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Form 8-K Skilled Healthcare Group For: Nov 03

November 4, 2014 6:03 AM EST


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form�8-K
CURRENT REPORT
Pursuant to Section�13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 3, 2014
Skilled Healthcare Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware
001-33459
20-3934755
(State or Other Jurisdiction
of Incorporation)
(Commission
File Number)
(IRS Employer
Identification Number)

27442 Portola Parkway, Suite�200
Foothill Ranch, CA
92610
(Address of Principal Executive Offices)
(Zip Code)
(949)�282-5800
(Registrant's telephone number, including area code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o
Written communications pursuant to Rule�425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule�14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule�14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule�13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))












Item 2.02����Results of Operations and Financial Condition.

On November 3, 2014, Skilled Healthcare Group, Inc., a Delaware corporation (the Company), issued a press release announcing its operating results for the three months and nine months ended September 30, 2014. A copy of the press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.

This information and the information contained in the press release shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that Section. The information in this Current Report on Form 8-K is not incorporated by reference into any filings of the Company made under the Securities Act of 1933, as amended, whether made before or after the date of this Current Report on Form 8-K, regardless of any general incorporation language in the filing, unless specifically stated so therein.

Item 9.01����Financial Statements and Exhibits.

(d)����Exhibits.

Exhibit
Description
99.1
Press Release, dated November 3, 2014





SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.


Date: November 3, 2014
SKILLED HEALTHCARE GROUP, INC.
/s/ Roland G. Rapp
Roland G. Rapp
General Counsel, Secretary and
Chief Administrative Officer





EXHIBIT INDEX



Exhibit
Description
99.1
Press Release, dated November 3, 2014








































Exhibit 99.1

SKILLED HEALTHCARE GROUP REPORTS THIRD QUARTER 2014 ADJUSTED EPS OF $0.13

"
Revenue from our Long-term Care Segment of $166.4 million increased 5.1% year over year
"
Adjusted EBITDA of $21.8 million increased 18.5% year over year
"
Adjusted net income per share of $0.13 increased 116.7% year over year
"
Skilled mix of 21.4% increased 50 basis points year over year
"
Providing financial outlook for 4Q14 and FY 2014

FOOTHILL RANCH, Calif. - November 3, 2014 - Skilled Healthcare Group, Inc. (NYSE: SKH) today announced its consolidated financial operating results for the three and nine month period ended September 30, 2014.

I am very pleased with the financial results from our third quarter, said Robert Fish, Chief Executive Officer of Skilled Healthcare Group. Our business is starting to benefit from the strategic initiatives we put in place earlier this year and were seeing not only improved revenue, but also reduced cost. I am particularly proud that we have been able to achieve this progress while making improvements in several of our quality metrics. At this point we feel comfortable providing our financial outlook for the remainder of 2014 and we anticipate seeing our initiatives continue to ramp into the fourth quarter of this year and well beyond.

Third Quarter 2014 Results

Continuing Operations

Revenue for the quarter ended September 30, 2014 was $208.6 million, a decrease of 0.1% when compared to $208.7 million in the third quarter of 2013. Skilled mix1 increased 50 basis points to 21.4% in the third quarter of 2014 from 20.9% in the third quarter of 2013. Occupancy decreased 70 basis points to 81.0% in the third quarter of 2014 from 81.7% in the third quarter of 2013. Quality mix2 in the third quarter of 2014 decreased 260 basis points to 65.2%, compared to 67.8% in the prior year period.

Adjusted EBITDA3 was $21.8 million, or 10.4% of revenue, for the quarter ended September 30, 2014, an increase of 18.2% compared to $18.4 million, or 8.8% of revenue, in the same period a year ago. Adjusted EBITDAR3 was $26.9 million, or 12.9% of revenue, for the quarter ended September 30, 2014, an increase of 15.9% compared to $23.2 million, or 11.1% of revenue, for the quarter ended September 30, 2013.

Net income for the quarter ended September 30, 2014 totaled $0.6 million, as compared to a net loss of $12.1 million for the third quarter of 2013. Adjusted net income4 for the quarter ended September 30, 2014 totaled $5.1 million, an increase of 112.4% compared to adjusted net income of $2.4 million for the third quarter of 2013. Adjusted net income excludes certain items as described in the Reconciliation of Income (Loss) From Continuing Operations Before Provision for Income Taxes to Adjusted Net Income From Continuing Operations table at the end of this press release.






