Genesis Healthcare, Inc. (Genesis, or the Company) (NYSE:GEN), one
of the largest post-acute care providers in the United States,
today announced operating results for the second quarter ended June
30, 2018.
Second Quarter 2018 Results
- US GAAP revenue in the second quarter of 2018 was $1.27 billion
compared to $1.34 billion in the second quarter of 2017;
- US GAAP net loss attributable to Genesis Healthcare, Inc. in
the second quarter of 2018 was $39.6 million compared to $65.2
million in the second quarter of 2017; and
- Adjusted EBITDA in the second quarter of 2018 was $131.2
million compared to $137.1 million in the second quarter of
2017.
“I am extremely pleased with our second quarter results as our
Adjusted EBITDAR less cash lease payments exceeded Wall Street
estimates and recorded year-over-year growth for the first time
since 2015,” noted George V. Hager, Jr., Chief Executive Officer of
Genesis. “Although we continue to face pressure on occupancy
and nursing wage inflation, I am encouraged by a number of
favorable trends, including a flattening of skilled patient lengths
of stay and greatly improved performance by our Rehabilitation
Therapy segment.”
“These trends, coupled with continued success aggressively
managing our cost structure, divesting underperforming and non-core
assets, reducing lease costs and focusing our day-to-day efforts on
key operational performance improvement initiatives served to more
than offset lingering headwinds,” continued Hager. “Looking
ahead, we are well positioned to build on this momentum as we head
into the second half of 2018.”
“I am also pleased to report that the recent changes to the CMS
5-Star Quality Rating System, meant to better reflect the quality
of care in a facility, resulted in a significant improvement for
Genesis. As it relates to overall Staffing, when CMS made
their changes, Genesis’ overall Staffing star rating improved from
2.7 to 3.3 stars; and our overall Quality star rating improved to
more than 4 stars.”
Portfolio OptimizationGenesis
has made significant progress with its strategy to exit challenging
facilities and certain low density markets in order to focus on
investment and growth in core, strategic markets. During 2018,
Genesis has completed or is in the process of divesting or exiting
the operations of 63 facilities as follows:
- During the second quarter, Genesis divested, exited or closed
the operations of 18 facilities. Including an additional
facility divested in the first quarter of 2018, Genesis exited the
operations on a total of 19 facilities since the start of the year,
with approximate annual net revenue of $194.8 million, Adjusted
EBITDA loss of $0.1 million and a pre-tax net loss of $25.2
million. Genesis estimates these transactions resulted in the
reduction of approximately $13.8 million of annual cash lease
payments.
- Genesis expects it will continue to exit the operations of
challenging facilities and markets in the second half of the
year. Specifically, the Company expects to exit the
operations of at least another 20 facilities, in addition to the 24
Texas facilities already announced. In total, these 44
facilities generated approximate annual net revenue of $341.2
million, Adjusted EBITDA of $8.8 million and a pre-tax net loss of
$24.8 million. Genesis estimates these transactions will result in
the reduction of an additional $11.4 million of annual cash lease
payments.
- In August 2018, Genesis expects to open its 12th PowerBack
Rehabilitation location in a brand new state-of-the-art
rehabilitation facility in Exton, PA. PowerBack
Rehabilitation offers 100% all short stay rehabilitation so
patients can return home as soon as possible.
Other Updates Adoption and Impact of Revenue
Recognition Accounting StandardsOn January 1, 2018, Genesis adopted
Accounting Standards Codification Topic 606, Revenue from Contracts
with Customers (ASC 606). Results for reporting periods
beginning after January 1, 2018 are presented under ASC 606, while
comparative information has not been restated and continues to be
reported under the accounting standards in effect for those
periods. The impact of applying ASC 606 to the three and six
months ended June 30, 2018 was a $22.0 million and $46.8 million
implicit price concession, respectively, directly reducing net
revenues, which previously would have been recorded as a provision
for losses on accounts receivable.
If the provisions of ASC 606 were applied on a pro forma basis
to the three and six months ended June 30, 2017, reported net
revenue would have been $1,317.3 million and $2,682.9 million,
respectively, with no impact to net loss attributed to Genesis
Healthcare, Inc.
Conference CallGenesis Healthcare,
Inc. will hold a conference call at 8:30 a.m. Eastern Time on
Wednesday, August 8, 2018. Investors can access the
conference call by calling (855) 849-2198 or live via a listen-only
webcast through the Genesis website at
http://www.genesishcc.com/investor-relations/, where a replay of
the call will also be posted for one year.
About Genesis Healthcare, Inc.
Genesis Healthcare, Inc. (NYSE: GEN) is a holding company with
subsidiaries that, on a combined basis, comprise one of the
nation's largest post-acute care providers with more than 440
skilled nursing facilities and assisted/senior living communities
in 30 states nationwide. Genesis subsidiaries also supply
rehabilitation and respiratory therapy to more than 1,600
healthcare providers in 46 states, the District of Columbia and
China. References made in this release to "Genesis," "the
Company," "we," "us" and "our" refer to Genesis Healthcare, Inc.
and each of its wholly-owned companies. Visit our website at
www.genesishcc.com.
