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 third quarter ended
September 30, 2019.
Third Quarter 2019 Results
- US GAAP revenue in the third quarter of 2019 was $1.12
billion;
- US GAAP net income attributable to Genesis Healthcare, Inc. in
the third quarter of 2019 was $46.1 million;
- Adjusted EBITDA in the third quarter of 2019 was $34.7 million;
and
- Adjusted EBITDAR in the third quarter of 2019 was $134.7
million.
“We had a very successful quarter as we
generated same store occupancy growth for the fourth consecutive
quarter, made final preparations for the transition to the PDPM and
continued to execute on our portfolio optimization strategy,” noted
George V. Hager, Jr., Chief Executive Officer of Genesis. “In
addition, I am pleased to report that we received a positive
reconciliation and settlement under the MSSP for the 2018
performance year and as a result, we reported income from our
Genesis Healthcare ACO for the first time ever.”
“The positive results this quarter reflect the
successful execution of our strategic long-term investments in the
areas of portfolio optimization and “value-based” programming,”
continued Hager. “We are making significant progress in
returning Genesis to its historic operating model based on local
market density, strong hospital and payor relationships and
consistent clinical outcomes and results. Currently, 76% of our
facilities are located in Genesis’ historical eastern markets.”
Medicare Shared Savings Program
(MSSP)As the industry continues to migrate from
fee-for-service to pay-for-value, Genesis’ unique capabilities in
the area of physician services has given it a competitive advantage
in advancing participation in value-based programs.
In 2016, Genesis Healthcare ACO, LLC began
participating in the MSSP through the Company’s Genesis Physician
Services (GPS) division. GPS providers make more than half a
million visits annually to both short- and long-stay patients,
helping them improve overall healthcare quality and reduce
unnecessary hospital readmissions. GPS is the only
captive SNFist company in the industry and the only post-acute
sponsored accountable care organization in the United States.
2018 Performance Year
During 2018, the Company managed approximately 6,400 Medicare
fee-for-service beneficiaries under the MSSP with annualized
Medicare spend of more than $155 million. In 2018, the MSSP
required Genesis to save at least 3.2% of the total Medicare spend
under management to share in up to 50% of the savings with Centers
for Medicare and Medicaid Services (CMS), while assuming no
downside risk. In August 2019, Genesis was informed by CMS
that it reached the minimum savings rate set by CMS required for
gain share. As a result, in the third quarter of 2019,
Genesis recognized MSSP income of approximately $1.7 million, net
of expenses and provider distributions.
2019 Performance Year
During the first six months of 2019, the Company continued to
operate under its first MSSP agreement with CMS. Effective
July 1, 2019 through December 31, 2024, the Company entered into
its second MSSP agreement with CMS. Under this agreement, the
Company can share in up to 75% of the savings with CMS, but is also
at risk for 40% of any increase in cost above the defined targets,
which is further capped at 15% of its annualized benchmark costs
under management.
With nearly four years of participation under the MSSP, the
Company has gained valuable experience driving better outcomes and
improved quality, managing episodic cost and developing in-house
capabilities to predict program performance. Based upon the
data available to the Company during the quarter ended September
30, 2019, the Company recognized $4.7 million of estimated MSSP
income, net of expenses and provider distributions, for the period
January 1, 2019 to September 30, 2019. The final
reconciliation and settlement of the 2019 performance year is
expected to be announced by CMS in the third quarter of 2020.
The Company will continue to closely monitor and evaluate its
estimated performance under the 2019 performance year and will
adjust its estimated MSSP income.
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 third quarter of 2019, Genesis
divested, exited or closed the operations of 22 facilities.
In 2019, through October 1, 2019, Genesis exited a total of 43
facilities with approximate annual net revenue of $366.3 million, a
pre-tax net loss of $10.3 million and Adjusted EBITDA of $11.5
million. These transactions resulted in the reduction of
approximately $6.9 million of annual cash lease payments and the
repayment of $154 million of indebtedness.
