EX-99.1 2 ex991.htm ex991.htm
EXHIBIT 99.1
 
 

Sun Healthcare Group, Inc.
 Reports 2009 Fourth-quarter Earnings and Normalized EPS of $0.28
and 2009 Year-end Earnings and Normalized EPS of $1.10

Contact: Investor Inquiries (505) 468-2341
Media Inquiries (505) 468-4582

Irvine, Calif. (March 3, 2010)—Sun Healthcare Group, Inc. (NASDAQ GS: SUNH) today announced its operating results for the fourth quarter and year ended Dec. 31, 2009.

 
Fourth-quarter Results:
 
On a normalized basis, comparing the quarter ended Dec. 31, 2009, to the same period in 2008 (unless otherwise stated):
 
·  
consolidated revenues rose 1.6 percent to $474.1 million;
o  
rates continued to drive revenue growth;
·  
consolidated adjusted EBITDAR increased 3.6 percent to $63.7 million;
o  
adjusted EBITDAR margin improved 20 basis points to 13.4 percent;
·  
consolidated adjusted EBITDA increased 4.9 percent to $45.4 million;
o  
adjusted EBITDA margin improved 30 basis points to 9.6 percent;
·  
diluted earnings per share from continuing operations reported at $0.28, up 7.7 percent;
·  
free cash flow of $4.0 million for the quarter resulted in $54.6 million of free cash flow for the year, an increase of $9.0 million, or 20 percent, year over year;
·  
normalizing items in the fourth quarter consisted of a non-recurring pretax expense of $3.9 million related to prior year self-insurance reserves, $0.5 million of transaction costs related to a hospice acquisition and $0.4 million of restructuring costs, which consisted principally of employee severance payments; and
·  
results included $0.5 million of non-recurring project costs associated with the continued implementation of a clinical/billing platform and labor management system.

 
The company is reaffirming its 2010 guidance issued earlier this year on Jan. 6, 2010. Commenting on the Company’s fourth-quarter results, Richard K. Matros, Sun’s chairman and chief executive officer, remarked, “The story of the quarter is the story of the year. Successful execution of our high acuity strategy drove rate growth, resulting in revenue growth for both the quarter and the year of 1.6 percent and 3.2 percent, respectively, accompanied by strong expense controls, our infrastructure cost reductions, and a favorable labor market. This revenue growth somewhat mitigated the continued softness we have experienced in occupancy and payor mix. I would note that we have managed to achieve consecutive revenue growth in all four quarters of 2009. I have always said that I have great faith in our management team’s ability to execute, as illustrated by a 30 basis point expansion of normalized adjusted EBITDA for the quarter and a 50 basis-point expansion for the year. In an environment that has clearly tested us, our earnings growth of 7.7 percent for the quarter and 18.3 percent for the year was quite respectable. Our ability to convert our operating results into free cash flow continues to be a company strength. Our free cash flow for 2009 was a robust $54.6 million.”

 
 
 
Segment Updates
 
     The year-over-year revenue growth in Sun’s inpatient services business, SunBridge, for the quarter of $9.5 million or 2.3 percent was principally driven by skilled rate growth and census expansion in the Company’s hospice business, SolAmor. SunBridge’s nursing center Medicare rate continued to demonstrate strong acuity growth, as evidenced by Rehab RUG utilization of 90.2 percent and REX utilization of 42.6 percent, resulting in a 2.6 percent increase in Medicare rates, despite a reduction from CMS in those rates effective Oct. 1, 2009. In addition, SunBridge experienced a 1.7 percent increase in managed care rates. SolAmor’s revenues more than doubled, growing from $5.8 million to $11.7 million, due to census expansion derived from an October acquisition, combined with continued same store census growth. On a normalized basis, SolAmor contributed $2.7 million of adjusted EBITDA for the quarter and a margin of 23.4 percent, and for the full year 2009, SolAmor contributed $6.2 million of adjusted EBITDA and a margin of 20.1 percent. On an overall basis, inpatient services’ normalized adjusted EBITDAR remained strong at $72.5 million for the quarter, with a margin of 17.1 percent. For the full year 2009, inpatient services’ normalized adjusted EBITDAR margin was 17.3 percent.
 
     Sun’s rehabilitation therapy services business, SunDance, continued to experience revenue growth of $5.7 million, or 14.2 percent, in the quarter. Adjusted EBITDA margin also expanded in the quarter by 50 basis points, producing a 5.7 percent adjusted EBITDA margin. These results were favorably impacted by the 9.8 percent growth in revenue per contract. SunDance’s adjusted EBITDA margin for the year was 6.5 percent, an increase of 50 basis points.
 
     In line with the medical staffing industry as a whole, Sun’s medical staffing services business, CareerStaff, continues to be impacted negatively by the slow national economy. Revenues from CareerStaff were down compared to revenues in the fourth quarter of 2008. Despite the decline in revenues, CareerStaff experienced an adjusted EBITDA margin of 10.1 percent for the quarter.
 
Looking ahead in 2010, Mr. Matros further stated, “We will continue to focus on short-stay high acuity patients and expect to increase our Rehab Recovery Suites® beds in excess of 35 percent. We have already begun preparing for the implementation by CMS in October of the new Resource Utilization Group categories (RUGS IV) from a strategic, educational and business development perspective. While we acknowledge the challenges posed by RUGS IV, which will determine the Medicare rates we receive for our services, we also recognize the opportunities. Hospice will be our most robust growth segment on a relative basis; however, we expect continued growth in our contract rehabilitation business as well. While our staffing segment will continue to be challenged, we expect it will weather the economic storm and be poised for growth once again.”
 
Conference Call
 
As previously announced, investors and the general public are invited to listen to a conference call with Sun’s senior management on Thursday, March 4, 2010, at 10 a.m. Pacific / 1 p.m. Eastern, to discuss the Company’s earnings for the fourth-quarter and year-end of 2009.

      To listen to the conference call, dial (888) 587-0614 and refer to Sun Healthcare Group. A recording of the call will be available from 4 p.m. Eastern on March 4, 2010, until midnight Eastern on April 5, 2010, by calling (888) 203-1112 and using access code 2394889.

About Sun Healthcare Group, Inc.
 
Sun Healthcare Group, Inc.’s (NASDAQ GS: SUNH) subsidiaries provide nursing, rehabilitative and related specialty healthcare services principally to the senior population in the United States. Sun’s core business is providing inpatient services, primarily through 183 skilled nursing centers, 14 assisted and independent living centers and eight mental health centers. On a consolidated basis, Sun has annual revenues of more than $1.8 billion and approximately 30,000 employees in 46 states. At Dec. 31, 2009,  SunBridge centers had 23,205 licensed beds located in 25 states, of which 22,423 were available for occupancy. Sun also provides rehabilitation therapy services to affiliated and non-affiliated centers through


 
 
 

its SunDance subsidiary, medical staffing services through its CareerStaff Unlimited subsidiary and hospice services through its SolAmor subsidiary.

