StockSelector.com
  Research, Select, & Monitor Tuesday, May 21, 2019 4:31:44 PM ET  
Trade Ideas The Market Industries Stocks Portfolio

 
Ticker Lookup
Genesis Healthcare Inc.$1.23$.076.03%

  Quote | Ranking | Chart | Valuations | Sentiment | Industry | News | Earnings | Analysts | More...

Your Target?

 Genesis HealthCare Reports Solid Fourth Quarter 2018 Results
   Monday, March 18, 2019 6:00:00 AM ET

KENNETT SQUARE, Pa., March 18, 2019 (GLOBE NEWSWIRE) -- 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 fourth quarter ended December 31, 2018

Fourth Quarter and Fiscal Year End 2018 Results

  • US GAAP revenue in the fourth quarter of 2018 was $1.2 billion compared to $1.3 billion in the fourth quarter of 2017;  US GAAP revenue in the year ended 2018 was $5.0 billion compared to $5.4 billion in the year ended 2017;
     
  • US GAAP net loss attributable to Genesis Healthcare, Inc. in the fourth quarter of 2018 was $69.0 million compared to $89.2 million in the fourth quarter of 2017;  US GAAP net loss attributable to Genesis Healthcare, Inc in the year ended 2018 was $235.2 million compared to $579.0  million in the year ended 2017;
     
  • Adjusted EBITDAR in the fourth quarter of 2018 was $144.1 million compared to $143.6 million in the fourth quarter of 2017;  Adjusted EBITDAR in the year ended 2018 was $603.9 million compared to $632.4 million in the year ended 2017;  and
     
  • Adjusted EBITDA in the fourth quarter of 2018 was $111.8 million compared to $109.0 million in the fourth quarter of 2017.  Adjusted EBITDA in the year ended 2018 was $474.1 million compared to $484.9 million in the year ended 2017.


“This was another solid quarter for Genesis as we reached two new and important milestones,” noted George V. Hager, Jr., Chief Executive Officer of Genesis.  “First, despite having 46 fewer facilities under our operation in the fourth quarter of 2018 as compared to 2017, Adjusted EBITDAR grew about 40 basis points on an absolute basis and 6.5% on a “same-store” basis.  Second, “same-store” occupancy grew this quarter over the same quarter last year by 30 basis points, marking the first period of year over year occupancy growth since 2014.”

“Reflecting on 2018, I am pleased with the many milestones reached and accomplishments made by our dedicated team,” continued Hager.   “Last year we strengthened Genesis by successfully restructuring leases and loans, divesting underperforming or non-strategic assets, reducing overhead costs and driving solid and consistent operating results while enhancing our clinical outcomes.  We are excited to build on these accomplishments and our momentum in 2019.”

Portfolio Optimization
Genesis continues to progress its strategy to exit challenging facilities and certain low density markets in order to focus on investment and growth in core, strategic markets. During the fourth quarter, Genesis divested, exited or closed the operations of 29 facilities.  Including the facilities divested in the first nine months 2018, Genesis exited the operations of 55 facilities in total for the year, with approximate annual net revenue of $487.8 million, Adjusted EBITDA of $10.7 million and a pre-tax net loss of $36.2 million. Genesis estimates these transactions resulted in the reduction of approximately $20.7 million of annual cash lease payments.
             
Genesis will continue to exit operations of challenging facilities and markets in 2019. The Company exited operations of an additional 10 facilities thus far during the first quarter of 2019.  In total, these 10 facilities generated approximate annual net revenue of $98.0 million, Adjusted EBITDA of ($1.2) million and a pre-tax net loss of $7.3 million. These divestitures will result in the reduction of $3.4 million of annual cash lease payments.

Portfolio Expansion
In the fourth quarter of 2018, Genesis acquired the operations of eight skilled nursing facilities and one assisted living facility in New Mexico and Arizona, increasing our presence in markets we view as favorable.  The nine new facilities have approximately 1,000 beds and generate approximate annual net revenue of $60.0 million.  The facilities are leased from one of the Company’s major REIT partners. Genesis expects no material impact to EBITDA in the next 12 months as a consequence of these acquisitions.

