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, 2019.
Second Quarter 2019 Results
- US GAAP revenue in the second quarter of 2019 was $1.15 billion
compared to $1.27 billion in the second quarter of 2018;
- US GAAP net loss attributable to Genesis Healthcare, Inc. in
the second quarter of 2019 was $4.8 million compared to a net loss
of $39.6 million in the second quarter of 2018; and
- Adjusted EBITDAR in the second quarter of 2019 was $156.0
million compared to $163.3 million in the second quarter of
2018.
“We are pleased to announce another consecutive
strong quarter for Genesis,” noted George V. Hager, Jr., Chief
Executive Officer of Genesis. “Current quarter “same-store”
Adjusted EBITDAR grew 4.1% and the related margin expanded by 80
basis points, as compared to the prior year quarter. “Our
inpatient segment continues the steady and improving performance
experienced over the past few quarters led by “same-store”
occupancy growth of 80 basis points and effective expense
management.”
“Our team of dedicated professionals remains
focused on providing quality outcomes to our patients, optimizing
our portfolio of assets, improving operating performance and making
final preparations for the October 1, 2019 transition to the new
Medicare Patient Driven Payment Model, which we expect will be good
for our patients and accretive for Genesis,” continued Hager.
Portfolio OptimizationGenesis
continues to exit underperforming facilities and certain low
density markets in order to focus on investment and growth in core,
strategic markets. During the second quarter of 2019, Genesis
divested, exited or closed the operations of nine facilities.
During the first and second quarter of 2019, Genesis exited a total
of 19 facilities with approximate annual net revenue of $179.0
million, a pre-tax net loss of $9.1 million and Adjusted EBITDA of
$4.4 million. These transactions resulted in the reduction of
approximately $4.3 million of annual cash lease
payments. Subsequent
to June 30, 2019, Genesis divested 11 leased facilities and one
owned assisted living facility. As a result of these
divestitures, Genesis completed its exit from the inpatient
business in Ohio. The 12 divested facilities resulted in a
reduction of $1.9 million of annual cash lease payments. In
aggregate, these 12 facilities generate approximate annual net
revenue of $73.5 million, a pre-tax net loss of $4.7 million and
Adjusted EBITDA of $2.4 million.
“In addition to divestitures, we are
prioritizing future transactions that will lessen the burden of
lease escalators, allow us to participate in future real estate
appreciation, reduce our overall cost of capital and set the stage
for greater facility ownership in the future,” commented Hager.
Adoption of New
Lease Accounting Standard On January 1,
2019, Genesis adopted FASB Accounting Standards Codification Topic
842, Leases (Topic 842), which requires lessees to recognize leases
on-balance sheet. Therefore, comparative information for
periods prior to January 1, 2019 has not been adjusted.
Topic 842 had a material effect on Genesis’s
consolidated financial statements. The most significant
effects of adoption relate to (1) the recognition of new
right-of-use (ROU) assets and lease liabilities on its consolidated
balance sheet for real estate operating leases; (2) the
derecognition of existing assets and liabilities for sale-leaseback
transactions that previously did not qualify for sale accounting;
and (3) providing significant new disclosures about its leasing
activities. In addition, for the three and six months ended
June 30, 2019, adoption of Topic 842 is the primary driver of the
increase to lease expense and the decrease to interest expense,
when compared to the same periods in the prior year, since the
prior year has not been adjusted.
Conference CallGenesis
Healthcare, Inc. will hold a conference call at 8:30 a.m. Eastern
Time on Thursday, August 8, 2019. 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 approximately 400
skilled nursing facilities and assisted/senior living communities
in 27 states nationwide. Genesis subsidiaries also supply
rehabilitation therapy to approximately 1,200 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;
- 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; and
- 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.