Net income per diluted share was $0.02 for the quarter ended September 30, 2014, as compared to net loss per share of $0.32 for the same period in 2013. Adjusted net income per diluted share4 was $0.13 for the quarter ended September 30, 2014, an increase of 116.7% compared to adjusted net income per diluted share of $0.06 for the quarter ended September 30, 2013.
Long-Term Care Services Segment
Revenue for our long-term care services segment in the quarter ended September 30, 2014 was $166.4 million, an increase of $8.1 million, or 5.1%, as compared to $158.3 million for the same period a year ago. Revenue for this segment represented 79.7% of total revenue in the third quarter of 2014, compared to 75.9% of total revenue in the third quarter of 2013.

Therapy Services Segment
Revenue for Hallmark Rehabilitation, our rehabilitation therapy services segment, was $22.1 million for the quarter ended September 30, 2014, a decrease of $3.2 million, or 12.7%, compared to the same period a year ago. Third-party rehabilitation therapy accounted for 10.6% of total revenue in the third quarter of 2014, compared to 12.1% of total revenue in the third quarter of 2013.

Hospice and Home Health Services Segment
Revenue for Signature Hospice and Home Health, our hospice and home health services segment, was $20.2 million in the third quarter of 2014, a decrease of $5.0 million, or 19.8%, compared to $25.1 million in the third quarter of 2013. Average daily hospice census decreased 18.7% to 991 for the third quarter of 2014, from 1,219 for the third quarter of 2013.

First Nine Months 2014 Results

Continuing Operations

Revenue for the nine months ended September 30, 2014 was $622.9 million, a decrease of 1.8% when compared to $634.0 million for the nine months ended September 2013. Skilled mix remained constant at 21.9% for the nine months ended September 30, 2014 and for the nine months ended September 30, 2013. Occupancy decreased 50 basis points to 81.7% for the nine months ended September 30, 2014 from 82.2% for the nine months ended September 30, 2013. Quality mix for the nine months ended September 30, 2014 decreased 230 basis points to 66.6%, compared to 68.9% in the prior year period.

Adjusted EBITDA was $57.9 million, or 9.3% of revenue, for the nine months ended September 30, 2014, a increase of 3.8% compared to $55.8 million, or 8.8% of revenue, in the same period a year ago. Adjusted EBITDAR was $72.8 million, or 11.7% of revenue, for the nine months ended September 30, 2014, an increase of 4.0% compared to $69.9 million, or 11.0% of revenue, for the nine months ended September 30, 2013.

Net loss for the nine months ended September 30, 2014 totaled $0.8 million, as compared to net loss of $7.5 million for the nine months ended September 30, 2013. Adjusted net income for the nine months ended September 30, 2014 totaled $10.2 million, an increase of 2.0% compared to adjusted net income of $10.0 million for the nine months ended September 30, 2013. Adjusted net income excludes certain items as described in the Reconciliation of Income (Loss) From Continuing Operations Before Provision for Income Taxes to Adjusted Net Income From Continuing Operation table at the end of this press release.

Net loss per share was $0.02 for the nine months ended September 30, 2014, as compared to net loss per share of $0.20 for the same period in 2013. Adjusted net income per diluted share was $0.26 for the nine months ended September 30, 2014, a decrease of 3.7% compared to adjusted net income per diluted share of $0.27 for the nine months ended September 30, 2013.





Long-Term Care Services Segment
Revenue for our long-term care services segment for the nine months ended September 30, 2014 was $490.8 million, an increase of $12.4 million, or 2.6%, as compared to $478.5 million for the same period a year ago. Revenue for this segment represented 78.7% of total revenue for the nine months ended September 30, 2014, compared to 75.4% of total revenue for the nine months ended September 30, 2013.

Therapy Services Segment
Revenue for Hallmark Rehabilitation, our rehabilitation therapy services segment, was $68.2 million for the nine months ended September 30, 2014, a decrease of $10.8 million, or 13.7%, compared to the same period a year ago. Third-party rehabilitation therapy accounted for 11.0% of total revenue for the nine months ended September 30, 2014, compared to 12.6% of total revenue for the nine months ended September 30, 2013.

