Skilled Healthcare Group Reports Third Quarter 2012 Adjusted EPS Of $0.21; HUD Approves SKH Portfolio Credit For Up To $460 Million On 78 Properties

FOOTHILL RANCH, Calif., Nov. 5, 2012 /PRNewswire/ -- Skilled Healthcare Group, Inc. (NYSE: SKH) today announced its consolidated financial operating results for the three and nine-month period ended September 30, 2012.  For the third quarter of 2012, the Company reported revenue of $216.6 million, Adjusted EBITDA1 of $24.1 million, Adjusted net income per share2 of $0.21, GAAP net income per share of $0.16 and a $9.8 million reduction in outstanding debt.  Additionally the Company announced that it has received the formal portfolio conditional credit approval from the U.S. Department of Housing and Urban Development (HUD) for up to an aggregate of $460 million in HUD insured loans secured by up to 78 facilities under HUD's Section 232 loan program, which provides loans for nursing homes, assisted living and related facilities.  The Company has not yet determined the amount of borrowings it will ultimately seek under the HUD insured loan program, and all loan applications will be subject to further review and approval by HUD.

"We are excited about the opportunity to secure long-term fixed-rate loans under the HUD 232 program. Our ability to secure loans of this type with the real property assets we own exemplifies a significant advantage of owning rather than leasing the real property of over 77% of the skilled nursing and assisted living facilities operated by our subsidiaries.  Our senior secured credit facility allows us to borrow up to $250 million in HUD insured loans if we use the net proceeds to pay down existing term debt under the senior secured credit facility.  HUD insured borrowings beyond $250 million will necessitate either refinancing the senior secured credit facility in full or otherwise seeking a waiver or amendment from the senior secured lenders. We anticipate savings of approximately $10 million annually in interest expense from the first $250 million in HUD insured loans that we are able to close.  Due to the lengthy processing time required for HUD loans, we would not expect that the loan applications we submit would begin to close until at least the first quarter of 2013.  We believe that lowering our debt service by such a substantial annual amount under these fully amortizing 35 year loans would better position us to weather the continued challenges in the healthcare services profession.  In particular, our long-term care segment has seen our skilled census affected by the continued shift of traditional Medicare to Medicare Advantage, or managed care, patients this quarter, who contribute a lower daily revenue rate than our traditional Medicare patients," said Boyd Hendrickson, Chairman and Chief Executive Officer of Skilled Healthcare Group.

Mr. Hendrickson continued, "In spite of the challenging environment that persisted through the third quarter of 2012, we generated strong cash flows from operating activities of $30.9 million so far this year, which enabled us to reduce debt from $475.5 million as of December 31, 2011 to $453.5 million at September 30, 2012."

"I am particularly proud of the exemplary work of the professional staff in our agencies and facilities to provide high quality patient care.  The quality and performance initiatives by our operating subsidiaries to reduce hospital readmissions, improve five-star scores, and improve other quality measures has been satisfying to say the least. The bleak reimbursement and dynamic operating environment have not dimmed the enthusiasm amongst the team to continually improve," Mr. Hendrickson stated.

Third Quarter 2012 Results
Revenue for the quarter ended September 30, 2012 was $216.6 million, a decrease of 0.1% when compared to $216.8 million in the third quarter of 2011.  Skilled mix3 decreased 100 basis points to 21.7% in the third quarter of 2012 from 22.7% in the third quarter of 2011.  Quality mix4 in the third quarter of 2012 decreased 190 basis points to 68.8%, compared to 70.7% in the prior year period.

Adjusted EBITDA was $24.1 million, or 11.1% of revenue, for the quarter ended September 30, 2012, a decrease of 28.6% compared to $33.8 million, or 15.6% of revenue, in the same period a year ago.  Adjusted EBITDAR5 was $28.8 million, or 13.3% of revenue, for the quarter ended September 30, 2012, a decrease of 24.6% compared to $38.2 million, or 17.6% of revenue, for the quarter ended September 30, 2011.

Net income for the quarter ended September 30, 2012 totaled $6.1 million, as compared to a net loss of $232.8 million for the third quarter of 2011, which was attributable in large part to a non-cash intangible asset impairment charge of $270.5 million.  Adjusted net income for the quarter ended September 30, 2012, totaled $8.0 million, a decrease of 32.7% compared to adjusted net income of $11.9 million for the third quarter of 2011.  Adjusted net income2 excludes certain items as described in the Adjusted Net Income Reconciliation table at the end of this press release.