 
Forward-Looking Statement
 
     Statements made in this release that are not historical facts are "forward-looking" statements (as defined in the Private Securities Litigation Reform Act of 1995) that involve risks and uncertainties and are subject to change at any time. These forward-looking statements may include, but are not limited to, statements containing words such as "anticipate," "believe," "plan," "estimate,” "expect,” "hope,” "intend,” "may” and similar expressions. Examples of forward-looking statements include all statements regarding our expected future financial position and results of operations, business strategy,  the impact of reductions in reimbursements and other changes in government reimbursement programs, growth opportunities and plans and objectives of management for future operations. Factors that could cause actual results to differ are identified in the public filings made by the company with the Securities and Exchange Commission and include changes in Medicare and Medicaid reimbursements; the impact that any healthcare reform legislation will have on our business; our ability to maintain the occupancy rates and payor mix at our healthcare centers; potential liability for losses not covered by, or in excess of, our insurance; the effects of government regulations and investigations; the significant amount of our indebtedness, covenants in our debt agreements that may restrict our activities and our ability to make acquisitions, to incur more indebtedness and to refinance indebtedness on favorable terms; the impact of the current economic downturn on our business; increasing labor costs and the shortage of qualified healthcare personnel; and our ability to receive increases in reimbursement rates from government payors to cover increased costs. More information on factors that could affect our business and financial results are included in our public filings made with the Securities and Exchange Commission, including our Annual Report on Forms 10-K and 10-K/A and Quarterly Reports on Form 10-Q and 10-Q/A, copies of which are available on Sun’s web site, www.sunh.com. There may be additional risks of which we are presently unaware or that we currently deem immaterial.
     The forward-looking statements involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond our control. We caution investors that any forward-looking statements made by Sun are not guarantees of future performance  and are only made as of the date of this release. We disclaim any obligation to update any such factors or to announce publicly the results of any revisions to any of the forward-looking statements to reflect future events or developments.
     EBITDA and EBITDAR and adjusted EBITDA and adjusted EBITDAR as used in this press release and in the accompanying tables, which are non-GAAP financial measures, are each reconciled to net income (loss) in the accompanying tables. In addition, the normalizing adjustments to EBITDA, adjusted EBITDA, EBITDAR, adjusted EBITDAR, pre-tax income and income from continuing operations discussed in this press release and shown in the accompanying tables are non-GAAP adjustments.
     Any documents filed by Sun with the SEC may be obtained free of charge at the SEC’s web site at www.sec.gov. In addition, investors and stockholders of Sun may obtain free copies of the documents filed with the SEC by contacting Sun’s investor relations department at (505) 468-2341 (TDD users, please call (505) 468-4458) or by sending a written request to Investor Relations, Sun Healthcare Group, Inc. 101 Sun Avenue N.E., Albuquerque, N.M. 87109. You may also read and copy any reports, statements and other information filed by Sun with the SEC at the SEC public reference room at Room 1580, 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at (800) SEC-0330 or visit the SEC’s web site for further information.


 
 
 

SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
             
KEY INCOME STATEMENT FIGURES
CONSOLIDATED
(in thousands, except per share data)
             
   
For the
    
For the
  
   
Three Months Ended
    
Three Months Ended
  
   
December 31, 2009
    
December 31, 2008
  
             
             
Revenue
   $ 474,064     $ 466,796  
                 
Depreciation and amortization
     12,128       10,801  
                 
Interest expense, net
     11,905       13,459  
                 
Pre-tax income
     16,499       16,360  
                 
Income tax expense (benefit)
     6,821       (67,466 )
                 
Income from continuing operations
     9,678       83,826  
                 
Loss from discontinued operations
     (1,003 )     (1,405 )
                 
Net income
   $ 8,675     $ 82,421  
                 
                 
Diluted earnings per share
   $ 0.20     $ 1.88  
                 
                 
                 
Adjusted EBITDAR
   $ 59,340     $ 57,996  
Margin - Adjusted EBITDAR
     12.5 %     12.4 %
                 
Adjusted EBITDAR normalized
   $ 63,745     $ 61,546  
Margin - Adjusted EBITDAR normalized
     13.4 %     13.2 %
                 
                 
                 
                 
Adjusted EBITDA
   $ 40,964     $ 39,719  
Margin - Adjusted EBITDA
     8.6 %     8.5 %
                 
Adjusted EBITDA normalized
   $ 45,369     $ 43,269  
Margin - Adjusted EBITDA normalized
     9.6 %     9.3 %
                 
                 
                 
                 
Pre-tax income continuing operations - normalized
   $ 21,336     $ 19,010  
                 
Income tax expense - normalized
   $ 8,804     $ 7,606  
                 
Income from continuing operations normalized
   $ 12,532     $ 11,404  
                 
Diluted earnings per share - normalized
   $ 0.28     $ 0.26  
                 
Net income - normalized
   $ 11,842     $ 10,449  
                 
Diluted earnings per share - normalized
   $ 0.27     $ 0.24  
                 
                 
                 
See definitions of Adjusted EBITDA and Adjusted EBITDAR in the table "Reconciliation of Net Income to Adjusted
  
     EBITDA and Adjusted EBITDAR".
                
See normalizing adjustments in the table "Normalizing Adjustments - Quarter Comparison".
  
                 



 
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SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
             
KEY INCOME STATEMENT FIGURES
CONSOLIDATED
(in thousands, except per share data)
             
   
For the
    
For the
  
   
Year Ended
    
Year Ended
  
   
December 31, 2009
    
December 31, 2008
  
             
             
Revenue
   $ 1,881,799     $ 1,823,503  
                 
Depreciation and amortization
     45,463       40,354  
                 
Interest expense, net
     49,327       54,603  
                 
Pre-tax income
     72,096       66,576  
                 
Income tax expense (benefit)
     29,616       (47,348 )
                 
Income from continuing operations
     42,480       113,924  
                 
Loss from discontinued operations
     (3,809 )     (4,637 )
                 
Net income
   $ 38,671     $ 109,287  
                 
                 
Diluted earnings per share
   $ 0.88     $ 2.49  
                 
                 
                 
Adjusted EBITDAR
   $ 241,381     $ 234,158  
Margin - Adjusted EBITDAR
     12.8 %     12.8 %
                 
Adjusted EBITDAR normalized
   $ 250,086     $ 236,527  
Margin - Adjusted EBITDAR normalized
     13.3 %     13.0 %
                 
                 
                 
                 
Adjusted EBITDA
   $ 168,232     $ 160,557  
Margin - Adjusted EBITDA
     8.9 %     8.8 %
                 
Adjusted EBITDA normalized
   $ 176,937     $ 162,926  
Margin - Adjusted EBITDA normalized
     9.4 %     8.9 %
                 
                 
                 
                 
Pre-tax income continuing operations - normalized
   $ 82,105     $ 68,045  
                 
Income tax expense - normalized
   $ 33,720     $ 27,252  
                 
Income from continuing operations normalized
   $ 48,385     $ 40,793  
                 
Diluted earnings per share - normalized
   $ 1.10     $ 0.93  
                 
Net income - normalized
   $ 45,237     $ 36,384  
                 
Diluted earnings per share - normalized
   $ 1.03     $ 0.83  
                 
                 
                 
See definitions of Adjusted EBITDA and Adjusted EBITDAR in the table "Reconciliation of Net Income to Adjusted
  
     EBITDA and Adjusted EBITDAR".
                