As announced earlier, on January 31, 2019, Genesis also entered into a new real estate partnership (Partnership) with Next Healthcare Capital (Next) involving 15 skilled nursing facilities previously leased from Welltower Inc. (Welltower).  Welltower sold the real estate of 15 facilities to the new Partnership, of which Genesis acquired a 46% ownership interest.  Genesis also acquired a fixed price purchase option to acquire the real estate beginning in 2026 at a 10% premium above the original acquisition cost. Genesis will continue to operate these facilities pursuant to a new lease with the Partnership.   The remaining interest is held by Next, a privately owned healthcare real estate investment firm. The 15 facilities had been included in the Company’s master lease with Welltower and were subject to 2.0% annual rent escalators. Under the new lease, there are no rent escalators for the first five years.
             
Other Updates - Adoption and Impact of Revenue Recognition Accounting Standard
On January 1, 2018, Genesis adopted FASB Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606).  Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.  The impact of applying ASC 606 to the three and twelve months ended December 31, 2018 was a $28.4 million and $95.8 million implicit price concession, respectively, directly reducing net revenues, which previously would have been recorded as a provision for losses on accounts receivable.

If the provisions of ASC 606 were applied on a pro forma basis to the three and twelve months ended December 31, 2017, reported net revenue would have been $1,304.1 million and $5,277.3 million, respectively, with no impact to net loss attributed to Genesis Healthcare, Inc.

Conference Call
Genesis Healthcare, Inc. will hold a conference call at 8:30 a.m. Eastern Time on Monday, March 18, 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 more than 400 skilled nursing facilities and assisted/senior living communities in 29 states nationwide. Genesis subsidiaries also supply rehabilitation and respiratory therapy to approximately 1,400 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 Statements
This 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, 2017, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings with the U.S. Securities and Exchange Commission, discuss the foregoing risks as well as other important risks and uncertainties of which investors should be aware. Any forward-looking statements contained herein are made only as of the date of this release. Genesis disclaims any obligation to update its forward-looking statements or any of the information contained in this release. Investors are cautioned not to place undue reliance on these forward-looking statements.


 
GENESIS HEALTHCARE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
            
 Three months ended December 31 Twelve months ended December 31,
 2018  2017  2018  2017 
Net revenues$ 1,185,947  $ 1,327,880  $ 4,976,650  $ 5,373,740 
Salaries, wages and benefits  664,780    733,568    2,786,908    3,036,868 
Other operating expenses  354,101    420,891    1,479,880    1,583,114 
General and administrative costs  34,777    40,061    149,182    167,718 
Lease expense  32,311    34,521    129,859    147,525 
Depreciation and amortization expense  52,860    71,800    220,896    255,786 
Interest expense  115,051    125,909    463,738    499,382 
(Gain) loss on early extinguishment of debt  (9,394)   (8,866)   391    (6,566)
Investment income  (1,976)   (1,231)   (6,832)   (5,328)
Other loss (income)  29,441    (7,130)   (12,920)   8,473 
Transaction costs  5,386    6,462    31,953    14,325 
Customer receivership and other related charges  —    55,000    —    90,864 
Long-lived asset impairments  16,989    28,012    104,997    191,375 
Goodwill and identifiable intangible asset impairments  1,477    —    3,538    360,046 
Equity in net (income) loss of unconsolidated affiliates  (206)   48    (100)   (243)
Loss before income tax benefit  (109,650)   (171,165)   (374,840)   (969,599)
Income tax benefit  (664)   (16,110)   (2,423)   (10,427)
Loss from continuing operations  (108,986)   (155,055)   (372,417)   (959,172)
Income (loss) from discontinued operations, net of taxes  —    38    —    (32)
Net loss  (108,986)   (155,017)   (372,417)   (959,204)
Less net loss attributable to noncontrolling interests  40,033    65,776    137,186    380,222 
Net loss attributable to Genesis Healthcare, Inc.$ (68,953) $ (89,241) $ (235,231) $ (578,982)
Loss per common share:           
Basic and diluted:           
Weighted-average shares outstanding for loss from continuing operations per share  102,625    96,715    101,007    94,217 
Net loss per common share:           
Loss from continuing operations attributable to Genesis Healthcare, Inc.$ (0.67) $ (0.92) $ (2.33) $ (6.15)
Income (loss) from discontinued operations, net of taxes  —    —    —    — 
Net loss attributable to Genesis Healthcare, Inc.$ (0.67) $ (0.92) $ (2.33) $ (6.15)
            



