KENNETT SQUARE, Pa., April 27 /PRNewswire-FirstCall/ -- Genesis
HealthCare Corporation (GHC) (NASDAQ:GHCI) today announced income
from continuing operations of $5.8 million, or $0.29 per diluted
share, and net income of $5.4 million, or $0.26 per diluted share,
for the quarter ended March 31, 2007, compared with income from
continuing operations of $8.3 million, or $0.43 per diluted share,
and net income of $8.1 million, or $0.42 per diluted share, in the
comparable period in the prior year. Earnings in the quarter were
reduced by $0.32 per diluted share due to certain transaction,
severance, deferred compensation plan and tax expenses, including
$5.2 million, or $0.15 per diluted share, of transaction related
costs from the proposed merger with affiliates of Formation
Capital, LLC and JER Partners, $2.7 million, or $0.08 per diluted
share, of severance related costs, $2.0 million, or $0.06 per
diluted share, of incremental stock based compensation associated
with the growth in the value of GHC's common stock held in a
deferred compensation plan and $0.03 per diluted share for an
increase in GHC's effective tax rate caused by the
non-deductibility of certain merger related transaction costs. For
the six months ended March 31, 2007, income from continuing
operations was $16.5 million, or $0.83 per diluted share, and net
income was $16.1 million, or $0.81 per diluted share, compared with
income from continuing operations of $19.6 million, or $1.00 per
diluted share, and net income of $19.5 million, or $1.00 per
diluted share, in the comparable six month period in the prior
year. Revenue for the quarter ended March 31, 2007 grew 13.7% to
$496.1 million compared to revenue of $436.3 million in the
comparable period in the prior year. Approximately $30.3 million of
the increase in revenue was related to acquisitions and newly
consolidated joint ventures. Adjusted for these items, revenues
grew 6.7%. Revenue for the six months ended March 31, 2007 grew to
$972.0 million compared to revenue of $871.9 million in the
comparable period in the prior year. Approximately $39.3 million of
the increase in revenue was related to acquisitions and newly
consolidated joint ventures. Adjusted for these items, revenues
grew 6.7%. EBITDA for the quarter ended March 31, 2007 totaled
$37.3 million compared to $35.6 million in the comparable period in
the prior year. EBITDA for the quarter ended March 31, 2007 was
negatively impacted by $9.9 million of transaction, severance and
deferred compensation plan expenses. Furthermore, the quarter was
positively impacted by $5.6 million related to acquisitions and
newly consolidated joint ventures. EBITDA for the quarter ended
March 31, 2006 was negatively impacted by $0.2 million of debt
extinguishment costs. (See attached reconciliation on page 7).
EBITDA for the six months ended March 31, 2007 totaled $79.9
million compared to $75.9 million in the comparable period in the
prior year. EBITDA for the six months ended March 31, 2007 was
negatively impacted by $13.5 million of transaction, severance and
deferred compensation plan expenses along with debt extinguishment
costs incurred in the first quarter. Furthermore, the six month
period was positively impacted by $7.7 million related to
acquisitions and newly consolidated joint ventures. EBITDA for the
six months ended March 31, 2006 was negatively impacted by $0.2
million of debt extinguishment costs. (See attached reconciliation
on page 7). The following table provides a reconciliation of the
current quarter GAAP earnings per share to Non-GAAP earnings per
share. Three months Six months ended ended March 31, 2007 Diluted
EPS from continuing operations - GAAP $0.29 $0.83 Adjust for: Debt
extinguishment costs - 0.02 Transaction costs on proposed Merger
0.15 0.24 Incremental compensation costs for company shares held in
deferred compensation plan 0.06 0.06 Severance costs 0.08 0.08
Effective tax rate adjusted to 40% 0.03 0.04 Diluted EPS from
continuing operations - Non GAAP $0.61 $1.28 Inpatient Services
Inpatient services net revenue grew 13.7% to $445.7 million in the
quarter ended March 31, 2007 from $392.0 million in the prior year
quarter. Acquisitions and newly consolidated joint ventures
generated $30.3 million of the revenue growth, with the remainder
attributed to an increase in non- Medicaid days mix and an increase
in payor rates, while occupancy remained stable at 91.6%. Medicare
rates in the quarter ended March 31, 2007 grew 5.6% to
