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 first quarter ended March
31, 2020 and provided an update regarding the impact of the 2019
novel coronavirus (COVID-19) pandemic on its business.
“As a nation, we are facing the most significant
pandemic of modern times, and nowhere has this challenge been more
readily apparent than in skilled nursing facilities,” stated George
V. Hager, Jr., Chief Executive Officer of Genesis. “Our focus has
been concentrated on protecting the health and safety of the
patients and residents in our care as well as the staff who care
for them. We are doing everything that is medically known to
contain the entry and spread of this deadly and highly contagious
virus in our centers, which disproportionately affects seniors with
multiple health conditions. In most cases, we have gone beyond
public health guidelines, instituting even more stringent infection
precautions than previously recommended and have suggested
protocols that were later adopted by public health officials.”
“Our thoughts and prayers go out to those
impacted by COVID-19,” Hager further commented. “We are incredibly
blessed to have such a dedicated and heroic workforce, so many of
whom selflessly are putting themselves at risk as we battle this
virus, which is often hidden as asymptomatic carriers unwittingly
spread it. We are in frequent – often daily – communication with
families and other responsible parties, and are grateful for their
engagement in hearing our updates and expressing their needs.
Finally, we support the now-intensifying focus by government
officials at the Federal, state, county and local levels on
collaborating to protect our seniors in skilled nursing and
assisted living facilities and appreciate the swift and significant
financial support provided to our industry by the President and his
Administration. To date, Genesis has received approximately $180
million in federal grants under the CARES Act in addition to other
federally sponsored sources of near term capital critical to our
fight against the pandemic. We will continue to work closely with
industry advocates, elected officials and the President’s
Administration to thoughtfully articulate the resource needs of our
industry as we fight this deadly virus together.”
First Quarter 2020 Results
- US GAAP revenue in the first
quarter of 2020 was $1.09 billion compared to $1.16 billion in the
first quarter of 2019;
- US GAAP net income (loss)
attributable to Genesis Healthcare, Inc. in the first quarter of
2020 was $33.5 million compared to $(15.3) million in the first
quarter of 2019;
- Adjusted EBITDA in the first
quarter of 2020 was $42.9 million compared to $54.4 million in the
first quarter of 2019; and
- Adjusted EBITDAR in the first
quarter of 2020 was $140.9 million.
Despite the challenges of preparation and
response to this unprecedented pandemic, Genesis reported a solid
first quarter of 2020, including same store occupancy growth of 30
basis points as compared to the first quarter last year, marking
the sixth consecutive quarter of same store occupancy growth.
The COVID-19 pandemic began to cause a decrease
in Genesis patient admissions in late February 2020 and an increase
in operating expenses in early March 2020. These combined impacts
on first quarter 2020 earnings were a loss of approximately $8
million, after giving effect to $6 million of COVID-19 related
Medicaid reimbursement relief provided by several states. Excluding
the estimated net impact of COVID-19, same-store net revenue and
same-store Adjusted EBITDAR in the first quarter of 2020 grew 5.0%
and 3.2%, respectively, as compared to the first quarter of 2019.
See Reasons for Non-GAAP Financial Disclosure and the accompanying
reconciliations to GAAP to non-GAAP measures included later in this
release.
COVID-19 UPDATE AND OUTLOOK
The Company’s primary focus, as the effects of
COVID-19 began to impact the United States, was the health and
safety of its patients, residents, employees and their respective
families. The Company implemented various measures to provide the
safest possible environment within its sites of service during this
pandemic and will continue to do so.