 
GENESIS HEALTHCARE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(IN THOUSANDS)
      
 December 31 December 31
 2018
 2017
Assets:     
Current assets:     
Cash and equivalents$ 20,865  $ 54,525 
Restricted cash and equivalents  73,762    4,113 
Accounts receivable, net of allowance for doubtful accounts  622,717    724,138 
Other current assets  158,281    157,131 
Total current assets  875,625    939,907 
Property and equipment, net of accumulated depreciation  2,887,554    3,413,599 
Restricted cash and equivalents  47,649    — 
Identifiable intangible assets, net of accumulated amortization  119,082    142,976 
Goodwill  85,642    85,642 
Other long-term assets  248,071    205,741 
Total assets$ 4,263,623  $ 4,787,865 
      
Liabilities and Stockholders' Deficit:     
Current liabilities:     
Accounts payable and accrued expenses$ 462,599  $ 519,493 
Accrued compensation  172,726    167,368 
Other current liabilities  276,887    212,333 
Total current liabilities  912,212    899,194 
      
Long-term debt  1,082,933    1,050,337 
Capital lease obligations  967,942    1,025,355 
Financing obligations  2,732,939    2,929,483 
Other long-term liabilities  612,463    563,628 
Stockholders' deficit  (2,044,866)   (1,680,132)
Total liabilities and stockholders' deficit$ 4,263,623  $ 4,787,865 
      

.



 
GENESIS HEALTHCARE, INC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
      
 Year ended December 31
 2018 2017 
Net cash provided by operating activities (1)$ 18,584 $ 120,455 
Net cash provided by investing activities  11,876   47,552 
Net cash provided by (used in) financing activities  53,178   (172,829)
Net increase (decrease) in cash, cash equivalents and restricted cash and equivalents  83,638   (4,822)
Beginning of period  58,638   63,460 
End of period$ 142,276 $ 58,638 

(1) - Net cash provided by operating activities in the twelve months ended December 31, 2018 and 2017 includes approximately $18.9 million and $14.3 million, respectively, of cash payments for transaction-related costs.

 
GENESIS HEALTHCARE, INC.
KEY PERFORMANCE AND VALUATION MEASURES
(UNAUDITED)
            
 Three months ended  December 31 Year ended December 31, 2018
 2018  2017  2018  2017 
Financial Results (in thousands)           
Net revenues$ 1,185,947  $ 1,327,880  $ 4,976,650  $ 5,373,740 
EBITDA  58,261    26,544    309,794    (214,431)
Adjusted EBITDAR  144,106    143,552    603,934    632,381 
Adjusted EBITDA  111,795    109,031    474,075    484,856 
Net loss attributable to Genesis Healthcare, Inc.  (68,953)   (89,241)   (235,231)   (578,982)
                

INPATIENT SEGMENT:

              
 Three months ended  December 31  Twelve months ended December 31,
 2018 2017  2018 2017 
Occupancy Statistics - Inpatient             
Available licensed beds in service at end of period  48,859   54,696    48,859   54,696 
Available operating beds in service at end of period  47,020   52,602    47,020   52,602 
Available patient days based on licensed beds  4,484,068   5,032,001    17,705,185   19,966,080 
Available patient days based on operating beds  4,320,545   4,840,088    17,073,587   19,243,523 
Actual patient days  3,699,879   4,101,299    14,587,970   16,352,103 
Occupancy percentage - licensed beds  82.5%  81.5%   82.4  81.9
Occupancy percentage - operating beds  85.6%  84.7%   85.4  85.0
Skilled mix  18.1%  18.7%   18.9  19.6
Average daily census  40,216   44,579    39,967   44,800 
Revenue per patient day (skilled nursing facilities)             
Medicare Part A$ 522 $ 525  $ 526 $ 526 
Insurance  449   462    455   458 
Private and other  352   331    352   327 
Medicaid  229   221    226   219 
Medicaid (net of provider taxes)  210   202    206   200 
Weighted average (net of provider taxes)$ 274 $ 272  $ 275 $ 272 
Patient days by payor (skilled nursing facilities)             
Medicare  366,375   433,259    1,516,655   1,827,828 
Insurance  265,867   292,634    1,080,193   1,206,602 
Total skilled mix days  632,242   725,893    2,596,848   3,034,430 
Private and other  200,190   247,040    815,475   1,022,755 
Medicaid  2,661,926   2,911,275    10,372,459   11,478,412 
Total Days  3,494,358   3,884,208    13,784,782   15,535,597 
Patient days as a percentage of total patient days (skilled nursing facilities)             
Medicare  10.5%  11.2%   11.0  11.8
Insurance  7.6%  7.5%   7.9  7.8
Skilled mix  18.1%  18.7%   18.9  19.6
Private and other  5.7%  6.4%   5.9  6.6
Medicaid  76.2%  74.9%   75.2  73.8
Total  100.0%  100.0%   100.0  100.0
Facilities at end of period             
Skilled nursing facilities             
Leased  339   360    339   360 
Owned  42   44    42   44 
Joint Venture  5   5    5   5 
Managed *  13   35    13   35 
Total skilled nursing facilities  399   444    399   444 
Total licensed beds  48,748   54,625    48,748   54,625 
Assisted/Senior living facilities:             
Leased  20   19    20   19 
Owned  3   4    3   4 
Joint Venture  1   1    1   1 
Managed  2   2    2   2 
Total assisted/senior living facilities  26   26    26   26 
Total licensed beds  2,209   2,209    2,209   2,209 
Total facilities  425   470    425   470 
              
Total Jointly Owned and Managed— (Unconsolidated)  15   15    15   15 
              

REHABILITATION THERAPY SEGMENT**:

                
 Three months ended  December 31  Twelve months ended December 31,
 2018  2017  2018   2017 
Revenue mix %:               
Company-operated  36   37%   37   37
Non-affiliated  64   63%   63   63
Sites of service (at end of period)  1,295    1,472    1,295    1,472 
Revenue per site$ 153,785  $ 152,585  $ 631,272  $ 615,727 
Therapist efficiency %  68   66%   68   67

* In 2017, includes 20 facilities located in Texas for which the real estate is owned by Genesis.

** Excludes respiratory therapy services.

Reasons for Non-GAAP Financial Disclosure

The following discussion includes references to Adjusted EBITDAR, EBITDA and Adjusted EBITDA, which are non-GAAP financial measures (collectively, Non-GAAP Financial Measures).  A Non-GAAP Financial Measure is a numerical measure of a registrant’s historical or future financial performance, financial position and cash flows that excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable financial measure calculated and presented in accordance with GAAP in the statement of operations, balance sheet or statement of cash flows (or equivalent statements) of the registrant; or includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable financial measure so calculated and presented.  In this regard, GAAP refers to generally accepted accounting principles in the United States.  We have provided reconciliations of the Non-GAAP Financial Measures to the most directly comparable GAAP financial measures.

We believe the presentation of Non-GAAP Financial Measures provides useful information to investors regarding our results of operations because these financial measures are useful for trending, analyzing and benchmarking the performance and value of our business.  By excluding certain expenses and other items that may not be indicative of our core business operating results, these Non-GAAP Financial Measures:

  • allow investors to evaluate our performance from management’s perspective, resulting in greater transparency with respect to supplemental information used by us in our financial and operational decision making;
     
  • facilitate comparisons with prior periods and reflect the principal basis on which management monitors financial performance;
     
  • facilitate comparisons with the performance of others in the post-acute industry;
     
  • provide better transparency as to the measures used by management and others who follow our industry to estimate the value of our company; and
     
  • allow investors to view our financial performance and condition in the same manner as our significant landlords and lenders require us to report financial information to them in connection with determining our compliance with financial covenants.