approximately $419 per patient day from the prior year quarter as a
result of the October 1, 2006 inflationary increase as well as
higher Medicare patient acuity. Medicaid rates in the quarter ended
March 31, 2007 grew 4.4% to approximately $192 per patient day from
the prior year quarter due to an increase in state Medicaid rates
as well as higher patient acuity. Inpatient services EBITDA grew
20.1% to $62.2 million in the quarter ended March 31, 2007 from
$51.7 million in the comparable period in the prior year. Excluding
acquisitions and the newly consolidated facilities, EBITDA grew
11.2% over the comparable period in the prior year. In addition to
the revenue increases previously discussed, EBITDA growth was
driven by improved cost control. Rehabilitation Services
Rehabilitation services revenues grew 22.0% to $71.0 million in the
quarter ended March 31, 2007 from $58.2 million in the prior year
quarter. Revenues benefited from new business, higher pricing and
higher patient acuity in the inpatient business. Rehabilitation
services EBITDA grew 51.5% to $5.1 million in the quarter ended
March 31, 2007 from $3.4 million in the prior year quarter. In
addition to the revenue increases, rehabilitation EBITDA improved
due to therapist and operational efficiencies. Balance Sheet and
Cash Flow GHC ended the quarter with $475.2 million of debt and
$33.1 million of cash. Included within these balances is $43.7
million of non-recourse debt and $7.8 million in cash related to
consolidated variable interest entities and other partnerships.
During the quarter, GHC repaid $36.5 million of debt principally
under the revolving credit facility. GHC's operating cash flow for
the quarter was $41.8 million. Capital expenditures in the quarter
ended March 31, 2007 totaled $26.1 million. Acquisitions,
Dispositions and Newly Consolidated Joint Ventures Acquisitions
Effective January 1, 2007, GHC completed a lease and purchase
option agreement for 11 facilities in Maine with 748 skilled
nursing and 220 residential care beds. Under the agreement, GHC
leases the facilities for 25 years with an annual lease payment of
approximately $5 million. GHC paid approximately $15 million in
cash in exchange for tangible operating assets and has entered into
a $53 million fixed price purchase option exercisable in 2026. The
transaction is accounted for as a capital lease resulting in $40
million of capital lease obligations. The incremental interest and
depreciation expense associated with this transaction totaled $1.1
million and $0.6 million, respectively in the quarter ended March
31, 2007. On November 1, 2006, GHC completed the acquisition of a
skilled nursing facility in Maryland with 115 beds, and on December
1, 2006 acquired two additional skilled nursing facilities and four
assisted living facilities with a combined complement of 405 beds
in West Virginia. On June 1, 2006, GHC purchased its joint venture
partners' interests in three skilled nursing facilities located in
West Virginia having a combined 208 beds. Dispositions During the
second quarter, GHC closed a 90 bed skilled nursing facility which
had annual revenues of approximately $5 million. Accordingly, GHC
has accounted for this property as a discontinued operation in all
periods presented herein. Newly Consolidated Joint Ventures
Effective October 1, 2006, GHC began consolidating two partnerships
in accordance with EITF Issue No. 04-5, "Determining Whether a
General Partner, or the General Partners as a Group, Controls a
Limited Partnership or Similar Entity When the Limited Partners
Have Certain Rights." One of the partnerships is a jointly owned
and managed skilled nursing facility having 112 beds. The second
partnership owns the real estate of a skilled nursing facility that
is leased to GHC. Income Taxes GHC's effective tax rate of 45.9% in
the quarter ended March 31, 2007 was adversely impacted by certain
nondeductible transaction costs of the proposed merger. No Earnings
Conference Call, Webcast or Earnings Guidance Genesis HealthCare
will not host an earnings conference call or webcast, and will not
provide fiscal 2007 earnings guidance. About Genesis HealthCare
Corporation Genesis HealthCare Corporation (NASDAQ:GHCI) is one of
the nation's largest long-term care providers with over 200 skilled
nursing centers and assisted living residences in 13 eastern
states. Genesis also supplies contract rehabilitation therapy to
over 600 healthcare providers in 20 states and the District of
Columbia. Visit our website at http://www.genesishcc.com/.