Net income per diluted share was $0.16 for the quarter ended September 30, 2012, as compared to a net loss per diluted share of $6.26 for the same period in 2011.  Adjusted net income per diluted share was $0.21 for the quarter ended September 30, 2012, a decrease of 34.4% compared to adjusted net income per diluted share of $0.32 for the quarter ended September 30, 2011.

Long-Term Care Services Segment
Revenue for our long-term care services segment in the quarter ended September 30, 2012 was $164.6 million, a decrease of $7.6 million, or 4.4%, as compared to $172.2 million for the same period a year ago.  Revenue for this segment represented 76.0% of total revenue in the third quarter of 2012, compared to 79.4% of total revenue in the third quarter of 2011.  The decrease in revenue was primarily related to lower per patient day (PPD) rates from the impact of the October 2011 Medicare rate cut, a decrease in our skilled mix, and a shift from Medicare days to Managed Medicare days as more seniors elect Medicare Advantage.

Therapy Services Segment
Revenue for Hallmark Rehabilitation, our rehabilitation therapy services segment, was $26.1 million for the quarter ended September 30, 2012, an increase of $3.0 million, or 13.0%, compared to the same period a year ago. Third-party rehabilitation therapy accounted for 12.1% of total revenue in the third quarter of 2012, compared to 10.7% of total revenue in the third quarter of 2011.

Hospice and Home Health Services Segment
Revenue for Signature Hospice and Home Health, our hospice and home health care services segment, was $25.9 million in the third quarter of 2012, an increase of $4.4 million, or 20.5%, compared to $21.5 million in the third quarter of 2011.  Average daily hospice census grew to 1,433 for the three-months ended September 30, 2012 from 1,131 for the three-months ended September 30, 2011, an increase of 26.7%. The increase in census was due in significant part to our October 2011 acquisition of the two Cornerstone hospice agencies.

Year-to-Date 2012 Results
Revenue for the nine months ended September 30, 2012 was $653.4 million, a decrease of 0.1% when compared to $654.3 million in the nine months ended September 30, 2011.  Skilled mix decreased 130 basis points to 22.3% in the first nine months of 2012 from 23.6% in the first nine months of 2011.  Quality mix in the first nine months of 2012 decreased 140 basis points to 69.7%, compared to 71.1% in the prior year period.

Adjusted EBITDA was $77.0 million, or 11.8% of revenue, for the nine months ended September 30, 2012, a decrease of 25.9% compared to $103.9 million, or 15.9% of revenue, in the same period a year ago.  Adjusted EBITDAR was $90.7 million, or 13.9% of revenue, for the first nine months of 2012, a decrease of 22.8% compared to $117.5 million, or 18.0% of revenue, for the first nine months of 2011.

Net income for the nine months ended September 30, 2012, totaled $15.9 million, as compared to a net loss of $210.8 million for the nine months ended September 30, 2011, which was attributable in large part to a non-cash intangible asset impairment charge of $270.5 million in the third quarter of 2011.  Adjusted net income for the nine months ended September 30, 2012, totaled $21.1 million, a decrease of 40.4% compared to adjusted net income of $35.4 million for the nine months ended September 30, 2011.  Adjusted net income for the nine months ended September 30, 2012, 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 $0.42 for the nine months ended September 30, 2012, as compared to net loss per share of $5.67 for the same period in 2011.  Adjusted net income per diluted share was $0.56 for the nine months ended September 30, 2012, a decrease of 41.1% compared to adjusted net income per diluted share of $0.95 for the same period in 2011.  Additionally, outstanding debt has been reduced by $22.0 million since December 31, 2011.

Long-Term Care Services Segment
Revenue for our long-term care services segment in the nine months ended September 30, 2012 was $495.7 million, a decrease of $31.2 million, or 5.9%, as compared to $526.9 million for the same period a year ago.  Revenue for this segment represented 75.9% of total revenue in the first nine months of 2012, compared to 80.5% of total revenue in the first nine months of 2011.  The decrease in revenue was primarily related to lower PPD rates from the impact of the October 2011 Medicare rate cut, a decrease in our skilled mix, and a shift from Medicare days to Managed Medicare days as more seniors elect Medicare Advantage.