Divestitures in excess of acquisitions reduced
Adjusted EBITDAR by $10.5 million in the third quarter of 2019 as
compared to the prior year
quarter. Genesis
recently announced that it has made another investment with a
private investor involving 18 skilled nursing facilities
historically leased by Genesis from Second Spring Healthcare
Investments and Welltower Inc. Genesis will continue to operate the
18 facilities pursuant to a new lease with the new owner, reducing
annual rent escalators from 2.0% to zero until year five. Through
its investment, Genesis holds approximately a 30% interest in the
entity that owns the real estate of the 18 facilities.
Genesis also acquired a fixed price purchase option to acquire the
real estate in 2024 at a 10% premium above the original acquisition
cost.
“In addition to divestitures, we are
prioritizing transactions like this unique investment 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. “We were tracking so well toward our goal to
own or obtain fixed price purchase options on at least 30% of our
portfolio by the end of 2020 that we are now raising our goal to
35%. Additionally, we are currently pursing creative joint venture
structures designed to take advantage of strong local operating
resources in a number of our western markets.”
Patient Driven Payment Model (PDPM) Genesis
continues to work through the transition to PDPM effective October
1, 2019. As previously announced, the Company expects its
average Medicare rate per patient day in its inpatient segment, to
remain relatively flat under PDPM as compared to the average
Medicare rate under the previous RUGs payment system. In addition,
the Company estimates that operating expenses in its captive
skilled nursing facilities will decline approximately $30 million
annually as a result of using more cost effective modalities in the
delivery of therapy services. Separately, as a result of PDPM
related contract pricing modifications, the Company’s third party
rehabilitation therapy services revenue is expected to decline
approximately $30 million annually. This revenue reduction is
expected to be offset completely by cost reductions that have been
implemented. Thus, Genesis continues to see PDPM as both positive
for patients and accretive to the Company.
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) significant new disclosures about leasing activities.
In addition, for the three and nine months ended September 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, November 7, 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. Credit
Suisse 28th Annual Healthcare Conference George V. Hager,
Jr., Chief Executive Officer, and Tom DiVittorio, Chief Financial
Officer, are scheduled to conduct a “fireside chat” at the Credit
Suisse 28th Annual Healthcare Conference on Wednesday, November 13,
2019 at 9:10 a.m. Mountain Time at The Phoenician in Scottsdale,
Arizona. A live webcast and replay will also be available on
the Company’s website at www.genesishcc.com/investor-relations.
Stifel 2019 Healthcare Conference
George V. Hager, Jr., Chief Executive Officer, and Tom DiVittorio,
Chief Financial Officer, are also scheduled to conduct a “fireside
chat” at the Stifel 2019 Healthcare Conference on Wednesday,
November 20, 2019 at 11:30 a.m. Eastern Time at the Lotte New York
Palace Hotel, New York, New York. A live webcast and replay
will also be available on the Company’s website at
www.genesishcc.com/investor-relations.