See normalizing adjustments in the table "Normalizing Adjustments - Quarter Comparison".
  


 
2 of 16
 

SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
             
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
             
             
   
December 31, 2009
    
December 31, 2008
  
   
(audited)
    
(audited)
  
ASSETS
            
             
Current assets:
            
Cash and cash equivalents
   $ 104,483     $ 92,153  
Restricted cash
     24,034       34,676  
Accounts receivable, net
     220,319       205,620  
Prepaid expenses and other assets
     21,757       21,456  
Assets held for sale
     -       3,654  
Deferred tax assets
     68,415       57,261  
                 
 Total current assets
     439,008       414,820  
                 
Property and equipment, net
     622,682       603,645  
Intangible assets, net
     53,931       54,388  
Goodwill
     338,296       326,808  
Restricted cash, non-current
     3,317       3,303  
Deferred tax assets
     108,999       134,807  
Other assets
     4,961       5,563  
 
                
Total assets
   $ 1,571,194     $ 1,543,334  
                 
                 
LIABILITIES AND STOCKHOLDERS' EQUITY
                
                 
Current liabilities:
                
Accounts payable
   $ 57,109     $ 62,000  
Accrued compensation and benefits
     58,953       60,660  
Accrued self-insurance obligations, current
     45,661       45,293  
Other accrued liabilities
     55,265       56,857  
Current portion of long-term debt and capital lease obligations
     46,416       17,865  
                 
Total current liabilities
     263,404       242,675  
                 
Accrued self-insurance obligations, net of current portion
     121,948       114,557  
Long-term debt and capital lease obligations, net of current portion
     654,132       707,976  
Unfavorable lease obligations, net
     12,663       15,514  
Other long-term liabilities
     69,983       58,903  
                 
Total liabilities
     1,122,130       1,139,625  
                 
                 
Stockholders' equity:
                
Preferred stock of $.01 par value, authorized 10,000,000 shares,
      no shares were issued and outstanding as of
     December 31, 2009 and 2008
     -       -  
Common stock of $.01 par value, authorized 125,000,000 shares,
      43,764,240 and 43,544,765 shares issued and outstanding
      as of December 31, 2009 and 2008, respectively
     438       435  
Additional paid-in capital
     655,667       650,543  
Accumulated deficit
     (204,012 )     (242,683 )
Accumulated other comprehensive loss, net
     (3,029 )     (4,586 )
      449,064       403,709  
Total liabilities and stockholders' equity
   $ 1,571,194     $ 1,543,334  


 
3 of 16
 

SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
             
CONSOLIDATED
INCOME STATEMENTS
(in thousands, except per share data)
             
   
For the
    
For the
  
    Three Months Ended   Three Months Ended
   
December 31, 2009
    
December 31, 2008
  
   
(unaudited)
    
(unaudited)
  
             
Total net revenues
   $ 474,064     $ 466,796  
Costs and expenses:
                
Operating salaries and benefits
     266,842       262,764  
Self-insurance for workers' compensation and
      general and professional liability insurance
     18,125       18,708  
Operating administrative costs
     12,693       13,498  
Other operating costs
     97,456       93,440  
Center rent expense
     18,376       18,277  
General and administrative expenses
     14,011       15,774  
Depreciation and amortization
     12,128       10,801  
Provision for losses on accounts receivable
     5,597       4,616  
Interest, net of interest income of $74 and $328, respectively
     11,905       13,459  
Gain on sale of assets, net
     -       (901 )
Restructuring costs
     432       -  
Total costs and expenses
     457,565       450,436  
                 
Income before income taxes and discontinued operations
     16,499       16,360  
Income tax expense (benefit)
     6,821       (67,466 )
Income from continuing operations
     9,678       83,826  
                 
Discontinued operations:
                
Loss from discontinued operations, net of related taxes
     (1,004 )     (927 )
Gain (loss) on disposal of discontinued operations, net of related taxes
   1       (478 )
Loss from discontinued operations, net
     (1,003 )     (1,405 )
                 
Net income
   $ 8,675     $ 82,421  
                 
                 
Basic income per common and common equivalent share:
                
Income from continuing operations
   $ 0.22     $ 1.92  
Loss from discontinued operations, net
     (0.02 )     (0.03 )
Net income
   $ 0.20     $ 1.89  
                 
Diluted income per common and common equivalent share:
                
Income from continuing operations
   $ 0.22     $ 1.91  
Loss from discontinued operations, net
     (0.02 )     (0.03 )
Net Income
   $ 0.20     $ 1.88  
                 
Weighted average number of common and
   common equivalent shares outstanding:
          
Basic
     43,944       43,602  
Diluted
     44,062       43,873  


 
4 of 16
 

SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
             
CONSOLIDATED
INCOME STATEMENTS
(in thousands, except per share data)
             
   
For the
    
For the
  
   
Year Ended
    
Year Ended
  
   
December 31, 2009
    
December 31, 2008
  
   
(audited)
    
(audited)
  
             
Total net revenues
   $ 1,881,799     $ 1,823,503  
Costs and expenses:
                
Operating salaries and benefits
     1,057,645       1,028,987  
Self-insurance for workers' compensation and
      general and professional liability insurance
     63,752       59,694  
Operating administrative costs
     50,924       51,171  
Other operating costs
     384,832       373,084  
Center rent expense
     73,149       73,601  
General and administrative expenses
     62,068       62,302  
Depreciation and amortization
     45,463       40,354  
Provision for losses on accounts receivable
     21,197       14,107  
Interest, net of interest income of $383 and $1,781, respectively
     49,327       54,603  
Loss (gain) on sale of assets, net
     42       (976 )
Restructuring costs
     1,304       -  
Total costs and expenses
     1,809,703       1,756,927  
                 
Income before income taxes and discontinued operations
     72,096       66,576  
Income tax expense (benefit)
     29,616       (47,348 )
Income from continuing operations
     42,480       113,924  
                 
Discontinued operations:
                
Loss from discontinued operations, net of related taxes
     (3,476 )     (1,636 )
Loss on disposal of discontinued operations, net of related taxes
     (333 )     (3,001 )
Loss from discontinued operations, net
     (3,809 )     (4,637 )
                 
Net income
   $ 38,671     $ 109,287  
                 
                 
Basic income per common and common equivalent share:
                
Income from continuing operations
   $ 0.97     $ 2.63  
Loss from discontinued operations, net
     (0.09 )     (0.11 )
Net income
   $ 0.88     $ 2.52  
                 
Diluted income per common and common equivalent share:
                