Therapy Services Segment
Revenue for Hallmark Rehabilitation, our rehabilitation therapy services segment, was $78.7 million for the nine months ended September 30, 2012, an increase of $9.7 million, or 12%, compared to the same period a year ago. Third-party rehabilitation therapy accounted for 12.0% of total revenue in the first nine months of 2012, compared to 10.5% of total revenue in the first nine months of 2011.

Hospice and Home Health Services Segment
Revenue for Signature Hospice and Home Health, our hospice and home health care services segment, was $79.0 million in the first nine months of 2012, an increase of $20.6 million, or 35.3%, compared to $58.4 million in the first nine months of 2011.  Average daily hospice census grew to 1,404 for the nine months ended September 30, 2012 from 1,070 for the nine months ended September 30, 2011, an increase of 31.2%. 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. has revised its 2012 guidance based upon current occupancy and skilled mix levels in its long-term care operating segment combined with the negative impact of the Medicare Part B therapy cap exception process that became effective October 1, 2012.  The Company now anticipates 2012 consolidated revenue to be between $870.0 million and $875.0 million, Adjusted EBITDA to be in the range of $102.0 million to $104.0 million, Adjusted EBITDAR to be in the range of $120.5 million to $122.5 million and adjusted net income per common diluted share to be between $0.74 and $0.76.  Adjusted EBITDA and EBITDAR are not adjusted for the reconciling items of approximately $2.8 million that were adjusting items for Adjusted EPS for the three months ended September 30, 2012; these were the 2011 hospice cap adjustment, non-routine legal expense and IT outsourcing evaluation costs as noted in the Reconciliation of Forecasted Adjusted Net Income per Share to Forecasted Net Income per Share in this release.  This guidance also assumes the following:

  • Market basket increase of 1.7% in Medicare beginning October 1, 2012.
  • 2012 capital expenditures of approximately $17 to $20 million.
  • Average interest rate on outstanding debt of approximately 7.5%.
  • An effective tax rate of 38%.
  • No additional acquisitions, developments or divestitures.

Conference Call
A conference call and webcast will be held tomorrow, Tuesday, November 6, at 9:00 a.m. Pacific Time (12:00 noon Eastern Time) to discuss Skilled Healthcare Group's consolidated financial results for the three and nine-month period ended September 30, 2012 and its outlook for the full year 2012.

To participate in the call, interested parties may dial (800) 847-9525 and reference conference ID 44824910.  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 September 30, 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)      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. 

(2)      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 Adjusted Net Income Reconciliation table in this press release. 

(3)      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.

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

(5)      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.

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, Adjusted EBITDA, Adjusted EBITDAR and adjusted net income per diluted share, as well as statements regarding the Company's pursuit of HUD-insured loans. 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. For example, there can be no assurance that the Company will ultimately be approved for any HUD-insured loans, what the timing of any approvals would be, or what the actual interest rates on any HUD-insured loans would be.  The HUD loan approval process is subject to a number of contingencies, many of which are beyond our control.

Additionally, the Company faces a number of other risks and uncertainties, including, 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)

(Unaudited)

 



Three Months Ended
September 30,

Nine Months Ended September 30,


2012

2011

2012

2011

Revenue:





Net patient service revenue

$

215,854


$

216,078


$      651,120


$        652,855

Lease facility revenue

769


746


2,291


1,492


216,623


216,824


653,411


654,347






Expenses:





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

182,243


173,548


545,589


520,258

Rent cost of revenue

4,639


4,413


13,734


13,530

General and administrative

6,021


5,423


18,548


19,553

Litigation settlement costs, (net of recoveries)


(4,488)



(4,488)

Depreciation and amortization

6,258


6,459


19,124


19,036

Impairment of long-lived assets


270,478



270,478


199,161


455,833


596,995


838,367






Other (expenses) income:





Interest expense

(8,790)


(9,711)


(28,876)


(29,319)

Interest income

125


170


402


553

Other (expense) income, net

(57)


(123)


20


(477

Equity in earnings of joint venture

461


472


1,422


1,583

Debt retirement costs

(168)



(4,126)


Total other (expenses) income, net

(8,429)


(9,192)


(31,158)


(27,660)

Income (loss) before provision for (benefit from) income taxes

9,033


(248,201)


25,258


(211,680)

Provision for (benefit from) income taxes

2,965


(15,387)


9,356


(911)

Net income (loss)

$

6,068


$

(232,814)


$

15,902


$

(210,769)






Income (loss) per share, basic

$

0.16


$

(6.26)


$

0.42


$

(5.67)

Income (loss) per share, diluted

$

0.16


$

(6.26)


$              0.42


$

(5.67)






Weighted-average common shares outstanding, basic

37,431


37,164


37,372


37,133

Weighted-average common shares outstanding, diluted

37,503


37,164


37,534


37,133

 

 

 

Skilled Healthcare Group, Inc.

