Skilled Healthcare Group Reports First Quarter 2012 EPS Of $0.17

FOOTHILL RANCH, Calif., May 2, 2012 /PRNewswire/ -- Skilled Healthcare Group, Inc. (NYSE: SKH) today announced its consolidated financial operating results for the three-month period ended March 31, 2012.

"We are pleased to report our first quarter of 2012 operating results.  Our cost mitigation efforts in response to the October 1, 2011 Medicare rate cut and changes to therapy reimbursement continue to meet our expectations," said Boyd Hendrickson, Chairman and Chief Executive Officer of Skilled Healthcare Group, Inc. "Our Cornerstone hospice acquisition, which closed in the fourth quarter of 2011, has complemented our Signature hospice and home health operations very well.  Signature represented 11.9 percent of our revenue in the first quarter of 2012, up from 8.1 percent a year ago. Hospice and home health care represent important service elements within the continuum of care for seniors and we are proud of the excellent care provided by our companies in this area as well the care provided at our long-term care facilities."

First Quarter 2012 Results

Revenue for the quarter ended March 31, 2012 was $219.4 million, a decrease of 1.4 percent when compared to $222.6 million in the first quarter of 2011.  Skilled Mix(1) decreased 160 basis points to 22.9 percent in the first quarter of 2012 from 24.5 percent in the first quarter of 2011.  Quality mix(2) in the first quarter of 2012 decreased 90 basis points to 70.3 percent, compared to 71.2 percent in the prior year period.

Adjusted EBITDA(3) was $26.1 million, or 11.9 percent of revenue, for the quarter ended March 31, 2012, a decrease of 29.2 percent compared to $36.8 million, or 16.5 percent of revenue, in the same period a year ago.  Adjusted EBITDAR(4) was $30.6 million, or 14.0 percent of revenue, for the quarter ended March 31, 2012, a decrease of 26.0 percent compared to $41.4 million, or 18.6 percent of revenue, for the quarter ended March 31, 2011.

Net income for the quarter ended March 31, 2012, totaled $6.3 million, a decrease of 46.5 percent compared to net income of $11.8 million for the first quarter of 2011.  Adjusted net income(5) excludes certain items as described in the Adjusted Net Income Reconciliation table at the end of this press release.  Due to the absence of any such items during the first quarter of 2012, adjusted net income for the quarter was also $6.3 million

Net income per diluted share was $0.17 for the quarter ended March 31, 2012, a decrease of 46.9 percent compared to net income per diluted share of $0.32 for the same period in 2011.  Adjusted net income per diluted share for the quarter ended March 31, 2011 was $0.34.

Long-Term Care Services Segment

Revenue for our long-term care services segment in the quarter ended March 31, 2012 was $167.1 million, a decrease of $15.2 million, or 8.4 percent, as compared to $182.3 million for the same period a year ago.  Revenue for this segment represented 76.2 percent of total revenue in the first quarter of 2012, compared to 81.9 percent of total revenue in the first quarter of 2011.

Therapy Services Segment

Revenue for Hallmark Rehabilitation, our rehabilitation therapy services segment, was $26.1 million for the quarter ended March 31, 2012, an increase of $3.9 million compared to the same period a year ago. Third-party rehabilitation therapy accounted for 11.9 percent of total revenue in the first quarter of 2012, compared to 10.0 percent of total revenue in the first quarter of 2011.

Hospice and Home Health Care Services Segment

Revenue for Signature Hospice and Home Health Care, our hospice and home health care services segment, was $26.2 million in the first quarter of 2012, an increase of $8.1 million, or 45.1 percent, compared to $18.1 million in the first quarter of 2011. Average daily hospice census grew to 1,375 for the three-months ended March 31, 2012 from 992 for the three-months ended March 31, 2011, an increase of 38.6 percent. The increase in census was due in significant part to our October 2011 acquisition of the two Cornerstone hospice agencies.

2012 Guidance

Skilled Healthcare Group, Inc. reiterates its 2012 guidance announced on February 13, 2012, and expects full year 2012 consolidated revenue to be between $865.0 million and $880.0 million, EBITDA to be in the range of $112.2 million to $115.9 million, EBITDAR to be in the range of $131.5 million to $135.2 million and net income per common diluted share to be between $0.78 and $0.85.  This guidance assumes the following:

  • Market basket increase of 2 percent in Medicare beginning October 1, 2012.
  • No Medicaid rate changes for Medicaid's fiscal 2013.
  • 2012 capital expenditures of approximately $20 million.
  • Average interest rate on outstanding debt of approximately eight percent.
  • An effective tax rate of 39 percent.
  • Guidance does not include additional acquisitions, developments or divestitures.
  • Guidance does not include the write-off of deferred financing fees related to the April 2012 credit facility amendment and May 2012 redemption of our 11% Senior Subordinated Notes due 2014 (the "Notes"), nor the interest expense associated with the period from the date of the redemption notice (April 12, 2012) to the redemption date (May 12, 2012) for the Notes.