Income from continuing operations
   $ 0.97     $ 2.59  
Loss from discontinued operations, net
     (0.09 )     (0.10 )
Net Income
   $ 0.88     $ 2.49  
                 
Weighted average number of common and
   common equivalent shares outstanding:
          
Basic
     43,841       43,331  
Diluted
     43,963       43,963  


 
5 of 16
 

SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
             
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
             
   
For the
    
For the
  
   
Three Months Ended
    
Three Months Ended
  
   
December 31, 2009
    
December 31, 2008
  
   
(unaudited)
    
(unaudited)
  
             
Cash flows from operating activities:
            
Net income
   $ 8,674     $ 82,421  
Adjustments to reconcile net income to net cash provided by
          
      operating activities, including discontinued operations:
                
Depreciation and amortization
     12,128       10,812  
Amortization of favorable and unfavorable lease intangibles
     (474 )     (436 )
Provision for losses on accounts receivable
     5,597       5,312  
Gain on sale of assets, including discontinued operations, net
     (2 )     (104 )
Stock-based compensation expense
     1,425       1,532  
Deferred taxes
     8,984       (64,675 )
Other
     -       (22 )
Changes in operating assets and liabilities, net of acquisitions:
          
Accounts receivable
     (12,959 )     (17,335 )
Restricted cash
     1,817       (1,227 )
Prepaid expenses and other assets
     2,795       1,487  
Accounts payable
     3,433       11,145  
Accrued compensation and benefits
     (7,916 )     (1,238 )
Accrued self-insurance obligations
     6,504       8,179  
Income taxes payable
     -       (2,782 )
Other accrued liabilities
     (11,721 )     (9,397 )
Other long-term liabilities
     (1,400 )     2,019  
Net cash provided by operating activities
     16,885       25,691  
                 
Cash flows from investing activities:
                
Capital expenditures
     (12,854 )     (14,011 )
Proceeds from sale of assets held for sale
     -       4,557  
Acquisitions, net of cash acquired
     (14,936 )     (2,326 )
Net cash used for investing activities
     (27,790 )     (11,780 )
                 
Cash flows from financing activities:
                
Principal repayments of long-term debt and capital lease obligations
 (2,043 )     (2,207 )
Distribution to non-controlling interest
     -       (65 )
Proceeds from issuance of common stock
     26       81  
Net cash used for financing activities
     (2,017 )     (2,191 )
                 
Net (decrease) increase in cash and cash equivalents
     (12,922 )     11,720  
Cash and cash equivalents at beginning of period
     117,405       80,433  
Cash and cash equivalents at end of period
   $ 104,483     $ 92,153  
                 


 
6 of 16
 

SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
             
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
             
   
For the
    
For the
  
   
Year Ended
    
Year Ended
  
   
December 31, 2009
    
December 31, 2008
  
   
(audited)
    
(audited)
  
             
Cash flows from operating activities:
            
Net income
   $ 38,671     $ 109,287  
Adjustments to reconcile net income to net cash provided by
          
 operating activities, including discontinued operations:
                
Depreciation and amortization
     45,465       40,614  
Amortization of favorable and unfavorable lease intangibles
     (1,824 )     (1,879 )
Provision for losses on accounts receivable
     21,196       15,283  
Loss on sale of assets, including discontinued operations, net
     605       2,151  
Impairment charge for discontinued operation
     -       1,800  
Stock-based compensation expense
     5,810       5,270  
Deferred taxes
     27,003       (51,128 )
Other
     -       (10 )
Changes in operating assets and liabilities, net of acquisitions:
          
Accounts receivable
     (33,547 )     (35,136 )
Restricted cash
     10,628       3,215  
Prepaid expenses and other assets
     2,940       (4,213 )
Accounts payable
     (8,390 )     4,032  
Accrued compensation and benefits
     (2,989 )     (2,367 )
Accrued self-insurance obligations
     7,759       4,773  
Income taxes payable
     -       (1,806 )
Other accrued liabilities
     (3,196 )     (8,719 )
Other long-term liabilities
     (1,223 )     7,020  
Net cash provided by operating activities
     108,908       88,187  
                 
Cash flows from investing activities:
                
Capital expenditures
     (54,312 )     (42,543 )
Purchase of leased real estate
     (3,275 )     (8,956 )
Proceeds from sale of assets held for sale
     2,174       18,354  
Acquisitions, net of cash acquired
     (14,936 )     (11,734 )
Insurance proceeds received for damaged property
     -       628  
Net cash used for investing activities
     (70,349 )     (44,251 )
                 
Cash flows from financing activities:
                
Borrowings of long-term debt
     20,822       20,290  
Principal repayments of long-term debt and capital lease obligations
 (46,292 )     (29,627 )
Payment to non-controlling interest
     (311 )     (418 )
Distribution to non-controlling interest
     (549 )     (353 )
Proceeds from issuance of common stock
     101       2,493  
Net cash used for financing activities
     (26,229 )     (7,615 )
                 
Net increase in cash and cash equivalents
     12,330       36,321  
Cash and cash equivalents at beginning of period
     92,153       55,832  
Cash and cash equivalents at end of period
   $ 104,483     $ 92,153  
                 


 
7 of 16
 

SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
             
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA and ADJUSTED EBITDAR
(in thousands)
             
   
For the
    
For the
  
   
Three Months Ended
    
Three Months Ended
  
   
December 31, 2009
    
December 31, 2008
  
   
(unaudited)
    
(unaudited)
  
             
 Total net revenues
   $ 474,064     $ 466,796  
                 
 Net income
   $ 8,675     $ 82,421  
                 
                 
 Income from continuing operations
     9,678       83,826  
                 
 Income tax expense (benefit)
     6,821       (67,466 )
                 
 Interest, net
     11,905       13,459  
                 
 Depreciation and amortization
     12,128       10,801  
                 
 EBITDA
   $ 40,532     $ 40,620  
                 
 Gain on sale of assets, net
     -       (901 )
                 
 Restructuring costs
     432       -  
                 
 Adjusted EBITDA
   $ 40,964     $ 39,719  
                 
                 
 Center rent expense
     18,376       18,277  
                 
 Adjusted EBITDAR
   $ 59,340     $ 57,996  
                 


EBITDA is defined as earnings before loss on discontinued operations, income taxes, interest, net, depreciation and amortization.  Adjusted EBITDA is defined as EBITDA before loss (gain) on sale of assets, net, and restructuring costs.  Adjusted EBITDAR is defined as Adjusted EBITDA before facility rent expense.  Adjusted EBITDA and Adjusted EBITDAR are used by management to evaluate financial performance and resource allocation for each entity within the operating units and for the Company as a whole.  Adjusted EBITDA and Adjusted EBITDAR are commonly used as analytical indicators within the healthcare industry and also serve as measures of leverage capacity and debt service ability. Adjusted EBITDA and Adjusted EBITDAR should not be considered as measures of financial performance under generally accepted accounting principles.  As the items excluded from Adjusted EBITDA and Adjusted EBITDAR are significant components in understanding and assessing financial performance, Adjusted EBITDA and Adjusted EBITDAR should not be considered in isolation or as alternatives to net income, cash flows generated by or used in operating, investing or financing activities or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity.  Because Adjusted EBITDA and Adjusted EBITDAR are not measurements determined in accordance with U.S. generally accepted accounting principles and are thus susceptible to varying calculations, Adjusted EBITDA and Adjusted EBITDAR as presented may not be comparable to other similarly titled measures of other companies.