Condensed Consolidated Balance Sheet and Cash Flow Data

(In thousands)

 



September 30, 2012


December 31, 2011


(Unaudited)


(Audited)

Balance Sheet Data:




ASSETS




Cash and cash equivalents

$

3,199



$

16,017


Other current assets

137,958



129,513


Property and equipment and leased facility assets, net

379,759



386,294


Goodwill

85,609



84,299


Other assets

78,061



81,076


Total assets

$

684,586



$

697,199






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities less current portion of long-term debt

$

95,519



$

99,780


Current portion of long-term debt

14,493



4,414


Other long-term liabilities

42,656



48,340


Long-term debt, less current portion

439,047



471,069


Stockholders' equity

92,871



73,596


Total liabilities and stockholders' equity

$

684,586



$

697,199


 

 

 


Nine Months Ended September 30,


2012


2011


(Unaudited)


(Unaudited)

Cash Flows Data:




Net cash provided by operating activities

$

30,936



$

66,191


Net cash used in investing activities

(12,516)



(24,713)


Net cash used in financing activities

(31,238)



(29,228)


(Decrease) increase in cash and cash equivalents

(12,818)



12,250


Cash and cash equivalents at beginning of period

16,017



4,192


Cash and cash equivalents at end of period

$

3,199



$

16,442


 

           

 

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 September 30,


Nine Months Ended September 30,


2012


2011


2012


2011

Occupancy statistics (skilled nursing facilities):








Available beds in service at end of period

8,813


8,814


8,813


8,814

Available patient days

810,303


810,670


2,413,572


2,438,072

Actual patient days

669,531


672,636


2,003,210


2,025,664

Occupancy percentage

82.6%


83.0%


83.0%


83.1%

Average daily number of patients

7,278


7,311


7,311


7,420

Hospice average daily census

1,433


1,131


1,404


1,070

Home health episodic-based admissions

2,083


1,665


6,167


3,516

Home health episodic-based recertifications

459


264


1,152


563

EBITDA (in thousands)

$

23,956


$

(232,201)


$

72,856


$

(163,878)

Adjusted EBITDA (in thousands)

$

24,124


$

33,789


$

76,982


$

103,941

Adjusted EBITDA margin

11.1%


15.6%


11.8%


15.9%

Adjusted EBITDAR (in thousands)

$

28,763


$

38,202


$

90,716


$

117,471

Adjusted EBITDAR margin

13.3%


17.6%


13.9%


18.0%








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







LTC only Medicare (Part A)

$

510


$

572


$

509


$

574

Medicare blended rate (Part A & B)

574


636


572


633

Managed care (Part A)

382


389


383


388

 Managed care blended rate (Part A & B)

391


397


392


391

Medicaid

160


153


158


154

Private and other

167


175


178


177

Weighted-average for all

$

235


$

246


$

238


$

251

Patient days by payor (skilled nursing facilities):







Medicare

85,591


95,771


267,315


311,498

Managed care

59,396


56,841


179,882


166,525

Total skilled mix days

144,987


152,612


447,197


478,023

Private pay and other

108,126


108,799


319,568


323,903

Medicaid

416,418


411,225


1,236,445


1,223,738

Total days

669,531


672,636


2,003,210


2,025,664

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







Medicare

12.8%


14.2%


13.3%


15.4%

Managed care

8.9


8.5


9.0


8.2

Skilled Mix

21.7


22.7


22.3


23.6

Private pay and other

16.1


16.2


16.0


16.0

Medicaid

62.2


61.1


61.7


60.4

Total

100.0%


100.0%


100.0%


100.0%

Revenue from (total company):







Medicare

32.9%


36.5%


33.9%


38.1%

Managed care, private pay, and other

35.9


34.2


35.8


33.0

Quality mix

68.8


70.7


69.7


71.1

Medicaid

31.2


29.3


30.3


28.9

Total

100.0%


100.0%


100.0%


100.0%

 

 

Skilled Healthcare Group, Inc.

