EX-99.1 2 ex991.htm EXHIBIT 99.1 Exhibit 99.1
EXHIBIT 99.1
 
Sun Healthcare Group, Inc.
Reports First-Quarter Results; Margin Expansion Continues;
Updates Guidance to Reflect Harborside Acquisition

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

      Irvine, Calif. (May 2, 2007) - Sun Healthcare Group, Inc. (NASDAQ GM: SUNH) today announced results for the first quarter ended March 31, 2007.

Consolidated Earnings
     For the quarter ended March 31, 2007, Sun reported total net revenues of $273.6 million and net income of $3.9 million or $0.09 per fully-diluted share, based on 44.0 million weighted-average shares outstanding. For the comparable quarter ended March 31, 2006, total net revenues were $256.8 million and net income was $1.1 million or $0.04 per fully-diluted share, based on 31.2 million weighted-average shares outstanding.

     From continuing operations for the quarter ended March 31, 2007, Sun reported income of $4.4 million or $0.10 per fully-diluted share, as compared to income from continuing operations of $0.8 million or $0.03 per fully-diluted share for the same period in 2006. Sun’s results included approximately $0.1 million of integration costs associated with its acquisition of Harborside Healthcare Corporation, which closed on April 19, 2007. Sun expects to incur further costs over the next several quarters as the operations of Harborside and Sun are integrated.

     Comparing the quarter ended March 31, 2007, to the same period in 2006, Sun reported:
 
·
revenue increased $16.8 million, or 6.5 percent, to $273.6 million from $256.8 million;
 
·
EBITDAR increased $6.4 million, or 30.9 percent, to $27.1 million from $20.7 million;
 
·
EBITDAR margin for 2007 was 9.9 percent compared to 8.1 percent in 2006;
 
·
EBITDA increased $5.4 million, or 74.0 percent, to $12.7 million from $7.3 million;
 
·
EBITDA margin for 2007 was 4.6 percent compared to 2.9 percent in 2006;
 
·
pre-tax income increased $6.6 million to $6.7 million from $0.1 million; and
 
·
income from continuing operations increased $3.6 million to $4.4 million from $0.8 million.

     "I am pleased with the continued strength of our operating results as shown by our first-quarter numbers. For the quarter, we have met the expectations established with our initial 2007 guidance and are encouraged by what we are seeing in the industry environment for the remainder of 2007,” said Richard K. Matros, Sun’s chairman and chief executive officer. “Our acquisition of Harborside last month was completed as planned. We are now in the integration process and look forward to the rest of 2007 as we operate the combined company," Matros continued.

Inpatient Business
     Comparing the quarter ended March 31, 2007, to the same period in 2006, Sun reported:
 
·
revenue increased $13.7 million, or 6.4 percent, to $229.1 million from $215.4 million;
 
·
net segment EBITDAR increased $4.1 million, or 12.6 percent, to $36.6 million from $32.5 million;
 
·
net segment EBITDAR margin for 2007 was 16.0 percent compared to 15.1 percent in 2006;
 
·
net segment EBITDA increased $3.1 million, or 15.9 percent, to $22.5 million from $19.4 million;
 
·
net segment EBITDA margin for 2007 was 9.8 percent compared to 9.0 percent in 2006; and
 
·
net segment income increased $3.1 million, or 22.6 percent, to $16.8 million from $13.7 million.
 
 

    The revenue gain of $13.7 million was primarily attributable to:
 
·
an increase of $4.3 million in commercial revenue driven by higher rates and higher customer base which drove $3.4 million and $0.9 of the increase, respectively;  
 
·
a 7.6 percent increase in our LTC Part A Medicare rates from $338.03 in the first quarter 2006 to $363.87 in the first quarter 2007, or $4.1 million in revenues;
 
·
a 4.2 percent increase in Medicaid rates or $4.2 million in revenue; and
 
·
a $1.1 million increase in Medicare part B revenue.

