KENNETT SQUARE, Pa., Nov. 22 /PRNewswire-FirstCall/ -- Genesis HealthCare Corporation (“GHC”) today announced income from continuing operations of $10.8 million, or $0.54 per diluted share, and net income of $10.8 million, or $0.53 per diluted share, for the quarter ended September 30, 2004. For the fiscal year ended September 30, 2004, pro forma income from continuing operations was $31.4 million, or $1.57 per diluted share, which assumes the December 1, 2003 spin-off of GHC from NeighborCare, Inc. (“NCI”) occurred on October 1, 2003. (See attached pro forma financial information on page 13).
Revenues for the quarter ended September 30, 2004 grew 8.5% to $400.5 million from $369.1 million in the comparable period in the prior year. For the fiscal year ended September 30, 2004, revenues grew 10.3% to $1,529.9 million from $1,386.5 million in the prior fiscal year.
EBITDA for the quarter ended September 30, 2004 was $36.7 million, compared to EBITDA of $25.9 million for the comparable period in the prior year. (See attached reconciliation on page 8). Included in EBITDA for the quarter ended September 30, 2004 was the net benefit of the recognition of the New Hampshire provider tax assessment totaling $3.5 million, or $0.11 per diluted share. EBITDA in the quarter ended September 30, 2004 was reduced by $0.4 million, or $0.01 per diluted share, for non-cash charges related to the early extinguishment of debt.
EBITDA and Adjusted EBITDA for the fiscal year ended September 30, 2004 was $125.6 million, compared to EBITDA and Adjusted EBITDA of $99.6 million and $98.4 million, respectively, for the prior fiscal year. (See attached reconciliation on page 8). EBITDA for the fiscal year ended September 30, 2004 was also positively impacted by the net benefit of the New Hampshire provider tax assessment totaling $3.5 million, or $0.11 per diluted share. EBITDA in the fiscal year ended September 30, 2004 was reduced by $1.7 million, or $0.05 per diluted share, for non-cash charges related to the early extinguishment of debt.
While the New Hampshire provider tax assessment was recognized retroactive to May 1, 2003 through September 30, 2004, the net benefit has been recorded in the quarter ended September 30, 2004. The following table details the periods to which the benefit relates:
New Hampshire Provider Tax Assessment ($ in Millions except EPS) Fiscal Fiscal Fourth Total 2003 2004 Quarter 2004 Revenue $10.7 $3.1 $7.6 $1.8 Expense 7.2 1.8 5.4 1.4 EBITDA 3.5 1.3 2.2 0.4 Pre Tax Income 3.5 1.3 2.2 0.4 Net Income 2.1 0.8 1.4 0.3 EPS $0.11 $0.04 $0.07 $0.01 Note: Table may not foot mathematically due to rounding.
The current quarter results were positively impacted by approximately $2.8 million of incremental pre-tax Pennsylvania Medicaid rate adjustments that were retroactive to July 1, 2003. This benefit was partially offset by certain severance costs related to the rehabilitation services segment, an increase in the full year effective tax rate, and an increase in depreciation expense. The retroactive Pennsylvania Medicaid rate adjustments relate ratably to each of the prior five quarters.
“For the third consecutive quarter, overall results exceeded our expectations,” said George V. Hager, Jr., Chairman and Chief Executive Officer. “The first year of our operational improvement plan has produced strong growth in our profit margins, despite softness in our rehabilitation services segment. While the rehabilitation business continued to suffer from therapist shortages, which were amplified during this quarter’s summer vacation season, this decline was offset by the strong performance of our inpatient business.”
