Sun Healthcare Group, Inc. Reports 2011 Third-Quarter Results and Normalized EPS of $0.32
(firmenpresse) - IRVINE, CA -- (Marketwire) -- 11/01/11 -- Sun Healthcare Group, Inc. (NASDAQ: SUNH) today announced its operating results for the third quarter ended Sept. 30, 2011.
Normalized results for the third quarter period ended Sept. 30, 2011:
consolidated revenues rose 2.6 percent to $485.9 million, compared to the same period in 2010, driven primarily by growth in rate and skilled mix in the inpatient services segment;
consolidated adjusted EBITDAR increased 5.6 percent to $63.8 million and adjusted EBITDAR margin grew 30 basis points to 13.1 percent, compared to normalized data for the same period in 2010;
diluted earnings per share from continuing operations was $0.32 on 26.2 million weighted-average diluted shares;
free cash flow was $3.7 million; and
the Company recorded a non-cash, pre-tax impairment charge of $317.1 million associated with the write-down of goodwill and other intangible assets as a result of the impact on the inpatient services business of the final Medicare reimbursement rates for fiscal year 2012 established by the Centers for Medicare and Medicaid Services (CMS), which became effective on Oct. 1, 2011 (the CMS final rule), and a $2.4 million expense related to restructuring initiatives. Both the impairment charge and the restructuring costs have been normalized out of reported results, and the results reported above do not reflect the impact of these charges.
Regarding the Company's third-quarter results, William A. Mathies, Sun's chairman and chief executive officer, stated, "Revenue growth and EBITDAR margin expansion in the quarter were in line with our expectations. Our operating metrics showed strength too, with skilled mix days growing 30 basis points year-over-year as our focus on attracting and providing high quality care for high-acuity, short-stay patients continues to have a positive return for the Company. Additionally, the free cash flow we generated in the quarter contributed to bringing our quarter-end cash balance to $91.2 million. The quarter's strength provides us with a solid footing from which to address the challenges we face related to the CMS final rule for skilled nursing facilities implemented on October 1."
Mathies concluded, "We have begun our mitigation efforts to offset the impact of the CMS final rule, some of which will impact the fourth quarter of 2011 but most of which will yield results in 2012. Based on our experience thus far, we continue to believe that the net impact of the CMS final rule on our 2012 EBITDAR will be between $45 million and $50 million. We also continue to evaluate strategic uses of our significant cash balance toward enhancing our financial flexibility, as well as other strategic initiatives through which we can strengthen our competitive positioning."
SunBridge, Sun's inpatient services business, reported year-over-year revenue growth in the quarter of $13.7 million, or 3.2 percent, and adjusted EBITDAR of $74.5 million for the quarter, up $5.7 million or 8.2 percent compared to the same quarter during the prior year. Adjusted EBITDAR margin for inpatient services in the quarter was 17.1 percent, up 80 basis points from the same period in 2010. Skilled mix revenue as a percent of total revenue increased by 260 basis points (to 39.8 percent) compared to the same quarter in 2010, driven by continued growth in total skilled admissions. In the quarter, the number of Rehab Recovery Suites® (RRS) beds was increased by an additional 113 beds, enhancing the ability to attract high-acuity patients. These additional beds bring total available RRS beds to 2,185, an increase of 32.7 percent during the same quarter in 2010.
Included in the inpatient segment, revenues from SolAmor, Sun's hospice business, increased $3.6 million from $11.3 million in the third quarter of 2010 to $14.9 million in the third quarter of 2011. Same-store revenue growth in the quarter was 9.4 percent or $1.1 million. An additional $2.5 million of revenue growth was attributable to the Countryside acquisition. On Oct. 1, 2011, SolAmor acquired a small Ohio-based hospice business which complements SunBridge's Ohio nursing centers and broadens SolAmor's footprint to 11 states.
SunDance, Sun's rehabilitation therapy services business, reported for the quarter revenues of $62.4 million, adjusted EBITDAR of $2.7 million and adjusted EBITDAR margin of 4.3 percent. While revenues were up compared to the same quarter one year ago, EBITDAR and EBITDAR margin were both down year-over-year due to changes in concurrent therapy reimbursement, which was effective on Oct. 1, 2010, and also due to the implementation of the multiple procedure payment reduction (MPPR), which was effective on Jan. 1, 2011.
CareerStaff, Sun's medical staffing services business, reported revenues of $21.8 million for the quarter, down 2.0 percent compared to revenues in the same quarter of 2010. Despite the decline in revenues, CareerStaff achieved adjusted EBITDAR of $1.6 million and an adjusted EBITDAR margin of 7.3 percent for the quarter.