Facility Ownership

(Unaudited)

 



As of September 30,



2012


2011

Facilities:




Skilled nursing facilities operated:




Owned

52


52

Leased

22


22

Total skilled nursing facilities operated

74


74

Total licensed beds

9,181


9,180

Skilled nursing facilities leased to unaffiliated third party operator

5


5

Assisted living facilities




Owned

21


21

Leased

1


2

Total assisted living facilities

22


23

Total licensed beds

1,228


1,312

Total facilities

101


102

Percentage owned facilities

77.2%


76.5%

 

 

Skilled Healthcare Group, Inc.

Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Adjusted EBITDAR

(In thousands)

(Unaudited)

 



Three Months Ended
September 30,

 

Nine Months Ended September 30,


2012


2011


2012


2011

Net income (loss)

$

6,068


$

(232,814)


$

15,902


$

(210,769)

Interest expense, net of interest income

8,665


9,541


28,474


28,766

Provision for (benefit from) income taxes

2,965


(15,387)


9,356


(911)

Depreciation and amortization expense

6,258


6,459


19,124


19,036

EBITDA

23,956


(232,201)


72,856


(163,878)

Debt retirement costs

168



4,126


Disposals of property and equipment




293

Expenses related to the exploration of strategic alternatives




716

Exit costs related to the Northern California divestiture




820

Litigation settlement costs, (net of recoveries)


(4,488)



(4,488)

Impairment of long-lived assets


270,478



270,478

Adjusted EBITDA

24,124


33,789


76,982


103,941

Rent cost of revenue

4,639


4,413


13,734


13,530

Adjusted EBITDAR

$

28,763


$

38,202


$

90,716


$

117,471

 

 

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 September 30,


Nine Months Ended September 30,


2012


2011


2012


2011

Income (loss) from operations

$

9,033


$

(248,201)


$

25,258


$

(211,680)

Debt retirement costs

168



4,126


Double bond interest expense for bond



1,192


Disposals of property and equipment




290

Impairment of long-lived assets


270,478



270,478

Litigation settlement costs, net of recoveries


(4,488)



(4,488)

Expenses related to the exploration of strategic alternatives




716

Exit costs related to the Northern California divestiture




820

Legal Expenses for non-routine matters

592



592


IT outsourcing evaluation costs

374



404


2011 Hospice cap accrual

1,900



1,900


Adjusted income before provision for income taxes

12,067


17,789


33,472


56,136

Provision for income taxes

4,055


5,888


12,385


21,107

Add back tax credit valuation allowance related to Northern California divestiture




(388)

Adjusted net income

$

8,012


$

11,901


$

21,087


$

35,417








Weighted-average common shares outstanding, diluted

37,503


37,294


37,534


37,329

Adjusted net income per share, diluted

$

0.21


$

0.32


$

0.56


$

0.95

Effective tax rate

33.6%


33.1%


37.0%


37.6%

 

Reconciliation of Forecasted Adjusted Net Income per Share to Forecasted Net Income per Share

Year Ending December 31, 2012

 


Earnings Per Share

Adjusted net income per diluted share guidance

 

$0.74 - $0.76

Items excluded, net of tax, from adjusted net income per share to calculate net income per share

 


     Debt retirement costs

(0.07)

     2011 Hospice cap accrual

(0.03)

     Double bond interest expense for bond

(0.02)

     IT outsourcing evaluation costs

(0.01)

     Legal Expenses for non-routine matters

(0.01)

Net income per share guidance

$0.60 - $0.62

 

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

$

22.3



$

23.3


Bond double interest expense (net of taxes)

0.7



0.7


Debt retirement costs (net of taxes)

2.5



2.5


Interest expense net of bond double interest (A)

35.8



35.8


Provision for income taxes

15.3



16.3


Depreciation and amortization expense

25.4



25.4


Adjusted EBITDA guidance

102.0



104.0


Rent cost of revenue

18.5



18.5


Adjusted EBITDAR guidance

$

120.5



$

122.5


(A) We paid double interest expense due to our senior subordinated notes being outstanding for 30 days after we completed the $100.0 million expansion of our term loan. We were required to provide a 30 day redemption notice for the senior subordinated notes.

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 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.
Dev Ghose or Chris Felfe
(949) 282-5800

SOURCE Skilled Healthcare Group, Inc.



RELATED LINKS
http://www.skilledhealthcaregroup.com

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