In March 2020, in an effort to prevent the
introduction of COVID-19 into its facilities, and to help control
further exposure to infections within communities, Genesis
implemented policies restricting visitors at all of its facilities
except for essential healthcare personnel and certain end-of-life
situations. The Company also implemented policies for screening
employees and anyone permitted to enter the building, and
implemented in-room only dining, activities programming and
therapy. Upon confirmation of a positive COVID-19 exposure at a
facility, the Company followed government guidance to minimize
further exposure, including personal protection protocols,
restricting new admissions, and isolating patients. Notwithstanding
these restrictions and Genesis’ other response efforts, the virus
has had, and likely will continue to have, introduction to, and
transmission within, certain facilities due to the easily
transmissible nature of COVID-19. The Company’s first report of a
positive case of COVID-19 in one of its facilities occurred on
March 16, 2020. Since that time 187 of its 361 facilities have
experienced one or more positive cases of COVID-19 among patients
and residents. Over 84% of patient and resident positive COVID-19
cases have occurred in its facilities located in the states of New
Jersey, Connecticut, Massachusetts, Pennsylvania and Maryland,
which correspond to many of the largest community outbreak areas
across the country. Genesis facilities in these five states
represent 43% of its total operating beds.
Starting in late February 2020, the Company’s
occupancy began to decrease following efforts by referring
hospitals to cancel or reschedule elective procedures in
anticipation of COVID-19 cases in their communities. Occupancy was
further decreased by implementation of self-imposed admission bans
in those Genesis facilities having exposure to positive cases of
COVID-19 among patients, residents and employees. These
self-imposed restrictions on admissions were instituted to limit
risks of potential spread of the virus by individuals that either
tested positive for COVID-19, exhibited symptoms of COVID-19 but
had not yet been tested positive due to a severe shortage of
testing materials, or were asymptomatic of COVID-19 but potentially
positive and contagious.
Net Revenues.
The Company estimates that net revenues for the
first quarter of 2020 were not materially impacted by COVID-19
because revenue lost from a decline in occupancy was offset by
changes in payor mix and approximately $6 million of COVID-19
related Medicaid reimbursement relief provided by several states in
which the Company operates.
The decline in occupancy continued through late
May 2020, resulting in our skilled nursing facility operating
occupancy decreasing from 88.2% for the three months ended March
31, 2020 to 81.9% for the month ended April 30, 2020. Operating
occupancy for the month ended May 31, 2020 is projected to be
approximately 76%. The impact of COVID-19 on net revenue for the
remainder of 2020 will depend on future developments, which are
highly uncertain and cannot be predicted, including new information
that may emerge concerning the scope and severity of COVID-19 and
the actions taken by public and private entities in response to the
pandemic.
Operating Expenses.
Beginning in early March 2020, the Company began
to incur increases in costs as a result of the pandemic, with more
dramatic increases occurring at facilities with positive COVID-19
cases among patients, residents, and/or employees. During the first
quarter of 2020, the Company incurred approximately $7 million of
incremental operating expense to prepare for and respond to the
pandemic. Increases in cost primarily stemmed from elevated labor
costs, including increased use of overtime and bonus pay, as well
as a significant increase in both the cost and usage of personal
protective equipment, medical equipment, food service supplies for
staff, enhanced cleaning and environmental sanitation costs and the
impact of utilizing less efficient modes of providing therapy in
order to avoid the grouping of patients.
Such costs have escalated following March 31,
2020, and the Company also expects such costs to include increased
workers compensation expense, health plan expense and consulting
costs. The Company estimates that its operating expenses for the
month ended April 30, 2020 grew approximately $21 million due to
the COVID-19 pandemic. The Company is not reasonably able to
predict the total amount of costs it will incur related to the
pandemic and to what extent such costs will be borne by or offset
by actions taken by public and private entities in response to the
pandemic.
Reimbursement Relief and Liquidity.