The Company’s Annual Report on Form 10-K for the
year ended December 31, 2018, 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, |
|
|
2019 |
|
2018 |
|
2019 |
|
2018 |
Net revenues |
|
$ |
1,145,052 |
|
|
$ |
1,272,360 |
|
|
$ |
2,306,692 |
|
|
$ |
2,573,432 |
|
Salaries, wages and
benefits |
|
|
626,159 |
|
|
|
705,754 |
|
|
|
1,268,569 |
|
|
|
1,441,524 |
|
Other operating expenses |
|
|
332,528 |
|
|
|
370,555 |
|
|
|
675,066 |
|
|
|
754,715 |
|
General and administrative
costs |
|
|
35,562 |
|
|
|
39,046 |
|
|
|
71,094 |
|
|
|
78,921 |
|
Lease expense |
|
|
94,586 |
|
|
|
32,111 |
|
|
|
188,647 |
|
|
|
65,182 |
|
Depreciation and amortization
expense |
|
|
28,268 |
|
|
|
63,495 |
|
|
|
66,463 |
|
|
|
114,998 |
|
Interest expense |
|
|
52,975 |
|
|
|
117,955 |
|
|
|
104,491 |
|
|
|
232,992 |
|
(Gain) loss on early
extinguishment of debt |
|
|
(24 |
) |
|
|
(501 |
) |
|
|
(24 |
) |
|
|
9,785 |
|
Investment income |
|
|
(2,143 |
) |
|
|
(1,631 |
) |
|
|
(4,007 |
) |
|
|
(2,678 |
) |
Other income |
|
|
(23,413 |
) |
|
|
(22,220 |
) |
|
|
(40,330 |
) |
|
|
(22,152 |
) |
Transaction costs |
|
|
8,823 |
|
|
|
3,112 |
|
|
|
10,084 |
|
|
|
15,207 |
|
Long-lived asset
impairments |
|
|
900 |
|
|
|
27,257 |
|
|
|
900 |
|
|
|
55,617 |
|
Goodwill and identifiable
intangible asset impairments |
|
|
— |
|
|
|
1,132 |
|
|
|
— |
|
|
|
1,132 |
|
Equity in net (income) loss of
unconsolidated affiliates |
|
|
(24 |
) |
|
|
38 |
|
|
|
(85 |
) |
|
|
258 |
|
Loss before income tax
benefit |
|
|
(9,145 |
) |
|
|
(63,743 |
) |
|
|
(34,176 |
) |
|
|
(172,069 |
) |
Income tax benefit |
|
|
(162 |
) |
|
|
(886 |
) |
|
|
(111 |
) |
|
|
(539 |
) |
Net loss |
|
|
(8,983 |
) |
|
|
(62,857 |
) |
|
|
(34,065 |
) |
|
|
(171,530 |
) |
Less net loss attributable to
noncontrolling interests |
|
|
4,164 |
|
|
|
23,245 |
|
|
|
13,983 |
|
|
|
63,380 |
|
Net loss attributable to
Genesis Healthcare, Inc. |
|
$ |
(4,819 |
) |
|
$ |
(39,612 |
) |
|
$ |
(20,082 |
) |
|
$ |
(108,150 |
) |
Loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding for loss from continuing
operations per share |
|
|
106,846 |
|
|
|
100,596 |
|
|
|
105,289 |
|
|
|
99,430 |
|
Net loss attributable to Genesis Healthcare, Inc. |
|
$ |
(0.05 |
) |
|
$ |
(0.39 |
) |
|
$ |
(0.19 |
) |
|
$ |
(1.09 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
GENESIS HEALTHCARE,
INC.CONDENSED CONSOLIDATED BALANCE
SHEETS(UNAUDITED)(IN
THOUSANDS)
|
|
|
|
|
|
|
|
|
June 30, |
|
December 31, |
|
|
2019 |
|
2018 |
Assets: |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and equivalents |
|
$ |
11,857 |
|
|
$ |
20,865 |
|
Restricted cash and equivalents |
|
|
32,600 |
|
|
|
73,762 |
|
Accounts receivable, net of allowance for doubtful accounts |
|
|
558,907 |
|
|
|
622,717 |
|
Other current assets |
|
|
143,264 |
|
|
|
158,281 |
|
Total current assets |
|
|
746,628 |
|
|
|
875,625 |
|
Property and equipment, net of
accumulated depreciation |
|
|
673,911 |
|
|
|
2,887,554 |
|
Finance lease right-of-use