Forward-Looking StatementsThis release includes “forward-looking
statements” within the meaning of the federal securities laws,
including the Private Securities Litigation Reform Act of 1995. You
can identify these statements by the fact that they do not relate
strictly to historical or current facts. These statements contain
words such as “may,” “will,” “project,” “might,” “expect,”
“believe,” “anticipate,” “intend,” “could,” “would,” “estimate,”
“continue,” “pursue,” “plans,” or “prospect,” or the negative or
other variations thereof or comparable terminology. They include,
but are not limited to, statements about Genesis’ expectations and
beliefs regarding its future financial performance, anticipated
cost management, anticipated business development, anticipated
financing activities and anticipated demographic and supply-demand
trends facing the industry. These forward-looking statements are
based on current expectations and projections about future events,
including the assumptions stated in this release, and there can be
no assurance that they will be achieved or occur, in whole or in
part, in the timeframes anticipated by the Company or at all.
Investors are cautioned that forward-looking statements are not
guarantees of future performance or results and involve risks and
uncertainties that cannot be predicted or quantified and,
consequently, the actual performance of Genesis may differ
materially from that expressed or implied by such forward-looking
statements.
These risks and uncertainties include, but are not limited to,
the following:• reductions and/or delays in Medicare or Medicaid
reimbursement rates, or changes in the rules governing the Medicare
or Medicaid programs could have a material adverse effect on our
revenues, financial condition and results of operations;• reforms
to the U.S. healthcare system that have imposed new requirements on
us and uncertainties regarding potential material changes to such
reforms;• revenue we receive from Medicare and Medicaid being
subject to potential retroactive reduction;• our success being
dependent upon retaining key executives and personnel;• it can be
difficult to attract and retain qualified nurses, therapists,
healthcare professionals and other key personnel, which, along with
a growing number of minimum wage and compensation related
regulations, can increase our costs related to these employees;•
recently enacted changes in Medicare reimbursements for physician
and non-physician services could impact reimbursement for medical
professionals;• we are subject to extensive and complex laws and
government regulations. If we are not operating in compliance with
these laws and regulations or if these laws and regulations change,
we could be required to make significant expenditures or change our
operations in order to bring our facilities and operations into
compliance;• our physician services operations are subject to
corporate practice of medicine laws and regulations. Our failure to
comply with these laws and regulations could have a material
adverse effect on our business and operations; • we face
inspections, reviews, audits and investigations under federal and
state government programs, such as the Department of Justice. These
investigations and audits could result in adverse findings that may
negatively affect our business, including our results of
operations, liquidity, financial condition, and reputation;•
significant legal actions, which are commonplace in our industry,
could subject us to increased operating costs, which could
materially and adversely affect our results of operations,
liquidity, financial condition, and reputation;• insurance
coverages, including professional liability coverage, may become
increasingly expensive and difficult to obtain for health care
companies, and our self-insurance may expose us to significant
losses;• failure to maintain effective internal control over
financial reporting could have an adverse effect on our ability to
report on our financial results on a timely and accurate basis; •
we may be unable to reduce costs to offset decreases in our patient
census levels or other expenses timely and completely;• completed
and future acquisitions may consume significant resources, may be
unsuccessful and could expose us to unforeseen liabilities and
integration risks;• we lease a significant number of our facilities
and may experience risks relating to lease termination, lease
expense escalators, lease extensions, special charges and leases
that are not economically efficient in the current business
environment;• our substantial indebtedness, scheduled maturities
and disruptions in the financial markets could affect our ability
to obtain financing or to extend or refinance debt as it matures,
which could negatively impact our results of operations, liquidity,
financial condition and the market price of our common stock;• the
holders of a majority of the voting power of Genesis’ common stock
have entered into a voting agreement, and the voting group’s
interests may conflict with the interests of other stockholders;•
exposure to the credit and non-payment risk of our contracted
customer relationships, including as a result from bankruptcy,
receivership, liquidation, reorganization or insolvency, especially
during times of systemic industry pressures, economic conditions,
regulatory uncertainty and tight credit markets, which could result
in material losses; • some of our directors are significant
stockholders or representatives of significant stockholders, which
may present issues regarding diversion of corporate opportunities
and other potential conflicts; and • we are a “controlled company”
within the meaning of New York Stock Exchange (NYSE) rules and, as
a result, qualify for and rely on exemptions from certain corporate
governance requirements.
The Company’s Annual Report on Form 10-K for the year ended
December 31, 2017, Quarterly Reports on Form 10-Q, Current Reports
on Form 8-K, and other filings with the U.S. Securities and
Exchange Commission, discuss the foregoing risks as well as other
important risks and uncertainties of which investors should be
aware. Any forward-looking statements contained herein are made
only as of the date of this release. Genesis disclaims any
obligation to update its forward-looking statements or any of the
information contained in this release. Investors are cautioned not
to place undue reliance on these forward-looking statements.