     "The margin in our core business continued to expand primarily as a result of the increase in the acuity of the patients admitted to our facilities. Although the Medicare census increase was moderate, the increase in our rates was significant, resulting in an 80 basis-point improvement in Medicare revenues as a percent of total revenues. In addition, we are seeing positive movement in our commercial census and rates as well, reflecting the increasing acuity in that population. Those factors, along with an increase in the private pay category, improved our quality mix by 130 basis points. Sun on a stand alone basis has opened 12 short term rehabilitation units with eight more in development. Inclusive of Harborside, Sun has opened 29 short term rehabilitation units with 11 more scheduled to open this year expanding our opportunity to improve mix going forward," said Matros.

Updated 2007 Guidance
     The table below represents full year 2007 guidance for Sun. Sun has updated its 2007 guidance to incorporate the acquisition of Harborside in April 2007. The updated guidance is based on (1) Sun’s previous guidance for 2007 results combined with (2) the anticipated results from the nine months of Harborside operations for 2007. Sun’s updated guidance includes expected realization of approximately $6 million in synergies over the remaining nine months of 2007. Sun expects to realize synergies in the first 12 months after the acquisition of approximately $10 million, and synergies in the first 24 months of approximately $12 million to $15 million.
Guidance
   
Low
 
High
 
Revenue
             
Sun
 
$
1,100.0
  
$
1,110.0
  
Harborside
   
505.0
   
509.0
 
     Total
   
1,605.0
   
1,619.0
 
               
EBITDAR
             
Sun
   
110.0
   
114.0
 
Harborside
   
71.0
   
73.0
 
Synergies
   
6.0
   
6.0
 
     Total
   
187.0
   
193.0
 
               
EBITDA
             
Sun
   
54.0
   
58.0
 
Harborside
   
51.0
   
53.0
 
Synergies
   
6.0
   
6.0
 
     Total
   
111.0
   
117.0
 
               
Depreciation and amortization
   
33.0
   
34.0
 
               
Interest expense, net
   
44.0
   
45.0
 
               
Pre-tax
   
34.0
   
38.0
 
               
Income taxes @ 35%
   
11.9
   
13.3
 
               
Net Income
 
$
22.1
  
$
24.7
  
               
Diluted weighted-average shares
   
44.0
   
44.0
 
               
Diluted earnings per share
 
$
0.50
  
$
0.56
  
               
EBITDAR Margin
   
11.7
%
  
11.9
%
               
EBITDA Margin
   
6.9
%
  
7.2
%
               
 
     As stated above, Sun’s 2007 full-year guidance includes only nine months of impact from the Harborside acquisition. As such, Sun anticipates annual 12 month run rates for depreciation and amortization to be approximately $39 to $41 million and annual 12 month run rates for net interest expense to be approximately $56 to $59 million.
 
 
 
Conference Call 
     Sun’s senior management will hold a conference call to discuss the Company’s 2007 first-quarter operating results on Thursday, May 3, 2007, at 1 p.m. EDT / 10 a.m. PDT. To listen to the conference call, dial (877) 516-8526 and refer to Sun Healthcare Group. A recording of the call will be available from 4 p.m. EDT on May 3, 2007, until midnight EDT on May 10, 2007, by calling (800) 642-1687 and using access code 5416821.

About Sun Healthcare Group, Inc. 
     Sun Healthcare Group, Inc., with executive offices in Irvine, California, owns SunBridge Healthcare Corporation and other affiliated companies that operate long-term and postacute care facilities in many states. In addition, the Sun Healthcare Group family of companies provides therapy through SunDance Rehabilitation Corporation, hospice services through SolAmor Hospice and medical staffing through CareerStaff Unlimited, Inc.  