The Company has taken, and will continue to
take, actions to enhance and preserve liquidity in response to the
pandemic. Since March 31, 2020, historical sources of liquidity
have been supplemented by grants and advanced Medicare payments
under programs expanded or created under the Coronavirus Aid,
Relief, and Economic Security Act (CARES Act). Specifically, in
April 2020, the Company applied for and received $158 million of
advanced Medicare payments and in April and May 2020 received
approximately $180 million of relief grants. In addition, the
Company has elected to implement the CARES Act payroll tax deferral
program, which is expected to preserve on an interest free basis
approximately $90 million of cash representing the employer portion
of payroll taxes estimated to be incurred between March 27, 2020
and December 31, 2020. The advance Medicare payments, which are
also interest free, will be repaid between August 2020 and November
2020, while one-half of the payroll tax deferral amount will become
due on each of December 31, 2021 and December 31, 2022. In addition
to relief funding under the CARES Act, funding has been committed
by a number of states in which the Company operates, currently
estimated at $27 million.
The Company continues to seek opportunities to
enhance and preserve liquidity, including through reducing
expenses, continuing to evaluate its capital structure and seeking
further government-sponsored financial relief related to the
pandemic. The Company cannot provide assurance that such efforts
will be successful or adequate to offset the lost revenue and
escalating operating expenses as a result of the pandemic.
Portfolio OptimizationGenesis
continues to exit challenged facilities and certain low density
markets in order to focus on investment and growth in core markets.
During the first quarter of 2020, Genesis divested, exited or
closed the operations of 24 facilities.
As previously announced, in February 2020, the
Company entered into a series of agreements with New Generation
Health, LLC (NewGen), a healthcare consulting firm led by
experienced professionals specializing in the operation of skilled
nursing facilities in the western portion of the United States.
Pursuant to these agreements, effective February 1, 2020, Genesis
sold the real estate and operations of six skilled nursing
facilities and transferred the leasehold rights to 13 skilled
nursing, behavioral health and assisted living facilities, for a
total of $79 million. These 19 facilities are located in the states
of California, Washington and Nevada. Genesis retained a 50%
interest in the facilities and no longer consolidates the financial
statements of the divested facilities.
The 24 divested facilities this quarter
generated approximate annual net revenue of $234 million, Adjusted
EBITDA of $19 million and a pre-tax net loss of $4 million. These
transactions resulted in the reduction of approximately $10 million
of annual cash lease payments and the repayment of over $112
million of indebtedness.
The Company exited operations of an additional
15 facilities thus far during the second quarter of 2020. In total,
these 15 facilities generated approximate annual net revenue of
$172 million, Adjusted EBITDA of $6 million and a pre-tax net loss
of $2 million. These transactions resulted in the reduction of
approximately $12 million of annual cash lease payments and the
repayment of approximately $27 million of indebtedness.
Conference Call, Including a COVID-19
UpdateGenesis Healthcare, Inc. will hold a conference call
at 8:30 a.m. Eastern Time on Wednesday, May 27, 2020 to discuss its
financial results for the first quarter 2020 and to provide a
Company update with respect to COVID-19. 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
companies providing services to nearly 400 skilled nursing
facilities and assisted/senior living communities in 25 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 impact of the
COVID-19 pandemic on occupancy levels, revenue, operating expenses
and government-sponsored financial relief, 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;
- 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 extent to which the COVID-19
pandemic continues materially and adversely to affect our patients,
staff, operations, financial condition, results of operations,
compliance with financial covenants and liquidity will depend on
future developments, including the measures taken by public and
private entities in response to the pandemic, which are highly
uncertain and cannot be predicted;
- no assurance can be given that we
will be able to regain compliance with the NYSE continued listing
standard regarding the minimum share price requirement or maintain
compliance with other continued listing requirements set forth in
the NYSE Listed Company Manual; and
- we could experience adverse
consequences if our common stock ultimately were to be suspended
from trading on, and delisted from, the NYSE for any reason, which
could have an adverse effect on our business, liquidity or
financial condition, any of which could lead to difficulty
maintaining important business, financing and operational
relationships.
The Company’s Annual Report on Form 10-K for the
year ended December 31, 2019, Quarterly Reports on Form 10-Q,
Current Reports on Form 8-K, and other filings with the U.S.