Genesis HealthCare Contact: Investor
Relations
610-925-2000
GENESIS HEALTHCARE, INC.CONDENSED
CONSOLIDATED STATEMENTS OF
OPERATIONS(UNAUDITED)(IN
THOUSANDS, EXCEPT PER SHARE DATA)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30, |
|
Six months ended
June 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Net revenues |
|
$ |
1,272,360 |
|
|
$ |
1,341,276 |
|
|
$ |
2,573,432 |
|
|
$ |
2,730,408 |
|
Salaries, wages and
benefits |
|
|
705,754 |
|
|
|
739,402 |
|
|
|
1,441,524 |
|
|
|
1,563,896 |
|
Other operating
expenses |
|
|
370,555 |
|
|
|
396,316 |
|
|
|
754,715 |
|
|
|
762,137 |
|
General and
administrative costs |
|
|
39,046 |
|
|
|
41,151 |
|
|
|
78,921 |
|
|
|
86,237 |
|
Lease expense |
|
|
32,111 |
|
|
|
38,234 |
|
|
|
65,182 |
|
|
|
74,334 |
|
Depreciation and
amortization expense |
|
|
63,495 |
|
|
|
60,227 |
|
|
|
114,998 |
|
|
|
124,596 |
|
Interest expense |
|
|
117,955 |
|
|
|
124,288 |
|
|
|
232,992 |
|
|
|
249,042 |
|
(Gain) loss on early
extinguishment of debt |
|
|
(501 |
) |
|
|
2,301 |
|
|
|
9,785 |
|
|
|
2,301 |
|
Investment income |
|
|
(1,631 |
) |
|
|
(1,392 |
) |
|
|
(2,678 |
) |
|
|
(2,501 |
) |
Other (income)
loss |
|
|
(22,220 |
) |
|
|
4,190 |
|
|
|
(22,152 |
) |
|
|
13,224 |
|
Transaction costs |
|
|
3,112 |
|
|
|
3,781 |
|
|
|
15,207 |
|
|
|
6,806 |
|
Customer receivership
and other related charges |
|
|
— |
|
|
|
35,566 |
|
|
|
— |
|
|
|
35,566 |
|
Long-lived asset
impairments |
|
|
27,257 |
|
|
|
— |
|
|
|
55,617 |
|
|
|
— |
|
Goodwill and
identifiable intangible asset impairments |
|
|
1,132 |
|
|
|
— |
|
|
|
1,132 |
|
|
|
— |
|
Equity in net loss
(income) of unconsolidated affiliates |
|
|
38 |
|
|
|
(88 |
) |
|
|
258 |
|
|
|
(222 |
) |
Loss before income tax
(benefit) expense |
|
|
(63,743 |
) |
|
|
(102,700 |
) |
|
|
(172,069 |
) |
|
|
(185,008 |
) |
Income tax (benefit)
expense |
|
|
(886 |
) |
|
|
2,803 |
|
|
|
(539 |
) |
|
|
4,087 |
|
Loss from continuing
operations |
|
|
(62,857 |
) |
|
|
(105,503 |
) |
|
|
(171,530 |
) |
|
|
(189,095 |
) |
Loss from discontinued
operations, net of taxes |
|
|
— |
|
|
|
(47 |
) |
|
|
— |
|
|
|
(68 |
) |
Net loss |
|
|
(62,857 |
) |
|
|
(105,550 |
) |
|
|
(171,530 |
) |
|
|
(189,163 |
) |
Less net loss
attributable to noncontrolling interests |
|
|
23,245 |
|
|
|
40,394 |
|
|
|
63,380 |
|
|
|
73,246 |
|
Net loss attributable
to Genesis Healthcare, Inc. |
|
$ |
(39,612 |
) |
|
$ |
(65,156 |
) |
|
$ |
(108,150 |
) |
|
$ |
(115,917 |
) |
Loss per common
share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding for loss from continuing
operations per share |
|
|
100,596 |
|
|
|
93,273 |
|
|
|
99,430 |
|
|
|
92,581 |
|
Net loss
per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
continuing operations attributable to Genesis Healthcare, Inc. |
|
$ |
(0.39 |
) |
|
$ |
(0.70 |
) |
|
$ |
(1.09 |
) |
|
$ |
(1.25 |
) |
Loss from
discontinued operations, net of taxes |
|
|
— |
|
|
|
(0.00 |
) |
|
|
- |
|
|
|
(0.00 |
) |
Net loss
attributable to Genesis Healthcare, Inc. |
|
$ |
(0.39 |
) |
|
$ |
(0.70 |
) |
|
$ |
(1.09 |
) |
|
$ |
(1.25 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
GENESIS HEALTHCARE,
INC.CONDENSED CONSOLIDATED BALANCE
SHEET(UNAUDITED)(IN
THOUSANDS)
|
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
|
2018 |
|
2017 |
|
Assets: |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and
equivalents |
|
$ |
78,932 |
|
|
$ |
54,525 |
|
|
Restricted cash and equivalents |
|
|
6,949 |
|
|
|
4,113 |
|
|
Accounts
receivable, net of allowances for doubtful accounts |
|
|
687,970 |
|
|
|
724,138 |
|
|
Other
current assets |
|
|
154,716 |
|
|
|
157,131 |
|
|
Total
current assets |
|
|
928,567 |
|
|
|
939,907 |
|
|
Property and equipment,
net of accumulated depreciation |
|
|
3,017,243 |
|
|
|
3,413,599 |
|
|
Restricted cash and
equivalents |
|
|
57,191 |
|
|
|
— |
|
|
Identifiable intangible
assets, net of accumulated amortization |
|
|
131,091 |
|
|
|
142,976 |
|
|
Goodwill |
|
|
85,642 |
|
|
|
85,642 |
|
|
Other long-term
assets |
|
|
325,083 |
|
|
|
205,741 |
|
|
Total
assets |
|
$ |
4,544,817 |
|
|
$ |
4,787,865 |