Inpatient Services
Inpatient services net revenue of $358.8 million in the quarter ended September 30, 2004 grew from $324.8 million in the comparable period in the prior year. The growth was primarily driven by an increase in Medicare and Medicaid revenues. Medicare rates grew 11.9% to $354 per patient day for the quarter ended September 30, 2004 from $316 per patient day in the comparable period in the prior year. This increase was a result of the October 1, 2003 Medicare rate increases, as well as higher Medicare patient acuity. Medicaid rates grew approximately $12 per patient day, or 7.7%, to $163 per patient day for the quarter ended September 30, 2004 versus the comparable period in the prior year due to approximately $1.60 per patient day from the current quarter impact of the New Hampshire provider tax assessment, and the remaining $10 per patient day principally from scheduled annual Medicaid rate increases and changes in acuity.
Lastly, $8.5 million of revenue growth in the quarter ended September 30, 2004 was attributed to the consolidation of four inpatient centers previously managed by GHC, which were consolidated in financial statements earlier in the year, but are not included in the comparable period in the prior year.
The Company’s progress in its margin expansion initiatives continues to benefit the inpatient services segment. Drug and medical supply costs declined by 15.3% on a per patient day basis in the quarter ended September 30, 2004 versus the comparable period in the prior year. This decrease was driven by the company’s post spin-off pricing contract with NCI and improved utilization and drug management. GHC decreased agency labor costs by 30.4% on a per patient day basis. Professional (RN/LPN) agency utilization represented substantially all of this decline. This improvement was achieved while continuing a commitment to high quality care and without a significant change in overall nursing hours per patient day.
Rehabilitation Services
Rehabilitation services revenues were down slightly to $50.2 million in the quarter ended September 30, 2004 versus $51.3 million in the comparable period in the prior year. EBITDA declined to $0.9 million in the quarter ended September 30, 2004 versus $5.8 million in the comparable period in the prior year. The high demand for therapists in the quarter ended September 30, 2004, amplified by the summer vacation season, led to increased therapist rates, which continued to increase labor costs in the Company’s rehabilitation services segment. The decline in EBITDA was further driven by reduced therapist efficiency in certain markets where the Company does not have significant density of external contract rehabilitation customers. The remainder of the change, approximately $2.0 million in EBITDA, was a result of modifications in pricing to the GHC inpatient services segment that became effective October 1, 2003.
Balance Sheet
GHC generated operating cash flow of $48.2 million in the quarter and $148.4 million in the fiscal year ended September 30, 2004. As a result, the Company repaid $26.2 million of debt in the quarter and has voluntarily repaid nearly $77.7 million of debt since the spin-off, including $15.0 million of debt assumed and repaid subsequent to the date of the spin-off. GHC ended the quarter with $126.1 million in cash and $403.1 million of indebtedness.
Net Days Sales Outstanding (DSO) for the fiscal year 2004 was 40 days, down from 47 days in the comparable period in the prior year.
“Our strong financial and operating performance in fiscal 2004 provides a solid foundation for continued organic growth in 2005,” said James V. McKeon, Chief Financial Officer. “We will continue the focus on our operational improvement plan next year and we expect to continue to use our free cash flow to repay debt to achieve our leverage targets while investing in our facilities and information systems to promote efficiencies.”
Share Repurchase Program
The Board of Directors authorized the repurchase of up to $25.0 million of the Company’s common stock commencing in December 2004. Share repurchases, if any, may take place at management’s discretion and/or under pre-established, non-discretionary programs from time to time, depending on market conditions, in the open market, and in privately negotiated transactions.
“At today’s values, we find that buying back stock is a very attractive use of our cash and is accretive to earnings per share,” said Hager. “Given our solid financial performance and positive cash flow from operations, we have sufficient cash reserves to fund our capital expenditures and the share repurchase program without impacting our leverage, financial flexibility, or our strong liquidity position.”
Basis of Presentation
The accompanying financial information through November 30, 2003 was prepared on a basis which reflects the historical financial information of GHC assuming the operations of NCI contributed in the spin-off were organized as a separate legal entity, owning certain net assets of NCI. Beginning December 1, 2003, the accompanying financial information has been prepared on a basis which reflects the net operations of GHC as a stand alone entity. The allocation methodologies followed in preparing the accompanying financial information prior to the December 1, 2003 spin-off may not necessarily reflect the results of operations, cash flows, or financial position of GHC in the future, or what the results of operations, cash flows or financial position would have been had GHC been a separate stand-alone entity for all periods presented.