Securities and Exchange Commission, discuss the foregoing risks as
well as other important risks and uncertainties of which investors
should be aware. Any forward-looking statements contained herein
are made only as of the date of this release. Genesis disclaims any
obligation to update its forward-looking statements or any of the
information contained in this release. Investors are cautioned not
to place undue reliance on these forward-looking statements.
Genesis HealthCare Contact:Investor
Relations610-925-2000
GENESIS HEALTHCARE,
INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(UNAUDITED)(IN
THOUSANDS, EXCEPT PER SHARE DATA)
|
|
|
|
|
|
|
Three months ended March 31, |
|
2020 |
|
|
2019 |
|
Net revenues |
$ |
1,092,250 |
|
|
$ |
1,161,640 |
|
Salaries, wages and
benefits |
|
580,533 |
|
|
|
642,410 |
|
Other operating expenses |
|
340,481 |
|
|
|
342,538 |
|
General and administrative
costs |
|
39,617 |
|
|
|
35,532 |
|
Lease expense |
|
98,020 |
|
|
|
94,061 |
|
Depreciation and amortization
expense |
|
25,988 |
|
|
|
38,195 |
|
Interest expense |
|
36,240 |
|
|
|
51,516 |
|
Loss on early extinguishment
of debt |
|
4,039 |
|
|
|
— |
|
Investment income |
|
(1,156 |
) |
|
|
(1,864 |
) |
Other income |
|
(84,832 |
) |
|
|
(16,917 |
) |
Transaction costs |
|
5,591 |
|
|
|
1,261 |
|
Long-lived asset
impairments |
|
9,700 |
|
|
|
— |
|
Equity in net income of
unconsolidated affiliates |
|
127 |
|
|
|
(61 |
) |
Income (loss) before income
tax (benefit) expense |
|
37,902 |
|
|
|
(25,031 |
) |
Income tax (benefit)
expense |
|
(779 |
) |
|
|
51 |
|
Net income (loss) |
|
38,681 |
|
|
|
(25,082 |
) |
Less net (income) loss
attributable to noncontrolling interests |
|
(5,173 |
) |
|
|
9,819 |
|
Net income (loss) attributable
to Genesis Healthcare, Inc. |
$ |
33,508 |
|
|
$ |
(15,263 |
) |
Earnings (loss) per common
share: |
|
|
|
|
|
Basic: |
|
|
|
|
|
Weighted-average shares outstanding for basic net income (loss) per
share |
|
109,721 |
|
|
|
103,715 |
|
Basic net income (loss) per common share attributable to Genesis
Healthcare, Inc. |
$ |
0.31 |
|
|
$ |
(0.15 |
) |
|
|
|
|
|
|
Diluted: |
|
|
|
|
|
Weighted-average shares outstanding for diluted net income (loss)
per share |
|
167,414 |
|
|
|
103,715 |
|
Diluted net income (loss) per common share attributable to Genesis
Healthcare, Inc. |
$ |
0.24 |
|
|
$ |
(0.15 |
) |
GENESIS HEALTHCARE,
INC.CONDENSED CONSOLIDATED BALANCE
SHEETS(UNAUDITED)(IN
THOUSANDS)
|
|
|
|
|
|
|
March 31, |
|
December 31, |
|
2020 |
|
|
2019 |
|
Assets: |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash and equivalents |
$ |
23,502 |
|
|
$ |
12,097 |
|
Restricted cash and equivalents |
|
47,285 |
|
|
|
63,101 |
|