We use Non-GAAP Financial Measures primarily as performance measures and believe that the GAAP financial measure most directly comparable to them is net income (loss) attributable to Genesis Healthcare, Inc.  We use Non-GAAP Financial Measures to assess the value of our business and the performance of our operating businesses, as well as the employees responsible for operating such businesses.  Non-GAAP Financial Measures are useful in this regard because they do not include such costs as interest expense, income taxes and depreciation and amortization expense which may vary from business unit to business unit depending upon such factors as the method used to finance the original purchase of the business unit or the tax law in the state in which a business unit operates.  By excluding such factors when measuring financial performance, many of which are outside of the control of the employees responsible for operating our business units, we are better able to evaluate value and the operating performance of the business unit and the employees responsible for business unit performance.  Consequently, we use these Non-GAAP Financial Measures to determine the extent to which our employees have met performance goals, and therefore the extent to which they may or may not be eligible for incentive compensation awards.

We also use Non-GAAP Financial Measures in our annual budget process.  We believe these Non-GAAP Financial Measures facilitate internal comparisons to historical operating performance of prior periods and external comparisons to competitors’ historical operating performance.  The presentation of these Non-GAAP Financial Measures is consistent with our past practice and we believe these measures further enable investors and analysts to compare current non-GAAP measures with non-GAAP measures presented in prior periods.

Although we use Non-GAAP Financial Measures as financial measures to assess value and the performance of our business, the use of these Non-GAAP Financial Measures is limited because they do not consider certain material costs necessary to operate the business.  These costs include our lease expense (only in the case of Adjusted EBITDAR), the cost to service debt, the depreciation and amortization associated with our long-lived assets, losses on early extinguishment of debt, transaction costs, long-lived asset impairment charges, federal and state income tax expenses, the operating results of our discontinued businesses and the income or loss attributable to noncontrolling interests.  Because Non-GAAP Financial Measures do not consider these important elements of our cost structure, a user of our financial information who relies on Non-GAAP Financial Measures as the only measures of our performance could draw an incomplete or misleading conclusion regarding our financial performance.  Consequently, a user of our financial information should consider net loss attributable to Genesis Healthcare, Inc. as an important measure of its financial performance because it provides the most complete measure of our performance.

Other companies may define Non-GAAP Financial Measures differently and, as a result, our Non-GAAP Financial Measures may not be directly comparable to those of other companies.  Non-GAAP Financial Measures do not represent net income (loss), as defined by GAAP. Non-GAAP Financial Measures should be considered in addition to, not as a substitute for, or superior to, GAAP Financial Measures.

We use the following Non-GAAP Financial Measures that we believe are useful to investors as key valuation and operating performance measures:

EBITDA

We believe EBITDA is useful to an investor in evaluating our operating performance because it helps investors evaluate and compare the results of our operations from period to period by removing the impact of our capital structure (interest expense) and our asset base (depreciation and amortization expense) from our operating results.  In addition, 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 loss (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.
     
  • Customer receivership and other related charges. We excluded the non-cash costs of $55.0 million and $90.9 million recorded in the three and twelve months ended December 31, 2017. These non-cash costs were related to customer receivership proceedings and the related respective write-down of unpaid accounts receivable.  We believe these charges are caused by the challenging operating environment, particularly for highly levered customers of our rehabilitation therapy business.  Accordingly, we believe these costs do not accurately reflect the underlying performance of our operating businesses.
     
  • Long-lived asset impairments.  We exclude non-cash long-lived asset impairment charges because we believe including them does not reflect the ongoing performance of our operating businesses.  Additionally, such impairment charges represent accelerated depreciation expense, and depreciation expense is also excluded from EBITDA.
     