Hospice and Home Health Services Segment
Revenue for Signature Hospice and Home Health, our hospice and home health services segment, was $63.9 million for the nine months ended September 30, 2014, a decrease of $12.6 million, or 16.5%, compared to $76.5 million for the nine months ended September 30, 2013. Average daily hospice census decreased 20.0% to 1,035 for the nine months ended September 30, 2014, from 1,292 for the nine months ended September 30, 2013.

2014 Guidance
Skilled Healthcare Group, Inc. expects fourth quarter adjusted EPS of $0.14 to $0.16, adjusted EBITDA of $22.5 to $24 million, and adjusted EBITDAR of $27.5 to $29 million. For the full year 2014, Skilled Healthcare Group, Inc. expects adjusted EPS of $0.40 to $0.42, adjusted EBITDA of $80.5 to $82 million, and adjusted EBITDAR of $100.5 to $102 million. This guidance includes the results of the first nine months of 2014 and assumes the following:
"
the anticipated impact of updated Medicaid rates in several states,
"
continuation of the Texas Upper Payment Limit supplemental payment program,
"
Medicare rate improvements of 1.6% in our long-term care division, effective October 1st, and
"
continued traction in operational improvement initiatives
Conference Call
A conference call and webcast will be held tomorrow, Tuesday, November 4th, at 9:00 a.m. Pacific Time (12:00 noon Eastern Time) to discuss Skilled Healthcare Group's third quarter 2014 financial results.

To participate in the call, interested parties may dial (877) 765-8543 and reference conference 22951671. Alternatively, interested parties may access the call in listen-only mode at www.skilledhealthcaregroup.com. A replay of the conference call will be available after 12:00 noon Pacific Time at www.skilledhealthcaregroup.com.





About Skilled Healthcare Group, Inc.
Skilled Healthcare Group, Inc., based in Foothill Ranch, California, is a holding company with subsidiary healthcare services companies, which in the aggregate had trailing twelve month revenue of approximately $831 million and approximately 15,000 employees as of September 30, 2014. Skilled Healthcare Group and its wholly-owned companies, collectively referred to as the "Company," operate long-term care facilities and provide a wide range of post-acute care services, with a strategic emphasis on sub-acute specialty health care. The Company operates long-term care facilities in California, Iowa, Kansas, Missouri, Nebraska, Nevada, New Mexico and Texas, including 73 skilled nursing facilities that offer sub-acute care and rehabilitative and specialty health skilled nursing care, and 22 assisted living facilities that provide room and board and social services. In addition, the Company provides physical, occupational and speech therapy in Company-operated facilities and unaffiliated facilities. Furthermore, the Company provides hospice and home health care in Arizona, California, Idaho, Montana, New Mexico and Nevada. The Company leases 5 skilled nursing facilities in California to an unaffiliated third party operator. More information about Skilled Healthcare is available at www.skilledhealthcaregroup.com.

Footnotes
(1)
Skilled mix represents the number of Medicare and non-Medicaid managed care patient days at our affiliated skilled nursing facilities divided by the total number of patient days at our affiliated skilled nursing facilities for any given period.
(2)
Quality mix represents non-Medicaid revenue as a percentage of total revenue.
(3)
EBITDA is net income before depreciation, amortization and interest expense (net of interest income) and the provision for income taxes. EBITDAR is EBITDA excluding facility rent expense. Adjusted earnings before interest, taxes, depreciation and amortization, or Adjusted EBITDA, reflects the non-GAAP adjustments to net income that are reflected in the Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Adjusted EBITDAR table in this press release.
(4)
Adjusted net income per diluted share and adjusted net income each reflect the non-GAAP adjustments to income before provision for income taxes that are reflected in the Reconciliation of Income Before Provision for Income Taxes to Adjusted Net Income table in this press release.

Forward-Looking Statements
This release includes "forward-looking statements." 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" or "pursue," or the negative or other variations thereof or comparable terminology. They include statements about Skilled Healthcare's expectations and beliefs regarding its opportunities and abilities to execute our strategic plan and about our expectations of future performance. These forward-looking statements are based on current expectations and projections about future events, including the assumptions stated in this release. These forward-looking statements are based on current expectations and projections about future events, including the assumptions stated in this release.

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 Skilled Healthcare may differ materially from that expressed or implied by such forward-looking statements.