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 nearly 400 skilled
nursing facilities and assisted/senior living communities in 26
states nationwide. Genesis subsidiaries also supply rehabilitation
therapy to approximately 1,200 healthcare providers in 44 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,
INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(UNAUDITED)(IN
THOUSANDS, EXCEPT PER SHARE DATA)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
Nine months ended September 30, |
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
Net revenues |
|
$ |
1,123,705 |
|
|
$ |
1,217,271 |
|
|
$ |
3,430,397 |
|
|
$ |
3,790,703 |
|
Salaries, wages and
benefits |
|
|
620,493 |
|
|
|
680,604 |
|
|
|
1,889,062 |
|
|
|
2,122,128 |
|
Other operating expenses |
|
|
339,441 |
|
|
|
371,064 |
|
|
|
1,014,507 |
|
|
|
1,125,779 |
|
General and administrative
costs |
|
|
35,930 |
|
|
|
35,482 |
|
|
|
107,024 |
|
|
|
114,404 |
|
Lease expense |
|
|
100,018 |
|
|
|
32,366 |
|
|
|
288,665 |
|
|
|
97,548 |
|
Depreciation and amortization
expense |
|
|
34,932 |
|
|
|
53,038 |
|
|
|
101,395 |
|
|
|
168,036 |
|
Interest expense |
|
|
37,099 |
|
|
|
115,695 |
|
|
|
141,590 |
|
|
|
348,687 |
|
Loss on early extinguishment
of debt |
|
|
2,460 |
|
|
|
— |
|
|
|
2,436 |
|
|
|
9,785 |
|
Investment income |
|
|
(2,071 |
) |
|
|
(2,178 |
) |
|
|
(6,078 |
) |
|
|
(4,856 |
) |
Other income |
|
|
(131,811 |
) |
|
|
(20,207 |
) |
|
|
(172,141 |
) |
|
|
(42,360 |
) |
Transaction costs |
|
|
12,941 |
|
|
|
11,361 |
|
|
|
23,025 |
|
|
|
26,567 |
|
Long-lived asset
impairments |
|
|
16,037 |
|
|
|
32,390 |
|
|
|
16,937 |
|
|
|
88,008 |
|
Goodwill and identifiable
intangible asset impairments |
|
|
— |
|
|
|
929 |
|
|
|
— |
|
|
|
2,061 |
|
Equity in net (income) loss of
unconsolidated affiliates |
|
|
(93 |
) |
|
|
(152 |
) |
|
|
(178 |
) |
|
|
106 |
|
Income (loss) before income
tax benefit |
|
|
58,329 |
|
|
|
(93,121 |
) |
|
|
24,153 |
|
|
|
(265,190 |
) |
Income tax benefit |
|
|
(569 |
) |
|
|
(1,220 |
) |
|
|
(680 |
) |
|
|
(1,759 |
) |
Net income (loss) |
|
|
58,898 |
|
|
|
(91,901 |
) |
|
|
24,833 |
|
|
|
(263,431 |
) |
Less net (income) loss
attributable to noncontrolling interests |
|
|
(12,801 |
) |
|
|
33,773 |
|
|
|
1,182 |
|
|
|
97,153 |
|
Net income (loss) attributable
to Genesis Healthcare, Inc. |
|
$ |
46,097 |
|
|
$ |
(58,128 |
) |
|
$ |
26,015 |
|
|
$ |
(166,278 |
) |
Earnings (loss) per common
share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic: |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding for basic net income (loss) per
share |
|
|
109,123 |
|
|
|
102,489 |
|
|
|
106,581 |
|
|
|
100,461 |
|
Basic net income (loss) per common share attributable to Genesis
Healthcare, Inc. |
|
$ |
0.42 |
|
|
$ |
(0.57 |
) |
|
$ |
0.24 |
|
|
$ |
(1.66 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted: |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding for diluted net income (loss)
per share |
|
|
166,002 |
|
|
|
102,489 |
|
|
|
164,583 |
|
|
|
100,461 |
|
Diluted net income (loss) per common share attributable to Genesis
Healthcare, Inc. |
|
$ |
0.40 |
|
|
$ |
(0.57 |
) |
|
$ |
0.21 |
|
|
$ |
(1.66 |
) |
GENESIS HEALTHCARE,
INC.CONDENSED CONSOLIDATED BALANCE
SHEETS(UNAUDITED)(IN