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Deficit: |
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
Accounts
payable and accrued expenses |
|
$ |
453,434 |
|
|
$ |
519,493 |
|
|
Accrued
compensation |
|
|
156,773 |
|
|
|
167,368 |
|
|
Other
current liabilities |
|
|
210,221 |
|
|
|
212,333 |
|
|
Total
current liabilities |
|
|
820,428 |
|
|
|
899,194 |
|
|
|
|
|
|
|
|
|
|
Long-term debt |
|
|
1,160,366 |
|
|
|
1,050,337 |
|
|
Capital lease
obligations |
|
|
996,059 |
|
|
|
1,025,355 |
|
|
Financing
obligations |
|
|
2,744,799 |
|
|
|
2,929,483 |
|
|
Other long-term
liabilities |
|
|
670,911 |
|
|
|
563,628 |
|
|
Stockholders'
deficit |
|
|
(1,847,746 |
) |
|
|
(1,680,132 |
) |
|
Total
liabilities and stockholders' deficit |
|
$ |
4,544,817 |
|
|
$ |
4,787,865 |
|
|
|
|
|
|
|
|
|
|
GENESIS HEALTHCARE,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(UNAUDITED)(IN
THOUSANDS)
|
|
|
|
|
|
|
|
|
|
|
Six months ended
June 30, |
|
|
|
2018 |
|
2017 |
Net cash provided by
operating activities (1) |
|
|
$ |
11,469 |
|
|
$ |
69,127 |
|
Net cash (used in)
provided by investing activities |
|
|
|
(35,082 |
) |
|
|
43,736 |
|
Net cash provided by
(used in) financing activities |
|
|
|
108,047 |
|
|
|
(98,261 |
) |
Net increase in cash,
cash equivalents and restricted cash and equivalents |
|
|
|
84,434 |
|
|
|
14,602 |
|
Beginning of
period |
|
|
|
58,638 |
|
|
|
63,460 |
|
End of period |
|
|
$ |
143,072 |
|
|
$ |
78,062 |
|
(1) - Net cash provided by operating activities in the six
months ended June 30, 2018 and 2017 includes
approximately $15.2 million and $6.8 million, respectively, of cash
payments for transaction-related costs.
GENESIS HEALTHCARE,
INC.KEY PERFORMANCE AND VALUATION
MEASURES(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30, |
|
|
Six months ended
June 30, |
|
|
2018 |
|
2017 |
|
|
2018 |
|
2017 |
Financial
Results (in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues |
|
$ |
1,272,360 |
|
|
$ |
1,341,276 |
|
|
|
$ |
2,573,432 |
|
|
$ |
2,730,408 |
|
EBITDA |
|
|
117,707 |
|
|
|
81,815 |
|
|
|
|
175,921 |
|
|
|
188,630 |
|
Adjusted
EBITDAR |
|
|
163,326 |
|
|
|
175,351 |
|
|
|
|
313,943 |
|
|
|
341,041 |
|
Adjusted
EBITDA |
|
|
131,215 |
|
|
|
137,117 |
|
|
|
|
248,761 |
|
|
|
266,707 |
|
Net loss
attributable to Genesis Healthcare, Inc. |
|
|
(39,612 |
) |
|
|
(65,156 |
) |
|
|
|
(108,150 |
) |
|
|
(115,917 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INPATIENT SEGMENT:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30, |
|
|
Six months ended
June 30, |
|
|
2018 |
|
2017 |
|
|
2018 |
|
2017 |
|
Occupancy
Statistics - Inpatient |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available
licensed beds in service at end of period |
|
|
52,303 |
|
|
55,247 |
|
|
|
52,303 |
|
|
55,247 |
|
Available
operating beds in service at end of period |
|
|
50,182 |
|
|
53,265 |
|
|
|
50,182 |
|
|
53,265 |
|
Available
patient days based on licensed beds |
|
|
4,759,573 |
|
|
5,027,477 |
|
|
|
9,466,843 |
|
|
10,004,387 |
|
Available
patient days based on operating beds |
|
|
4,567,679 |
|
|
4,849,175 |
|
|
|
9,087,860 |
|
|
9,651,290 |
|
Actual
patient days |
|
|
3,840,181 |
|
|
4,102,031 |
|
|
|
7,681,223 |
|
|
8,224,551 |
|
Occupancy
percentage - licensed beds |
|
|
80.7 |
% |
|
81.6 |
% |
|
|
81.1 |
% |
|
82.2 |
% |
Occupancy
percentage - operating beds |
|
|
84.1 |
% |
|
84.6 |
% |
|
|
84.5 |
% |
|
85.2 |
% |
Skilled
mix |
|
|
18.9 |
% |
|
19.7 |
% |
|
|
19.6 |
% |
|
20.3 |
% |
Average
daily census |
|
|
42,200 |
|
|
45,077 |
|
|
|
42,438 |
|
|
45,440 |
|
Revenue
per patient day (skilled nursing facilities) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare
Part A |
|
$ |
528 |
|
$ |
530 |
|
|
$ |
526 |
|
$ |
527 |
|
Insurance |
|
|
461 |
|
|
461 |
|
|
|
458 |
|
|
456 |
|
Private
and other |
|
|
337 |
|
|
328 |
|
|
|
335 |
|
|
323 |
|
Medicaid |
|
|
223 |
|
|
218 |
|
|
|
223 |
|
|
218 |
|
Medicaid
(net of provider taxes) |
|
|
204 |
|
|
198 |
|
|
|
204 |
|
|
198 |
|
Weighted
average (net of provider taxes) |
|
$ |
274 |
|
$ |
272 |
|
|
$ |
275 |
|
$ |
273 |
|
Patient days by
