Skilled Healthcare Group Reports Second Quarter 2013 Adjusted EPS Of $0.09

Aug 05, 2013, 20:00 ET from Skilled Healthcare Group, Inc.

FOOTHILL RANCH, Calif., Aug. 5, 2013 /PRNewswire/ -- Skilled Healthcare Group, Inc. (NYSE: SKH) today announced its consolidated financial operating results for the three and six month periods ended June 30, 2013.

"Our Consolidated Adjusted EPS of $0.09 for the quarter was disappointing to us and was caused by several factors.  First, in our long-term care business we continue to see a shift of Medicare patient days to managed care days. We've also experienced overall softness in our skilled nursing occupancy rates.  Second, continued therapy reimbursement changes, in particular the Medicare Part B manual medical review for treatments exceeding the $3,700 threshold, have created a significant delay in payment to skilled nursing facilities generally, as the Medicare Administrative Contractors and Recovery Auditors have thus far been unable to keep pace with the volume of claims for beneficiaries who have a clinical need and qualify for Part B services. Third, we continue to experience hospice cap exposure. In response to these operational challenges we have made a number of changes to our administrative services subsidiary. We anticipate that these changes will save approximately $6.0 million per year, beginning August 1, 2013. None of these staffing reductions are being made at any operating subsidiary and as such no staffing at the patient care provider level is affected.  We continue to be optimistic in this challenging time in the post acute care space.  We continue to provide a level of care that is the most cost effective in the US Healthcare service area," said Boyd Hendrickson, Chairman and Chief Executive Officer of Skilled Healthcare Group.

Second Quarter 2013 Results

Revenue for the quarter ended June 30, 2013 was $213.7 million, a decrease of 1.7% when compared to $217.4 million in the second quarter of 2012. Skilled mix1 decreased 50 basis points to 21.9% in the second quarter of 2013 from 22.4% in the second quarter of 2012. Occupancy declined 100 basis points to 82.0% in the second quarter of 2013 from 83.0% in the second quarter of 2012. Quality mix2 in the second quarter of 2013 decreased 130 basis points to 68.9%, compared to 70.2% in the prior year period.

EBITDA3 was $17.2 million, or 8.1% of revenue, for the quarter ended June 30, 2013, a decrease of 22.9% compared to $22.3 million, or 10.3% of revenue, in the same period a year ago. EBITDAR3 was $22.1 million, or 10.3% of revenue, for the quarter ended June 30, 2013, a decrease of 17.8% compared to $26.9 million, or 12.4% of revenue, for the quarter ended June 30, 2012.

Adjusted EBITDA was $17.6 million or 8.2% of revenue, for the quarter ended June 30, 2013, a decrease of 34.3% compared to $26.8 million, or 12.3% of revenue, in the same period a year ago.  Adjusted EBITDAR was $22.5 million, or 10.5% of revenue, for the quarter ended June 30, 2013, a decrease of 28.1% compared to $31.3 million, or 14.4% of revenue, for the quarter ended June 30, 2012.

Net income for the quarter ended June 30, 2013 totaled $1.5 million, as compared to $3.5 million for the second quarter of 2012. Adjusted net income4 for the quarter ended June 30, 2013 totaled $3.4 million, a decrease of 48.5% compared to adjusted net income of $6.6 million for the second quarter of 2012. Adjusted net income excludes certain items as described in the Reconciliation of Income Before Provision for Income Taxes to Adjusted Net Income table at the end of this press release.

Net income per diluted share was $0.04 for the quarter ended June 30, 2013, as compared to $0.09 for the same period in 2012. Adjusted net income per diluted share was $0.09 for the quarter ended June 30, 2013, a decrease of 50.0% compared to adjusted net income per diluted share of $0.18 for the quarter ended June 30, 2012.

