836

EBITDAR / Adjusted EBITDAR

$

76,302

$

$

3,505

$

45,896

$

125,703

$

27,887

$

153,590

Loss per common share:

Diluted:

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

49,865

Diluted net income from continuing operations per share (e)

$

(2.49)

Not calculated

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

 

 

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

Twelve months  ended  December 31,  2015

Conversion to  cash basis  leases (a)

Newly acquired or  constructed  businesses with  start-up losses and   newly divested  facilities (b)

Other  adjustments (c)

Twelve months  ended  December 31,  2015

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

Twelve months  ended  December 31,  2015

Net revenues

$

5,619,224

$

$

(45,613)

$

388

$

5,573,999

$

71,288

$

5,645,287

Salaries, wages and benefits

3,289,820

(25,890)

(3,211)

3,260,719

43,926

3,304,645

Other operating expenses

1,358,983

(22,742)

(10,602)

1,325,639

17,141

1,342,780

General and administrative costs

175,889

(9,530)

166,359

1,516

167,875

Provision for losses on accounts receivable

100,521

(1,011)

99,510

1,289

100,799

Lease expense

150,276

341,030

(9,588)

481,718

1,766

483,484

Depreciation and amortization expense

237,617

(135,472)

(5,919)

96,226

1,998

98,224

Interest expense

507,809

(417,033)

(162)

90,614

2,521

93,135

Loss on extinguishment of debt

130

(130)

Other income (loss)

(1,400)

(55)

1,455

11

11

Investment income

(1,677)

(1,677)

(1,677)

Transaction costs

96,374

(69)

(96,305)

Long-lived asset impairment

28,546

(28,546)

Skilled Healthcare loss contingency expense

31,500

(31,500)

Equity in net income of unconsolidated affiliates

(2,139)

(2,139)

(146)

(2,285)

(Loss) income before income tax benefit

$

(353,025)

$

211,475

$

19,823

$

178,757

$

57,030

$

1,266

$

58,296

Income tax expense (benefit)

172,524

49,088

4,601

(175,844)

50,369

494

50,863

(Loss) income from continuing operations

$

(525,549)

$

162,387

$

15,222

$

354,601

$

6,661

$

772

$

7,433

Loss from discontinued operations, net of taxes

1,219

1,283

2,502

2,502

Net (loss) income attributable to noncontrolling interests

(100,573)

29,591

2,088

27,911

(40,983)

531

(40,452)

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

$

(426,195)

$

131,513

$

13,134

$

326,690

$

45,142

$

241

$

45,383

Depreciation and amortization expense

237,617

(135,472)

(5,919)

96,226

1,998

98,224

Interest expense

507,809

(417,033)

(162)

90,614

2,521

93,135

Loss on extinguishment of debt

130

(130)

Other income (loss)

(1,400)

(55)

1,455

11

11

Transaction costs

96,374

(69)

(96,305)

Long-lived asset impairment

28,546

(28,546)

Skilled Healthcare loss contingency expense

31,500

(31,500)

Income tax expense (benefit)

172,524

49,088

4,601

(175,844)

50,369

494

50,863

Loss from discontinued operations, net of taxes

1,219

1,283

2,502

2,502

Net (loss) income attributable to noncontrolling interests

(100,573)

29,591

2,088

27,911

(40,983)

531

(40,452)

EBITDA / Adjusted EBITDA

$

547,551

$

(341,030)

$

13,618

$

23,731

$

243,870

$

5,796

$

249,666

Lease expense

150,276

341,030

(9,588)

481,718

1,766

483,484

EBITDAR / Adjusted EBITDAR

$

697,827

$

$

4,030

$

23,731

$

725,588

$

7,562

$

733,150

(Loss) income per common share:

Diluted:

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

85,755

153,671

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

$

(4.96)

$

0.23

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

 

 

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

Twelve months  ended  December 31,  2014

Conversion to  cash basis  leases (a)

Newly acquired or  constructed businesses with start- up losses and newly divested  facilities (b)

Other  adjustments (c)

Twelve months  ended  December 31,  2014

Skilled Healthcare  Group, Inc. twelve  months ended  December 31,  2014

Twelve months  ended  December 31,  2014

Net revenues

$

4,768,080

$

$

(18,526)

$

4,260

$

4,753,814

$

831,338

$

5,585,152

Salaries, wages and benefits

2,904,094

(16,233)

(2,579)

2,885,282

522,357

3,407,639

Other operating expenses

1,109,699

(8,372)

(44,361)