asset, net of accumulated amortization |
|
|
516,537 |
|
|
|
— |
|
Operating lease right-of-use
asset |
|
|
2,200,252 |
|
|
|
— |
|
Restricted cash and
equivalents |
|
|
52,334 |
|
|
|
47,649 |
|
Identifiable intangible
assets, net of accumulated amortization |
|
|
92,397 |
|
|
|
119,082 |
|
Goodwill |
|
|
85,642 |
|
|
|
85,642 |
|
Other long-term assets |
|
|
274,879 |
|
|
|
248,071 |
|
Total assets |
|
$ |
4,642,580 |
|
|
$ |
4,263,623 |
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Deficit: |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
448,579 |
|
|
$ |
462,599 |
|
Accrued compensation |
|
|
155,639 |
|
|
|
172,726 |
|
Other current liabilities |
|
|
359,841 |
|
|
|
276,887 |
|
Total current liabilities |
|
|
964,059 |
|
|
|
912,212 |
|
|
|
|
|
|
|
|
Long-term debt |
|
|
1,142,079 |
|
|
|
1,082,933 |
|
Finance lease obligations |
|
|
839,196 |
|
|
|
967,942 |
|
Operating lease
obligations |
|
|
2,250,790 |
|
|
|
— |
|
Financing obligations |
|
|
— |
|
|
|
2,732,939 |
|
Other long-term
liabilities |
|
|
579,435 |
|
|
|
612,463 |
|
Stockholders' deficit |
|
|
(1,132,979 |
) |
|
|
(2,044,866 |
) |
Total liabilities and stockholders' deficit |
|
$ |
4,642,580 |
|
|
$ |
4,263,623 |
|
|
|
|
|
|
|
|
GENESIS HEALTHCARE,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(UNAUDITED)(IN
THOUSANDS)
|
|
|
|
|
|
|
|
|
|
|
Six months ended June 30, |
|
|
|
2019 |
|
2018 |
Net cash provided by operating activities (1) |
|
|
$ |
36,081 |
|
|
$ |
11,469 |
|
Net cash used in investing
activities |
|
|
|
(162,208 |
) |
|
|
(35,082 |
) |
Net cash provided by financing
activities |
|
|
|
80,642 |
|
|
|
108,047 |
|
Net (decrease) increase in
cash, cash equivalents and restricted cash and equivalents |
|
|
|
(45,485 |
) |
|
|
84,434 |
|
Beginning of period |
|
|
|
142,276 |
|
|
|
58,638 |
|
End of period |
|
|
$ |
96,791 |
|
|
$ |
143,072 |
|
(1) - Net cash provided by operating activities in the six
months ended June 30, 2019 and 2018 includes
approximately $10.1 million and $15.2 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, |
|
|
2019 |
|
2018 |
|
|
2019 |
|
2018 |
Financial Results (in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues |
|
$ |
1,145,052 |
|
|
$ |
1,272,360 |
|
|
|
$ |
2,306,692 |
|
|
$ |
2,573,432 |
|
EBITDA |
|
|
72,098 |
|
|
|
117,707 |
|
|
|
|
136,778 |
|
|
|
175,921 |
|
Adjusted EBITDAR |
|
|
156,019 |
|
|
|
163,326 |
|
|
|
|
304,516 |
|
|
|
313,943 |
|
Adjusted EBITDA |
|
|
61,433 |
|
|
|
131,215 |
|
|
|
|
115,869 |
|
|
|
248,761 |
|
Net loss attributable to Genesis Healthcare, Inc. |
|
|
(4,819 |
) |
|
|
(39,612 |
) |
|
|
|
(20,082 |
) |
|
|
(108,150 |
) |
INPATIENT SEGMENT:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
|
|
2019 |
|
2018 |
|
|
2019 |
|
2018 |
|
Occupancy Statistics -
Inpatient |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available licensed beds in service at end of period |
|
|
46,353 |
|
|
52,303 |
|
|
|
46,353 |
|
|
52,303 |
|