Additionally, the Company faces a number of other risks and uncertainties, including, but not limited to, the factors described in Skilled Healthcare's Annual Report on Form 10-K for the year ended December�31, 2013 filed with the Securities and Exchange Commission (including the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained therein) and in our subsequent reports on Form 10-Q and Form 8-K.






Any forward-looking statements contained herein are made only as of the date of this release. Skilled Healthcare disclaims any obligation to update the forward-looking statements. Investors are cautioned not to place undue reliance on these forward-looking statements.







Skilled Healthcare Group, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three Months Ended September 30,
Nine Months Ended September 30,
2014
2013 (1)
2014
2013 (1)
Revenue:
(Unaudited)
(Unaudited)
Net patient service revenue
$
207,811

$
207,957

$
620,496

$
631,660

Lease facility revenue
807

787

2,401

2,335

208,618

208,744

622,897

633,995

Expenses:
Cost of services (exclusive of rent cost of revenue and depreciation and amortization shown below)
176,689

181,078

535,527

550,164

Rent cost of revenue
5,146

4,806

14,842

14,160

General and administrative
12,780

6,490

26,151

19,782

Change in fair value of contingent consideration
7

79

(100
)
(2,082
)
Depreciation and amortization
6,120

5,900

18,240

17,700

Governmental investigation expense




6,000



Impairment of long-lived assets


19,000

82

19,000

Loss on disposal of asset
68



73



200,810

217,353

600,815

618,724

Other (expenses) income:
Interest expense
(8,009
)
(8,744
)
(23,993
)
(26,153
)
Interest income
173

63

518

287

Other (expense) income, net
(26
)
(49
)
34

(111
)
Equity in earnings of joint venture
568

508

1,206

1,469

Debt modification/retirement costs
(21
)
(432
)
(843
)
(1,520
)
Total other (expenses) income, net
(7,315
)
(8,654
)
(23,078
)
(26,028
)
Income (loss) from continuing operations before benefit from income taxes
493

(17,263
)
(996
)
(10,757
)
Benefit from income taxes
(150
)
(5,324
)
(153
)
(3,940
)
Income (loss) from continuing operations
643

(11,939
)
(843
)
(6,817
)
Loss from discontinued operations, net of tax


(136
)


(665
)
Net income (loss)
$
643

$
(12,075
)
$
(843
)
$
(7,482
)
Earnings (loss) per share, basic:
Earnings (loss) per common share from continuing operations
$
0.02

$
(0.32
)
$
(0.02
)
$
(0.18
)
Loss per share from discontinued operations






(0.02
)
Earnings (loss) per share
$
0.02

$
(0.32
)
$
(0.02
)
$
(0.20
)
Earnings (loss) per share, diluted:
Earnings (loss) per common share from continuing operations
$
0.02

$
(0.32
)
$
(0.02
)
$
(0.18
)
Loss per share from discontinued operations






(0.02
)
Earnings (loss) per share
$
0.02

$
(0.32
)
$
(0.02
)
$
(0.20
)
Weighted-average common shares outstanding, basic
38,207

37,499

38,093

37,567

Weighted-average common shares outstanding, diluted
38,463

37,499

38,093

37,567


Note:
(1) Amounts have been adjusted for discontinued operations







Skilled Healthcare Group, Inc.
Condensed Consolidated Balance Sheet and Cash Flow Data
(In thousands)


September 30, 2014
December 31, 2013
(Unaudited)
(Audited)
Balance Sheet Data:
ASSETS
Cash and cash equivalents
$
10,536

$
4,177

Accounts receivable, less allowance for doubtful accounts of $19,241 and $16,665 at September 30, 2014 and December�31, 2013, respectively
114,598

107,215

Other current assets
32,504

31,025

Property and equipment and leased facility assets, net
342,342

351,238

Goodwill
68,833

69,065

Other assets
81,084

80,696

Total assets
$
649,897

$
643,416

LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities, less current portion of long-term debt
$
106,940

$
90,158

Other long-term liabilities
40,716

41,901

Long-term debt
407,817

419,125

Stockholders equity
94,424

92,232

Total liabilities and stockholders equity
$
649,897

$
643,416





Nine Months Ended September 30,
2014
2013
(Unaudited)
Cash Flows Data:
Net cash provided by operating activities
$
31,459

$
36,832

Net cash used in investing activities
(8,087
)
(9,977
)
Net cash used in financing activities
(17,013
)
(26,263
)
Increase in cash and cash equivalents
6,359