payor (skilled nursing facilities) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare |
|
|
400,370 |
|
|
462,145 |
|
|
|
834,094 |
|
|
959,782 |
|
Insurance |
|
|
285,935 |
|
|
304,107 |
|
|
|
591,221 |
|
|
624,418 |
|
Total
skilled mix days |
|
|
686,305 |
|
|
766,252 |
|
|
|
1,425,315 |
|
|
1,584,200 |
|
Private
and other |
|
|
227,920 |
|
|
259,577 |
|
|
|
454,823 |
|
|
522,875 |
|
Medicaid |
|
|
2,726,538 |
|
|
2,872,360 |
|
|
|
5,405,661 |
|
|
5,713,784 |
|
Total
Days |
|
|
3,640,763 |
|
|
3,898,189 |
|
|
|
7,285,799 |
|
|
7,820,859 |
|
Patient days as
a percentage of total patient days (skilled nursing
facilities) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare |
|
|
11.0 |
% |
|
11.9 |
% |
|
|
11.4 |
% |
|
12.3 |
% |
Insurance |
|
|
7.9 |
% |
|
7.8 |
% |
|
|
8.2 |
% |
|
8.0 |
% |
Skilled
mix |
|
|
18.9 |
% |
|
19.7 |
% |
|
|
19.6 |
% |
|
20.3 |
% |
Private
and other |
|
|
6.3 |
% |
|
6.7 |
% |
|
|
6.2 |
% |
|
6.7 |
% |
Medicaid |
|
|
74.8 |
% |
|
73.6 |
% |
|
|
74.2 |
% |
|
73.0 |
% |
Total |
|
|
100.0 |
% |
|
100.0 |
% |
|
|
100.0 |
% |
|
100.0 |
% |
Facilities at
end of period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Skilled nursing
facilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leased |
|
|
341 |
|
|
363 |
|
|
|
341 |
|
|
363 |
|
Owned |
|
|
44 |
|
|
44 |
|
|
|
44 |
|
|
44 |
|
Joint
Venture |
|
|
5 |
|
|
5 |
|
|
|
5 |
|
|
5 |
|
Managed
* |
|
|
35 |
|
|
35 |
|
|
|
35 |
|
|
35 |
|
Total skilled nursing facilities |
|
|
425 |
|
|
447 |
|
|
|
425 |
|
|
447 |
|
Total licensed beds |
|
|
52,232 |
|
|
55,105 |
|
|
|
52,232 |
|
|
55,105 |
|
Assisted/Senior living
facilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leased |
|
|
19 |
|
|
19 |
|
|
|
19 |
|
|
19 |
|
Owned |
|
|
4 |
|
|
4 |
|
|
|
4 |
|
|
4 |
|
Joint
Venture |
|
|
1 |
|
|
1 |
|
|
|
1 |
|
|
1 |
|
Managed |
|
|
2 |
|
|
2 |
|
|
|
2 |
|
|
2 |
|
Total assisted/senior living facilities |
|
|
26 |
|
|
26 |
|
|
|
26 |
|
|
26 |
|
Total licensed beds |
|
|
2,209 |
|
|
2,182 |
|
|
|
2,209 |
|
|
2,182 |
|
Total
facilities |
|
|
451 |
|
|
473 |
|
|
|
451 |
|
|
473 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Jointly Owned and
Managed— (Unconsolidated) |
|
|
15 |
|
|
15 |
|
|
|
15 |
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REHABILITATION THERAPY SEGMENT**:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30, |
|
|
Six months ended
June 30, |
|
|
2018 |
|
2017 |
|
|
2018 |
|
2017 |
|
Revenue mix %: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-operated |
|
|
37 |
% |
|
38 |
% |
|
|
37 |
% |
|
38 |
% |
Non-affiliated |
|
|
63 |
% |
|
62 |
% |
|
|
63 |
% |
|
62 |
% |
Sites of service (at
end of period) |
|
|
1,424 |
|
|
1,528 |
|
|
|
1,424 |
|
|
1,528 |
|
Revenue per site |
|
$ |
158,619 |
|
$ |
149,634 |
|
|
$ |
315,914 |
|
$ |
307,594 |
|
Therapist efficiency
% |
|
|
68 |
% |
|
68 |
% |
|
|
68 |
% |
|
68 |
% |
* In 2018 and 2017, includes 20 facilities located in Texas for
which the real estate is owned by Genesis.
** Excludes respiratory therapy services.
Reasons for Non-GAAP Financial
Disclosure
The following discussion includes references to Adjusted
EBITDAR, EBITDA and Adjusted EBITDA, which are non-GAAP financial
measures (collectively, Non-GAAP Financial Measures). A
Non-GAAP Financial Measure is a numerical measure of a registrant’s
historical or future financial performance, financial position and
cash flows that excludes amounts, or is subject to adjustments that
have the effect of excluding amounts, that are included in the most
directly comparable financial measure calculated and presented in
accordance with GAAP in the statement of operations, balance sheet
or statement of cash flows (or equivalent statements) of the
registrant; or includes amounts, or is subject to adjustments that
have the effect of including amounts, that are excluded from the
most directly comparable financial measure so calculated and
presented. In this regard, GAAP refers to generally accepted
accounting principles in the United States. We have provided
reconciliations of the Non-GAAP Financial Measures to the most
directly comparable GAAP financial measures.