Long-Term Care Services Segment

Revenue for our long-term care services segment in the quarter ended June 30, 2013 was $161.8 million, a decrease of $2.3 million, or 1.4%, as compared to $164.1 million for the same period a year ago. Revenue for this segment represented 75.7% of total revenue in the second quarter of 2013, compared to 75.5% of total revenue in the second quarter of 2012. 

Therapy Services Segment

Revenue for Hallmark Rehabilitation, our rehabilitation therapy services segment, was $26.6 million for the quarter ended June 30, 2013, an increase of $0.2 million, or 0.8%, compared to the same period a year ago. Third-party rehabilitation therapy accounted for 12.4% of total revenue in the second quarter of 2013, compared to 12.1% of total revenue in the second quarter of 2012.

Hospice and Home Health Services Segment

Revenue for Signature Hospice and Home Health, our hospice and home health care services segment, was $25.3 million in the second quarter of 2013, a decrease of $1.6 million, or 5.9%, compared to $26.9 million in the second quarter of 2012. Average daily hospice census decreased 5.6% to 1,324 for the three-months ended June 30, 2013, from 1,402 for the three-months ended June 30, 2012. Results for the second quarter of 2013 were negatively affected by hospice cap reserves of $0.7 million for the 2012 cap year and $0.7 million for the 2013 cap year as patients stayed on service for longer than expected.

First Six Months 2013 Results

Revenue for the six months ended June 30, 2013 was $432.6 million, a decrease of 1.0% when compared to $436.8 million in the six months ended June 30, 2012. Skilled mix1 remained consistent at 22.6% for the first six months of 2013 as compared to the same period a year ago. Occupancy declined 70 basis points to 82.5% in the first six months of 2013 from 83.2% in the first six months of 2012. Quality mix2 for the first six month of 2013 decreased 80 basis points to 69.4%, compared to 70.2% in the prior year period.

EBITDA3 was $35.1 million, or 8.1% of revenue, for the six months ended June 30, 2013, a decrease of 27.3% compared to $48.3 million, or 11.1% of revenue, in the same period a year ago. EBITDAR3 was $44.7 million, or 10.3% of revenue, for the six months ended June 30, 2013, a decrease of 22.1% compared to $57.4 million, or 13.1% of revenue, for the six months ended June 30, 2012.

Adjusted EBITDA was $35.6 million, or 8.2% of revenue, for the six months ended June 30, 2013, a decrease of 32.7% compared to $52.9 million, or 12.1% of revenue for the same period a year ago.  Adjusted EBITDAR was $45.2 million, or 10.4% of revenue, for the first six months of 2013, a decrease of 27.1% compared to $62.0 million, or 14.2% of revenue, for the first six months of 2012.

Net income for the six months ended June 30, 2013 totaled $4.6 million, as compared to $9.8 million for the same period in 2012. Adjusted net income4 decreased 44.5% to $7.1 million for the six months ended June 30, 2013 from adjusted net income of $12.8 million for the first six months of 2012.

Net income per diluted share was $0.12 for the six months ended June 30, 2013, as compared to $0.26 for the same period in 2012. Adjusted net income per diluted share was $0.19 for the first six months of 2013, a decrease of 44.1% compared to adjusted net income per diluted share of $0.34 for the six months ended June 30, 2012.

Long-Term Care Services Segment

Revenue for our long-term care services segment in the six months ended June 30, 2013 was $327.5 million, a decrease of $3.6 million, or 1.1%, as compared to $331.2 million for the same period a year ago. Revenue for this segment represented 75.7% of total revenue in the first six months of 2013, compared to 75.8% of total revenue in the same period of 2012. 

Therapy Services Segment

Revenue for Hallmark Rehabilitation, our rehabilitation therapy services segment, was $53.7 million for the six months ended June 30, 2013, an increase of $1.2 million, or 2.3%, compared to the same period a year ago. Third-party rehabilitation therapy accounted for 12.5% of total revenue in the first six months  of 2013, compared to 12.0% of total revenue in the same period of 2012.