592

Cash and cash equivalents at beginning of period
4,177

2,003

Cash and cash equivalents at end of period
$
10,536

$
2,595





















Skilled Healthcare Group, Inc.
Consolidated Key Performance Indicators
(Unaudited)

The following table summarizes our key performance indicators, along with other statistics, for each of the dates or periods indicated

Continuing Operations

Three Months Ended September 30,
Nine Months Ended September 30,
2014
2013 (1)
2014
2013 (1)
Occupancy statistics (skilled nursing facilities):
Available beds in service at end of period
8,657

8,595

8,657

8,595

Available patient days
797,064

790,554

2,349,946

2,346,677

Actual patient days
645,263

645,899

1,920,178

1,929,326

Occupancy percentage
81.0
%
81.7
%
81.7
%
82.2
%
Average daily number of patients
7,014

7,021

7,034

7,067

Hospice average daily census
991

1,219

1,035

1,292

Home health episodic-based admissions
1,938

1,996

6,098

6,329

Home health episodic-based recertifications
473

479

1,386

1,445

EBITDA (in thousands)
$
14,449

$
(2,818
)
$
40,719

$
32,144

Adjusted EBITDA (in thousands)
$
21,788

$
18,427

$
57,918

$
55,787

Adjusted EBITDA margin
10.4
%
8.8
%
9.3
%
8.8
%
Adjusted EBITDAR (in thousands)
$
26,934

$
23,233

$
72,760

$
69,947

Adjusted EBITDAR margin
12.9
%
11.1
%
11.7
%
11.0
%
Revenue per patient day (skilled nursing facilities prior to intercompany eliminations):
Medicare
$
522

$
515

$
521

$
518

Managed care
410

401

407

391

Medicaid
168

163

167

163

Private and other
175

170

177

172

Weighted-average for all
$
241

$
234

$
242

$
237

Patient days by payor (skilled nursing facilities):
Medicare
72,350

72,949

223,944

233,246

Managed care
65,597

62,238

197,265

189,387

Total skilled mix days
137,947

135,187

421,209

422,633

Private pay and other
98,717

103,791

289,694

310,307

Medicaid
408,599

406,921

1,209,275

1,196,386

Total days
645,263

645,899

1,920,178

1,929,326

Patient days as a percentage of total patient days (skilled nursing facilities):
Medicare
11.2
%
11.3
%
11.6
%
12.1
%
Managed care
10.2

9.6

10.3

9.8

Skilled Mix
21.4

20.9

21.9

21.9

Private pay and other
15.3

16.1

15.1

16.1

Medicaid
63.3

63.0

63.0

62.0

Total
100.0
%
100.0
%
100.0
%
100.0
%
Revenue for total company:
Medicare
27.7
%
30.2
%
28.9
%
31.2
%
Managed care, private pay, and other
37.5

37.6

37.7

37.7

Quality mix
65.2

67.8

66.6

68.9

Medicaid
34.8

32.2

33.4

31.1

Total
100.0
%
100.0
%
100.0
%
100.0
%

Note:
(1) Amounts have been adjusted for discontinued operations






Skilled Healthcare Group, Inc.
Facility Ownership
(Unaudited)
As of September 30,
2014
2013 (1)
Facilities:
Skilled nursing facilities operated:
Owned
51
51

Leased
22
21

Total skilled nursing facilities operated
73
72

Total licensed beds
9,036
8,967

Skilled nursing facilities leased to unaffiliated third party operator
5
5

Assisted living facilities
Owned
21
21

Leased
1
1

Total assisted living facilities
22
22

Total licensed beds
1,212
1,212

Total facilities
100
99

Available beds in service (SNF only)
8,657
8,595

Percentage owned facilities
77.0
%
77.8
%

Note:
(1) Amounts have been adjusted for discontinued operations













































































































































































































































































































































Skilled Healthcare Group, Inc.
Reconciliation of Net Income (loss) to EBITDA, EBITDAR, Adjusted EBITDA, and Adjusted EBITDAR
(In thousands)
(Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2014
2013 (1)
2014
2013 (1)
Net income (loss)
$
643

$
(12,075
)
$
(843
)
$
(7,482
)
Interest expense, net of interest income
7,836

8,681

23,475

25,866

Benefit from income taxes
(150
)
(5,324
)
(153
)
(3,940
)
Depreciation and amortization expense
6,120