 
8 of 16
 

SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
             
RECONCILIATION OF NET INCOME TO ADJUSTED EBITDA and ADJUSTED EBITDAR
(in thousands)
             
   
For the
    
For the
  
   
Year Ended
    
Year Ended
  
   
December 31, 2009
    
December 31, 2008
  
   
(audited)
    
(audited)
  
             
 Total net revenues
   $ 1,881,799     $ 1,823,503  
                 
 Net income
   $ 38,671     $ 109,287  
                 
                 
 Income from continuing operations
     42,480       113,924  
                 
 Income tax expense (benefit)
     29,616       (47,348 )
                 
 Interest, net
     49,327       54,603  
                 
 Depreciation and amortization
     45,463       40,354  
                 
 EBITDA
   $ 166,886     $ 161,533  
                 
 Gain on sale of assets, net
     42       (976 )
                 
 Restructuring costs
     1,304       -  
                 
 Adjusted EBITDA
   $ 168,232     $ 160,557  
                 
                 
 Center rent expense
     73,149       73,601  
                 
 Adjusted EBITDAR
   $ 241,381     $ 234,158  
                 


EBITDA is defined as earnings before loss on discontinued operations, income taxes, interest, net, depreciation and amortization.  Adjusted EBITDA is defined as EBITDA before loss (gain) on sale of assets, net, and restructuring costs.  Adjusted EBITDAR is defined as Adjusted EBITDA before facility rent expense.  Adjusted EBITDA and Adjusted EBITDAR are used by management to evaluate financial performance and resource allocation for each entity within the operating units and for the Company as a whole.  Adjusted EBITDA and Adjusted EBITDAR are commonly used as analytical indicators within the healthcare industry and also serve as measures of leverage capacity and debt service ability. Adjusted EBITDA and Adjusted EBITDAR should not be considered as measures of financial performance under generally accepted accounting principles.  As the items excluded from Adjusted EBITDA and Adjusted EBITDAR are significant components in understanding and assessing financial performance, Adjusted EBITDA and Adjusted EBITDAR should not be considered in isolation or as alternatives to net income, cash flows generated by or used in operating, investing or financing activities or other financial statement data presented in the consolidated financial statements as indicators of financial performance or liquidity.  Because Adjusted EBITDA and Adjusted EBITDAR are not measurements determined in accordance with U.S. generally accepted accounting principles and are thus susceptible to varying calculations, Adjusted EBITDA and Adjusted EBITDAR as presented may not be comparable to other similarly titled measures of other companies.


 
9 of 16
 

SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
                                     
RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED EBITDA
and ADJUSTED EBITDAR
($ in thousands)
                                     
For the Three Months Ended December 31, 2009
 (unaudited)
                                     
   
Inpatient
Services
    
Rehabilitation
Therapy
Services
    
Medical
Staffing
Services
    
Other &
Corp Seg
    
Elimination
of Affiliated
Revenue
    
Consolidated
  
                                     
Nonaffiliated revenue
   $ 423,465     $ 27,303     $ 23,289     $ 7     $ -     $ 474,064  
                                                 
Affiliated revenue
     -       18,998       262       -       (19,260 )     -  
                                                 
Total revenue
   $ 423,465     $ 46,301     $ 23,551     $ 7     $ (19,260 )   $ 474,064  
                                                 
Income (loss) from continuing operations
 $ 36,010     $ 2,506     $ 2,209     $ (31,047 )   $ -     $ 9,678  
                                                 
Income tax expense
     -       -       -       6,821       -       6,821  
                                                 
Interest, net
     2,881       -       (1 )     9,025       -       11,905  
                                                 
Depreciation and amortization
     11,007       141       179       801       -       12,128  
                                                 
EBITDA
   $ 49,898     $ 2,647     $ 2,387     $ (14,400 )   $ -     $ 40,532  
                                                 
Restructuring costs
     143       -       -       289       -       432  
                                                 
Adjusted EBITDA
   $ 50,041     $ 2,647     $ 2,387     $ (14,111 )   $ -     $ 40,964  
                                                 
                                                 
Center rent expense
     18,025       131       220       -       -       18,376  
                                                 
Adjusted EBITDAR
   $ 68,066     $ 2,778     $ 2,607     $ (14,111 )   $ -     $ 59,340  
                                                 
                                                 
Normalized Adjusted EBITDA
   $ 54,446     $ 2,647     $ 2,387     $ (14,111 )   $ -     $ 45,369  
Normalized Adjusted EBITDAR
   $ 72,471     $ 2,778     $ 2,607     $ (14,111 )   $ -     $ 63,745  
                                                 
                                                 
Adjusted EBITDA margin
     11.8 %     5.7 %     10.1 %                     8.6 %
                                                 
Adjusted EBITDAR margin
     16.1 %     6.0 %     11.1 %                     12.5 %
                                                 
 Normalized Adjusted EBITDA margin
     12.9 %     5.7 %     10.1 %                     9.6 %
                                                 
 Normalized Adjusted EBITDAR margin
     17.1 %     6.0 %     11.1 %                     13.4 %
                                                 
See definitions of Adjusted EBITDA and Adjusted EBITDAR in the table "Reconciliation of Net Income to Adjusted EBITDA and
  
     Adjusted EBITDAR".
                                                
See normalizing adjustments in the table "Normalizing Adjustments - Quarter Comparison".
                  
                                                 


 
10 of 16
 

SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
                                     
RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED EBITDA
and ADJUSTED EBITDAR
($ in thousands)
                                     
For the Year Ended December 31, 2009
 (audited)
                                     
   
Inpatient
Services
    
Rehabilitation
Therapy
Services
    
Medical
Staffing
Services
    
Other &
Corp Seg
    
Elimination
of Affiliated
Revenue
    
Consolidated
  
                                     
Nonaffiliated revenue
   $ 1,675,775     $ 105,366     $ 100,624     $ 34     $ -     $ 1,881,799  
                                                 
Affiliated revenue
     -       74,166       1,930       -       (76,096 )     -  
                                                 
Total revenue
   $ 1,675,775     $ 179,532     $ 102,554     $ 34     $ (76,096 )   $ 1,881,799  
                                                 
Income (loss) from continuing operations
 $ 155,937     $ 11,078     $ 8,610     $ (133,145 )   $ -     $ 42,480  
                                                 
Income tax expense
     -       -       -       29,616       -       29,616  
                                                 
Interest, net
     12,226       (2 )     (2 )     37,105       -       49,327  
                                                 
Depreciation and amortization
     41,335       540       780       2,808       -       45,463  
                                                 