We believe the presentation of Non-GAAP Financial Measures
provides useful information to investors regarding our results of
operations because these financial measures are useful for
trending, analyzing and benchmarking the performance and value of
our business. By excluding certain expenses and other items
that may not be indicative of our core business
operating results, these Non-GAAP Financial Measures:
- allow investors to evaluate our performance from management’s
perspective, resulting in greater transparency with respect to
supplemental information used by us in our financial and
operational decision making;
- facilitate comparisons with prior periods and reflect the
principal basis on which management monitors financial
performance;
- facilitate comparisons with the performance of others in the
post-acute industry;
- provide better transparency as to the measures used by
management and others who follow our industry to estimate the value
of our company; and
- allow investors to view our financial performance and condition
in the same manner as our significant landlords and lenders require
us to report financial information to them in connection with
determining our compliance with financial covenants.
We use Non-GAAP Financial Measures primarily as performance
measures and believe that the GAAP financial measure most directly
comparable to them is net income (loss) attributable to Genesis
Healthcare, Inc. We use Non-GAAP Financial Measures to assess
the value of our business and the performance of our operating
businesses, as well as the employees responsible for operating such
businesses. Non-GAAP Financial Measures are useful in this
regard because they do not include such costs as interest expense,
income taxes and depreciation and amortization expense which may
vary from business unit to business unit depending upon such
factors as the method used to finance the original purchase of the
business unit or the tax law in the state in which a business unit
operates. By excluding such factors when measuring financial
performance, many of which are outside of the control of the
employees responsible for operating our business units, we are
better able to evaluate value and the operating performance of the
business unit and the employees responsible for business unit
performance. Consequently, we use these Non-GAAP Financial
Measures to determine the extent to which our employees have met
performance goals, and therefore the extent to which they may or
may not be eligible for incentive compensation awards.
We also use Non-GAAP Financial Measures in our annual budget
process. We believe these Non-GAAP Financial Measures
facilitate internal comparisons to historical operating performance
of prior periods and external comparisons to competitors’
historical operating performance. The presentation of these
Non-GAAP Financial Measures is consistent with our past practice
and we believe these measures further enable investors and analysts
to compare current non-GAAP measures with non-GAAP measures
presented in prior periods.
Although we use Non-GAAP Financial Measures as financial
measures to assess value and the performance of our business, the
use of these Non-GAAP Financial Measures is limited because they do
not consider certain material costs necessary to operate the
business. These costs include our lease expense (only in the
case of Adjusted EBITDAR), the cost to service debt, the
depreciation and amortization associated with our long-lived
assets, losses on early extinguishment of debt, transaction costs,
long-lived asset impairment charges, federal and state income tax
expenses, the operating results of our discontinued businesses and
the income or loss attributable to noncontrolling interests.
Because Non-GAAP Financial Measures do not consider these important
elements of our cost structure, a user of our financial information
who relies on Non-GAAP Financial Measures as the only measures of
our performance could draw an incomplete or misleading conclusion
regarding our financial performance. Consequently, a user of
our financial information should consider net loss attributable to
Genesis Healthcare, Inc. as an important measure of its financial
performance because it provides the most complete measure of our
performance.
Other companies may define Non-GAAP Financial Measures
differently and, as a result, our Non-GAAP Financial Measures may
not be directly comparable to those of other companies.
Non-GAAP Financial Measures do not represent net income (loss), as
defined by GAAP. Non-GAAP Financial Measures should be considered
in addition to, not as a substitute for, or superior to, GAAP
Financial Measures.
We use the following Non-GAAP Financial Measures that we believe
are useful to investors as key valuation and operating performance
measures:
EBITDA
We believe EBITDA is useful to an investor in
evaluating our operating performance because it helps investors
evaluate and compare the results of our operations from period to
period by removing the impact of our capital structure (interest
expense) and our asset base (depreciation and amortization expense)
from our operating results. In addition, financial covenants
in our debt agreements use EBITDA as a measure of compliance.
Adjustments to EBITDA
We adjust EBITDA when evaluating our performance
because we believe that the exclusion of certain additional items
described below provides useful supplemental information to
investors regarding our ongoing operating performance, in the case
of Adjusted EBITDA. We believe that the presentation of
Adjusted EBITDA, when combined with GAAP net loss attributable to
Genesis Healthcare, Inc., and EBITDA, is beneficial to an
investor’s complete understanding of our operating performance. In
addition, such adjustments are substantially similar to the
adjustments to EBITDA provided for in the financial covenant
calculations contained in our lease and debt agreements.
We adjust EBITDA for the following items:
- (Gain) loss on early extinguishment of debt. We recognize
gains or losses on the early extinguishment of debt when we
refinance our debt prior to its original term, requiring us to
write-off any unamortized deferred financing fees. We exclude
the effect of gains or losses recorded on the early extinguishment
of debt because we believe these gains and losses do not accurately
reflect the underlying performance of our operating
businesses.
- Other (income) loss. We primarily use this income
statement caption to capture gains and losses on the sale or
disposition of assets. We exclude the effect of such gains
and losses because we believe they do not accurately reflect the
underlying performance of our operating businesses.