Statements made in this release, our website and in our other
public filings and releases, which are not historical facts contain
"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," "intend," "may," "target," "appears" and
similar expressions. Such forward-looking statements include,
without limitation, closure/timing of transactions including the
amended agreement and plan of merger, expected reimbursement rates,
our net operating loss carryforwards, our effective tax rate,
agency labor utilization, wage rates, debt repayments, share
repurchases, provider tax assessments, changes in state Medicaid
rates the extent and effectiveness of our facilities renovation
program, our expected income from continuing operations, earnings
per diluted share, EBITDA and capital expenditures for fiscal 2007.
Factors that could cause actual results to differ materially
include, but are not limited to, the following: costs, changes in
the reimbursement rates and timing/method of payment from Medicare
or Medicaid, or the implementation of other measures to reduce
reimbursement for our services; community-based care trends,
capitation or other risk sharing reimbursement trends, efforts of
third party payors to control costs; the impact of federal and
state regulations; changes in payor mix and payment methodologies;
competition in our business; the capital intensive nature of our
inpatient services segment and the need for extensive capital
expenditures in order to improve our physical infrastructure; an
increase in insurance costs and potential liability for losses not
covered by, or in excess of, our insurance; competition for and
availability of qualified staff in the healthcare industry and
risks of potential strikes; our ability to control operating costs,
and generate sufficient cash flow to meet operational and financial
requirements; our ability to fulfill debt obligations; our
covenants which limit our discretion in the operation of our
business; an economic downturn or changes in the laws affecting our
business in those markets in which we operate; the impact of new
accounting pronouncements; the impact of implementing new
information systems; the impact of acquisitions; the impact to our
ongoing business caused by the diversion of management's attention
prior to the completion of the merger; when and if the proposed
merger will be completed; financial and other implications if the
proposed merger is terminated; and other matters beyond our
control. The forward-looking statements involve known and unknown
risks, uncertainties and other factors that are, in some cases,
beyond our control. We caution investors that any forward-looking
statements made by us are not guarantees of future performance. We
disclaim 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. Genesis
HealthCare Contact: Lori Mayer Investor Relations 610-925-2000
GENESIS HEALTHCARE CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS THREE MONTHS ENDED MARCH 31,
2007 AND 2006 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Three
months ended March 31, 2007 March 31, 2006 Net revenues $496,070
$436,265 Operating expenses: Salaries, wages and benefits 302,998
267,717 Other operating expenses 147,863 129,338 Loss on early
extinguishment of debt - 188 Transaction costs of proposed Merger
5,196 - Lease expense 5,540 5,620 Depreciation and amortization
expense 18,508 15,530 Interest expense 7,679 6,357 Investment
income (2,834) (2,237) Income before income tax expense, equity in
net income of unconsolidated affiliates and minority interests
11,120 13,752 Income tax expense 4,933 5,579 Income before equity
in net income of unconsolidated affiliates and minority interests
6,187 8,173 Equity in net income of unconsolidated affiliates 179
435 Minority interests (552) (323) Income from continuing
operations 5,814 8,285 Loss from discontinued operations, net of
taxes (453) (217) Net income $5,361 $8,068 Per common share data:
Basic: Income from continuing operations $0.30 $0.43 Loss from
discontinued operations (0.02) (0.01) Net income $0.27 $0.42
Weighted average shares 19,495,676 19,234,656 Diluted: Income from
continuing operations $0.29 $0.43 Loss from discontinued operations