EBITDA
   $ 209,498     $ 11,616     $ 9,388     $ (63,616 )   $ -     $ 166,886  
                                                 
Gain on sale of assets, net
     8       34       -       -       -       42  
                                                 
Restructuring costs
     143       -       -       1,161       -       1,304  
                                                 
Adjusted EBITDA
   $ 209,649     $ 11,650     $ 9,388     $ (62,455 )   $ -     $ 168,232  
                                                 
                                                 
Center rent expense
     71,749       480       920       -       -       73,149  
                                                 
Adjusted EBITDAR
   $ 281,398     $ 12,130     $ 10,308     $ (62,455 )   $ -     $ 241,381  
                                                 
                                                 
Normalized Adjusted EBITDA
   $ 218,354     $ 11,650     $ 9,388     $ (62,455 )   $ -     $ 176,937  
Normalized Adjusted EBITDAR
   $ 290,103     $ 12,130     $ 10,308     $ (62,455 )   $ -     $ 250,086  
                                                 
                                                 
Adjusted EBITDA margin
     12.5 %     6.5 %     9.2 %                     8.9 %
                                                 
Adjusted EBITDAR margin
     16.8 %     6.8 %     10.1 %                     12.8 %
                                                 
 Normalized Adjusted EBITDA margin
     13.0 %     6.5 %     9.2 %                     9.4 %
                                                 
 Normalized Adjusted EBITDAR margin
     17.3 %     6.8 %     10.1 %                     13.3 %
                                                 
See definitions of Adjusted EBITDA and Adjusted EBITDAR in the table "Reconciliation of Net Income to Adjusted EBITDA and
  
     Adjusted EBITDAR".
                                                
See normalizing adjustments in the table "Normalizing Adjustments - Quarter Comparison".
          
                                                 


 
11 of 16
 

SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
                                     
RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED EBITDA
and ADJUSTED EBITDAR
($ in thousands)
                                     
For the Three Months Ended December 31, 2008
 (unaudited)
                                     
   
Inpatient
Services
    
Rehabilitation
Therapy
Services
    
Medical
Staffing
Services
    
Other &
Corp Seg
    
Elimination
of Affiliated
Revenue
    
Consolidated
  
                                     
Nonaffiliated revenue
   $ 414,008     $ 24,012     $ 28,768     $ 8     $ -     $ 466,796  
                                                 
Affiliated revenue
     -       16,543       467       -       (17,010 )     -  
                                                 
Total revenue
   $ 414,008     $ 40,555     $ 29,235     $ 8     $ (17,010 )   $ 466,796  
                                                 
Income (loss) from continuing operations
 $ 37,290     $ 1,979     $ 2,824     $ 41,733     $ -     $ 83,826  
                                                 
Income tax expense
     -       -       -       (67,466 )     -       (67,466 )
                                                 
Interest, net
     3,540       -       (6 )     9,925       -       13,459  
                                                 
Depreciation and amortization
     9,646       137       195       823       -       10,801  
                                                 
EBITDA
   $ 50,476     $ 2,116     $ 3,013     $ (14,985 )   $ -     $ 40,620  
                                                 
Gain on sale of assets, net
     -       -       -       (901 )     -       (901 )
                                                 
Adjusted EBITDA
   $ 50,476     $ 2,116     $ 3,013     $ (15,886 )   $ -     $ 39,719  
                                                 
                                                 
Center rent expense
     17,926       108       243       -       -       18,277  
                                                 
Adjusted EBITDAR
   $ 68,402     $ 2,224     $ 3,256     $ (15,886 )   $ -     $ 57,996  
                                                 
                                                 
Normalized Adjusted EBITDA
   $ 54,026     $ 2,116     $ 3,013     $ (15,886 )   $ -     $ 43,269  
Normalized Adjusted EBITDAR
   $ 71,952     $ 2,224     $ 3,256     $ (15,886 )   $ -     $ 61,546  
                                                 
                                                 
Adjusted EBITDA margin
     12.2 %     5.2 %     10.3 %                     8.5 %
                                                 
Adjusted EBITDAR margin
     16.5 %     5.5 %     11.1 %                     12.4 %
                                                 
 Normalized Adjusted EBITDA margin
     13.0 %     5.2 %     10.3 %                     9.3 %
                                                 
 Normalized Adjusted EBITDAR margin
     17.4 %     5.5 %     11.1 %                     13.2 %
                                                 
See definitions of Adjusted EBITDA and Adjusted EBITDAR in the table "Reconciliation of Net Income to Adjusted EBITDA and
  
     Adjusted EBITDAR".
                                                
See normalizing adjustments in the table "Normalizing Adjustments - Quarter Comparison".
                  


 
12 of 16
 

SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
                                     
RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED EBITDA
and ADJUSTED EBITDAR
($ in thousands)
                                     
 For the Year Ended December 31, 2008
 (audited)
                                     
   
Inpatient
Services
    
Rehabilitation
Therapy
Services
    
Medical
 Staffing
Services
    
Other &
Corp Seg
    
Elimination
of Affiliated
Revenue
    
Consolidated
  
                                     
Nonaffiliated revenue
   $ 1,616,059     $ 89,619     $ 117,788     $ 37     $ -     $ 1,823,503  
                                                 
Affiliated revenue
     -       60,856       2,622       -       (63,478 )     -  
                                                 
Total revenue
   $ 1,616,059     $ 150,475     $ 120,410     $ 37     $ (63,478 )   $ 1,823,503  
                                                 
Income (loss) from continuing operations
 $ 154,281     $ 8,462     $ 9,690     $ (58,509 )   $ -     $ 113,924  
                                                 
Income tax expense
     -       -       -       (47,348 )     -       (47,348 )
                                                 
Interest, net
     13,670       (1 )     (20 )     40,954       -       54,603  
                                                 
Depreciation and amortization
     35,957       533       806       3,058       -       40,354  
                                                 
EBITDA
   $ 203,908     $ 8,994     $ 10,476     $ (61,845 )   $ -     $ 161,533  
                                                 
Gain on sale of assets, net
     -       -       -       (976 )     -       (976 )
                                                 
Adjusted EBITDA
   $ 203,908     $ 8,994     $ 10,476     $ (62,821 )   $ -     $ 160,557  
                                                 
                                                 
Center rent expense
     72,231       394       976       -       -       73,601  
                                                 
Adjusted EBITDAR
   $ 276,139     $ 9,388     $ 11,452     $ (62,821 )   $ -     $ 234,158  
                                                 
                                                 
Normalized Adjusted EBITDA
   $ 205,755     $ 8,994     $ 10,476     $ (62,299 )   $ -     $ 162,926  
Normalized Adjusted EBITDAR
   $ 277,986     $ 9,388     $ 11,452     $ (62,299 )   $ -     $ 236,527  
                                                 
                                                 
Adjusted EBITDA margin
     12.6 %     6.0 %     8.7 %                     8.8 %
                                                 
Adjusted EBITDAR margin
     17.1 %     6.2 %     9.5 %                     12.8 %
                                                 
 Normalized Adjusted EBITDA margin
     12.7 %     6.0 %     8.7 %                     8.9 %
                                                 
 Normalized Adjusted EBITDAR margin
     17.2 %     6.2 %     9.5 %                     13.0 %
                                                 
See definitions of Adjusted EBITDA and Adjusted EBITDAR in the table "Reconciliation of Net Income to Adjusted EBITDA and
  
     Adjusted EBITDAR".
                                                
See normalizing adjustments in the table "Normalizing Adjustments - Quarter Comparison".
                  