1,056,966

165,644

1,222,610

General and administrative costs

147,063

147,063

28,265

175,328

Provision for losses on accounts receivable

77,670

77,670

13,428

91,098

Lease expense

131,898

320,306

(3,005)

449,199

20,000

469,199

Depreciation and amortization expense

193,675

(132,326)

(434)

60,915

24,322

85,237

Interest expense

442,724

(391,962)

50,762

31,240

82,002

Loss (gain) on extinguishment of debt

1,133

(1,133)

Other (income) loss

(138)

138

(579)

(579)

Investment income

(3,399)

(3,399)

(3,399)

Transaction costs

13,353

(13,353)

Long-lived asset impairment

31,399

(31,399)

Equity in net income of unconsolidated affiliates

416

416

(1,427)

(1,011)

(Loss) income before income tax (benefit) expense

$

(281,507)

$

203,982

$

9,518

$

96,947

$

28,940

$

28,088

$

57,028

Income tax (benefit) expense

(44,022)

31,899

1,488

15,161

4,526

10,548

15,074

(Loss) income from continuing operations

$

(237,485)

$

172,083

$

8,030

$

81,786

$

24,414

$

17,540

$

41,954

Loss (income) from discontinued operations, net of taxes

14,044

(2,041)

12,003

12,003

Net loss attributable to noncontrolling interests

2,456

2,456

2,456

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

$

(253,985)

$

174,124

$

8,030

$

81,786

$

9,955

$

17,540

$

27,495

Depreciation and amortization expense

193,675

(132,326)

(434)

60,915

24,322

85,237

Interest expense

442,724

(391,962)

50,762

31,240

82,002

Loss (gain) on extinguishment of debt

1,133

(1,133)

Other (income) loss

(138)

138

(579)

(579)

Transaction costs

13,353

(13,353)

Long-lived asset impairment

31,399

(31,399)

Income tax (benefit) expense

(44,022)

31,899

1,488

15,161

4,526

10,548

15,074

Loss (income) from discontinued operations, net of taxes

14,044

(2,041)

12,003

12,003

Net income attributable to noncontrolling interests

2,456

2,456

2,456

EBITDA / Adjusted EBITDA

$

400,639

$

(320,306)

$

9,084

$

51,200

$

140,617

$

83,071

$

223,688

Lease expense

131,898

320,306

(3,005)

449,199

20,000

469,199

EBITDAR / Adjusted EBITDAR

$

532,537

$

$

6,079

$

51,200

$

589,816

$

103,071

$

692,887

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)

$

(4.81)

Not calculated

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

 

(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 December 31, 

Twelve months ended December 31, 

2015

2014

2015

2014

(in thousands)

Lease expense:

Cash rent - capital leases

$

22,989

$

22,602

$

91,899

$

89,683

Cash rent - financing obligations

65,550

61,911

257,121

242,918

Non-cash - operating lease arrangements

(2,075)

(2,712)

(7,990)

(12,295)

Lease expense adjustments

$

86,464

$

81,801

$

341,030

$

320,306

Depreciation and amortization expense:

Capital lease accounting

$

(8,974)

$

(8,257)

$

(35,544)

$

(35,385)

Financing obligation accounting

(25,207)

(25,445)

(99,928)

(96,941)

Depreciation and amortization expense adjustments

$

(34,181)

$

(33,702)

$

(135,472)

$

(132,326)

Interest expense:

Capital lease accounting

$

(26,514)

$

(26,350)

$

(104,660)

$

(100,846)

Financing obligation accounting

(79,148)

(73,356)

(312,373)

(291,116)

Interest expense adjustments

$

(105,662)

$

(99,706)

$

(417,033)

$

(391,962)

Total pre-tax lease accounting adjustments

$

(53,379)

$

(51,607)

$

(211,475)

$

(203,982)

 

(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.  The divestiture of underperforming or non-strategic facilities has also become an important element of our earnings optimization strategy.  We eliminate the results of divested facilities beginning in the quarter in which they become divested.  We view the losses associated with the wind down of such divested facilities as non-recurring and not indicative of the performance of our core business.

(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.