Discontinued Operations
GHC accounts for discontinued operations, including assets held for sale, under the provisions of Statement of Financial Accounting Standards, No. 144 “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of” (“SFAS 144"). Under SFAS 144, discontinued businesses including assets held for sale are removed from the results of continuing operations and presented as a separate line on the statement of operations.
Conference Call
Genesis HealthCare Corporation will hold a conference call at 10:00 a.m. EST on Tuesday, November 23, 2004 to discuss the results. Investors can access the conference call by phone at (888) 798-1823 or live via webcast through the GHC web site at http://www.genesishcc.com/, where a replay of the call will also be posted for one year.
About Genesis HealthCare Corporation
Genesis HealthCare Corporation is one of the nation’s largest long term care providers with over 200 skilled nursing centers and assisted living residences in 12 eastern states. Genesis also supplies contract rehabilitation therapy to over 650 healthcare providers in 21 states and the District of Columbia.
Visit our website at http://www.genesishcc.com/.
Statements made in this release, our website and in our other public filings and releases, which are not historical facts contain “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,” “intend,” “may,” “target,” “appears” and similar expressions. Such forward-looking statements include, without limitation, the effect of the spin-off on our operations, expected reimbursement rates, including RUGs changes, agency labor utilization, voluntary debt repayments, share repurchases, provider tax assessments and increases in state Medicaid rates. Factors that could cause actual results to differ materially include, but are not limited to, the following: costs, changes in the reimbursement rates or methods of payment from Medicare or Medicaid, or the implementation of other measures to reduce reimbursement for our services; the nature, timing and amount of provider tax assessments; the expiration of enactments providing for additional government funding; efforts of third party payors to control costs; the impact of federal and state regulations; changes in payor mix and payment methodologies; further consolidation of managed care organizations and other third party payors; competition in our business; an increase in insurance costs and potential liability for losses not covered by, or in excess of, our insurance; competition for and availability of qualified staff in the healthcare industry; our ability to control operating costs, and generate sufficient cash flow to meet operational and financial requirements; changes in interest expense; and an economic downturn or changes in the laws affecting our business in those markets in which we operate.
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 us 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.
GENESIS HEALTHCARE CORPORATION UNAUDITED STATEMENTS OF OPERATIONS THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Three months ended September 30, September 30, 2004 2003 Net revenues $400,458 $369,145 Operating expenses: Salaries, wages and benefits 240,185 220,429 Other operating expenses 116,050 115,227 Loss on early extinguishment of debt 439 - Lease expense 7,128 7,626 Depreciation and amortization expense 11,965 10,076 Interest expense 6,782 4,527 Income before income tax expense, equity in net income (loss) of unconsolidated affiliates and minority interests 17,909 11,260 Income tax expense 7,435 4,392 Income before equity in net income (loss) of unconsolidated affiliates and minority interests 10,474 6,868 Equity in net income (loss) of unconsolidated affiliates 465 (81) Minority interests (133) (307) Income from continuing operations 10,806 6,480 Loss from discontinued operations, net of taxes (35) (4,565) Net income $10,771 $1,915 Per common share data: Basic: Income from continuing operations $0.54 Loss from discontinued operations (0.00) Net income $0.54 Weighted average shares 20,002,548 Diluted: Income from continuing operations $0.54 Loss