     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. 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; potential liability for losses not covered by, or in excess of, our insurance; the effects of government regulations and investigations; our ability to generate cash flow sufficient to operate our business and pay interest and other costs of the indebtedness incurred in our acquisition of Harborside Healthcare Corporation; our ability to integrate the operations of Harborside; 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 Form 10-K and Quarterly Reports on Form 10-Q, copies of which are available on Sun’s web site, www.sunh.com.
     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. 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 as used in this press release, and EBITDAM and EBITDARM as used in the accompanying tables, which are non-GAAP financial measures, are each reconciled to net income (loss) in the accompanying tables. In addition, the adjustments to EBITDA, 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
 
 
 
 
 
 
CONDENSED
CONSOLIDATED BALANCE SHEETS
(in thousands)
           
           
   
March 31, 2007
 
December 31, 2006
  
               
ASSETS
              
               
Current assets:
              
Cash and cash equivalents
  
$
99,670
  
$
131,935
  
Restricted cash
    
28,081
   
32,752
 
Accounts receivable, net
    
114,499
   
117,091
 
Assets held for sale
    
4,500
   
7,172
 
Other current assets
    
14,495
   
10,324
 
               
Total current assets
    
261,245
   
299,274
 
               
Property and equipment, net
    
221,324
   
217,544
 
Restricted cash, non-current
    
33,033
   
29,083
 
Goodwill
    
54,605
   
55,092
 
Intangible assets, net
    
12,309
   
13,691
 
Other assets, net
    
7,146
   
6,739
 
 
              
Total assets
  
$
589,662
  
$
621,423
  
               
               
LIABILITIES AND STOCKHOLDERS' EQUITY
              
               
Current liabilities:
              
Accounts payable
  
$
39,090
  
$
43,400
  
Accrued compensation and benefits
    
40,663
   
42,723
 
Accrued self-insurance obligations, current
    
40,281
   
48,689
 
Liabilities held for sale
    
1,826
   
1,672
 
Other accrued liabilities
    
43,278
   
42,535
 
Capital leases, current
    
618
   
494
 
Current portion of long-term debt:
              
Company obligations
    
12,815
   
22,780
 
Clipper partnerships
    
786
   
736
 
               
Total current liabilities
    
179,357
   
203,029
 
               
Accrued self-insurance obligations, net of current
    
89,121
   
81,559
 
Long-term debt, net of current portion:
              
Company obligations
    
81,172
   
100,763
 
Clipper partnerships
    
49,181
   
49,392
 
Other long-term liabilities
    
42,112
   
42,547
 
               
Total liabilities
    
440,943
   
477,290
 
               
Stockholders' equity
    
148,719
   
144,133
 
Total liabilities and stockholders' equity
  
$
589,662
  
$
621,423
  
               
 
1 of 10
 
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
 
 
 
 
 
 
CONSOLIDATED
STATEMENTS OF OPERATIONS
(in thousands, except per share data)
           
   
For the
 
For the
 
 
 
Three Months Ended
 
Three Months Ended
 
 
 
March 31, 2007
 
March 31, 2006
 
 
 
(unaudited)
 
(unaudited)
 
               
Total net revenues
  
$
273,569
  
$
256,756
  
Costs and expenses:
              
Operating salaries and benefits
    
156,426
   
146,920
 
Self-insurance for workers' compensation and
general and professional liability insurance
    
10,564
   
12,672
 
Operating administrative costs
    
7,591
   
7,874
 
Other operating costs
    
56,612
   
55,465
 
Facility rent expense
    
14,379
   
13,390
 
General and administrative expenses
    
12,832
   
11,645
 
Depreciation
    
2,402
   
1,395
 
Amortization
    
1,518
   
1,472
 
Provision for losses on accounts receivable
    
2,440
   
1,448
 
Interest, net
    
2,059
   
4,367
 
Loss on extinguishment of debt, net
    
19
   
-
 
Loss on sale of assets, net
    
7
   
13
 
Total costs and expenses
    
266,849
   
256,661
 
               
Income before income taxes and discontinued operations
    
6,720
   
95
 
Income tax expense (benefit)
    
2,368
   
(727
)
Income from continuing operations
    
4,352
   
822
 
               
Discontinued operations:
              
(Loss) income from discontinued operations, net of related taxes
    
(79
)
  