Accounts receivable, net of allowance for doubtful accounts |
|
553,520 |
|
|
|
567,636 |
|
Other current assets |
|
149,474 |
|
|
|
186,013 |
|
Total current assets |
|
773,781 |
|
|
|
828,847 |
|
Property and equipment, net of
accumulated depreciation |
|
853,793 |
|
|
|
962,105 |
|
Finance lease right-of-use
asset, net of accumulated amortization |
|
33,791 |
|
|
|
37,097 |
|
Operating lease right-of-use
asset |
|
2,353,477 |
|
|
|
2,399,505 |
|
Restricted cash and
equivalents |
|
50,766 |
|
|
|
50,608 |
|
Identifiable intangible
assets, net of accumulated amortization |
|
86,136 |
|
|
|
87,446 |
|
Goodwill |
|
85,642 |
|
|
|
85,642 |
|
Other long-term assets |
|
251,595 |
|
|
|
210,890 |
|
Total assets |
$ |
4,488,981 |
|
|
$ |
4,662,140 |
|
|
|
|
|
|
|
Liabilities and
Stockholders' Deficit: |
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
Accounts payable and accrued expenses |
$ |
422,048 |
|
|
$ |
464,476 |
|
Accrued compensation |
|
154,058 |
|
|
|
153,698 |
|
Other current liabilities |
|
401,588 |
|
|
|
452,996 |
|
Total current liabilities |
|
977,694 |
|
|
|
1,071,170 |
|
|
|
|
|
|
|
Long-term debt |
|
1,355,148 |
|
|
|
1,450,994 |
|
Finance lease obligations |
|
38,845 |
|
|
|
39,335 |
|
Operating lease
obligations |
|
2,632,831 |
|
|
|
2,681,403 |
|
Other long-term
liabilities |
|
526,598 |
|
|
|
501,803 |
|
Stockholders' deficit |
|
(1,042,135 |
) |
|
|
(1,082,565 |
) |
Total liabilities and stockholders' deficit |
$ |
4,488,981 |
|
|
$ |
4,662,140 |
|
GENESIS HEALTHCARE,
INC.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(UNAUDITED)(IN
THOUSANDS)
|
|
|
|
|
|
|
Three months ended March 31, |
|
2020 |
|
|
2019 |
|
Net cash provided by operating activities (1) |
$ |
15,250 |
|
|
$ |
12,146 |
|
Net cash provided by (used in)
investing activities |
|
114,936 |
|
|
|
(203,419 |
) |
Net cash (used in) provided by
financing activities |
|
(134,439 |
) |
|
|
147,501 |
|
Net decrease in cash, cash
equivalents and restricted cash and equivalents |
|
(4,253 |
) |
|
|
(43,772 |
) |
Beginning of period |
|
125,806 |
|
|
|
142,276 |
|
End of period |
$ |
121,553 |
|
|
$ |
98,504 |
|
(1) - Net cash provided by operating activities in the three
months ended March 31, 2020 and 2019 includes
approximately $5.6 million and $1.3 million, respectively, of cash
payments for transaction-related costs.
GENESIS HEALTHCARE,
INC.KEY PERFORMANCE AND VALUATION
MEASURES(UNAUDITED)
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
2020 |
|
|
2019 |
|
Financial Results (in
thousands) |
|
|
|
|
|
Financial Performance Measures: |
|
|
|
|
|
Net revenues (GAAP) |
$ |
1,092,250 |
|
$ |
1,161,640 |
|
Net income (loss) attributable to Genesis Healthcare, Inc.