THOUSANDS)
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
|
2019 |
|
|
2018 |
|
Assets: |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash and equivalents |
|
$ |
34,837 |
|
|
$ |
20,865 |
|
Restricted cash and equivalents |
|
|
42,807 |
|
|
|
73,762 |
|
Accounts receivable, net of allowance for doubtful accounts |
|
|
545,259 |
|
|
|
622,717 |
|
Other current assets |
|
|
161,365 |
|
|
|
158,281 |
|
Total current assets |
|
|
784,268 |
|
|
|
875,625 |
|
Property and equipment, net of
accumulated depreciation |
|
|
957,218 |
|
|
|
2,887,554 |
|
Finance lease right-of-use
asset, net of accumulated amortization |
|
|
37,685 |
|
|
|
— |
|
Operating lease right-of-use
asset |
|
|
2,416,914 |
|
|
|
— |
|
Restricted cash and
equivalents |
|
|
50,425 |
|
|
|
47,649 |
|
Identifiable intangible
assets, net of accumulated amortization |
|
|
90,079 |
|
|
|
119,082 |
|
Goodwill |
|
|
85,642 |
|
|
|
85,642 |
|
Other long-term assets |
|
|
251,916 |
|
|
|
248,071 |
|
Total assets |
|
$ |
4,674,147 |
|
|
$ |
4,263,623 |
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Deficit: |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Accounts payable and accrued expenses |
|
$ |
473,563 |
|
|
$ |
462,599 |
|
Accrued compensation |
|
|
153,488 |
|
|
|
172,726 |
|
Other current liabilities |
|
|
400,188 |
|
|
|
276,887 |
|
Total current liabilities |
|
|
1,027,239 |
|
|
|
912,212 |
|
|
|
|
|
|
|
|
Long-term debt |
|
|
1,420,952 |
|
|
|
1,082,933 |
|
Finance lease obligations |
|
|
39,676 |
|
|
|
967,942 |
|
Operating lease
obligations |
|
|
2,697,496 |
|
|
|
— |
|
Financing obligations |
|
|
— |
|
|
|
2,732,939 |
|
Other long-term
liabilities |
|
|
554,007 |
|
|
|
612,463 |
|
Stockholders' deficit |
|
|
(1,065,223 |
) |
|
|
(2,044,866 |
) |
Total liabilities and stockholders' deficit |
|
$ |
4,674,147 |
|
|
$ |
4,263,623 |
|
|
|
|
|
|
|
|
GENESIS HEALTHCARE,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(UNAUDITED)(IN
THOUSANDS)
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, |
|
|
|
2019 |
|
|
2018 |
|
Net cash provided by operating activities (1) |
|
|
$ |
15,758 |
|
|
$ |
14,066 |
|
Net cash used in investing
activities |
|
|
|
(393,034 |
) |
|
|
(54,877 |
) |
Net cash provided by financing
activities |
|
|
|
363,069 |
|
|
|
110,273 |
|
Net (decrease) increase in
cash, cash equivalents and restricted cash and equivalents |
|
|
|
(14,207 |
) |
|
|
69,462 |
|
Beginning of period |
|
|
|
142,276 |
|
|
|
58,638 |
|
End of period |
|
|
$ |
128,069 |
|
|
$ |
128,100 |
|
(1) - Net cash provided by operating activities in the nine
months ended September 30, 2019 and 2018 includes
approximately $23.0 million and $26.6 million, respectively, of
cash payments for transaction-related costs.
GENESIS HEALTHCARE,
INC.KEY PERFORMANCE AND VALUATION
MEASURES(UNAUDITED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30, |
|
|
Nine months ended September 30, |
|
|
2019 |
|
2018 |
|
|
|
2019 |
|
2018 |
|
Financial Results (in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Performance Measures: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net revenues (GAAP) |
|
$ |
1,123,705 |
|
$ |
1,217,271 |
|
|
|
$ |
3,430,397 |
|
$ |
3,790,703 |
|
Net income (loss) attributable to Genesis Healthcare, Inc.