from discontinued operations (0.00) Net income $0.53 Weighted average shares 20,154,332 GENESIS HEALTHCARE CORPORATION UNAUDITED STATEMENTS OF OPERATIONS TWELVE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Twelve months ended September 30, September 30, 2004 2003 Net revenues $1,529,892 $1,386,486 Operating expenses: Salaries, wages and benefits 942,027 850,610 Other operating expenses 432,175 409,509 Loss (gain) on early extinguishment of debt 1,692 (1,123) Lease expense 28,437 27,920 Depreciation and amortization expense 46,398 38,969 Interest expense 26,985 17,014 Income before income tax expense, equity in net income of unconsolidated affiliates and minority interests 52,178 43,587 Income tax expense 21,360 12,556 Income before equity in net income of unconsolidated affiliates and minority interests 30,818 31,031 Equity in net income of unconsolidated affiliates 2,235 794 Minority interests (462) (307) Income from continuing operations 32,591 31,518 Loss from discontinued operations, net of taxes (3,518) (19,630) Net income $29,073 $11,888 Pro forma per common share data (1): Basic: Income from continuing operations $1.63 Loss from discontinued operations (0.18) Net income $1.46 Weighted average shares 19,947,177 Diluted: Income from continuing operations $1.63 Loss from discontinued operations (0.18) Net income $1.45 Weighted average shares 20,007,503 (1) - The computation of pro forma common share data assumes that the common shares of GHC distributed on December 1, 2003 in connection with the spin-off were outstanding since October 1, 2003. GENESIS HEALTHCARE CORPORATION UNAUDITED STATEMENTS OF OPERATIONS THREE MONTHS ENDED DECEMBER 31, 2003, MARCH 31, 2004, JUNE 30, 2004 AND SEPTEMBER 30, 2004 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Three months ended December March June September 2003 2004 2004 2004 Net revenues $369,395 $381,788 $378,251 $400,458 Operating expenses: Salaries, wages and benefits 226,867 237,707 237,268 240,185 Other operating expenses 105,554 107,481 103,090 116,050 Loss on early extinguishment of debt 173 655 425 439 Lease expense 7,411 6,888 7,010 7,128 Depreciation and amortization expense 11,588 11,489 11,356 11,965 Interest expense 5,821 7,528 6,854 6,782 Income before income tax expense, equity in net income of unconsolidated affiliates and minority interests 11,981 10,040 12,248 17,909 Income tax expense 4,860 4,067 4,998 7,435 Income before equity in net income of unconsolidated affiliates and minority interests 7,121 5,973 7,250 10,474 Equity in net income of unconsolidated affiliates 558 466 746 465 Minority interests (75) (84) (170) (133) Income from continuing operations 7,604 6,355 7,826 10,806 Loss from discontinued operations, net of taxes (1,598) (781) (1,104) (35) Net income $6,006 $5,574 $6,722 $10,771 Per common share data (1): Basic: Income from continuing operations $0.38 $0.32 $0.39 $0.54 Loss from discontinued operations (0.08) (0.04) (0.06) (0.00) Net income $0.30 $0.28 $0.34 $0.54 Weighted average shares 19,898,150 19,923,669 19,963,778 20,002,548 Diluted: Income from continuing operations $0.38 $0.32 $0.39 $0.54 Loss from discontinued operations (0.08) (0.04) (0.06) (0.00) Net income $0.30 $0.28 $0.34 $0.53 Weighted average shares 19,910,300 19,968,492 20,031,427 20,154,332 (1) - The computation of common share data in the three months ended December 31, 2003 was prepared on a pro forma basis assuming that the common shares of GHC distributed on December 1, 2003 in connection with the spin-off were outstanding since October 1, 2003. GENESIS HEALTHCARE CORPORATION RECONCILIATION OF NET INCOME TO EBITDA AND ADJUSTED EBITDA (IN THOUSANDS) Three months Twelve months ended ended September 30, September 30, 2004 2003 2004 2003 Net income $10,771 $1,915 $29,073 $11,888 Add back: Loss from discontinued operations, net of taxes 35 4,565 3,518 19,630 Equity in net (income) loss of unconsolidated affiliates (465) 81 (2,235) (794) Minority interests 133 307 462 307 Income tax expense 7,435 4,392 21,360 12,556 Interest expense 6,782 4,527 26,985 17,014 Depreciation and amortization expense 11,965 10,076 46,398 