 
13 of 16
 

Sun Healthcare Group, Inc. and Subsidiaries
Selected Operating Statistics
Continuing Operations
                         
 
For the
    
For the
    
 
Three Months Ended
    
Year Ended
    
 
December 31,
    
December 31,
    
 
2009
    
2008
    
2009
    
2008
    
Consolidated Company
                        
                         
Revenues - Non-affiliated (in thousands)
                      
Inpatient Services
 $      423,465
    
 $      414,008
    
       1,675,775
    
      1,616,059
    
Rehabilitation Therapy Services
           27,303
    
           24,012
    
          105,366
    
           89,619
    
Medical Staffing Services
           23,289
    
           28,768
    
          100,624
    
         117,788
    
Other - non-core businesses
                    7
    
                    8
    
                   34
    
                  37
    
Total
 $      474,064
    
 $      466,796
    
 $    1,881,799
    
 $   1,823,503
    
                         
                         
Revenue Mix - Non-affiliated (in thousands)
                      
Medicare
 $      137,748
29%
  
 $      136,305
29%
  
          555,593
30%
  
         522,555
29%
  
Medicaid
         194,035
41%
  
         186,478
40%
  
          753,393
40%
  
         729,014
40%
  
Private and Other
         112,702
24%
  
         116,177
25%
  
          454,126
24%
  
         465,099
25%
  
Managed Care / Insurance
           25,004
5%
  
           23,799
5%
  
          101,595
5%
  
           91,691
5%
  
Veterans
             4,575
1%
  
             4,037
1%
  
            17,092
1%
  
           15,144
1%
  
Total
 $      474,064
100%
  
 $      466,796
100%
  
 $    1,881,799
100%
  
 $   1,823,503
100%
  
                         
                         
                         
Inpatient Services Stats
                        
                         
Number of centers:
                205
    
                205
    
                 205
    
                205
    
Number of available beds:
           22,473
    
           22,517
    
            22,473
    
           22,517
    
Occupancy %:
87.8%
    
88.5%
    
88.1%
    
88.9%
    
                         
                         
Payor Mix % based on patient days:
                    
Medicare - SNF Beds
14.9%
    
15.6%
    
15.6%
    
16.2%
    
Managed care / Ins. - SNF Beds
4.0%
    
3.9%
    
4.1%
    
3.9%
    
    Total SNF skilled mix
18.9%
    
19.5%
    
19.7%
    
20.1%
    
                         
Medicare
13.5%
    
14.2%
    
14.2%
    
14.7%
    
Medicaid
61.7%
    
60.2%
    
60.8%
    
59.7%
    
Private and Other
20.0%
    
21.0%
    
20.2%
    
21.1%
    
Managed Care / Insurance
3.7%
    
3.6%
    
3.8%
    
3.5%
    
Veterans
1.1%
    
1.0%
    
1.0%
    
1.0%
    
                         
Revenue Mix % of revenues:
                        
Medicare - SNF Beds
31.1%
    
32.5%
    
32.4%
    
32.4%
    
Managed care / Ins. - SNF Beds
6.3%
    
6.1%
    
6.4%
    
6.0%
    
    Total SNF skilled mix
37.4%
    
38.6%
    
38.8%
    
38.4%
    
                         
Medicare
31.5%
    
32.0%
    
32.2%
    
31.6%
    
Medicaid
45.8%
    
45.0%
    
44.9%
    
45.1%
    
Private and Other
15.8%
    
16.3%
    
15.9%
    
16.8%
    
Managed Care / Insurance
5.8%
    
5.7%
    
6.0%
    
5.6%
    
Veterans
1.1%
    
1.0%
    
1.0%
    
0.9%
    
                         
                         
Revenues PPD:
                        
LTC only Medicare (Part A)
 $        457.75
    
 $        446.00
    
 $         455.00
    
 $        424.19
    
Medicare Blended Rate (Part A & B)
 $        494.00
    
 $        482.06
    
 $         492.36
    
 $        456.00
    
Medicaid
 $        173.57
    
 $        168.79
    
 $         171.55
    
 $        166.62
    
Private and Other
 $        178.17
    
 $        170.24
    
 $         176.40
    
 $        170.49
    
Managed Care / Insurance
 $        370.11
    
 $        363.95
    
 $         372.93
    
 $        351.93
    
Veterans
 $        235.19
    
 $        223.76
    
 $         231.33
    
 $        216.85
    
                         
                         
Rehab contracts
                        
                         
Affiliated
                127
    
                118
    
                 127
    
                118
    
Non-affiliated
                337
    
                327
    
                 337
    
                327
    
                         
Average Qtrly Revenue per Contract
 $             100
    
 $               91
    
 $                97
    
 $               85
    
(in thousands)
                        


 
14 of 16
 

SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
                             
NORMALIZING ADJUSTMENTS - QUARTER COMPARISON
(in thousands, except per share data)
                             
                             
   
 AS REPORTED - 4th QUARTER 2009
   
 
 
Revenue
  
 
Adjusted
EBITDAR
 
Adjusted
EBITDA
 
 
Pre-tax
  
Income from
Continuing
Operations
 
 
Disc Ops
 
 
Net Income
                             
As Reported 4th QUARTER 2009
  
$  474,064
  
 $    59,340
  
 $    40,964
  
$  16,499
  
$            9,678
  
$     (1,003)
  
$         8,675
Percent of Revenue
      
12.5%
  
8.6%
  
3.5%
  
2.0%
  
-0.2%
  
1.8%
                             
Normalizing Adjustments:
                            
Restructuring costs
  
                -
  
                -
  
                -
  
           432
  
                  255
  
                -
  
                255
Transaction costs related to acquisition
  
                -
  
              485
  
              485
  
           485
  
                  286
  
                -
  
                286
Prior periods' self-insurance costs
  
                -
  
           3,920
  
           3,920
  
        3,920
  
               2,313
  
              313
  
             2,626
                             
Normalized As Reported - 4th QUARTER 2009
$  474,064
  
 $    63,745
  
 $    45,369
  
$  21,336
  
$         12,532
  
$         (690)
  
$       11,842
Percent of Revenue
      
13.4%
  
9.6%
  
4.5%
  
2.6%
  
-0.1%
  
2.5%
                             
 As Reported
                  
 $              0.22
  
 $        (0.02)
  