5,900

18,240

17,700

EBITDA
14,449

(2,818
)
40,719

32,144

Rent cost of revenue
5,146

4,806

14,842

14,160

EBITDAR
19,595

1,988

55,561

46,304

EBITDA
14,449

(2,818
)
40,719

32,144

Change in fair value of contingent consideration
7

79

(100
)
(2,082
)
Organization restructure costs
359

457

1,430

2,006

Exit costs related to divested facilities
57



397



Legal expense for non-routine matters
616

416

1,590

1,809

Governmental investigation expense




6,000



Debt modification/retirement costs
21

432

843

1,520

Losses at skilled nursing facility not at full operation
450



583



Impairment of long-lived assets


19,000

82

19,000

Merger related expense
5,761

306

6,306

306

��Loss on disposal of asset
68



68



��Closure of California home health agency


419



419

Loss from discontinued operations, net of tax


136



665

Adjusted EBITDA
21,788

18,427

57,918

55,787

Rent cost of revenue
5,146

4,806

14,842

14,160

Adjusted EBITDAR
$
26,934

$
23,233

$
72,760

$
69,947


Note:
(1) Amounts have been adjusted for discontinued operations





Skilled Healthcare Group, Inc.
Reconciliation of Income (Loss) From Continuing Operations Before Provision for Income Taxes to Adjusted Net Income From Continuing Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2014
2013 (1)
2014
2013 (1)
Income (loss) from continuing operations before provision for income taxes
$
493

$
(17,263
)
$
(996
)
$
(10,757
)
Organization restructure costs
359

457

1,430

2,006

Exit costs related to divested facilities
57



397



Legal expense for non-routine matters
616

416

1,590

1,809

Losses at skilled nursing facility not at full operation
450



583



Governmental investigation expense




6,000



Merger related expense
5,761

306

6,306

306

Impairment of long lived assets


19,000

82

19,000

Debt modification/retirement costs
21

432

843

1,520

Closure of California Home Health Agency


419



419

Adjusted income before provision for income taxes
7,757

3,767

16,235

14,303

Adjusted provision for income taxes
2,683

2,878

6,663

5,833

Tax difference from shares that vested at a lower price than the grant price




(625
)


California Enterprise Zone tax credit valuation allowance


(1,500
)


(1,500
)
Adjusted net income from continuing operations
$
5,074

$
2,389

$
10,197

$
9,970

Weighted-average common shares outstanding, diluted
38,463

37,499

38,337

37,567

Adjusted net income per share, diluted
0.13

0.06

0.26

0.27

Effective tax rate
34.6
%
36.6
%
37.2
%
30.3
%

Note:
(1) Amounts have been adjusted for discontinued operations


























Skilled Healthcare Group, Inc.
Reconciliation of Forecasted Net Income to Forecasted EBITDA and Forecasted EBITDAR
Year Ending December 31, 2014
(In millions)
(Unaudited)
Outlook
Low
High
Net income guidance
$
3.6

$
4.5

Debt modification costs, net of tax
0.5

0.5

Organization restructure costs, net of tax
0.9

0.9

Exit costs related to divested facilities, net of tax
0.2

0.2

Legal expense for non-routine matters, net of tax
1.3

1.3

Governmental investigation expense, net of tax
3.7

3.7

Losses at skilled nursing facility not at full operation, net of tax
0.6

0.6

Merger related expense, net of tax
3.9

3.9

Tax difference from shares that vested at a lower price than grant price, net of tax
0.6

0.6

Adjusted net income guidance
15.3

16.2

Interest expense, net of interest income
31.0

31.0

Adjusted provision for income taxes
9.7

10.3

Depreciation, amortization, and change in fair value of contingent consideration
24.5

24.5

Adjusted EBITDA guidance
80.5

82.0

Rent cost of revenue
20.0

20.0

Adjusted EBITDAR guidance
$
100.5

$
102.0








Skilled Healthcare Group, Inc.
Reconciliation of Forecasted Net Income to Forecasted EBITDA and Forecasted EBITDAR
For the Quarter Ended December 31, 2014
(In millions)
(Unaudited)
Outlook
Low
High
Net income guidance
$
4.5