- Transaction costs. In connection with our acquisition and
disposition transactions, we incur costs consisting of investment
banking, legal, transaction-based compensation and other
professional service costs. We exclude acquisition and
disposition related transaction costs expensed during the period
because we believe these costs do not reflect the underlying
performance of our operating businesses.
- Customer receivership and other related charges. We excluded
the non-cash costs related to $35.6 million of charges recorded in
the three and six months ended June 30, 2017 related to customer
receivership proceedings and the related respective write-down of
unpaid accounts receivable. We believe these charges are
caused by the challenging operating environment, particularly for
highly levered customers of our rehabilitation therapy
business. Accordingly, we believe these costs do not
accurately reflect the underlying performance of our operating
businesses.
- Long-lived asset impairments. We exclude non-cash
long-lived asset impairment charges because we believe including
them does not reflect the ongoing performance of our operating
businesses. Additionally, such impairment charges represent
accelerated depreciation expense, and depreciation expense is also
excluded from EBITDA.
- Goodwill and identifiable intangible asset impairments.
We exclude non-cash goodwill and identifiable intangible asset
impairment charges because we believe including them does not
reflect the ongoing operating performance of our operating
businesses.
- Severance and restructuring. We exclude severance costs
from planned reduction in force initiatives associated with
restructuring activities intended to adjust our cost structure in
response to changes in the business environment. We believe
these costs do not reflect the underlying performance of our
operating businesses. We do not exclude severance costs that
are not associated with such restructuring activities.
- (Income) losses of newly acquired, constructed or divested
businesses. The acquisition and construction of new
businesses is an element of our growth strategy. Many of the
businesses we acquire have a history of operating losses and
continue to generate operating losses in the months that follow our
acquisition. Newly constructed or developed businesses also
generate losses while in their start-up phase. We view these
losses as both temporary and an expected component of our long-term
investment in the new venture. We adjust these losses when
computing Adjusted EBITDA in order to better analyze the
performance of our mature ongoing business. The activities of
such businesses are adjusted when computing Adjusted EBITDA until
such time as a new business generates positive Adjusted
EBITDA. The divestiture of underperforming or non-strategic
facilities is also an element of our business strategy. We
eliminate the results of divested facilities beginning in the
quarter in which they become divested. We view the income or
losses associated with the wind-down of such divested facilities as
not indicative of the performance of our ongoing operating
business.
- Stock-based compensation. We exclude stock-based
compensation expense because it does not result in an outlay of
cash and such non-cash expenses do not reflect the underlying
performance of our operating businesses.
- Other Items. From time to time we incur costs or realize
gains that we do not believe reflect the underlying performance of
our operating businesses. In the current reporting periods,
we incurred the following expenses that we believe are
non-recurring in nature and do not reflect ongoing operating
performance of the Company or our operating businesses.
(1) Regulatory defense and related costs – We exclude the
costs of investigating and defending the inherited legal matters
associated with prior transactions. We believe these costs
are non-recurring in nature as they will no longer be recognized
following the final settlement of these matters. Also, we do not
believe the excluded costs reflect underlying performance of our
operating businesses.
See the reconciliation of net loss attributable
to Genesis Healthcare, Inc. to EBITDA and Adjusted EBITDA included
herein.
Adjusted EBITDAR
We use Adjusted EBITDAR as one measure in
determining the value of prospective acquisitions or
divestitures. Adjusted EBITDAR is also a commonly used
measure to estimate the enterprise value of businesses in the
healthcare industry. In addition, financial covenants in our lease
agreements use Adjusted EBITDAR as a measure of compliance.
The adjustments made and previously described in
the computation of Adjusted EBITDA are also made when computing
Adjusted EBITDAR. See the reconciliation of net loss
attributable to Genesis Healthcare, Inc. to Adjusted EBITDAR
included herein.