Conference Call

A conference call and webcast will be held tomorrow, Thursday, May 3, at 9:00 a.m. Pacific Time (12:00 noon Eastern Time) to discuss Skilled Healthcare Group's consolidated financial results for the first quarter of 2012 and its outlook for the full year 2012.

To participate in the call, interested parties may dial (877) 765-8543 and reference conference ID 70192496.  Alternatively, interested parties may access the call in listen-only mode at www.skilledhealthcaregroup.com.  A replay of the conference call will be available after 12:00 noon Pacific Time at www.skilledhealthcaregroup.com.

About Skilled Healthcare Group, Inc.

Skilled Healthcare Group, Inc., based in Foothill Ranch, California, is a holding company with subsidiary healthcare services companies, which in the aggregate had trailing twelve month revenue of approximately $866 million and approximately 14,300 employees as of March 31, 2012. Skilled Healthcare Group and its wholly-owned companies, collectively referred to as the "Company," operate long-term care facilities and provide a wide range of post-acute care services, with a strategic emphasis on sub-acute specialty health care. The Company operates long-term care facilities in California, Iowa, Kansas, Missouri, Nebraska, Nevada, New Mexico and Texas, including 74 skilled nursing facilities that offer sub-acute care and rehabilitative and specialty health skilled nursing care, and 22 assisted living facilities that provide room and board and social services. In addition, the Company provides physical, occupational and speech therapy in Company-operated facilities and unaffiliated facilities. Furthermore, the Company provides hospice and home health care in Arizona, California, Idaho, Montana, New Mexico and Nevada. The Company leases 5 skilled nursing facilities in California to an unaffiliated third party operator. References made in this release to "Skilled Healthcare," "the Company," "we," "us" and "our" refer to Skilled Healthcare Group, Inc. and each of its wholly-owned companies. More information about Skilled Healthcare is available at www.skilledhealthcaregroup.com.

Footnotes

(1)

Skilled mix represents the number of Medicare and non-Medicaid managed care patient days at Skilled Healthcare Group's affiliated skilled nursing facilities divided by the total number of patient days at Skilled Healthcare Group's affiliated skilled nursing facilities for any given period.

(2)

Quality mix represents non-Medicaid revenue as a percentage of total revenue.

(3)

Adjusted earnings before interest, taxes, depreciation and amortization, or Adjusted EBITDA, reflects the non-GAAP adjustments to net income that are reflected in the Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Adjusted EBITDAR in this press release. EBITDA is net income before depreciation, amortization and interest expense (net of interest income) and the provision for income taxes.  EBITDAR is EBITDA excluding facility rent expense.

(4)

Adjusted EBITDAR is Adjusted EBITDA excluding facility rent expense as reflected in the Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Adjusted EBITDAR table in this press release.

(5)

Adjusted net income reflects the non-GAAP adjustments to income before provision for income taxes that are reflected in the Adjusted Net Income Reconciliation table in this press release.

Forward-Looking Statements

This release includes "forward-looking statements." 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" or "pursue," or the negative or other variations thereof or comparable terminology. They include statements about Skilled Healthcare's expectations for 2012 full year consolidated revenue, EBITDA, EBITDAR and net income per diluted common share. These forward-looking statements are based on current expectations and projections about future events.

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 Skilled Healthcare may differ materially from that expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, the factors described in Skilled Healthcare's Annual Report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission (including the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained therein) and in our subsequent reports on Form 10-Q and Form 8-K.

Any forward-looking statements are made only as of the date of this release. Skilled Healthcare disclaims any obligation to update the forward-looking statements. Investors are cautioned not to place undue reliance on these forward-looking statements.

 

Skilled Healthcare Group, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)

 


Three Months Ended March 31,


2012


2011


(Unaudited)

Revenue:




Net patient service revenue

$   218,659



$    222,578


Lease facility revenue

754





219,413



222,578






Expenses:




Cost of services (exclusive of rent cost of revenue and
 depreciation and amortization show below)

183,131



175,461


Rent cost of revenue

4,556



4,570


General and administrative

6,100



6,893


Depreciation and amortization

6,275



6,145



200,062



193,069






Other (expenses) income:




Interest expense

(9,565)



(9,946)


Interest income

145



175


Other expense

(29)



(324)


Equity in earnings of joint venture

471



554


Total other (expenses), net

(8,978)



(9,541)