(0.02) (0.01) Net income $0.26 $0.42 Weighted average shares
20,246,698 19,434,096 GENESIS HEALTHCARE CORPORATION AND
SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS SIX MONTHS ENDED MARCH 31, 2007 AND 2006 (IN THOUSANDS,
EXCEPT SHARE AND PER SHARE DATA) Six months ended March 31, 2007
March 31, 2006 Net revenues $972,043 $871,871 Operating expenses:
Salaries, wages and benefits 590,126 535,727 Other operating
expenses 287,677 253,103 Loss on early extinguishment of debt 766
188 Transaction costs of proposed Merger 7,985 - Lease expense
11,004 11,086 Depreciation and amortization expense 36,128 30,269
Interest expense 14,388 12,855 Investment income (5,398) (4,176)
Income before income tax expense, equity in net income of
unconsolidated affiliates and minority interests 29,367 32,819
Income tax expense 12,275 13,394 Income before equity in net income
of unconsolidated affiliates and minority interests 17,092 19,425
Equity in net income of unconsolidated affiliates 415 969 Minority
interests (1,041) (818) Income from continuing operations 16,466
19,576 Loss from discontinued operations, net of taxes (383) (71)
Net income $16,083 $19,505 Per common share data: Basic: Income
from continuing operations $0.85 $1.01 Loss from discontinued
operations (0.02) (0.00) Net income $0.83 $1.01 Weighted average
shares 19,472,439 19,349,677 Diluted: Income from continuing
operations $0.83 $1.00 Loss from discontinued operations (0.02)
(0.00) Net income $0.81 $1.00 Weighted average shares 19,836,027
19,599,130 GENESIS HEALTHCARE CORPORATION AND SUBSIDIARIES
RECONCILIATION OF NET INCOME TO EBITDA (IN THOUSANDS) Three months
ended Six months ended March 31, March 31, March 31, March 31, 2007
2006 2007 2006 Net income $5,361 $8,068 $16,083 $19,505 Add back:
Loss from discontinued operations, net of taxes 453 217 383 71
Equity in net income of unconsolidated affiliates (179) (435) (415)
(969) Minority interests 552 323 1,041 818 Income tax expense 4,933
5,579 12,275 13,394 Interest expense 7,679 6,357 14,388 12,855
Depreciation and amortization expense 18,508 15,530 36,128 30,269
EBITDA $37,307 $35,639 $79,883 $75,943 GENESIS HEALTHCARE
CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED
BALANCE SHEETS (IN THOUSANDS) March 31, 2007 September 30, 2006
Assets: Current assets: Cash and equivalents $33,092 $74,819
Current portion of restricted cash and investments in marketable
securities 31,044 35,160 Accounts receivable, net 253,164 226,689
Prepaid expenses and other current assets 47,618 48,583 Deferred
income taxes 39,704 45,206 Total current assets 404,622 430,457
Property and equipment, net 997,365 873,164 Restricted cash and
investments in marketable securities 62,293 64,819 Deferred income
taxes 8,105 5,830 Other long-term assets 99,934 98,260 Total assets
$1,572,319 $1,472,530 Liabilities and Shareholders' Equity: Current
liabilities: Current installments of long-term debt $15,009 $4,829
Accounts payable and accrued expenses 192,465 162,978 Current
portion of self-insurance liability reserves 36,554 40,455 Total
current liabilities 244,028 208,262 Long-term debt 460,239 440,005
Self-insurance liability reserves 77,946 70,682 Other long-term
liabilities 66,954 53,107 Commitments and contingencies Total
shareholders' equity 723,152 700,474 Total liabilities and
shareholders' equity $1,572,319 $1,472,530 GENESIS HEALTHCARE
CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS THREE MONTHS ENDED MARCH 31, 2007 AND 2006
(IN THOUSANDS) Three months ended March 31, 2007 March 31, 2006
Cash flows from operating activities: Net income $5,361 $8,068 Net
charges included in operations not requiring funds 26,229 26,323
Changes in assets and liabilities: Accounts receivable (14,363)
(9,492) Accounts payable and other accrued expenses 21,508 (2,061)
Other, net 3,114 5,595 Total adjustments 36,488 20,365 Net cash
provided by operating activities 41,849 28,433 Cash flows from
investing activities: Capital expenditures (26,062) (21,921) Net
proceeds on maturity or sale (purchases) of restricted marketable
securities 5,103 (4,035) Net change in restricted cash and
equivalents 21 (23) Purchase of eldercare centers (19,097) 200