GENESIS HEALTHCARE,
INC.RECONCILIATION OF NET LOSS ATTRIBUTABLE TO
GENESIS HEALTHCARE, INC. TO EBITDA AND ADJUSTED
EBITDA(UNAUDITED)(IN
THOUSANDS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30, |
|
|
Six months ended
June 30, |
|
|
2018 |
|
2017 |
|
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable
to Genesis Healthcare, Inc. |
|
$ |
(39,612 |
) |
|
$ |
(65,156 |
) |
|
|
$ |
(108,150 |
) |
|
$ |
(115,917 |
) |
Adjustments to compute
EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
discontinued operations, net of taxes |
|
|
— |
|
|
|
47 |
|
|
|
|
— |
|
|
|
68 |
|
Net loss
attributable to noncontrolling interests |
|
|
(23,245 |
) |
|
|
(40,394 |
) |
|
|
|
(63,380 |
) |
|
|
(73,246 |
) |
Depreciation and amortization expense |
|
|
63,495 |
|
|
|
60,227 |
|
|
|
|
114,998 |
|
|
|
124,596 |
|
Interest
expense |
|
|
117,955 |
|
|
|
124,288 |
|
|
|
|
232,992 |
|
|
|
249,042 |
|
Income
tax (benefit) expense |
|
|
(886 |
) |
|
|
2,803 |
|
|
|
|
(539 |
) |
|
|
4,087 |
|
EBITDA |
|
$ |
117,707 |
|
|
$ |
81,815 |
|
|
|
|
175,921 |
|
|
|
188,630 |
|
Adjustments to compute Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain)
loss on early extinguishment of debt |
|
|
(501 |
) |
|
|
2,301 |
|
|
|
|
9,785 |
|
|
|
2,301 |
|
Other
(income) loss |
|
|
(22,220 |
) |
|
|
4,190 |
|
|
|
|
(22,152 |
) |
|
|
13,224 |
|
Transaction costs |
|
|
3,112 |
|
|
|
3,781 |
|
|
|
|
15,207 |
|
|
|
6,806 |
|
Customer
receivership and other related charges |
|
|
— |
|
|
|
35,566 |
|
|
|
|
— |
|
|
|
35,566 |
|
Long-lived asset impairments |
|
|
27,257 |
|
|
|
— |
|
|
|
|
55,617 |
|
|
|
— |
|
Goodwill
and identifiable intangible asset impairments |
|
|
1,132 |
|
|
|
— |
|
|
|
|
1,132 |
|
|
|
— |
|
Severance
and restructuring |
|
|
3,493 |
|
|
|
514 |
|
|
|
|
6,333 |
|
|
|
4,694 |
|
(Income)
losses of newly acquired, constructed, or divested businesses |
|
|
(925 |
) |
|
|
6,276 |
|
|
|
|
2,175 |
|
|
|
10,269 |
|
Stock-based compensation |
|
|
2,129 |
|
|
|
2,480 |
|
|
|
|
4,556 |
|
|
|
4,766 |
|
Regulatory defense and other related costs (1) |
|
|
31 |
|
|
|
194 |
|
|
|
|
187 |
|
|
|
451 |
|
Adjusted
EBITDA |
|
$ |
131,215 |
|
|
$ |
137,117 |
|
|
|
$ |
248,761 |
|
|
$ |
266,707 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional lease
payments not included in GAAP lease expense |
|
$ |
74,564 |
|
|
$ |
86,704 |
|
|
|
$ |
152,496 |
|
|
$ |
173,328 |
|
Total cash lease
payments made pursuant to operating leases, capital leases and
financing obligations |
|
|
106,675 |
|
|
|
124,938 |
|
|
|
|
217,678 |
|
|
|
247,662 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GENESIS HEALTHCARE,
INC.RECONCILIATION OF NET LOSS ATTRIBUTABLE TO
GENESIS HEALTHCARE, INC. TO ADJUSTED
EBITDAR(UNAUDITED)(IN
THOUSANDS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
June 30, |
|
|
Six months ended
June 30, |
|
|
2018 |
|
2017 |
|
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable
to Genesis Healthcare, Inc. |
|
$ |
(39,612 |
) |
|
$ |
(65,156 |
) |
|
|
$ |
(108,150 |
) |
|
$ |
(115,917 |
) |
Adjustments to compute
Adjusted EBITDAR: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from
discontinued operations, net of taxes |
|
|
— |
|
|
|
47 |
|
|
|
|
— |
|
|
|
68 |
|
Net loss
attributable to noncontrolling interests |
|
|
(23,245 |
) |
|
|
(40,394 |
) |
|
|
|
(63,380 |
) |
|
|
(73,246 |
) |
Depreciation and amortization expense |
|
|
63,495 |
|
|
|
60,227 |
|
|
|
|
114,998 |
|
|
|
124,596 |
|
Interest
expense |
|
|
117,955 |
|
|
|
124,288 |
|
|
|
|
232,992 |
|
|
|
249,042 |
|
Income
tax (benefit) expense |
|
|
(886 |
) |
|
|
2,803 |
|
|
|
|
(539 |
) |
|
|
4,087 |
|
Lease
expense |
|
|
32,111 |
|
|
|
38,234 |
|
|
|
|
65,182 |
|
|
|
74,334 |
|
(Gain)
loss on early extinguishment of debt |
|
|
(501 |
) |
|
|
2,301 |
|
|
|
|
9,785 |
|
|
|
2,301 |
|
Other
(income) loss |
|
|
(22,220 |
) |
|
|
4,190 |
|
|
|
|
(22,152 |
) |
|
|
13,224 |
|
Transaction costs |
|
|
3,112 |
|
|
|
3,781 |
|
|
|
|
15,207 |
|
|
|
6,806 |
|
Customer
receivership and other related charges |
|
|
— |
|
|
|
35,566 |
|
|
|
|
— |
|
|
|
35,566 |
|
Long-lived asset impairments |
|
|
27,257 |
|
|
|
— |
|
|
|
|
55,617 |
|
|
|
— |
|
Goodwill
and identifiable intangible asset impairments |
|
|
1,132 |
|
|
|
— |
|
|
|
|
1,132 |
|
|
|
— |
|
Severance
and restructuring |
|
|
3,493 |
|
|
|
514 |
|
|
|
|
6,333 |
|
|
|
4,694 |
|
(Income)
losses of newly acquired, constructed, or divested businesses |
|
|
(925 |
) |
|
|
6,276 |
|
|
|
|
2,175 |
|
|
|
10,269 |
|
Stock-based compensation |
|
|
2,129 |
|
|
|
2,480 |
|
|
|
|
4,556 |
|
|
|
4,766 |
|
Regulatory defense and other related costs (1) |
|
|
31 |
|
|
|
194 |
|
|
|
|
187 |
|
|
|
451 |
|
Adjusted EBITDAR |
|
$ |
163,326 |
|
|
$ |
175,351 |
|
|
|
$ |
313,943 |
|
|
$ |
341,041 |
|
Genesis Healthcare (NYSE:GEN)
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