38,969 EBITDA $36,656 $25,863 $125,561 $99,570 Gain on early extinguishment of debt (1) - - - (1,123) Adjusted EBITDA $36,656 $25,863 $125,561 $98,447 (1)- The gain on early extinguishment of debt recognized in the twelve months ended September 30, 2003 is the result of a negotiated discount on a mortgage loan liquidated by us at the request of the mortgage lender. We excluded this gain from the calculation of Adjusted EBITDA because management does not view such a gain as likely to occur in the foreseeable future, nor have we encountered a similar transaction in recent years. While we often may be interested in extinguishing certain of our mortgage loans by refinancing such loans with senior credit facility borrowings at more favorable rates of interest, because most of these mortgage loans require expensive prepayment penalties, it is often not economically feasible for us to do so. To have a mortgage lender approach GHC to extinguish mortgage debt so that we are able to negotiate favorable extinguishment terms is deemed by management to be an unusual event that is reasonably unlikely to occur within the next two years. The loss on early extinguishment of debt recognized in the three and twelve month periods ended September 30, 2004 are the result of the early extinguishment of mortgage loans and senior credit facility debt, and principally consists of the write-off of unamortized deferred financing fees. We did not exclude these aggregate losses from the calculation of Adjusted EBITDA because GHC has recognized similar losses in recent years and believes it is likely that similar losses will be recognized within the next two years. GENESIS HEALTHCARE CORPORATION UNAUDITED CONDENSED BALANCE SHEETS (IN THOUSANDS) September 30, June 30, 2004 2004 Assets: Current assets: Cash and equivalents $126,071 $115,144 Restricted investments in marketable securities 29,887 30,820 Accounts receivable, net 164,622 175,732 Prepaid expenses and other current assets 33,526 31,193 Assets held for sale 6,267 2,988 Total current assets 360,373 355,877 Property and equipment, net 695,511 697,943 Assets held for sale 2,511 8,724 Restricted investments in marketable securities 65,121 65,345 Other long-term assets 111,704 106,316 Identifiable intangible assets, net 1,722 1,928 Goodwill 7,433 7,116 Total assets $1,244,375 $1,243,249 Liabilities and Shareholders’ Equity: Current liabilities: Current installments of long-term debt $27,230 $4,361 Accounts payable and accrued expenses 150,873 140,135 Current portion of self-insurance liability reserves 29,887 30,820 Total current liabilities 207,990 175,316 Long-term debt 375,841 425,581 Deferred income taxes - 13,496 Self-insurance liability reserves 62,920 64,800 Other long-term liabilities 28,858 28,598 Total shareholders’ equity 568,766 535,458 Total liabilities and shareholders’ equity $1,244,375 $1,243,249 GENESIS HEALTHCARE CORPORATION UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (IN THOUSANDS) Three months ended September 30, 2004 September 30, 2003 Cash flows from operating activities: Net income $10,771 $1,915 Net charges included in operations not requiring funds 29,298 18,025 Changes in assets and liabilities: Accounts receivable 5,839 (8,974) Accounts payable and accrued expenses 9,229 10,619 Other, net (6,906) 3,351 Total adjustments 37,460 23,021 Net cash provided by operating activities 48,231 24,936 Cash flows from investing activities: Capital expenditures (10,153) (5,456) Net sales of restricted marketable securities 964 3,190 Purchase of eldercare centers and lease amendments 335 (5,325) Proceeds from sale of eldercare assets 2,883 (854) Other, net (5,106) (6,928) Net cash used in investing activities (11,077) (15,373) Cash flows from financing activities: Repayment of long-term debt and payment of sinking fund requirements (26,227) (8,976) Net transactions with NCI, prior to the spin-off - 3,329 Net cash used in financing activities (26,227) (5,647) Net increase in cash and equivalents $10,927 $3,916 Cash and equivalents: Beginning of period 115,144 4,875 End of period $126,071 $8,791 GENESIS HEALTHCARE CORPORATION UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS TWELVE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (IN THOUSANDS) Twelve months ended September 30, 2004 September 30, 2003 Cash flows from operating activities: Net income $29,073 $11,888 Net charges included in operations not requiring funds 88,779 66,451 Changes in assets and liabilities: Accounts receivable 4,477 (10,121) Accounts payable and accrued expenses 29,948 (3,296) Other, net (3,881) 3,750 Total adjustments 119,323 56,784 Net cash provided by operating activities 148,396 68,672 Cash flows from investing activities: Capital expenditures (31,183) (30,472) Net purchases of restricted marketable securities (5,297) (4,183) Purchase of eldercare centers and lease amendments (48,641) (5,325) Purchase of rehabilitation services business - (5,923) Proceeds from sale of eldercare assets 17,956 55,123 Other, net (2,535) 3,684 Net cash (used in) provided by investing activities (69,700) 12,904 Cash flows from financing activities: Proceeds from issuance of long-term debt 410,000 - Repayment of long-term debt and payment of sinking fund requirements (306,531) (60,244) Debt issuance costs (9,337) - Net transactions with NCI, prior to the spin-off (55,548) (19,961) Net cash provided by (used in) financing activities (1) 38,584 (80,205) Net increase in cash and equivalents $117,280 $1,371 Cash and equivalents: Beginning of period 8,791 7,420 End of period $126,071 $8,791 (1)- Net cash provided by financing activities includes approximately $400.7 million of net proceeds received in connection with the issuance of GHC’s new financing arrangements, offset by the use of $218.5 million to repay indebtedness of NCI allocated to GHC, $88.0 million of other debt repayments and $55.5 million of cash transferred to NCI in connection with the spin-off. GENESIS HEALTHCARE CORPORATION FINANCIAL HIGHLIGHTS (UNAUDITED) Segment Data Three months ended Twelve months ended (dollars in Sept. 30, Sept. 30, Sept. 30, Sept. 30, thousands) 2004 2003 2004 2003 Inpatient services Revenue (1) $358,783 $324,842 $1,365,502 $1,216,557 EBITDA - $ (1) 51,326 34,652 172,591 120,559 EBITDA - % 14.3% 10.7% 12.6% 9.9% Rehabilitation therapy services (including intersegment amounts) Revenue (1) $50,169 $51,309 $197,078 $202,521 EBITDA - $ (1) 908 5,837 14,193 30,991 EBITDA - % 1.8% 11.4% 7.2% 15.3% Three months ended Twelve months ended Sept. 30, Sept. 30, Sept. 30, Sept. 30, Selected Operating Statistics 2004 2003 2004 2003 Occupancy - Licensed Beds 90.4% 91.4% 90.8% 90.9% Patient Days: Private and other 330,772 331,532 1,324,255 1,294,183 Medicare 259,155 267,645 1,059,971 1,025,348 Medicaid 1,111,812 1,076,775 4,364,200 4,127,525 Total Days 1,701,739 1,675,952 6,748,426 6,447,056 Per Diems (2): Private and other $203.18 $202.66 $202.56 $202.26 Medicare 354.11 316.37 350.04 314.07 Medicaid 163.09 151.37 160.35 148.32 Nursing labor costs per patient day: Employed labor $78.95 $71.61 $77.63 $71.74 Agency labor 4.32 6.21 4.47 6.18 Total $83.27 $77.82 $82.10 $77.92 Inpatient Licensed Beds (end of period) Owned - Skilled Nursing 15,263 - Assisted Living 877 Total Owned 16,140 Leased - Skilled Nursing 4,083 - Assisted Living 557 Total Leased 4,640 Total Owned and Leased (Consolidated) 20,780 Jointly Owned - Skilled Nursing 2,117 - Assisted Living 656 Managed - Skilled Nursing 2,427 - Assisted Living 603 - Transitional Care Units 331 Total Jointly Owned and Managed- (Unconsolidated) 6,134 (1)- The revenue and EBITDA of our operating segments was impacted in the three and twelve months ended September 30, 2004 by a $2.0 million and $7.9 million reduction, respectively, in the pricing extended by our rehabilitation therapy services segment to our inpatient services segment. (2)- Medicaid per diems exclude any retroactive rate increases or adjustments that do not relate to the period presented. GENESIS HEALTHCARE CORPORATION UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma condensed financial statement presented below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operation” in GHC’s annual report on Form 10-K filed on February 4, 2004.