(GAAP) |
|
33,508 |
|
|
(15,263 |
) |
EBITDA (Non-GAAP) |
|
100,130 |
|
|
64,680 |
|
Adjusted EBITDA (Non-GAAP) |
|
42,859 |
|
|
54,436 |
|
Valuation Measure: |
|
|
|
|
|
Adjusted EBITDAR (Non-GAAP) |
$ |
140,879 |
|
|
|
INPATIENT SEGMENT:
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
2020 |
|
2019 |
|
Occupancy Statistics -
Inpatient |
|
|
|
|
|
|
Available licensed beds in service at end of period |
|
40,601 |
|
|
47,271 |
|
Available operating beds in service at end of period |
|
38,834 |
|
|
45,306 |
|
Available patient days based on licensed beds |
|
3,693,851 |
|
|
4,313,860 |
|
Available patient days based on operating beds |
|
3,530,644 |
|
|
4,135,173 |
|
Actual patient days |
|
3,114,081 |
|
|
3,591,045 |
|
Occupancy percentage - licensed beds |
|
84.3 |
% |
|
83.2 |
% |
Occupancy percentage - operating beds |
|
88.2 |
% |
|
86.8 |
% |
Skilled mix |
|
18.4 |
% |
|
19.0 |
% |
Average daily census |
|
34,221 |
|
|
39,901 |
|
Revenue per patient day (skilled nursing facilities) |
|
|
|
|
|
|
Medicare Part A |
$ |
565 |
|
$ |
526 |
|
Insurance |
|
480 |
|
|
454 |
|
Private and other |
|
369 |
|
|
358 |
|
Medicaid |
|
246 |
|
|
230 |
|
Medicaid (net of provider taxes) |
|
224 |
|
|
211 |
|
Weighted average (net of provider taxes) |
$ |
294 |
|
$ |
278 |
|
Patient days by payor
(skilled nursing facilities) |
|
|
|
|
|
|
Medicare |
|
310,295 |
|
|
366,784 |
|
Insurance |
|
228,769 |
|
|
279,584 |
|
Total skilled mix days |
|
539,064 |
|
|
646,368 |
|
Private and other |
|
184,270 |
|
|
189,621 |
|
Medicaid |
|
2,213,879 |
|
|
2,556,143 |
|
Total
Days |
|
2,937,213 |
|
|
3,392,132 |
|
Patient days as a
percentage of total patient days (skilled nursing
facilities) |
|
|
|
|
|
|
Medicare |
|
10.6 |
% |
|
10.8 |
% |
Insurance |
|
7.8 |
% |
|
8.2 |
% |
Skilled mix |
|
18.4 |
% |
|
19.0 |
% |
Private and other |
|
6.3 |
% |
|
5.6 |
% |
Medicaid |
|
75.3 |
% |
|
75.4 |
% |
Total |
|
100.0 |
% |
|
100.0 |
% |
Facilities at end of
period |
|
|
|
|
|
|
Skilled nursing
facilities |
|
|
|
|
|
|
Leased |
|
265 |
|
|
314 |
|
Owned |
|
19 |
|
|
42 |
|
Joint Venture |
|
57 |
|
|
20 |
|
Managed |
|
12 |
|
|
12 |
|
Total skilled nursing facilities |
|
353 |
|
|
388 |
|
Total licensed beds |
|
42,552 |
|
|
47,050 |
|
Assisted/Senior living
facilities: |
|
|
|
|
|
|
Leased |
|
19 |
|
|
20 |
|
Owned |
|
1 |
|
|
3 |
|
Joint Venture |
|
2 |
|
|
1 |
|
Managed |
|
1 |
|
|
2 |
|
Total assisted/senior living facilities |
|
23 |
|
|
26 |
|
Total licensed beds |
|
1,829 |
|
|
2,209 |
|
Total
facilities |
|
376 |
|
|
414 |
|
|
|
|
|
|
|
|
Total Jointly Owned and
Managed— (Unconsolidated) |
|
32 |
|
|
14 |
|
REHABILITATION THERAPY SEGMENT*:
|
|
|
|
|
|
|
|
Three months ended March 31, |
|
|
2020 |
|
2019 |
|
Revenue mix %: |
|
|
|
|
|
|
Company-operated |
|
34.3 |
% |
|
36.6 |
% |
Non-affiliated |
|
65.7 |
% |
|
63.4 |
% |
Sites of service (at end of
period) |
|
1,137 |
|
|
1,237 |
|
Revenue per site |
$ |
140,598 |
|
$ |
149,821 |
|
Therapist efficiency % |
|
70.9 |
% |
|
68.1 |
% |
* 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
value, 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 these
two Non-GAAP Financial Measures is net (loss) income attributable
to Genesis Healthcare, Inc. We use one Non-GAAP Financial Measure
(Adjusted EBITDAR) as a valuation measure and believe that the GAAP
financial measure most directly comparable to this Non-GAAP
Financial Measure is net (loss) income 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, (gains) 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 net 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) income 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 (loss)
income, 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) income 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.