 

Three months ended December 31,

Twelve months ended December 31,

2015

2014

2015

2014

(in thousands)

Severance and restructuring (1)

$

364

$

6,762

$

3,485

$

8,975

Regulatory defense and related costs (2)

2,237

3,124

4,992

5,085

New business development costs (3)

511

1,641

Self-insurance adjustment (4)

35,499

10,500

35,499

Transaction costs (5)

4,352

8,070

96,305

13,353

Long-lived asset impairment (9)

28,546

31,399

28,546

31,399

Skilled Healthcare loss contingency expense (8)

31,500

Loss on early extinguishment of debt

453

130

1,133

Other loss (income) (6)

6,105

499

(1,455)

(138)

Stock based compensation (7)

2,275

4,754

Tax benefit from total adjustments

(10,185)

(18,946)

(41,493)

(15,161)

Deferred tax valuation allowance adjustment (10)

217,337

217,337

Total other adjustments

$

251,031

$

67,371

$

354,601

$

81,786

(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)

In the twelve months ended December 31, 2015, we incurred a self-insured program adjustment of $10.5 million for the actuarially developed GLPL and worker's compensation claims related to policy periods 2014 and prior.  In the three and twelve months ended December 31, 2014 we incurred a self-insured program adjustment of $35.5 million for the actuarial developed GLPL and workers' compensation claims related to prior policy years specifically related to the Sun Healthcare business acquired in December 2012.

(5)

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

(6)

We realized net gains and losses on the sale of certain assets in the years ended December 31, 2015 and 2014.

(7)

We incurred non-cash stock-based compensation related to restricted stock units.

(8)

We recognized $31.5 million of loss contingency expense associated with three Skilled Healthcare regulatory matters.

(9)

We incurred non-cash charges in connection with long-lived asset impairment testing.

(10)

We established a valuation allowance against our net deferred tax assets, as realization of such assets is no longer more likely than not.

 

(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 x (1 - 40% tax rate) / diluted weighted average shares on a fully exchanged basis.

 

SKILLED HEALTHCARE GROUP, INC.

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

(UNAUDITED)

(IN THOUSANDS)

GAAP as reported

Non-GAAP as adjusted

GAAP as reported

Non-GAAP as adjusted

GAAP as reported

Non-GAAP as adjusted

One month ended January 31,  2015

Adjust

One month  ended  January 31,  2015

Three months ended  December 31,  2014

Adjust

Three months ended December 31,  2014

Twelve months ended December 31,  2014

Adjust

Twelve months ended December 31,  2014

Net revenues

$

71,288

$

$

71,288

$

210,359

$

(1,164)

$

209,195

$

833,256

$

(1,918)

$

831,338

Salaries, wages and benefits

44,842

(916)

43,926

134,121

(491)

133,630

523,565

(1,208)

522,357

Other operating expenses

17,486

(345)

17,141

42,005

(1,495)

40,510

183,801

(18,157)

165,644

General and administrative costs

1,516

1,516

13,838

(9,662)

4,176

39,989

(11,724)

28,265

Provision for losses on accounts receivable

1,289

1,289

3,213

3,213

13,575

(147)

13,428

Lease expense

1,766

1,766

5,158

5,158

20,000

20,000

Depreciation and amortization expense

1,998

1,998

6,082

6,082

24,322

24,322

Interest expense

2,521

2,521

7,765

7,765

31,240

31,240

Loss on extinguishment of debt

843

(843)

Impairment of long-lived assets

82

(82)

Other (income) loss

11

11

(443)

(443)

(579)

(579)

Transaction costs

4,638

(4,638)

Equity in net income of unconsolidated affiliates

(146)

(146)

(221)

(221)

(1,427)

(1,427)

Income tax (benefit) expense

(1,807)

2,301

494

(1,094)

4,089

2,995

-

(1,247)

11,795

10,548

Net (loss) income

(2,826)

3,598

772

(65)

6,395

6,330

(908)

18,448

17,540

-

Depreciation and amortization expense

1,998

1,998

6,082

6,082

24,322

24,322

Interest expense

2,521

2,521

7,765

7,765

31,240

31,240

Loss on extinguishment of debt

843

(843)

Transaction costs

4,638

(4,638)

Impairment of long-lived assets

82

(82)

Other (income) loss

11

11

(443)

(443)

(579)

(579)

Income tax (benefit) expense

(1,807)

2,301

494

(1,094)

4,089

2,995

(1,247)

11,795

10,548

EBITDA / Adjusted EBITDA

4,535

1,261

5,796

12,245

10,484

22,729

53,753

29,318

83,071

Lease expense

1,766

1,766

5,158

5,158

20,000

20,000

EBITDAR / Adjusted EBITDAR

$

6,301

$

1,261

$

7,562

$

17,403

$

10,484

$

27,887

$

73,753

$

29,318

$

103,071

 

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  December 31, 2014

Twelve months ended  December 31, 2014

Severance and restructuring

$

1,220

$

162

$

1,592

Regulatory defense and related costs

41

Exist costs of divested facilities

397

Professional fees related to non-routine matters

8,086

21,982

Losses at skilled nursing facility not at full operation

442

1,025

Loss on disposal of asset

68

Loss on extinguishment of debt

843

Non-cash stock compensation

371

1,794

4,254

Impairment of long-lived assets

82

Transaction costs

4,267

Tax benefit of total adjustments

(2,301)

(4,089)

(11,795)

Total adjustments

$

3,598

$

6,395

$

18,448

 

 

GENESIS HEALTHCARE, INC.