383
 
Loss on disposal of discontinued operations, net of related taxes
    
(350
)
  
(66
)
(Loss) income from discontinued operations, net
    
(429
)
  
317
 
               
Net income
  
$
3,923
  
$
1,139
  
               
Basic income per common and common equivalent share:
              
Income from continuing operations
  
$
0.10
  
$
0.03
  
(Loss) income from discontinued operations, net
    
(0.01
)
  
0.01
 
Net income
  
$
0.09
  
$
0.04
  
               
Diluted income per common and common equivalent share:
              
Income from continuing operations
  
$
0.10
  
$
0.03
  
(Loss) income from discontinued operations, net
    
(0.01
)
  
0.01
 
Net Income
  
$
0.09
  
$
0.04
  
               
Weighted average number of common and
common equivalent shares outstanding:
              
Basic
    
42,908
   
31,174
 
Diluted
    
44,029
   
31,228
 
 
2 of 10

SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
 
 
 
 
 
 
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
           
   
For the
 
For the
 
 
 
Three Months Ended
 
Three Months Ended
 
 
 
March 31, 2007
 
March 31, 2006
 
 
 
(unaudited)
 
(unaudited)
 
               
Cash flows from operating activities:
              
Net income
  
$
3,923
  
$
1,139
  
Adjustments to reconcile net income to net cash provided by
              
operating activities, including discontinued operations:
              
Depreciation
    
2,434
   
1,613
 
Amortization
    
1,522
   
1,636
 
Amortization of favorable and unfavorable lease intangibles
    
(213
)
  
(379
)
Provision for losses on accounts receivable
    
2,523
   
1,948
 
Loss (gain) on disposal of discontinued operations, net
    
350
   
66
 
Loss (gain) on sale of assets, net
    
7
   
13
 
Restricted stock and stock option compensation
    
750
   
544
 
Other, net
    
2
   
25
 
Changes in operating assets and liabilities, net of acquisitions
    
(9,727
)
  
(13,724
)
Net cash provided by operating activities
    
1,571
   
(7,119
)
               
Cash flows from investing activities:
              
Capital expenditures, net
    
(7,250
)
  
(3,333
)
Proceeds from sale of assets held for sale
    
3,238
   
-
 
Insurance proceeds received
    
-
   
(236
)
Acquisitions, net
    
-
   
838
 
Net cash provided by (used for) investing activities
    
(4,012
)
  
(2,731
)
               
Cash flows from financing activities:
              
Net payments under Revolving Loan Agreement
    
6
   
17,720
 
Long-term debt repayments
    
(29,607
)
  
(7,694
)
Distribution of partnership equity
    
(256
)
  
(123
)
Principal payments under capital lease obligation
    
(540
)
  
-
 
Net proceeds from issuance of common stock from the exercise of
employee stock options
    
573
   
-
 
Net cash provided by financing activities
    
(29,824
)
  
9,903
 
               
Net increase in cash and cash equivalents
    
(32,265
)
  
53
 
Cash and cash equivalents at beginning of period
    
131,935
   
16,641
 
Cash and cash equivalents at end of period
  
$
99,670
  
$
16,694
  
 
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SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
 
 
 
 
 
 
RECONCILIATION OF NET INCOME TO EBITDA(M) and EBITDAR(M)
(in thousands)
           
   
For the
  
For the
  
   
Three Months Ended
  
Three Months Ended
  
   
March 31, 2007
  
March 31, 2006
  
   
(unaudited)
 
(unaudited)
 
               
Total net revenues
 
$
273,569
  
$
256,756
  
               
Net income
 
$
3,923
  
$
1,139
  
               
Income from continuing operations
   
4,352
   
822
 
               
Income tax expense (benefit)
   
2,368
   
(727
)
               