- 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.
- (Income) 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.
- Impact of COVID-19. We excluded the
net impact of the COVID-19 pandemic to our revenues and expenses
for the three months ended March 31, 2020 due to the extraordinary
nature of the virus and its impact across the globe. We view the
full extent of incremental expenses, lost revenue and government
relief grants as not indicative of the underlying potential
long-term performance of our operating businesses.
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.
Supplemental Information:
We provide supplemental information about
certain capital costs we believe are beneficial to an investor’s
understanding of our capital structure and cash flows. This
supplemental information includes (1) cash interest payments on our
recourse and HUD guaranteed indebtedness (2) cash rent payments
made to partially owned real estate joint ventures that is
eliminated in consolidation, net of any distributions returned to
us, and (3) total cash lease payments made pursuant to operating
leases and finance leases.
This supplemental information is used by us to
evaluate our leverage, fixed charge coverage and cash flow. This
supplemental information is consistent with information used by our
major creditors in evaluating compliance with financial covenants
contained in our material lease and loan agreements.
See the reconciliation of net (loss) income
attributable to Genesis Healthcare, Inc. to Non-GAAP financial
information included herein.
GENESIS HEALTHCARE,
INC.RECONCILIATION OF NET (LOSS) INCOME
ATTRIBUTABLE TO GENESIS HEALTHCARE, INC. TO
NON-GAAP FINANCIAL
INFORMATION(UNAUDITED)(IN
THOUSANDS)
|
|
|
|
|
|
|
Three months ended March 31, |
|
2020 |
|
|
2019 |
|
|
|
|
|
|
|
Net income (loss) attributable to Genesis Healthcare, Inc. |
$ |
33,508 |
|
|
$ |
(15,263 |
) |
Adjustments to compute
EBITDA: |
|
|
|
|
|
Net income (loss) attributable to noncontrolling interests |
|
5,173 |
|
|
|
(9,819 |
) |
Depreciation and amortization expense |
|
25,988 |
|
|
|
38,195 |
|
Interest expense |
|
36,240 |
|
|
|
51,516 |
|
Income tax (benefit) expense |
|
(779 |
) |
|
|
51 |
|
EBITDA |
|
100,130 |
|
|
|
64,680 |
|
Adjustments to compute Adjusted EBITDA: |
|
|
|
|
|
Loss on early extinguishment of debt |
|
4,039 |
|
|
|
— |
|
Other income |
|
(84,832 |
) |
|
|
(16,917 |
) |
Transaction costs |
|
5,591 |
|
|
|
1,261 |
|
Long-lived asset impairments |
|
9,700 |
|
|
|
— |
|
Severance and restructuring |
|
355 |
|
|
|
1,446 |
|
(Income) loss of newly acquired, constructed, or divested
businesses |
|
(1,921 |
) |
|
|
1,879 |
|
Stock-based compensation |
|
1,894 |
|
|
|
2,087 |
|
Impact of COVID-19 |
|
7,903 |
|
|
|
— |
|
Adjusted EBITDA |
$ |
42,859 |
|
|
$ |
54,436 |
|
Lease Expense |
|
98,020 |
|
|
|
94,061 |
|
Adjusted EBITDAR |
$ |
140,879 |
|
|
|
|
Supplemental information: |
|
|
|
|
|
Cash interest payments on recourse and HUD debt |
$ |
19,380 |
|
|
$ |
22,449 |
|
Cash payments made to partially owned real estate joint ventures,
net of distributions received |
|
12,700 |
|
|
|
— |
|
Total cash lease payments made pursuant to operating leases and
finance leases |
$ |
93,346 |
|
|
$ |
107,628 |
|
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