Income before provision for income taxes

10,373



19,968


Provision for income taxes

4,036



8,124


Net income

$

6,337



$

11,844






Earnings per share, basic

$

0.17



$

0.32


Earnings per share, diluted

$

0.17



$

0.32






Weighted-average common shares outstanding, basic

37,285



37,079


Weighted-average common shares outstanding, diluted

37,407



37,326


 

Skilled Healthcare Group, Inc.
Condensed Consolidated Balance Sheet and Cash Flow Data
(In thousands)

 


March 31, 2012


December 31, 2011


(Unaudited)


(Audited)

Balance Sheet Data:




ASSETS




Cash and cash equivalents

$

9,881



$

16,017


Other current assets

137,619



127,314


Property and equipment and leased facility assets, net

383,725



386,294


Goodwill

84,299



84,299


Other assets

80,958



81,076


Total assets

$

696,482



$

695,000






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities less current portion of long-term debt

$

87,196



$

93,964


Current portion of long-term debt

5,273



4,414


Other long-term liabilities

49,377



48,340


Long-term debt, less current portion

470,273



471,069


Stockholders' equity

84,363



77,213


Total liabilities and stockholders' equity

$

696,482



$

695,000


 


Three Months Ended March 31,


2012


2011


(Unaudited)


(Unaudited)

Cash Flows from Continuing Operations




Net cash (used) provided by operating activities

$

(1,022)



$

12,560


Net cash used in investing activities

(3,475)



(2,517)


Net cash used in financing activities

(1,639)



(13,295)


Decrease in cash and cash equivalents

(6,136)



(3,252)


Cash and cash equivalents at beginning of period

16,017



4,192


Cash and cash equivalents at end of period

$

9,881



$

940


 

Skilled Healthcare Group, Inc.
Consolidated Key Performance Indicators
(Unaudited)

 

The following table summarizes our key performance indicators, along with other statistics, for each of the dates or periods indicated:

 


Three Months Ended March 31,


2012


2011

Occupancy statistics (skilled nursing facilities):








Available beds in service at end of period

8,813



9,179


Available patient days

801,526



824,753


Actual patient days

668,431



690,808


Occupancy percentage

83.4

%


83.8

%

Skilled mix

22.9

%


24.5

%

Average daily number of patients

7,345



7,676






Hospice average daily census

1,375



992


Home health episodic-based admissions

1,985



979


Home health episodic-based recertifications

333



148






EBITDA (in thousands)

$

26,068



$

35,884


Adjusted EBITDA (in thousands)

$

26,068



$

36,801


Adjusted EBITDA margin

11.9

%


16.5

%

Adjusted EBITDAR (in thousands)

$

30,624



$

41,371


Adjusted EBITDAR margin

14.0

%


18.6

%





Revenue per patient day (skilled nursing facilities prior to intercompany eliminations)

LTC only Medicare (Part A)

$

508



$

577


Medicare blended rate (Part A & B)

575



630


Managed care

382



391


Medicaid

158



153


Private and other

181



175


Weighted-average for all

$

240



$

254






Revenue from (total company):




Medicare

35.0

%


39.6

%

Managed care, private pay, and other

35.3



31.6


Quality mix

70.3



71.2


Medicaid

29.7



28.8


Total

100.0

%


100.0

%

 

Skilled Healthcare Group, Inc.
Facility Ownership
(Unaudited)

 


As of March 31,


2012


2011

Facilities:




Skilled nursing facilities operated:




Owned

52


57


Leased

22


21


Total skilled nursing facilities operated

74


78


Total licensed beds

9,183


9,564


Skilled nursing facilities leased to unaffiliated third party operator

5



Assisted living facilities




Owned

21


20


Leased

1


2


Total assisted living facilities

22


22


Total licensed beds

1,214


1,264


Total facilities

101


100


Percentage owned facilities

77.2

%

77.0

%

 

Skilled Healthcare Group, Inc.
Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Adjusted EBITDAR
(In thousands)
(Unaudited)

 


Three Months Ended March 31,


2012


2011

Net income

$

6,337



$

11,844


Interest expense, net of interest income

9,420



9,771


Provision for income taxes

4,036



8,124


Depreciation and amortization expense

6,275



6,145


EBITDA

26,068



35,884


Loss on disposal of asset



290


Expenses related to the exploration of strategic alternatives



242


Exit costs related to Northern California divestiture



385


Adjusted EBITDA

26,068



36,801


Rent cost of revenue

4,556



4,570


Adjusted EBITDAR

$

30,624



$

41,371


 

Skilled Healthcare Group, Inc.
Reconciliation of Income Before Provision for Income Taxes to Adjusted Net Income
(In thousands, except per share data)
(Unaudited)

 