Hospice and Home Health Services Segment

Revenue for Signature Hospice and Home Health, our hospice and home health care services segment, was $51.4 million in the first six months of 2013, a decrease of $1.7 million, or 3.2%, compared to $53.1 million in the first six months of 2012. Average daily hospice census decreased 4.2% to 1,330 for the six months ended June 30, 2013, from 1,389 for the six months ended June 30, 2012. Results for the six months ended June 30, 2013 were negatively affected by hospice cap reserves of $0.2 million for the 2011 cap year, $1.9 million for the 2012 cap year, and $0.7 million for the 2013 cap year as patients stayed on service for longer than expected.

2013 Updated Guidance

Skilled Healthcare Group, Inc. expects full year 2013 consolidated revenue to be between $860 million and $870 million, EBITDA to be in the range of $78 million to $82 million, EBITDAR to be in the range of $97.5 million to $101.5 million and adjusted net income per common diluted share to be between $0.39 and $0.45. This guidance includes the results of the first half of 2013 and assumes the following:

  • Medicare increase of 1.3% beginning October 1, 2013
  • 2013 capital expenditures of approximately $15 to $18 million
  • Average interest rate on outstanding debt of approximately 7.8%
  • No benefit from HUD financing
  • An effective tax rate of 36%
  • Weighted average shares outstanding of 38.2 million
  • No additional acquisitions, developments or divestitures

Conference Call

A conference call and webcast will be held tomorrow, Tuesday, August 6th, at 9:00 a.m. Pacific Time (12:00 noon Eastern Time) to discuss Skilled Healthcare Group's consolidated financial results for the second quarter of 2013 and its outlook for 2013.

To participate in the call, interested parties may dial (800) 847-9525 and reference conference 18745997. 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 $868 million and approximately 15,000 employees as of June 30, 2013. 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. 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)   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. 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.

(4)   Adjusted net income per diluted share and adjusted net income each reflect the non-GAAP adjustments to income before provision for income taxes that are reflected in the Reconciliation of Income Before Provision for Income Taxes to Adjusted Net Income 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 2013 full year consolidated revenue, EBITDA, EBITDAR and net income per diluted share and anticipated savings as a result of changes in our administrative services structure. These forward-looking statements are based on current expectations and projections about future events, including the assumptions stated in this release.

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.

Additionally, the Company faces a number of other risks and uncertainties, including, but not limited to, the factors described in Skilled Healthcare's Annual Report on Form 10-K for the year ended December 31, 2012 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 June 30,

Six Months Ended June 30,

2013

2012

2013

2012

Revenue:

(Unaudited)

(Unaudited)

Net patient service revenue

$

212,905

$

216,607

$

431,019

$

435,266

Lease facility revenue

787

768

1,548

1,522

213,692

217,375

432,567

436,788

Expenses:

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

186,376

180,215

376,513

363,346

Rent cost of revenue

4,828

4,539

9,640

9,095

General and administrative

6,837

6,427

13,292

12,527

Change in fair value of contingent consideration

(2,244)

499

(2,161)

630

Depreciation and amortization

6,130

6,092

12,266

12,236

201,927

197,772

409,550

397,834

Other (expenses) income:

Interest expense

(8,734)

(10,521)

(17,409)

(20,086)

Interest income

112

132

224

277

Other (expense) income, net

(32)

106

(62)

77

Equity in earnings of joint venture

472

490

961

961

Debt modification/retirement costs

(1,088)

(3,958)

(1,088)

(3,958)

Total other (expenses) income, net

(9,270)

(13,751)

(17,374)

(22,729)

Income before provision for income taxes

2,495

5,852

5,643

16,225

Provision for income taxes

972

2,355

1,050

6,391

Net income

$

1,523

$

3,497

$

4,593

$

9,834

Net income per share, basic

$

0.04

$

0.09

$

0.12

$

0.26

Net income per share, diluted

$

0.04

$

0.09

$

0.12

$

0.26

Weighted-average common shares outstanding, basic

37,646

37,400

37,602

37,343

Weighted-average common shares outstanding, diluted

38,186

37,497

38,139

37,489

 