Loss on sale of assets, net
   
7
   
13
 
               
Net segment income
 
$
6,727
  
$
108
  
               
Interest, net
   
2,059
   
4,367
 
               
Depreciation and amortization
   
3,920
   
2,867
 
               
EBITDA
 
$
12,706
  
$
7,342
  
               
Facility rent expense
   
14,379
   
13,390
 
               
EBITDAR
 
$
27,085
  
$
20,732
  
               
Operating administrative costs
   
7,591
   
7,874
 
General and administrative expenses
   
12,832
   
11,645
 
Total operating and general and admin expenses
   
20,423
   
19,519
 
               
EBITDAM
 
$
33,129
  
$
26,861
  
EBITDARM
 
$
47,508
  
$
40,251
  

EBITDA is defined as earnings before income (loss) on discontinued operations, income taxes, loss (gain) on sale of assets, net, loss on asset impairment, restructuring costs, net, loss on contract termination, interest, net, depreciation and amortization. EBITDAM is defined as EBITDA before operating and general and administrative expenses. EBITDAR is defined as EBITDA before facility rent expense. EBITDARM is defined as EBITDAR before operating and general and administrative expenses. EBITDA, EBITDAM, EBITDAR and EBITDARM 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. EBITDA, EBITDAM, EBITDAR and EBITDARM are commonly used as analytical indicators within the healthcare industry and also serve as measures of leverage capacity and debt service ability. EBITDA, EBITDAM, EBITDAR and EBITDARM should not be considered as measures of financial performance under generally accepted accounting principles. As the items excluded from EBITDA, EBITDAM, EBITDAR and EBITDARM are significant components in understanding and assessing financial performance, EBITDA, EBITDAM, EBITDAR and EBITDARM should not be considered in isolation or as alternatives to net income (loss), 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 EBITDA, EBITDAM, EBITDAR and EBITDARM are not measurements determined in accordance with U.S. generally accepted accounting principles and are thus susceptible to varying calculations, EBITDA, EBITDAM, EBITDAR and EBITDARM as presented may not be comparable to other similarly titled measures of other companies.
4 of 10

SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
RECONCILIATION OF NET SEGMENT INCOME (LOSS) TO EBITDA(M) and EBITDAR(M)
($ in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
For the Three Months Ended March 31, 2007
 
(unaudited)
                           
   
Inpatient Services
 
Rehabilitation
Therapy
Services
 
Medical
Staffing
Services
 
Other &
Corp Seg
 
Elimination
of Affiliated
 Revenue
 
Consolidated
 
                                       
Nonaffiliated revenue
  
$
229,135
  
$
20,680
  
$
23,747
  
$
7
  
$
-
  
$
273,569
  
                                       
Affiliated revenue
    
-
   
10,262
   
187
   
-
   
(10,449
)
  
-
 
                                       
Total revenue
    
229,135
   
30,942
   
23,934
   
7
   
(10,449
)
  
273,569
 
                                       
Net segment income (loss)
  
$
16,809
  
$
1,427
  
$
1,413
  
$
(12,922
)
$
-
  
$
6,727
  
                                       
Interest, net
    
2,480
   
10
   
15
   
(446
)
  
-
   
2,059
 
                                       
Depreciation and amortization
    
3,199
   
116
   
169
   
436
   
-
   
3,920
 
                                       
EBITDA
  
$
22,488
  
$
1,553
  
$
1,597
  
$
(12,932
)
$
-
  
$
12,706
  
                                       
Facility rent expense
    
14,130
   
50
   
199
   
-
   
-
   
14,379
 
                                       
EBITDAR
  
$
36,618
  
$
1,603
  
$
1,796
  
$
(12,932
)
$
-
  
$
27,085
  
                                       
Operating and general and
administrative expenses
    
5,306
   
1,257
   
1,026
   
12,834
   
-
   
20,423
 
                                       
EBITDAM
 
$
27,794
  
$
2,810
  
$
2,623
  
$
(98
)
$
-
  
$
33,129
  
EBITDARM
 
$
41,924
  
$
2,860
  
$
2,822
  
$
(98
)
$
-
  
$
47,508
  
                                       
                                       
