|SUNH 10Q Just Now Out Lets Tear This SEC Filing apart and really dig into it Full DD Here |
Link to the Filing 10q
For the quarterly period ended June 30, 2011 Latest Quater here
(949) 255-7100 Phone number in case we have questions later
As of August 1, 2011, there were 25,137,216 shares of the Registrant’s $.01 par value Common Stock outstanding 25 Million Shares outstanding Current Share price 3.63$ a share So the Current Market Cap is 91.2 Million Dollars
Lets start off with the balance sheet keep in mind the total market cap for this company is just 91.2 Million Dollars Currently
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited)
June 30, 2011 December 31, 2010
Cash and cash equivalents $ 88,489 $ 81,163 88 Million Dollars in CASH Company increased cash here by 7 Million Dollars
Restricted cash 17,256 15,329 Restricted Cash of 17.2 Million also increased by 2 million dollars so far we have had a total cash increase of 9 Million Dollars
Accounts receivable, net of allowance for doubtful accounts of $70,419 AR Also increasd another 70 Million Dollars in assets
and $66,607 at June 30, 2011 and December 31, 2010, respectively 221,152 218,040 Also increased this is good these are assets
Prepaid expenses and other assets 22,990 16,859 increased as well
Deferred tax assets 71,511 69,800
Total current assets 421,398 401,191 421 Million Dollars in Total Assets What was that market cap again oh ya just 92 Million Dollars... What was the total cash on hand at the company 88.4+17.2=105.6 Million Dollars Guess we get the cash for FREE and the rest of the company along with it pretty sweet deal looking at all those assets and the fact that they increased cash and thats just the Current assets...
Property and equipment, net 143,880 139,860 143 Million this actually increased they are investing and expanding great! alot of times this will decrease due to deprciation.. 143 Million Dollars here... Market cap is only 92 Million???
Intangible assets, net 40,559 41,967 Normally mark this down
Goodwill 348,256 348,047 Huge Goodwill normally mark this down as i tend to look at the tangable assets
Restricted cash, non-current 351 350
Deferred tax assets 115,266 126,540
Other assets 46,596 23,803
Total assets $ 1,116,306 $ 1,081,758 1.1 Billion in total assets and thats up from the prior year pretty big most of the gains coming from cash and gains in property...
See accompanying notes.
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (unaudited) (CONTINUED)
LIABILITIES AND STOCKHOLDERS’ EQUITY
(in thousands, except per share data)
June 30, 2011 December 31, 2010
Accounts payable $ 46,895 $ 49,993 AP Decreased! even as cash increased oh yes this company is cash flow positive and big time!
Accrued compensation and benefits 61,074 61,518 about the same here
Accrued self-insurance obligations, current portion 60,633 52,093
Other accrued liabilities 53,555 53,945
Current portion of long-term debt and capital lease obligations 11,099 11,050
Total current liabilities 233,256 228,599 Current Liablities is half what our total current assets is!!!! we can pay this off pretty easy
Accrued self-insurance obligations, net of current portion 151,258 133,405 insurance good thing to have in this business
Long-term debt and capital lease obligations, net of current portion 139,450 144,930 gotta pay the rent on the buildings but when we get to the income statement our revenues and cash flows is more then enough to take care of this
Unfavorable lease obligations, net 8,452 9,815
Other long-term liabilities 52,379 52,566
Total liabilities 584,795 569,315 Half a billion well 584 Million Compared to over 1.1 Billion in total assets... That means shareholders value is 516 Million Dollars!!! and the market cap right now is less then 90 Million Dollars!
Commitments and contingencies (Note 5)
Preferred stock of $.01 par value, authorized 3,333
shares, zero shares issued and outstanding as of
June 30, 2011 and December 31, 2010 - -
Common stock of $.01 par value, authorized 41,667
shares, 25,137 and 24,974 shares issued and outstanding
as of June 30, 2011 and December 31, 2010, respectively 251 250
Additional paid-in capital 722,481 720,854
Accumulated deficit (190,603 ) (208,661 )
Accumulated other comprehensive loss, net (618 ) -
Total stockholders' equity 531,511 512,443 yup see there it is 531 Million according to there caluclations
Total liabilities and stockholders' equity $ 1,116,306 $ 1,081,758
Huge Balance sheet very nice lots of cash cash flow positive growing company
not much debt
Very Impressive balance sheet esp given the currrent market cap! Now lets continue on to the income statement
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED INCOME STATEMENTS (unaudited)
(in thousands, except per share data)
Three Months Ended
June 30, 2011 June 30, 2010
Total net revenues $ 487,674 $ 471,908 487 Million Dollars in revenues this is up 16 Million Dollars over last year!!! Growth!!!