(GAAP) |
|
|
46,097 |
|
|
(58,128 |
) |
|
|
|
26,015 |
|
|
(166,278 |
) |
EBITDA (Non-GAAP) |
|
|
130,360 |
|
|
75,612 |
|
|
|
|
267,138 |
|
|
251,533 |
|
Adjusted EBITDA (Non-GAAP) |
|
|
34,683 |
|
|
113,520 |
|
|
|
|
150,552 |
|
|
362,281 |
|
Valuation Measure: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDAR (Non-GAAP) |
|
$ |
134,701 |
|
|
|
|
|
$ |
439,217 |
|
|
|
INPATIENT SEGMENT:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30, |
|
|
Nine months ended September 30, |
|
|
|
2019 |
|
2018 |
|
|
2019 |
|
2018 |
|
Occupancy Statistics -
Inpatient |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available licensed beds in service at end of period |
|
|
43,769 |
|
|
51,634 |
|
|
|
43,769 |
|
|
51,634 |
|
Available operating beds in service at end of period |
|
|
41,912 |
|
|
49,553 |
|
|
|
41,912 |
|
|
49,553 |
|
Available patient days based on licensed beds |
|
|
4,026,748 |
|
|
4,750,328 |
|
|
|
11,939,391 |
|
|
14,096,082 |
|
Available patient days based on operating beds |
|
|
3,856,927 |
|
|
4,555,745 |
|
|
|
11,437,918 |
|
|
13,522,878 |
|
Actual patient days |
|
|
3,367,241 |
|
|
3,838,454 |
|
|
|
10,011,691 |
|
|
11,424,759 |
|
Occupancy percentage - licensed beds |
|
|
83.6 |
% |
|
80.8 |
% |
|
|
83.9 |
% |
|
81.0 |
% |
Occupancy percentage - operating beds |
|
|
87.3 |
% |
|
84.3 |
% |
|
|
87.5 |
% |
|
84.5 |
% |
Skilled mix |
|
|
17.6 |
% |
|
17.9 |
% |
|
|
18.4 |
% |
|
19.1 |
% |
Average daily census |
|
|
36,600 |
|
|
41,722 |
|
|
|
36,673 |
|
|
41,849 |
|
Revenue per patient day (skilled nursing facilities) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare Part A |
|
$ |
523 |
|
$ |
522 |
|
|
$ |
525 |
|
$ |
525 |
|
Insurance |
|
|
465 |
|
|
456 |
|
|
|
460 |
|
|
458 |
|
Private and other |
|
|
368 |
|
|
337 |
|
|
|
367 |
|
|
336 |
|
Medicaid |
|
|
233 |
|
|
223 |
|
|
|
232 |
|
|
223 |
|
Medicaid (net of provider taxes) |
|
|
213 |
|
|
204 |
|
|
|
213 |
|
|
204 |
|
Weighted average (net of provider taxes) |
|
$ |
277 |
|
$ |
270 |
|
|
$ |
279 |
|
$ |
274 |
|
Patient days by payor
(skilled nursing facilities) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare |
|
|
319,656 |
|
|
378,968 |
|
|
|
999,535 |
|
|
1,203,234 |
|
Insurance |
|
|
239,060 |
|
|
273,200 |
|
|
|
735,736 |
|
|
854,666 |
|
Total skilled mix days |
|
|
558,716 |
|
|
652,168 |
|
|
|
1,735,271 |
|
|
2,057,900 |
|
Private and other |
|
|
188,157 |
|
|
222,890 |
|
|
|
545,584 |
|
|
670,908 |
|
Medicaid |
|
|
2,425,249 |
|
|
2,758,817 |
|
|
|
7,150,761 |
|
|
8,098,284 |
|
Total
Days |
|
|
3,172,122 |
|
|
3,633,875 |
|
|
|
9,431,616 |
|
|
10,827,092 |
|
Patient days as a
percentage of total patient days (skilled nursing
facilities) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Medicare |
|
|
10.1 |
% |
|
10.4 |
% |
|
|
10.6 |
% |
|
11.1 |
% |
Insurance |
|
|
7.5 |
% |
|
7.5 |
% |
|
|
7.8 |
% |
|
8.0 |
% |
Skilled mix |
|
|
17.6 |
% |
|
17.9 |
% |
|
|
18.4 |
% |
|
19.1 |
% |
Private and other |
|
|
5.9 |
% |
|
6.1 |
% |
|
|
5.8 |
% |
|
6.2 |
% |
Medicaid |