EBITDA margin
    
9.8
%
  
5.0
%
  
6.7
%
              
4.6
%
                                       
EBITDAM margin
    
12.1
%
  
9.1
%
  
11.0
%
              
12.1
%
                                       
EBITDAR margin
    
16.0
%
  
5.2
%
  
7.5
%
              
9.9
%
                                       
EBITDARM margin
    
18.3
%
  
9.2
%
  
11.8
%
              
17.4
%
 
5 of 10

SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
RECONCILIATION OF NET SEGMENT INCOME (LOSS) TO EBITDA(M) and EBITDAR(M)
  
($ in thousands)
  
 
  
 
  
 
  
 
  
 
  
 
  
 
  
For the Three Months Ended March 31, 2006
 
(unaudited)
 
 
  
 
  
 
                  
   
Inpatient Services
 
Rehabilitation
Therapy
Services
 
Medical
Staffing
Services
 
Other &
Corp Seg
 
Elimination
of Affiliated
Revenue
 
Consolidated
 
                                       
Nonaffiliated revenue
  
$
215,435
  
$
20,000
  
$
21,318
  
$
3
  
$
-
  
$
256,756
  
                                       
Affiliated revenue
    
-
   
9,384
   
129
   
-
   
(9,513
)
  
-
 
                                       
Total revenue
    
215,435
   
29,384
   
21,447
   
3
   
(9,513
)
  
256,756
 
                                       
Net segment income (loss)
  
$
13,732
  
$
(1,550
)
$
972
  
$
(13,046
)
$
-
  
$
108
  
                                       
Interest, net
    
3,433
   
(6
)
  
36
   
904
   
-
   
4,367
 
                                       
Depreciation and amortization
    
2,189
   
89
   
187
   
402
   
-
   
2,867
 
                                       
EBITDA
  
$
19,354
  
$
(1,467
)
$
1,195
  
$
(11,740
)
$
-
  
$
7,342
  
                                       
Facility rent expense
    
13,118
   
58
   
214
   
-
   
-
   
13,390
 
                                       
EBITDAR
  
$
32,472
  
$
(1,409
)
$
1,409
  
$
(11,740
)
$
-
  
$
20,732
  
                                       
Operating and general and
administrative expenses
    
4,309
   
2,667
   
895
   
11,648
   
-
   
19,519
 
                                       
EBITDAM
 
$
23,663
  
$
1,200
  
$
2,090
  
$
(92
)
$
-
  
$
26,861
  
EBITDARM
 
$
36,781
  
$
1,258
  
$
2,304
  
$
(92
)
$
-
  
$
40,251
  
                                       
                                       
EBITDA margin
    
9.0
%
  
-5.0
%
  
5.6
%
              
2.9
%
                                       
EBITDAM margin
    
11.0
%
  
4.1
%
  
9.7
%
              
10.5
%
                                       
EBITDAR margin
    
15.1
%
  
-4.8
%
  
6.6
%
              
8.1
%
                                       
EBITDARM margin
    
17.1
%
  
4.3
%
  
10.7
%
              
15.7
%
 
6 of 10

SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES  
 
 
 
 
 
 
  
 
 
 
 
 
RECONCILIATION OF NET SEGMENT INCOME (LOSS) TO EBITDA AND EBITDAR  
INPATIENT SERVICES ONLY  
($ in thousands)  
 
 
 
 
 
 
  
 
 
 
 
 
For the Three Months Ended March 31, 2007   
(unaudited)  
                        
   
Inpatient
Services
 
Inpatient
Services -
Overhead
 
 Inpatient
Services
before Clipper
 
Clipper (1)
 
Total
Inpatient
 Services
 
                                 
Non affiliated revenues
  
$
229,135
  
$
-
  
$
229,135
  
$
-
  
$
229,135
  
                                 
Net segment income (loss)
  
$
22,436
  
$
(5,157
)
$
17,279
  
$
(470
)
  