Three Months Ended March 31,


2012


2011

Income before provision for income taxes

$

10,373



$

19,968


Loss on disposal of asset



290


Expenses related to the exploration of strategic alternatives



242


Exit costs related to Northern California divestiture



385


Adjusted income before provision for income taxes

10,373



20,885


Provision for income taxes

4,036



8,500


Add back tax credit valuation allowance related to Northern California divestiture



(388)


Adjusted net income

$

6,337



$

12,773






Weighted-average common shares outstanding, diluted

37,407



37,326


Adjusted net income per share, diluted

$

0.17



$

0.34


Effective tax rate

38.9

%


40.7

%

Skilled Healthcare Group, Inc.
Reconciliation of Forecasted Net Income to Forecasted EBITDA and Forecasted EBITDAR
Year Ending December 31, 2012
(In millions, except per share data)
(Unaudited)

 


Outlook


Low


High

Net income guidance

$

29.3



$

32.0


Interest expense, net of interest income

37.4



37.1


Provision for income taxes

18.7



20.5


Depreciation and amortization expense

26.8



26.3


EBITDA guidance

112.2



115.9


Rent cost of revenue

19.3



19.3


EBITDAR guidance

$

131.5



$

135.2






Diluted earnings per share

$

0.78



$

0.85






Weighted-average common shares outstanding, diluted

37.6



37.6


We believe that a report of adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR provides consistency in our financial reporting and provides a basis for the comparison of results of core business operations between our current, past and future periods.  Adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR are primary indicators management uses for planning and forecasting in future periods, including trending and analyzing the core operating performance of our business from period-to-period without the effect of U.S. GAAP, expenses, revenues and gains (losses) that are unrelated to the day-to-day performance of our business.  We also use adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR to benchmark the performance of our business against expected results, analyzing year-over-year trends as described below and to compare our operating performance to that of our competitors.

Management uses adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR to assess the performance of our core business operations, to prepare operating budgets and to measure our performance against those budgets on a consolidated and segment level.  Segment management uses these metrics to measure performance on  a facility-by-facility level.  We typically use adjusted net income per share, Adjusted EBITDA and Adjusted EBITDAR for these purposes on a consolidated basis as the adjustments to adjusted net income per share, EBITDA and EBITDAR are not generally allocable to any individual business unit and we typically use EBITDA and EBITDAR to compare the operating performance of each skilled nursing and assisted living facility, as well as to assess the performance of our operating segments.  EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR are useful in this regard because they do not include such costs as interest expense (net of interest income), income taxes, depreciation and amortization expense, rent cost of revenue (in the case of EBITDAR and Adjusted EBITDAR) and special charges, which may vary from business unit to business unit and period-to-period depending upon various factors, including the method used to finance the business, the amount of debt that we have determined to incur, whether a facility is owned or leased, the date of acquisition of a facility or business, the original purchase price of a facility or business unit or the tax law of the state in which a business unit operates.  These types of charges are dependent on factors unrelated to the underlying business unit performance.  As a result, we believe that the use of adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR provides a meaningful and consistent comparison of our underlying businesses and facilities between periods by eliminating certain items required by U.S. GAAP which have little or no significance to their day-to-day operations.

The use of adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA, Adjusted EBITDAR and other non-GAAP financial measures has certain limitations. Our presentation of adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA, Adjusted EBITDAR or other non-GAAP financial measures may be different from the presentation used by other companies and therefore comparability may be limited. Depreciation and amortization expense, interest expense, income taxes and other items have been and will be incurred and are not reflected in the presentation of adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA or Adjusted EBITDAR. Each of these items should also be considered in the overall evaluation of our results. Additionally, adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA, Adjusted EBITDAR do not consider capital expenditures and other investing activities and should not be considered as a measure of our liquidity. We compensate for these limitations by providing the relevant disclosure of our depreciation and amortization, interest and income taxes, capital expenditures and other items both in our reconciliations to the U.S. GAAP financial measures and in our consolidated financial statements, all of which should be considered when evaluating our performance.

Adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA, Adjusted EBITDAR and certain other non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with U.S. GAAP. Adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA, Adjusted EBITDAR and other non-GAAP financial measures should not be considered as an alternative to net income, operating income, or any other operating performance measure prescribed by U.S. GAAP, nor should these measures be relied upon to the exclusion of U.S. GAAP financial measures. Adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA, Adjusted EBITDAR and other non-GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed with our U.S. GAAP results and the reconciliations to the corresponding U.S. GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. You are strongly encouraged to review our financial information in its entirety and not to rely on any single financial measure.

Investor Contact:
Skilled Healthcare Group, Inc.
Dev Ghose or Chris Felfe
(949) 282-5800

SOURCE Skilled Healthcare Group, Inc.



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