The following unaudited pro forma condensed statement of operations for the twelve months ended September 30, 2004 is presented as if the spin-off of GHC occurred on October 1, 2003.
The unaudited pro forma condensed financial statement is presented for informational purposes only and is not necessarily indicative of what our financial position and results of operations actually would have been for the period presented if the spin-off occurred on October 1, 2003, nor does such financial statement purport to represent the results of future periods. The pro forma adjustments are based upon available information and certain assumptions that we consider reasonable and are described in the notes accompanying the unaudited pro forma condensed financial statement. No changes in operating revenues and expenses have been made to reflect the results of any modifications to operations that might have been made had the spin-off of GHC been completed on the aforesaid effective date for purposes of the pro forma results.
GENESIS HEALTHCARE CORPORATION UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS TWELVE MONTHS ENDED SEPTEMBER 30, 2004 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) Historical Pro Forma GHC Adjustments GHC Net revenues $1,529,892 $- $1,529,892 Expenses: Operating expenses 1,375,894 - 1,375,894 Lease expense 28,437 - 28,437 Depreciation and amortization expense 46,398 88 (1) 46,486 Interest expense 26,985 1,864 (2) 28,849 Income before income tax expense equity in net income of unconsolidated affiliates and minority interests 52,178 (1,952) 50,226 Income tax expense 21,360 (773)(3) 20,587 Income before equity in net income of unconsolidated affiliates and minority interests 30,818 (1,179) 29,639 Equity in net income of unconsolidated affiliates 2,235 - 2,235 Minority interests (462) - (462) Income from continuing operations $32,591 $(1,179) $31,412 Per common share data: Basic: Income from continuing operations $1.63 $1.57 Weighted average shares 19,947,177 19,947,177 Diluted: Income from continuing operations $1.63 $1.57 Weighted average shares 20,007,503 20,007,503 See accompanying Notes to Unaudited Pro Forma Condensed Statement of Operations. GENESIS HEALTHCARE CORPORATION NOTES TO UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS General note: The unaudited pro forma condensed statement of operations reflects all adjustments that, in the opinion of management, are necessary to present fairly the pro forma results of operations for the twelve months ended September 30, 2004, assuming the spin-off occurred on October 1, 2003. (1) Represents the amortization of estimated deferred financing fees and expenses related to our new financing arrangements offset by reduced historical amortization of deferred financing fees written-off following the repayment of the existing indebtedness. Twelve months ended September 30, 2004 (in thousands) Historical financing fee amortization $(54) New financing fee amortization 142 $88 (2) Reflects the increase in estimated interest expense for the months of October and November 2003 based upon the incurrence of incremental debt following the spin-off and an estimated weighted borrowing average rate of 6.8% following the spin-off. Debt service under our new senior credit facility is based upon a variable interest rate that may fluctuate due to market conditions and / or our operating performance. A variance of 1/8% in variable rates of interest would change interest expense by approximately $218 thousand for the twelve months ended September 30, 2004. (3) Income tax expense is reported at an estimated effective tax rate of 39.6%. Genesis HealthCare Contact: Lori Zimmerman Mayer Investor Relations 610-925-2000
Genesis HealthCare Corporation
CONTACT: Lori Zimmerman Mayer, Investor Relations of Genesis HealthCare,+1-610-925-2000
Web site: http://www.genesishcc.com/