At Sept. 30, 2011, Sun had $91.2 million in cash and $142.6 million of long-term debt. Sun's free cash flow for the third quarter of 2011 was $3.7 million, after taking into account $14.2 million of cash used for capital expenditures in the quarter. Rent expense in the quarter reflected the third full quarter in which the increased rents, resulting from Sun's 2010 restructuring, were paid. Rent expense in the third quarter totaled $37.2 million, consistent with second quarter rent of $37.0 million. As a result of the CMS final rule and its expected impact on Sun's profitability, the effective income tax rate for the nine months ended Sept. 30, 2011, was lowered to 39.0 percent from the 41.0 percent effective tax rate recorded through the end of the second quarter. Lowering the effective tax rate in the third quarter to balance out the year-to-date tax rate at 39.0 percent produced a lower than expected income tax expense (and rate) in the third quarter. The effective income tax rate for the fourth quarter is expected to be 39.0 percent.
Sun recorded a non-cash, pre-tax impairment charge of $317.1 million associated with the write-down of goodwill and other intangible assets as a result of the impact of the CMS final rule, which became effective on Oct. 1, 2011, on the inpatient services business. Sun also recorded a $1.8 million income tax benefit associated with the impairment charge and an expense of $2.4 million related to restructuring costs from Sun's mitigation initiatives in response to the CMS final rule. The restructuring costs are expected to be non-recurring.
As previously announced, investors and the general public are invited to listen to a conference call with Sun's senior management on Wednesday, Nov. 2, 2011, at 10 a.m. Pacific / 1 p.m. Eastern, to discuss the Company's third-quarter results for the period ended Sept. 30, 2011.
To listen to the conference call, dial (888) 208-1812 and refer to Sun Healthcare Group. A recording of the call will be available from 4 p.m. Eastern on Nov. 2, 2011, until midnight Eastern on Dec. 2, 2011, by calling (888) 203-1112 and using access code 8727814.
Sun Healthcare Group, Inc. (NASDAQ: SUNH) is a healthcare services company, serving principally the senior population, with consolidated annual revenues in excess of $1.9 billion and approximately 30,000 employees in 46 states. Sun's services are provided through its subsidiaries: as of Oct. 1, 2011, SunBridge Healthcare and its subsidiaries operate 165 skilled nursing centers, 14 combined skilled nursing, assisted and independent living centers, 10 assisted living centers, two independent living centers and eight mental health centers with an aggregate of 22,997 licensed beds in 25 states; SunDance Rehabilitation provides rehabilitation therapy services to affiliated and non-affiliated centers in 38 states; CareerStaff Unlimited provides medical staffing services in 43 states; and SolAmor Hospice provides hospice services in 11 states. For more information, go to .
Statements made in this release that are not historical facts are "forward-looking" statements (as defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties and are subject to change at any time. These forward-looking statements may include, but are not limited to, statements containing words such as "anticipate," "believe," "plan," "estimate," "expect," "hope," "intend," "may" and similar expressions. Forward-looking statements in this release include all statements regarding the scope, timing and effectiveness of the Company's efforts to mitigate the impact on the Company's business of the CMS final rule; the Company's expectations regarding the amount and recurring nature of restructuring costs associated with the CMS final rule; and the Company's expectations for the effective income tax rate for the fourth quarter of 2011. Factors that could cause actual results to differ are identified in filings made by the Company with the Securities and Exchange Commission and include changes in Medicare and Medicaid reimbursements, including with respect to the CMS final rule, and the Company's ability to mitigate the impact of such changes; the impact that healthcare reform legislation will have on the Company's business; the ability to maintain the occupancy rates and payor mix at the Company's healthcare centers; potential liability for losses not covered by, or in excess of, insurance; the effects of government regulations and investigations; the ability of the Company to collect its accounts receivable on a timely basis; the amount of the Company's indebtedness; covenants in debt agreements and leases that may restrict the Company's activities, including the Company's ability to make acquisitions and incur more indebtedness on favorable terms; the impact of the economic downturn on the business; increasing labor costs and the shortage of qualified healthcare personnel; and the Company's ability to receive increases in reimbursement rates from government payors to cover increased costs. More information on factors that could affect the Company's business and financial results are included in Sun's filings made with the Securities and Exchange Commission, including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, copies of which are available on Sun's web site, . There may be additional risks of which the Company is presently unaware or that it currently deems immaterial.
The forward-looking statements involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company's control. Sun cautions investors that any forward-looking statements made by Sun are not guarantees of future performance and are only made as of the date of this release. Sun disclaims any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments.
EBITDA, adjusted EBITDA, adjusted EBITDAR and free cash flow, as used in this press release and in the accompanying tables, which are non-GAAP financial measures, are each reconciled to their respective GAAP-recognized financial measures in the accompanying tables. In addition, normalizing adjustments to adjusted EBITDAR and other financial measures, as discussed in this press release and shown in the accompanying tables, are non-GAAP adjustments and are reconciled to GAAP financial measures in the accompanying tables.
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