Other, net 479 543 Net cash used in investing activities (39,556)
(25,236) Cash flows from financing activities: Net repayments under
revolving credit facility (33,000) - Repayment of long-term debt
(3,481) (3,737) Debt prepayment premium - (130) Proceeds from
exercise of stock options 679 839 Other, net 331 234 Net cash used
in financing activities (35,471) (2,794) Net (decrease) increase in
cash and equivalents $(33,178) $403 Cash and equivalents: Beginning
of period 66,270 88,240 End of period $33,092 $88,643 GENESIS
HEALTHCARE CORPORATION AND SUBSIDIARIES UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS SIX MONTHS ENDED MARCH 31,
2007 AND 2006 (IN THOUSANDS) Six months ended March 31, 2007 March
31, 2006 Cash flows from operating activities: Net income $16,083
$19,505 Net charges included in operations not requiring funds
63,918 52,363 Changes in assets and liabilities: Accounts
receivable (35,842) (29,739) Accounts payable and other accrued
expenses 38,917 (20) Other, net 1,261 5,900 Total adjustments
68,254 28,504 Net cash provided by operating activities 84,337
48,009 Cash flows from investing activities: Capital expenditures
(53,157) (53,962) Net proceeds on maturity or sale of restricted
marketable securities 13,904 475 Net change in restricted cash and
equivalents (7,088) (621) Purchase of eldercare centers (68,716)
(4,823) Consolidation of partnerships 2,324 - Other, net (164)
6,828 Net cash used in investing activities (112,897) (52,103) Cash
flows from financing activities: Repayment of long-term debt
(13,991) (5,212) Debt prepayment premium and debt issuance costs
(383) (130) Purchase of common stock for treasury - (10,691)
Proceeds from exercise of stock options 767 1,108 Other, net 440
312 Net cash used in financing activities (13,167) (14,613) Net
decrease in cash and equivalents $(41,727) $(18,707) Cash and
equivalents: Beginning of period 74,819 107,350 End of period
$33,092 $88,643 GENESIS HEALTHCARE CORPORATION AND SUBSIDIARIES
FINANCIAL HIGHLIGHTS (UNAUDITED) Three months ended Six months
ended Segment Data (dollars in March 31, March 31, March 31, March
31, thousands) 2007 2006 2007 2006 Inpatient services Revenue
$445,677 $392,047 $871,985 $783,830 EBITDA - $ 62,150 51,729
123,610 104,244 EBITDA - % 13.9% 13.2% 14.2% 13.3% EBITDA - $ per
patient day $33.52 $30.28 $33.92 $30.21 Rehabilitation therapy
services (including intersegment amounts) Revenue $71,043 $58,214
$138,818 $116,359 EBITDA - $ 5,114 3,375 10,711 8,061 EBITDA - %
7.2% 5.8% 7.7% 6.9% Three months ended Six months ended Selected
Operating Statistics March 31, March 31, March 31, March 31,
(Inpatient services segment) 2007 2006 2007 2006 Occupancy -
Licensed Beds 91.6% 91.7% 91.7% 91.6% Patient Days: Private and
other 403,203 347,783 780,849 703,824 Medicare 305,980 272,655
589,934 536,120 Medicaid 1,145,104 1,087,901 2,273,564 2,210,929
Total Days 1,854,287 1,708,339 3,644,347 3,450,873 Per Diems:
Private and other $221.23 $216.57 $220.55 $213.96 Medicare 419.25
396.96 418.17 394.49 Medicaid (Pro Forma) (1) 192.44 184.28 192.59
183.61 Revenue quality mix (non-Medicaid) (1) 50.6% 48.7% 49.8%
48.1% Nursing labor costs per patient day: Employed labor $87.35
$85.93 $87.07 $85.36 Agency labor 2.08 1.83 2.07 2.00 Total $89.43
$87.76 $89.14 $87.36 At March 31, 2007: Inpatient Inpatient
Licensed Facility Beds Count Owned - Skilled Nursing 15,579 125 -
Assisted Living 996 11 Total Owned 16,575 136 Leased - Skilled
Nursing 4,411 36 - Assisted Living 777 6 Total Leased 5,188 42
Total Owned and Leased (Consolidated) 21,763 178 Jointly Owned -
Skilled Nursing 745 4 - Assisted Living 586 5 Managed - Skilled
Nursing 2,767 21 - Assisted Living 638 4 - Transitional Care Units
206 8 Total Jointly Owned and Managed- (Unconsolidated) 4,942 42
(1) - Medicaid per diems and quality revenue mix are presented on a
pro forma basis to reflect retroactive provider assessments and
other reimbursement settlements in the period they relate to.
DATASOURCE: Genesis HealthCare Corporation CONTACT: Lori Mayer of
Genesis HealthCare Investor Relations, +1-610-925-2000 Web site:
http://www.genesishcc.com/
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