  • Goodwill and identifiable intangible asset impairments.  We exclude non-cash goodwill and identifiable intangible asset impairment charges because we believe including them does not reflect the ongoing operating performance of our operating businesses. 
     
  • Severance and restructuring.  We exclude severance costs from planned reduction in force initiatives associated with restructuring activities intended to adjust our cost structure in response to changes in the business environment.  We believe these costs do not reflect the underlying performance of our operating businesses.  We do not exclude severance costs that are not associated with such restructuring activities.
     
  • Losses of newly acquired, constructed or divested businesses.  The acquisition and construction of new businesses is an element of our growth strategy.  Many of the businesses we acquire have a history of operating losses and continue to generate operating losses in the months that follow our acquisition.  Newly constructed or developed businesses also generate losses while in their start-up phase.  We view these losses as both temporary and an expected component of our long-term investment in the new venture.  We adjust these losses when computing Adjusted EBITDA in order to better analyze the performance of our mature ongoing business.  The activities of such businesses are adjusted when computing Adjusted EBITDA until such time as a new business generates positive Adjusted EBITDA.  The divestiture of underperforming or non-strategic facilities is also an element of our business strategy.  We eliminate the results of divested facilities beginning in the quarter in which they become divested.  We view the income or losses associated with the wind-down of such divested facilities as not indicative of the performance of our ongoing operating business.
     
  • Stock-based compensation.  We exclude stock-based compensation expense because it does not result in an outlay of cash and such non-cash expenses do not reflect the underlying performance of our operating businesses.
     
  • Other Items.  From time to time we incur costs or realize gains that we do not believe reflect the underlying performance of our operating businesses.  In the current reporting periods, we incurred the following expenses that we believe are non-recurring in nature and do not reflect ongoing operating performance of the Company or our operating businesses.

    (1) Regulatory defense and related costs –
    We exclude the costs of investigating and defending the inherited legal matters associated with prior transactions.  We believe these costs are non-recurring in nature as they will no longer be recognized following the final settlement of these matters. Also, we do not believe the excluded costs reflect underlying performance of our operating businesses.

    (2) Other non-recurring costs - In the three and twelve months ended December 31, 2018, we excluded $4.5 million and $13.0 million, respectively, 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 delivery of healthcare.  This incentive was estimated to be earned and recognized between 2015 and 2016 within our physician services line of business.  In the three months ended December 31, 2017, we excluded $0.3 million of costs incurred in connection with a settlement of disputed costs related to previously reported periods and a regulatory audit associated with acquired businesses and related to pre-acquisition periods. In the twelve months ended December 31, 2017, we excluded $3.5 million of costs primarily incurred in connection with the removal of a non-cash actuarially developed discount related to the settlement of workers’ compensation claims for policy years 2012 and prior. We do not believe the excluded costs reflect the underlying performance of our operating businesses.

See the reconciliation of net loss attributable to Genesis Healthcare, Inc. to EBITDA and Adjusted EBITDA included herein.

Adjusted EBITDAR

We use Adjusted EBITDAR as one measure in determining the value of prospective acquisitions or divestitures.  Adjusted EBITDAR is also a commonly used measure to estimate the enterprise value of businesses in the healthcare industry. In addition, financial covenants in our lease agreements use Adjusted EBITDAR as a measure of compliance.

The adjustments made and previously described in the computation of Adjusted EBITDA are also made when computing Adjusted EBITDAR.  See the reconciliation of net loss attributable to Genesis Healthcare, Inc. to Adjusted EBITDAR included herein.