 

 

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

June 30, 2013

December 31, 2012

(Unaudited)

(Audited)

Balance Sheet Data:

ASSETS

Cash and cash equivalents

$

2,019

$

2,003

Accounts receivable, less allowance for doubtful accounts of $11,764 and $15,646 at June 30, 2013 and December 31, 2012, respectively

122,280

107,245

Other current assets

25,954

29,577

Property and equipment and leased facility assets, net

374,539

380,658

Goodwill

85,609

85,609

Other assets

74,573

77,544

Total assets

$

684,974

$

682,636

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities less current portion of long-term debt

$

93,192

$

90,965

Other long-term liabilities

40,279

42,873

Long-term debt

445,513

448,967

Stockholders' equity

105,990

99,831

Total liabilities and stockholders' equity

$

684,974

$

682,636

Six Months Ended June 30,

2013

2012

(Unaudited)

(Unaudited)

Cash Flows Data:

Net cash provided by operating activities

$

13,789

$

14,120

Net cash used in investing activities

(5,981)

(7,100)

Net cash used in financing activities

(7,792)

(17,465)

Increase (decrease) in cash and cash equivalents

16

(10,445)

Cash and cash equivalents at beginning of period

2,003

16,017

Cash and cash equivalents at end of period

$

2,019

$

5,572

 

 

 

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 June 30,

Six Months Ended June 30,

2013

2012

2013

2012

Occupancy statistics (skilled nursing facilities):

Available beds in service at end of period

8,801

8,805

8,801

8,805

Available patient days

801,625

801,743

1,594,857

1,603,269

Actual patient days

657,281

665,486

1,315,927

1,333,679

Occupancy percentage

82.0

%

83.0

%

82.5

%

83.2

%

Average daily number of patients

7,223

7,313

7,270

7,328

Hospice average daily census

1,324

1,402

1,330

1,389

Home health episodic-based admissions

2,091

2,099

4,333

4,084

Home health episodic-based recertifications

476

360

966

693

EBITDA (in thousands)

$

17,247

$

22,333

$

35,094

$

48,270

Adjusted EBITDA (in thousands)

$

17,640

$

26,790

$

35,570

$

52,858

Adjusted EBITDA margin

8.2

%

12.3

%

8.2

%

12.1

%

Adjusted EBITDAR (in thousands)

$

22,468

$

31,329

$

45,210

$

61,953

Adjusted EBITDAR margin

10.5

%

14.4

%

10.4

%

14.2

%

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

LTC only Medicare (Part A)

$

519

$

513

$

520

$

511

Medicare blended rate (Part A & B)

562

567

567

571

Managed care (Part A)

389

385

385

384

 Managed care blended rate (Part A & B)

398

394

394

392

Medicaid

162

157

162

157

Private and other

170

173

173

173

Weighted-average for all

$

235

$

236

$

238

$

237

Patient days by payor (skilled nursing facilities):

Medicare

79,135

88,690

164,363

181,724

Managed care

65,074

60,464

132,280

120,486

Total skilled mix days

144,209

149,154

296,643

302,210

Private pay and other

107,719

107,242

210,270

211,442

Medicaid

405,353

409,090

809,014

820,027

Total days

657,281

665,486

1,315,927

1,333,679

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

Medicare

12.0

%

13.3

%

12.5

%

13.6

%

Managed care

9.9

9.1

10.1

9.0

Skilled Mix

21.9

22.4

22.6

22.6

Private pay and other

16.4

16.1

16.0

15.9

Medicaid

61.7

61.5

61.4

61.5

Total

100.0

%

100.0

%

100.0

%

100.0

%

Revenue from (total company):

Medicare

31.0

%

33.8

%

31.8

%

34.4

%

Managed care, private pay, and other

37.9

36.4

37.6

35.8

Quality mix

68.9

70.2

69.4

70.2

Medicaid

31.1

29.8

30.6

29.8

Total

100.0

%

100.0

%

100.0

%

100.0

%

 