16,809
 
                                 
Interest, net
    
1,845
   
-
   
1,845
   
635
   
2,480
 
                                 
Depreciation and amortization
    
2,818
   
-
   
2,818
   
381
   
3,199
 
                                 
EBITDA
  
$
27,099
  
$
(5,157
)
$
21,942
  
$
546
  
$
22,488
  
                                 
Facility rent expense
    
14,555
   
-
   
14,555
   
(425
)
  
14,130
 
                                 
EBITDAR
  
$
41,654
  
$
(5,157
)
$
36,497
  
$
121
  
$
36,618
  
                                 
EBITDA margin
    
11.8
%
        
9.6
%
        
9.8
%
                                 
EBITDAR margin
    
18.2
%
        
15.9
%
        
16.0
%

(1)  
Clipper represents our interest of less than 16 percent in nine entities that are consolidated pursuant to the Financial Accounting Standards Board’s revised Interpretation No. 46 Consolidation of Variable Interest Entities. Sun began consolidating Clipper on July 1, 2004.
 
7 of 10
 

SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES  
 
 
 
 
 
 
  
 
 
 
 
 
RECONCILIATION OF NET SEGMENT INCOME (LOSS) TO EBITDA AND EBITDAR  
INPATIENT SERVICES ONLY  
($ in thousands)  
 
 
 
 
 
 
  
 
 
 
 
 
For the Three Months Ended March 31, 2006   
(unaudited)  
                        
   
Inpatient
 Services
 
Inpatient
Services -
Overhead
 
 Inpatient
Services
before Clipper
 
Clipper (1)
 
Total
Inpatient
Services
  
                                 
Non affiliated revenues
  
$
215,435
  
$
-
  
$
215,435
  
$
-
  
$
215,435
  
                                 
Net segment income (loss)
  
$
18,516
  
$
(4,365
)
$
14,151
  
$
(419
)
$
13,732
  
                                 
Interest, net
    
2,457
   
-
   
2,457
   
976
   
3,433
 
                                 
Depreciation and amortization
    
1,868
   
-
   
1,868
   
321
   
2,189
 
                                 
EBITDA
  
$
22,841
  
$
(4,365
)
$
18,476
  
$
878
  
$
19,354
  
                                 
Facility rent expense
    
13,994
   
-
   
13,994
   
(876
)
$
13,118
  
                                 
EBITDAR
  
$
36,835
  
$
(4,365
)
$
32,470
  
$
2
  
$
32,472
  
                                 
EBITDA margin
    
10.6
%
        
8.6
%
        
9.0
%
                                 
EBITDAR margin
    
17.1
%
        
15.1
%
        
15.1
%

(1)  
Clipper represents our interest of less than 12 percent in nine entities that are consolidated pursuant to the Financial Accounting Standards Board’s revised Interpretation No. 46 Consolidation of Variable Interest Entities. Sun began consolidating Clipper on July 1, 2004.
 
8 of 10


Sun Healthcare Group, Inc. and Subsidiaries
Selected Operating Statistics
Continuing Operations
           
   
For the
  
   
Three Months Ended
  
   
March 31,
  
   
2007
  
2006
  
Number of available beds:
              
Long Term Care
    
14,534
   
14,517
 
Hospitals
    
192
   
192
 
               
Number of facilities:
              
Long Term Care
    
138
    
145
  
Hospitals
    
3
    
3
  
               
Occupancy %:
              
Long Term Care
    
88.1
%
  
88.1
%
Hospitals
    
54.3
%
  
56.9
%
Inpatient Services
    
87.7
%
  
87.7
%
               
Payor Mix % based on patient days - LTC:
              
Medicare - SNF only
    
15.4
%
  
15.3
%
Medicare
    
13.8
%
  
13.8
%
Medicaid
    
59.8
%
  
60.7
%
Private and other
    
23.1
%
  
22.3
%
Commercial Insurance
    
2.3
%
  
2.2
%
Veterans
    
1.0
%
  
1.0
%
               
Payor Mix % based on patient days - Hospitals:
              