 
GENESIS HEALTHCARE, INC.
RECONCILIATION OF NET LOSS ATTRIBUTABLE TO GENESIS HEALTHCARE, INC. TO EBITDA AND ADJUSTED EBITDA
(UNAUDITED)
(IN THOUSANDS)
            
 Three months ended December 31 Twelve months ended December 31,
 2018  2017  2018  2017 
            
Net loss attributable to Genesis Healthcare, Inc.$ (68,953) $ (89,241) $ (235,231) $ (578,982)
Adjustments to compute EBITDA:           
(Income) loss from discontinued operations, net of taxes  —    (38)   —    32 
Net loss attributable to noncontrolling interests  (40,033)   (65,776)   (137,186)   (380,222)
Depreciation and amortization expense  52,860    71,800    220,896    255,786 
Interest expense  115,051    125,909    463,738    499,382 
Income tax benefit  (664)   (16,110)   (2,423)   (10,427)
EBITDA$ 58,261  $ 26,544    309,794    (214,431)
Adjustments to compute Adjusted EBITDA:           
(Gain) loss on early extinguishment of debt  (9,394)   (8,866)   391    (6,566)
Other loss (income)  29,441    (7,130)   (12,920)   8,473 
Transaction costs  5,386    6,462    31,953    14,325 
Customer receivership and other related charges  —    55,000    —    90,864 
Long-lived asset impairments  16,989    28,012    104,997    191,375 
Goodwill and identifiable intangible asset impairments  1,477    —    3,538    360,046 
Severance and restructuring  1,667    93    9,024    5,043 
Losses of newly acquired, constructed, or divested businesses  1,588    4,955    5,148    20,544 
Stock-based compensation  2,088    2,416    8,820    9,621 
Regulatory defense and related costs (1)  6    1,306    609    1,798 
Other non-recurring costs (2)  4,286    239    12,721    3,764 
Adjusted EBITDA$ 111,795  $ 109,031  $ 474,075  $ 484,856 
            
Additional lease payments not included in GAAP lease expense  73,022    85,796    299,132    344,520 
Total cash lease payments made pursuant to operating leases, capital leases and financing obligations  105,333    120,317    428,991    492,045 
                


 
GENESIS HEALTHCARE, INC.
RECONCILIATION OF NET LOSS ATTRIBUTABLE TO GENESIS HEALTHCARE, INC. TO ADJUSTED EBITDAR
(UNAUDITED)
(IN THOUSANDS)
            
 Three months ended December 31 Twelve months ended December 31,
 2018  2017  2018  2017 
            
Net loss attributable to Genesis Healthcare, Inc.$ (68,953) $ (89,241) $ (235,231) $ (578,982)
Adjustments to compute Adjusted EBITDAR:           
(Income) loss from discontinued operations, net of taxes  —    (38)   —    32 
Net loss attributable to noncontrolling interests  (40,033)   (65,776)   (137,186)   (380,222)
Depreciation and amortization expense  52,860    71,800    220,896    255,786 
Interest expense  115,051    125,909    463,738    499,382 
Income tax benefit  (664)   (16,110)   (2,423)   (10,427)
Lease expense  32,311    34,521    129,859    147,525 
(Gain) loss on early extinguishment of debt  (9,394)   (8,866)   391    (6,566)
Other loss (income)  29,441    (7,130)   (12,920)   8,473 
Transaction costs  5,386    6,462    31,953    14,325 
Customer receivership and other related charges  —    55,000    —    90,864 
Long-lived asset impairments  16,989    28,012    104,997    191,375 
Goodwill and identifiable intangible asset impairments  1,477    —    3,538    360,046 
Severance and restructuring  1,667    93    9,024    5,043 
Losses of newly acquired, constructed, or divested businesses  1,588    4,955    5,148    20,544 
Stock-based compensation  2,088    2,416    8,820    9,621 
Regulatory defense and related costs (1)  6    1,306    609    1,798 
Other non-recurring costs (2)  4,286    239    12,721    3,764 
Adjusted EBITDAR$ 144,106  $ 143,552  $ 603,934  $ 632,381 
                


Genesis HealthCare Contact:  
Investor Relations                                           
610-925-2000

1 GHC Logo - Full Color.jpg

Source: Genesis Administrative Services LLC


Register |  Password |  Feedback |  Copyright |  Usage Agreement |  Privacy Policy |  Advertising |  About Us |  Contact Us |  FAQ 

Past performance is not indicative of future results

StockSelector.com, the StockSelector.com logo, and News Selects are trademarks of StockSelector.com.
Copyright © 1998 - 2019 StockSelector.com. All rights reserved.