Available operating beds in service at end of period |
|
|
44,408 |
|
|
50,182 |
|
|
|
44,408 |
|
|
50,182 |
|
Available patient days based on licensed beds |
|
|
4,213,333 |
|
|
4,759,573 |
|
|
|
8,378,173 |
|
|
9,466,843 |
|
Available patient days based on operating beds |
|
|
4,036,602 |
|
|
4,567,679 |
|
|
|
8,027,459 |
|
|
9,087,860 |
|
Actual patient days |
|
|
3,496,046 |
|
|
3,840,181 |
|
|
|
6,977,410 |
|
|
7,681,223 |
|
Occupancy percentage - licensed beds |
|
|
83.0 |
% |
|
80.7 |
% |
|
|
83.3 |
% |
|
81.1 |
% |
Occupancy percentage - operating beds |
|
|
86.6 |
% |
|
84.1 |
% |
|
|
86.9 |
% |
|
84.5 |
% |
Skilled mix |
|
|
18.2 |
% |
|
18.9 |
% |
|
|
18.6 |
% |
|
19.6 |
% |
Average daily census |
|
|
38,418 |
|
|
42,200 |
|
|
|
38,549 |
|
|
42,438 |
|
Revenue per patient day (skilled nursing facilities) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare Part A |
|
$ |
528 |
|
$ |
528 |
|
|
$ |
526 |
|
$ |
526 |
|
Insurance |
|
|
454 |
|
|
461 |
|
|
|
456 |
|
|
458 |
|
Private and other |
|
|
364 |
|
|
337 |
|
|
|
361 |
|
|
335 |
|
Medicaid |
|
|
231 |
|
|
223 |
|
|
|
231 |
|
|
223 |
|
Medicaid (net of provider taxes) |
|
|
211 |
|
|
204 |
|
|
|
211 |
|
|
204 |
|
Weighted average (net of provider taxes) |
|
$ |
277 |
|
$ |
274 |
|
|
$ |
278 |
|
$ |
275 |
|
Patient days by payor
(skilled nursing facilities) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare |
|
|
344,916 |
|
|
400,370 |
|
|
|
704,651 |
|
|
834,094 |
|
Insurance |
|
|
252,272 |
|
|
285,935 |
|
|
|
518,739 |
|
|
591,221 |
|
Total skilled mix days |
|
|
597,188 |
|
|
686,305 |
|
|
|
1,223,390 |
|
|
1,425,315 |
|
Private and other |
|
|
193,603 |
|
|
227,920 |
|
|
|
379,838 |
|
|
454,823 |
|
Medicaid |
|
|
2,505,024 |
|
|
2,726,538 |
|
|
|
4,975,038 |
|
|
5,405,661 |
|
Total
Days |
|
|
3,295,815 |
|
|
3,640,763 |
|
|
|
6,578,266 |
|
|
7,285,799 |
|
Patient days as a
percentage of total patient days (skilled nursing
facilities) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare |
|
|
10.5 |
% |
|
11.0 |
% |
|
|
10.7 |
% |
|
11.4 |
% |
Insurance |
|
|
7.7 |
% |
|
7.9 |
% |
|
|
7.9 |
% |
|
8.2 |
% |
Skilled mix |
|
|
18.2 |
% |
|
18.9 |
% |
|
|
18.6 |
% |
|
19.6 |
% |
Private and other |
|
|
5.9 |
% |
|
6.3 |
% |
|
|
5.8 |
% |
|
6.2 |
% |
Medicaid |
|
|
75.9 |
% |
|
74.8 |
% |
|
|
75.6 |
% |
|
74.2 |
% |
Total |
|
|
100.0 |
% |
|
100.0 |
% |
|
|
100.0 |
% |
|
100.0 |
% |
Facilities at end of
period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Skilled nursing
facilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leased |
|
|
311 |
|
|
341 |
|
|
|
311 |
|
|
341 |
|
Owned |
|
|
37 |
|
|
44 |
|
|
|
37 |
|
|
44 |
|
Joint Venture |
|
|
20 |
|
|
5 |
|
|
|
20 |
|
|
5 |
|
Managed * |
|
|
12 |
|
|
35 |
|
|
|
12 |
|
|
35 |
|
Total skilled nursing facilities |
|
|
380 |
|
|
425 |
|
|
|
380 |
|
|
425 |
|
Total licensed beds |
|
|
46,108 |
|
|
52,232 |
|
|
|
46,108 |
|
|
52,232 |
|
Assisted/Senior living
facilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leased |
|