Medicare
    
66.8
%
  
68.8
%
Medicaid
    
6.8
%
  
9.7
%
Private and other
    
0.0
%
  
0.2
%
Commercial Insurance
    
26.4
%
  
21.3
%
Veterans
    
0.0
%
  
0.0
%
               
Payor Mix % based on patient days - Inpatient Services:
              
Medicare
    
14.3
%
  
14.2
%
Medicaid
    
59.4
%
  
60.2
%
Private and other
    
22.8
%
  
22.3
%
Commercial Insurance
    
2.5
%
  
2.3
%
Veterans
    
1.0
%
  
1.0
%
               
Revenue Mix % of revenues - LTC:
              
Medicare
    
29.1
%
  
28.3
%
Medicaid
    
47.2
%
  
48.6
%
Private and other
    
18.7
%
  
19.2
%
Commercial Insurance
    
3.9
%
  
2.9
%
Veterans
    
1.1
%
  
1.0
%
               
Revenue Mix % of revenues - Hospitals:
              
Medicare
    
62.6
%
  
73.2
%
Medicaid
    
5.5
%
  
7.7
%
Private and other
    
0.9
%
  
0.7
%
Commercial Insurance
    
31.0
%
  
18.4
%
Veterans
    
0.0
%
  
0.0
%
               
Revenue Mix % of revenues - Inpatient Services:
              
Medicare
    
31.5
%
  
31.3
%
Medicaid
    
44.6
%
  
45.9
%
Private and other
    
17.5
%
  
18.0
%
9 of 10
 
Sun Healthcare Group, Inc. and Subsidiaries
Selected Operating Statistics
Continuing Operations
 
          
   
For the
  
   
Three Months Ended
  
   
March 31,
  
   
2007
  
2006
  
Commercial Insurance
    
5.3
%
  
3.8
%
Veterans
    
1.1
%
  
1.0
%
               
Revenues PPD - LTC:
              
Medicare (Part A)
  
$
363.87
  
$
338.03
  
Medicaid
  
$
147.86
  
$
141.56
  
Private and other
  
$
146.88
  
$
144.19
  
Commercial Insurance
  
$
314.87
  
$
241.67
  
Veterans
  
$
205.75
  
$
184.28
  
               
Revenues PPD - Hospitals:
              
Medicare (Part A)
  
$
1,175.37
  
$
1,222.41
  
Medicaid
  
$
1,036.33
  
$
949.56
  
Private and other
  
$
-
  
$
-
  
Commercial Insurance
  
$
1,503.53
  
$
1,037.83
  
Veterans
  
$
-
  
$
-
  
               
Revenues PPD - Inpatient Services:
              
Medicare (Part A)
  
$
405.10
  
$
380.21
  
Medicaid
  
$
149.31
  
$
142.58
  
Private and other
  
$
146.94
  
$
144.27
  
Commercial Insurance
  
$
415.78
  
$
304.08
  
Veterans
  
$
205.75
  
$
184.28
  
               
Revenues - Non-affiliated (in thousands):
              
Inpatient Services:
              
Medicare
  
$
72,226
  
$
67,336
  
Medicaid
    
102,256
   
98,914
 
Private and other
    
54,653
   
49,185
 
Subtotal
    
229,135
   
215,435
 
               
Rehabilitation Therapy Services
    
20,680
   
20,000
 
Medical Staffing Services
    
23,747
   
21,318
 
Subtotal
    
44,427
   
41,318
 
               
Other - non-core businesses
    
7
   
3
 
Total
  
$
273,569
  
$
256,756
  
               
Rehab contracts:
              
Affiliated - continuing
    
87
   
98
 
Non-affiliated
    
303
   
341
 
               
DSO (Days Sales Outstanding):
              
Inpatient Services - LTC
    
35
   
37
 
Inpatient Services - Hospitals
    
65
   
53
 
Rehabilitation Therapy Services
    
77
   
82
 
Medical Staffing Services
    
55
   
61
 
 
 10 of 10