 

 

Skilled Healthcare Group, Inc.  Facility Ownership (Unaudited)

As of June 30,

2013

2012

Facilities:

Skilled nursing facilities operated:

Owned

52

52

Leased

22

22

Total skilled nursing facilities operated

74

74

Total licensed beds

9,185

9,181

Skilled nursing facilities leased to unaffiliated third party operator

5

5

Assisted living facilities

Owned

21

21

Leased

1

1

Total assisted living facilities

22

22

Total licensed beds

1,228

1,228

Total facilities

101

101

Percentage owned facilities

77.2

%

77.2

%

 

 

 

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

Three Months Ended June 30,

Six Months Ended June 30,

2013

2012

2013

2012

Net Income

$

1,523

$

3,497

$

4,593

$

9,834

Interest expense, net of interest income

8,622

10,389

17,185

19,809

Provision for income taxes

972

2,355

1,050

6,391

Depreciation and amortization expense

6,130

6,092

12,266

12,236

EBITDA

17,247

22,333

35,094

48,270

Rent cost of revenue

4,828

4,539

9,640

9,095

EBITDAR

22,075

26,872

44,734

57,365

EBITDA

17,247

22,333

35,094

48,270

Change in fair value of contingent consideration

(2,244)

499

(2,161)

630

Organization restructure costs

1,549

1,549

Debt modification/retirement costs

1,088

3,958

1,088

3,958

Adjusted EBITDA

17,640

26,790

35,570

52,858

Rent cost of revenue

4,828

4,539

9,640

9,095

Adjusted EBITDAR

$

22,468

$

31,329

$

45,210

$

61,953

 

 

 

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 June 30,

Six Months Ended June 30,

2013

2012

2013

2012

Income before provision for income taxes

$

2,495

$

5,852

$

5,643

$

16,225

Debt modification/retirement costs

1,088

3,958

1,088

3,958

Legal expense for non-routine matters

457

1,393

Organization restructure costs

1,549

1,549

Double bond interest expense for bond

1,192

1,192

Adjusted income before provision for income taxes

5,589

11,002

9,673

21,375

Adjusted provision for income taxes

2,171

4,390

2,612

8,529

Adjusted net income

$

3,418

$

6,612

$

7,061

$

12,846

Weighted-average common shares outstanding, diluted

38,186

37,497

38,139

37,489

Adjusted net income per share, diluted

$

0.09

$

0.18

$

0.19

$

0.34

Effective tax rate

38.8

%

39.9

%

27.0

%

39.9

%

 

 

Skilled Healthcare Group, Inc. Reconciliation of Forecasted Net Income to Forecasted EBITDA and Forecasted EBITDAR Year Ending December 31, 2013 (In millions) (Unaudited)

Outlook

Low

High

Net income guidance

$

12.4

$

14.7

Debt modification costs, net of tax

0.7

0.7

Organization restructure costs, net of tax

0.9

0.9

Legal expense for non-routine matter, net of tax

0.8

0.8

Adjusted net income guidance

14.8

17.1

Legal expense for non-routine matters

(1.4)

(1.4)

Interest expense, net of interest income

34.0

34.0

Provision for income taxes

7.1

8.8

Depreciation, amortization, and change in fair value of contingent consideration

23.5

23.5

Adjusted EBITDA guidance

78.0

82.0

Rent cost of revenue

19.5

19.5

Adjusted EBITDAR guidance

$

97.5

$

101.5

 

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 expenses, revenues and gains (losses) that are unrelated to the day-to-day performance of our consolidated and segmented business but are required to reported in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). We also use adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR to benchmark the performance of our consolidated and segmented 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 business unit by business unit basis. 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 business units 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. Chris Felfe (949) 282-5800

SOURCE Skilled Healthcare Group, Inc.



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