 $            0.20
Diluted EPS:                     As Normalized
                  
 $              0.28
 
 $        (0.01)
 
 $            0.27
                             
                             
                             
   
 AS REPORTED - 4th QUARTER 2008
   
 
 
Revenue
  
 
Adjusted
EBITDAR
 
Adjusted
EBITDA
 
 
Pre-tax
  
Income from
Continuing
Operations
 
 
Disc Ops
 
 
Net Income
                             
As Reported - 4th QUARTER 2008
  
$  466,796
  
 $    57,996
  
 $    39,719
  
$  16,360
  
$         83,826
  
$     (1,405)
  
$       82,421
Percent of Revenue
      
12.4%
  
8.5%
  
3.5%
  
18.0%
  
-0.3%
  
17.7%
                             
Normalizing Adjustments:
                            
Benefit for income taxes
  
                -
  
                -
  
                -
  
              -
  
            (74,012)
  
                -
  
         (74,012)
Gain on sale of property
  
                -
  
                -
  
                -
  
          (900)
  
                 (540)
  
                -
  
              (540)
Acquisition integration costs
  
                -
  
           3,550
  
           3,550
  
        3,550
  
               2,130
  
              450
  
             2,580
                             
Normalized As Reported - 4th QUARTER 2008
$  466,796
  
 $    61,546
  
 $    43,269
  
$  19,010
  
$         11,404
  
$         (955)
  
$       10,449
Percent of Revenue
      
13.2%
  
9.3%
  
4.1%
  
2.4%
  
-0.2%
  
2.2%
                             
 As Reported
                  
 $              1.91
  
 $        (0.03)
  
 $            1.88
Diluted EPS:                      As Normalized
                  
 $              0.26
  
 $        (0.02)
  
 $            0.24
                             
                             
                             
                             
                             
See definitions of Adjusted EBITDA and Adjusted EBITDAR in the table "Reconciliation of Net Income to Adjusted EBITDA and Adjusted EBITDAR".
                             
Normalizing adjustments are transactions or adjustments not related to ongoing operations and consists of restructuring costs, transaction costs related to an acquisition, adjustments related to prior periods' self-insurance costs, income from a tax benefit associated with the partial reversal of a valuation allowance on deferred tax assets, gain on sale of a non-core property, and integration costs related to an acquisition.
                             
Since normalizing adjustments are not measurements determined  in accordance with U.S. generally accepted accounting principles and are thus susceptible to varying calculations and interpretations, the information presented herein may not be comparable to other similarly described information of other companies.


 
15 of 16
 

SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
                             
NORMALIZING ADJUSTMENTS - YEAR TO DATE COMPARISON
(in thousands, except per share data)
                             
                             
   
 AS REPORTED -TWELVE MONTHS 2009
   
 
 
Revenue
  
 
Adjusted
EBITDAR
 
Adjusted
EBITDA
 
 
Pre-tax
  
Income from
Continuing
Operations
 
 
Disc Ops
 
 
Net Income
                             
As Reported - Twelve Months 2009
  
$ 1,881,799
  
 $ 241,381
  
 $ 168,232
  
$  72,096
  
$         42,480
  
$     (3,809)
  
$       38,671
Percent of Revenue
      
12.8%
  
8.9%
  
3.8%
  
2.3%
  
-0.2%
  
2.1%
                             
Normalizing Adjustments:
                            
Restructuring costs
  
                  -
  
                -
  
                -
  
        1,304
  
                  769
  
                -
  
                769
Transaction costs related to acquisition
  
                  -
  
              485
  
              485
  
           485
  
                  286
  
                -
  
                286
Prior periods' self-insurance costs
  
                  -
  
           8,220
  
           8,220
  
        8,220
  
               4,850
  
              661
  
             5,511
                             
Normalized As Reported - Twelve Months 2009
$ 1,881,799
  
 $ 250,086
  
 $ 176,937
  
$  82,105
  
$         48,385
  
$     (3,148)
  
$       45,237
Percent of Revenue
      
13.3%
  
9.4%
  
4.4%
  
2.6%
  
-0.2%
  
2.4%
                             
 As Reported
                  
 $              0.97
  
 $        (0.09)
  
 $            0.88
Diluted EPS:                      As Normalized
                  
 $              1.10
  
 $        (0.07)
  
 $            1.03
                             
                             
                             
                             
   
 AS REPORTED - TWELVE MONTHS 2008
   
 
 
Revenue
  
 
Adjusted
EBITDAR
 
Adjusted
EBITDA
 
 
Pre-tax
  
Income from
Continuing
Operations
 
 
Disc Ops
 
 
Net Income
                             
As Reported - Twelve Months 2008
  
$ 1,823,503
  
 $ 234,158
  
 $ 160,557
  
$  66,576
  
$       113,924
  
$     (4,637)
  
$     109,287
Percent of Revenue
      
12.8%
  
8.8%
  
3.7%
  
6.2%
  
-0.3%
  
6.0%
                             
Normalizing Adjustments:
                            
Benefit for income taxes
  
                  -
  
                -
  
                -
  
              -
  
            (74,012)
  
                -
  
         (74,012)
Gain on sale of property
  
                  -
  
                -
  
                -
  
          (900)
  
                 (540)
  
                -
  
              (540)
Release of insurance reserves related to prior periods
                  -
  
         (2,650)
  
         (2,650)
  
       (2,650)
  
              (1,590)
  
            (222)
  
           (1,812)
Prior periods' self-insurance costs
  
                  -
  
           3,550
  
           3,550
  
        3,550
  
               2,130
  
              450
  
             2,580
Acquisition integration costs
  
                  -
  
           1,469
  
           1,469
  
        1,469
  
                  881
  
                -
  
                881
                             
Normalized As Reported - Twelve Months 2008
$ 1,823,503
  
 $ 236,527
  
 $ 162,926
  
$  68,045
  
$         40,793
  
$     (4,409)
  
$       36,384
Percent of Revenue
      
13.0%
  
8.9%
  
3.7%
  
2.2%
  
-0.2%
  
2.0%
                             
                             
 As Reported
                  
 $              2.59
  
 $        (0.10)
  
 $            2.49
Diluted EPS:                      As Normalized
                  
 $              0.93
  
 $        (0.10)
  
 $            0.83
                             
                             
                             
See definitions of Adjusted EBITDA and Adjusted EBITDAR in the table "Reconciliation of Net Income to Adjusted EBITDA and Adjusted EBITDAR".
                             
Normalizing adjustments are transactions or adjustments not related to ongoing operations and consist of restructuring costs, transaction costs related to an acquisition, adjustments related to prior periods' self-insurance costs, income from a tax benefit associated with the partial reversal of a valuation allowance on deferred tax assets, gain on sale of a non-core property, and integration costs related to an acquisition.
                             
Since normalizing adjustments are not measurements determined  in accordance with U.S. generally accepted accounting principles and are thus susceptible to varying calculations and interpretations, the information presented herein may not be comparable to other similarly described information of other companies.

 
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