|
|
76.5 |
% |
|
76.0 |
% |
|
|
75.8 |
% |
|
74.7 |
% |
Total |
|
|
100.0 |
% |
|
100.0 |
% |
|
|
100.0 |
% |
|
100.0 |
% |
Facilities at end of
period |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Skilled nursing
facilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leased |
|
|
280 |
|
|
337 |
|
|
|
280 |
|
|
337 |
|
Owned |
|
|
30 |
|
|
44 |
|
|
|
30 |
|
|
44 |
|
Joint Venture |
|
|
38 |
|
|
5 |
|
|
|
38 |
|
|
5 |
|
Managed * |
|
|
12 |
|
|
33 |
|
|
|
12 |
|
|
33 |
|
Total skilled nursing facilities |
|
|
360 |
|
|
419 |
|
|
|
360 |
|
|
419 |
|
Total licensed beds |
|
|
43,712 |
|
|
51,543 |
|
|
|
43,712 |
|
|
51,543 |
|
Assisted/Senior living
facilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leased |
|
|
21 |
|
|
19 |
|
|
|
21 |
|
|
19 |
|
Owned |
|
|
1 |
|
|
4 |
|
|
|
1 |
|
|
4 |
|
Joint Venture |
|
|
1 |
|
|
1 |
|
|
|
1 |
|
|
1 |
|
Managed |
|
|
1 |
|
|
2 |
|
|
|
1 |
|
|
2 |
|
Total assisted/senior living facilities |
|
|
24 |
|
|
26 |
|
|
|
24 |
|
|
26 |
|
Total licensed beds |
|
|
1,941 |
|
|
2,209 |
|
|
|
1,941 |
|
|
2,209 |
|
Total
facilities |
|
|
384 |
|
|
445 |
|
|
|
384 |
|
|
445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Jointly Owned and
Managed— (Unconsolidated) |
|
|
13 |
|
|
15 |
|
|
|
13 |
|
|
15 |
|
REHABILITATION THERAPY SEGMENT**:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended
September 30, |
|
|
Nine months ended September 30, |
|
|
|
2019 |
|
2018 |
|
|
2019 |
|
2018 |
|
Revenue mix %: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-operated |
|
|
35.3 |
% |
|
37.2 |
% |
|
|
35.9 |
% |
|
37.1 |
% |
Non-affiliated |
|
|
64.7 |
% |
|
62.8 |
% |
|
|
64.1 |
% |
|
62.9 |
% |
Sites of service (at end of
period) |
|
|
1,185 |
|
|
1,327 |
|
|
|
1,185 |
|
|
1,327 |
|
Revenue per site |
|
$ |
149,357 |
|
$ |
152,273 |
|
|
$ |
459,411 |
|
$ |
476,010 |
|
Therapist efficiency % |
|
|
70.5 |
% |
|
67.5 |
% |
|
|
71.6 |
% |
|
67.8 |
% |
* 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 two Non-GAAP Financial Measures primarily
(EBITDA and Adjusted EBITDA) 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 one Non-GAAP Financial Measure (Adjusted EBITDAR) as a
valuation measure. 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 income (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 income (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:
- 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 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 nine months ended
September 30, 2019, 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. In the three and nine months
ended September 30, 2018, we excluded $8.5 million of costs
attributable to the write down of receivables in our non-core
physician services business and the impairment of unrealized
incentives associated with a government program rewarding the
meaningful use of technology in the delivery of healthcare.
This incentive was estimated to be earned and recognized between
2015 and 2016 within our physician services line of
business.