|
21 |
|
|
19 |
|
|
|
21 |
|
|
19 |
|
Owned |
|
|
3 |
|
|
4 |
|
|
|
3 |
|
|
4 |
|
Joint Venture |
|
|
1 |
|
|
1 |
|
|
|
1 |
|
|
1 |
|
Managed |
|
|
2 |
|
|
2 |
|
|
|
2 |
|
|
2 |
|
Total assisted/senior living facilities |
|
|
27 |
|
|
26 |
|
|
|
27 |
|
|
26 |
|
Total licensed beds |
|
|
2,233 |
|
|
2,209 |
|
|
|
2,233 |
|
|
2,209 |
|
Total
facilities |
|
|
407 |
|
|
451 |
|
|
|
407 |
|
|
451 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Jointly Owned and
Managed— (Unconsolidated) |
|
|
14 |
|
|
15 |
|
|
|
14 |
|
|
15 |
|
REHABILITATION THERAPY SEGMENT**:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended June 30, |
|
|
Six months ended June 30, |
|
|
|
2019 |
|
2018 |
|
|
2019 |
|
2018 |
|
Revenue mix %: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-operated |
|
|
36 |
% |
|
37 |
% |
|
|
36 |
% |
|
37 |
% |
Non-affiliated |
|
|
64 |
% |
|
63 |
% |
|
|
64 |
% |
|
63 |
% |
Sites of service (at end of
period) |
|
|
1,203 |
|
|
1,424 |
|
|
|
1,203 |
|
|
1,424 |
|
Revenue per site |
|
$ |
153,373 |
|
$ |
158,619 |
|
|
$ |
302,642 |
|
$ |
315,914 |
|
Therapist efficiency % |
|
|
73 |
% |
|
68 |
% |
|
|
72 |
% |
|
68 |
% |
* In 2018, 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, covenants in our
debt agreements use EBITDA as a measure of financial
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. 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.
- 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.
- Loss (income) 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.
- 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.
- Other non-recurring costs. In the three and six months
ended June 30, 2019 and June 30, 2018, we excluded an insurance
recovery and costs related to the hurricane events of fiscal year
2017. We do not believe the excluded costs reflect the
performance of our ongoing operating business.
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, |
|
|
2019 |
|
2018 |
|
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Genesis Healthcare, Inc. |
|
$ |
(4,819 |
) |
|
$ |
(39,612 |
) |
|
|
$ |
(20,082 |
) |
|
$ |
(108,150 |
) |
Adjustments to compute
EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to noncontrolling interests |
|
|
(4,164 |
) |
|
|
(23,245 |
) |
|
|
|
(13,983 |
) |
|
|
(63,380 |
) |
Depreciation and amortization expense |
|
|
28,268 |
|
|
|
63,495 |
|
|
|
|
66,463 |
|
|
|
114,998 |
|
Interest expense |
|
|
52,975 |
|
|
|
117,955 |
|
|
|
|
104,491 |
|
|
|
232,992 |
|
Income tax benefit |
|
|
(162 |
) |
|
|
(886 |
) |
|
|
|
(111 |
) |
|
|
(539 |
) |
EBITDA |
|
$ |
72,098 |
|
|
$ |
117,707 |
|
|
|
|
136,778 |
|
|
|
175,921 |
|
Adjustments to compute Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
(Gain) loss on early extinguishment of debt |
|
|
(24 |
) |
|
|
(501 |
) |
|
|
|
(24 |
) |
|
|
9,785 |
|
Other income |
|
|
(23,413 |
) |
|
|
(22,220 |
) |
|
|
|
(40,330 |
) |
|
|
(22,152 |
) |
Transaction costs |
|
|
8,823 |
|
|
|
3,112 |
|
|
|
|
10,084 |
|
|