$
5.3

Debt modification costs, net of tax




Organization restructure costs, net of tax
0.1

0.1

Exit costs related to divested facilities, net of tax




Legal expense for non-routine matters, net of tax
0.3

0.3

Governmental investigation expense, net of tax




Losses at skilled nursing facility not at full operation, net of tax
0.3

0.3

Merger related expense, net of tax




Tax difference from shares that vested at a lower price than grant price, net of tax




Adjusted net income guidance
5.2

6.0

Interest expense, net of interest income
7.5

7.5

Adjusted provision for income taxes
3.5

4.2

Depreciation, amortization, and change in fair value of contingent consideration
6.3

6.3

Adjusted EBITDA guidance
22.5

24.0

Rent cost of revenue
5.0

5.0

Adjusted EBITDAR guidance
$
27.5

$
29.0



We believe that a report of adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR provides consistency in our financial reporting and provides a basis for the comparison of results of core business operations between our current, past and future periods. Adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR are primary indicators management uses for planning and forecasting in future periods, including trending and analyzing the core operating performance of our business from period-to-period without the effect of expenses, revenues and gains (losses) that are unrelated to the day-to-day performance of our consolidated and segmented business but are required to reported in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). We also use adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR to benchmark the performance of our consolidated and segmented business against expected results, analyzing year-over-year trends as described below and to compare our operating performance to that of our competitors.





Management uses adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR to assess the performance of our core business operations, to prepare operating budgets and to measure our performance against those budgets on a consolidated and segment level. Segment management uses these metrics to measure performance on a business unit by business unit basis. We typically use adjusted net income per share, Adjusted EBITDA and Adjusted EBITDAR for these purposes on a consolidated basis as the adjustments to adjusted net income per share, EBITDA and EBITDAR are not generally allocable to any individual business unit and we typically use EBITDA and EBITDAR to compare the operating performance of each skilled nursing and assisted living facility, as well as to assess the performance of our operating segments. EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR are useful in this regard because they do not include such costs as interest expense (net of interest income), income taxes, depreciation and amortization expense, rent cost of revenue (in the case of EBITDAR and Adjusted EBITDAR) and special charges, which may vary from business unit to business unit and period-to-period depending upon various factors, including the method used to finance the business, the amount of debt that we have determined to incur, whether a facility is owned or leased, the date of acquisition of a facility or business, the original purchase price of a facility or business unit or the tax law of the state in which a business unit operates. These types of charges are dependent on factors unrelated to the underlying business unit performance. As a result, we believe that the use of adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR provides a meaningful and consistent comparison of our underlying business units between periods by eliminating certain items required by U.S. GAAP which have little or no significance to their day-to-day operations.

The use of adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA, Adjusted EBITDAR and other non-GAAP financial measures has certain limitations. Our presentation of adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA, Adjusted EBITDAR or other non-GAAP financial measures may be different from the presentation used by other companies and therefore comparability may be limited. Depreciation and amortization expense, interest expense, income taxes and other items have been and will be incurred and are not reflected in the presentation of adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA or Adjusted EBITDAR. Each of these items should also be considered in the overall evaluation of our results. Additionally, adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA, Adjusted EBITDAR do not consider capital expenditures and other investing activities and should not be considered as a measure of our liquidity. We compensate for these limitations by providing the relevant disclosure of our depreciation and amortization, interest and income taxes, capital expenditures and other items both in our reconciliations to the U.S. GAAP financial measures and in our consolidated financial statements, all of which should be considered when evaluating our performance.
Adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA, Adjusted EBITDAR and certain other non-GAAP financial measures are used in addition to and in conjunction with results presented in accordance with U.S. GAAP. Adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA, Adjusted EBITDAR and other non-GAAP financial measures should not be considered as an alternative to net income, operating income, or any other operating performance measure prescribed by U.S. GAAP, nor should these measures be relied upon to the exclusion of U.S. GAAP financial measures. Adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA, Adjusted EBITDAR and other non-GAAP financial measures reflect additional ways of viewing our operations that we believe, when viewed with our U.S. GAAP results and the reconciliations to the corresponding U.S. GAAP financial measures, provide a more complete understanding of factors and trends affecting our business than could be obtained absent this disclosure. You are strongly encouraged to review our financial information in its entirety and not to rely on any single financial measure.






Investor Contact:
Skilled Healthcare Group, Inc.
Chris Felfe
(949) 282-5800





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