Adjusted
EBITDAR
We use Adjusted EBITDAR as one measure in
determining the value of our business and 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 and other industries. 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 income (loss)
attributable to Genesis Healthcare, Inc. to Non-GAAP financial
information included herein.
GENESIS HEALTHCARE,
INC.RECONCILIATION OF NET INCOME (LOSS)
ATTRIBUTABLE TO GENESIS HEALTHCARE, INC. TO
NON-GAAP FINANCIAL
INFORMATION(UNAUDITED)(IN
THOUSANDS)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, |
|
|
Nine months ended September 30, |
|
|
2019 |
|
|
2018 |
|
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to Genesis Healthcare, Inc. |
|
$ |
46,097 |
|
|
$ |
(58,128 |
) |
|
|
$ |
26,015 |
|
|
$ |
(166,278 |
) |
Adjustments to compute
EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) attributable to noncontrolling interests |
|
|
12,801 |
|
|
|
(33,773 |
) |
|
|
|
(1,182 |
) |
|
|
(97,153 |
) |
Depreciation and amortization expense |
|
|
34,932 |
|
|
|
53,038 |
|
|
|
|
101,395 |
|
|
|
168,036 |
|
Interest expense |
|
|
37,099 |
|
|
|
115,695 |
|
|
|
|
141,590 |
|
|
|
348,687 |
|
Income tax expense (benefit) |
|
|
(569 |
) |
|
|
(1,220 |
) |
|
|
|
(680 |
) |
|
|
(1,759 |
) |
EBITDA |
|
$ |
130,360 |
|
|
$ |
75,612 |
|
|
|
|
267,138 |
|
|
|
251,533 |
|
Adjustments to compute Adjusted EBITDA: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss on early extinguishment of debt |
|
|
2,460 |
|
|
|
— |
|
|
|
|
2,436 |
|
|
|
9,785 |
|
Other income |
|
|
(131,811 |
) |
|
|
(20,207 |
) |
|
|
|
(172,141 |
) |
|
|
(42,360 |
) |
Transaction costs |
|
|
12,941 |
|
|
|
11,361 |
|
|
|
|
23,025 |
|
|
|
26,567 |
|
Long-lived asset impairments |
|
|
16,037 |
|
|
|
32,390 |
|
|
|
|
16,937 |
|
|
|
88,008 |
|
Goodwill and identifiable intangible asset impairments |
|
|
— |
|
|
|
929 |
|
|
|
|
— |
|
|
|
2,061 |
|
Severance and restructuring |
|
|
2,751 |
|
|
|
1,023 |
|
|
|
|
4,870 |
|
|
|
7,357 |
|
Loss of newly acquired, constructed, or divested businesses |
|
|
67 |
|
|
|
1,385 |
|
|
|
|
2,811 |
|
|
|
3,560 |
|
Stock-based compensation |
|
|
1,878 |
|
|
|
2,176 |
|
|
|
|
5,713 |
|
|
|
6,732 |
|
Regulatory defense and related costs |
|
|
— |
|
|
|
463 |
|
|
|
|
— |
|
|
|
603 |
|
Other non-recurring costs |
|
|
— |
|
|
|
8,388 |
|
|
|
|
(237 |
) |
|
|
8,435 |
|
Adjusted EBITDA |
|
$ |
34,683 |
|
|
$ |
113,520 |
|
|
|
$ |
150,552 |
|
|
$ |
362,281 |
|
Lease Expense |
|
|
100,018 |
|
|
|
32,366 |
|
|
|
|
288,665 |
|
|
|
97,548 |
|
Adjusted EBITDAR |
|
$ |
134,701 |
|
|
|
|
|
|
$ |
439,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash lease payments made
pursuant to operating leases, finance leases and financing
obligations |
|
$ |
100,500 |
|
|
$ |
105,980 |
|
|
|
$ |
314,516 |
|
|
$ |
323,658 |
|
Genesis HealthCare Contact: Investor
Relations
610-925-2000
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