|
15,207 |
|
Long-lived asset impairments |
|
|
900 |
|
|
|
27,257 |
|
|
|
|
900 |
|
|
|
55,617 |
|
Goodwill and identifiable intangible asset impairments |
|
|
— |
|
|
|
1,132 |
|
|
|
|
— |
|
|
|
1,132 |
|
Severance and restructuring |
|
|
673 |
|
|
|
3,493 |
|
|
|
|
2,119 |
|
|
|
6,333 |
|
Loss (income) of newly acquired, constructed, or divested
businesses |
|
|
865 |
|
|
|
(925 |
) |
|
|
|
2,744 |
|
|
|
2,175 |
|
Stock-based compensation |
|
|
1,748 |
|
|
|
2,129 |
|
|
|
|
3,835 |
|
|
|
4,556 |
|
Regulatory defense and related costs |
|
|
— |
|
|
|
31 |
|
|
|
|
— |
|
|
|
140 |
|
Other non-recurring costs |
|
|
(237 |
) |
|
|
— |
|
|
|
|
(237 |
) |
|
|
47 |
|
Adjusted EBITDA |
|
$ |
61,433 |
|
|
$ |
131,215 |
|
|
|
$ |
115,869 |
|
|
$ |
248,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional lease payments not
included in GAAP lease expense |
|
$ |
11,302 |
|
|
$ |
74,564 |
|
|
|
$ |
24,869 |
|
|
$ |
152,496 |
|
Total cash lease payments made
pursuant to operating leases, finance leases and financing
obligations |
|
|
105,888 |
|
|
|
106,675 |
|
|
|
|
213,516 |
|
|
|
217,678 |
|
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, |
|
|
2019 |
|
2018 |
|
|
2019 |
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to Genesis Healthcare, Inc. |
|
$ |
(4,819 |
) |
|
$ |
(39,612 |
) |
|
|
$ |
(20,082 |
) |
|
$ |
(108,150 |
) |
Adjustments to compute
Adjusted EBITDAR: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to noncontrolling interests |
|
|
(4,164 |
) |
|
|
(23,245 |
) |
|
|
|
(13,983 |
) |
|
|
(63,380 |
) |
Depreciation and amortization expense |
|
|
28,268 |
|
|
|
63,495 |
|
|
|
|
66,463 |
|
|
|
114,998 |
|
Interest expense |
|
|
52,975 |
|
|
|
117,955 |
|
|
|
|
104,491 |
|
|
|
232,992 |
|
Income tax benefit |
|
|
(162 |
) |
|
|
(886 |
) |
|
|
|
(111 |
) |
|
|
(539 |
) |
Lease expense |
|
|
94,586 |
|
|
|
32,111 |
|
|
|
|
188,647 |
|
|
|
65,182 |
|
(Gain) loss on early extinguishment of debt |
|
|
(24 |
) |
|
|
(501 |
) |
|
|
|
(24 |
) |
|
|
9,785 |
|
Other income |
|
|
(23,413 |
) |
|
|
(22,220 |
) |
|
|
|
(40,330 |
) |
|
|
(22,152 |
) |
Transaction costs |
|
|
8,823 |
|
|
|
3,112 |
|
|
|
|
10,084 |
|
|
|
15,207 |
|
Long-lived asset impairments |
|
|
900 |
|
|
|
27,257 |
|
|
|
|
900 |
|
|
|
55,617 |
|
Goodwill and identifiable intangible asset impairments |
|
|
— |
|
|
|
1,132 |
|
|
|
|
— |
|
|
|
1,132 |
|
Severance and restructuring |
|
|
673 |
|
|
|
3,493 |
|
|
|
|
2,119 |
|
|
|
6,333 |
|
Loss (income) of newly acquired, constructed, or divested
businesses |
|
|
865 |
|
|
|
(925 |
) |
|
|
|
2,744 |
|
|
|
2,175 |
|
Stock-based compensation |
|
|
1,748 |
|
|
|
2,129 |
|
|
|
|
3,835 |
|
|
|
4,556 |
|
Regulatory defense and related costs |
|
|
— |
|
|
|
31 |
|
|
|
|
— |
|
|
|
140 |
|
Other non-recurring costs |
|
|
(237 |
) |
|
|
— |
|
|
|
|
(237 |
) |
|
|
47 |
|
Adjusted EBITDAR |
|
$ |
156,019 |
|
|
$ |
163,326 |
|
|
|
$ |
304,516 |
|
|
$ |
313,943 |
|
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