KEY FINANCIAL PERFORMANCE INDICATORS

(UNAUDITED)

Three months ended December 31,

Twelve months ended December 31,

2015

2014

2015

2014

(In thousands)

(In thousands)

Financial Results

Net revenues

$

1,440,721

$

1,193,267

$

5,619,224

$

4,768,080

EBITDAR

155,740

76,302

697,827

532,537

EBITDA

118,497

43,033

547,551

400,639

Adjusted EBITDAR

161,031

125,703

725,588

589,816

Adjusted EBITDA

39,682

12,025

243,870

140,617

Pro forma adjusted EBITDAR

161,031

153,590

733,150

692,887

Pro forma adjusted EBITDA

39,682

34,754

249,666

223,688

INPATIENT SEGMENT:

Three months ended December 31,

Twelve months ended December 31,

2015

2014

2015

2014

Occupancy Statistics - Inpatient

Available licensed beds in service at end of period

58,841

46,407

58,841

46,407

Available operating beds in service at end of period

57,325

45,058

57,325

45,058

Available patient days based on licensed beds

5,121,285

4,256,802

20,216,691

16,967,951

Available patient days based on operating beds

5,010,717

4,134,842

19,663,712

16,463,613

Actual patient days

4,310,058

3,665,213

17,061,645

14,679,338

Occupancy percentage - licensed beds

84.2

%

86.1

%

84.4

%

86.5

%

Occupancy percentage - operating beds

86.0

%

88.6

%

86.8

%

89.2

%

Skilled mix

20.3

%

21.4

%

21.4

%

21.7

%

Average daily census

46,848

39,839

46,744

40,217

Revenue per patient day (skilled nursing facilities)

Medicare Part A

$

510

$

495

$

504

$

492

Medicare total (including Part B)

553

532

543

530

Insurance

447

450

448

450

Private and other

295

312

295

316

Medicaid

217

215

216

213

Medicaid (net of provider taxes)

196

194

195

193

Weighted average (net of provider taxes)

$

268

$

269

$

270

$

270

Patient days by payor (skilled nursing facilities)

Medicare

522,488

501,239

2,214,184

2,076,272

Insurance

289,540

230,073

1,172,776

900,663

Total skilled mix days

812,028

731,312

3,386,960

2,976,935

Private and other

297,293

243,004

1,160,070

971,500

Medicaid

2,880,344

2,444,435

11,272,487

9,759,092

Total Days

3,989,665

3,418,751

15,819,517

13,707,527

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

Medicare

13.1

%

14.7

%

14.0

%

15.1

%

Insurance

7.2

%

6.7

%

7.4

%

6.6

%

Skilled mix

20.3

%

21.4

%

21.4

%

21.7

%

Private and other

7.5

%

7.1

%

7.3

%

7.1

%

Medicaid

72.2

%

71.5

%

71.3

%

71.2

%

Total

100.0

%

100.00

%

100.0

%

100.0

%

Facilities at end of period

Skilled nursing facilities

Leased

381

359

381

359

Owned

49

2

49

2

Joint Venture

5

5

5

5

Managed *

40

14

40

14

Total skilled nursing facilities

475

380

475

380

Total licensed beds

58,046

46,204

58,046

46,204

Assisted living facilities:

Leased

30

28

30

28

Owned

22

1

22

1

Joint Venture

1

1

1

1

Managed

3

4

3

4

Total assisted living facilities

56

34

56

34

Total licensed beds

3,985

2,762

3,985

2,762

Total facilities

531

414

531

414

Total Jointly Owned and Managed– (Unconsolidated)

22

17

22

17

REHABILITATION THERAPY SEGMENT:

Three months ended December 31,

Twelve months ended December 31,

2015

2014

2015

2014

Revenue mix %:

Company-operated

37

%

38

%

38

%

37

%

Non-affiliated

63

%

62

%

62

%

63

%

Sites of service (at end of period)

1,670

1,358

1,670

1,358

Revenue per site

$

165,622

$

163,218

$

672,296

$

687,782

Therapist efficiency %

68

%

65

%

69

%

68

%

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

 

Genesis HealthCare Contact:  Investor Relations 610-925-2000

SOURCE Genesis HealthCare



RELATED LINKS

http://www.genesishcc.com