Costs and expenses:
Operating salaries and benefits 272,923 266,015 So revenues grew 16 Million while this only Grew by 6 Million Dollars!!! very good job great management here keeping cost in line with revenues (Also this one of the easist areas to cut cost as well for most companies as its one of there bigest expenses)
Self-insurance for workers’ compensation and general and
professional liability insurance 15,267 14,461 increased but were growing so not to bad esp compared to the revenue growth
Operating administrative expenses 13,476 13,301 Stayed the same
Other operating costs 98,986 95,094 up just 3 million not bad for 16 million in revenues growth great job!
Center rent expense 37,014 18,805 This grew but hopefully revenues will grow even more going forward!
General and administrative expenses 14,952 15,157 decreased great job!
Depreciation and amortization 7,762 12,462 This fell
Provision for losses on accounts receivable 4,709 4,916 same
Interest, net of interest income of $82 and $73, respectively 4,855 11,689
Transaction costs - 2,248
Integration costs 167 -
Total costs and expenses 470,111 454,148 470 Million in expenses 487 Million in revenues
Income before income taxes and discontinued operations 17,563 17,760
Income tax expense 7,201 7,135
Income from continuing operations 10,362 10,625
Loss from discontinued operations, net of related taxes (416 ) (652 )
Net income $ 9,946 $ 9,973 9.9 Million in total Net Income WOW Market cap is only 92 Million Dollars!!!! Company pays for its self at this rate in less then 10 Quaters!!! keep in mind that these are Quartly data!!! 9.9 Million times 10 is 99 Million Dollars and thats with NO GROWTH Folks!!
Basic earnings per common and common equivalent share:
Income from continuing operations $ 0.40 $ 0.72 .40 EPS for a 3.60$ Stock for a Quater Annualize this you get a PE of just 2!!!!
Loss from discontinued operations, net (0.02 ) (0.04 ) Small loss here 1 time
Net income $ 0.38 $ 0.68 .38 still very very good!!! wow
Diluted earnings per common and common equivalent share:
Income from continuing operations $ 0.40 $ 0.71
Loss from discontinued operations, net (0.02 ) (0.04 )
Net income $ 0.38 $ 0.67
Weighted average number of common and common
equivalent shares outstanding:
Basic 26,146 14,744
Diluted 26,187 14,863 Share count increased but given the size of the company and its current market cap THIS COMPANY IS A STEAL!!! HUGE REVENUES HUGE EARNINGS TINY MARKET CAP!!!
Lets Continue on the Cash Flows statement we can all ready tell that they are cash flow positive by simply looking at the balance sheet but still nice to look at when doing a Full DD
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
For the For the
Three Months Ended Six Months Ended
June 30, 2011 June 30, 2010 June 30, 2011 June 30, 2010
Cash flows from operating activities:
Net income $ 9,946 $ 9,973 $ 18,058 $ 20,171 Positive net income for the past 4 QUATERS!!! look at those earnings WOW
Adjustments to reconcile net income to net cash provided by
operating activities, including discontinued operations:
Depreciation and amortization 7,863 12,561 15,544 25,007
Amortization of favorable and unfavorable lease intangibles (490 ) (474 ) (974 ) (948 )
Provision for losses on accounts receivable 4,860 5,125 10,504 11,139
Stock-based compensation expense 1,352 1,694 2,801 3,087
Deferred taxes 7,944 6,755 9,976 11,691
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable (7,185 ) (4,871 ) (12,578 ) (11,193 )
Restricted cash 18 3,427 (1,928 ) 2,271
Prepaid expenses and other assets 439 (1,670 ) 190 2,613
Accounts payable (1,582 ) 7,140 (3,501 ) 1,281
Accrued compensation and benefits (4,018 ) (4,362 ) (580 ) 4,062
Accrued self-insurance obligations (2,569 ) 2,805 (3,912 ) 4,842
Income taxes payable (478 ) (290 ) - 338
Other accrued liabilities (216 ) (2,457 ) (946 ) 13
Other long-term liabilities (492 ) (4,144 ) (1,218 ) (5,099 )
Net cash provided by operating activities 15,392 31,212 31,436 69,275 Huge Cash Flows!!! They have declined some but the cash flows are still there!!! Keep in mind the market cap is only 90 Million find me another stock with this market cap with these kind of cash flows earnings and balance sheet very hard to do!!! all most mission impossible
Cash flows from investing activities:
Capital expenditures (9,319 ) (10,656 ) (18,156 ) (27,714 )
Acquisitions, net of cash acquired (356 ) - (356 ) -
Net cash used for investing activities (9,675 ) (10,656 ) (18,512 ) (27,714 )
Cash flows from financing activities:
Principal repayments of long-term debt and capital lease obligations (2,800 ) (16,036 ) (5,598 ) (36,976 )
Payment to non-controlling interest - - - (2,025 )
Distribution to non-controlling interest - - - (69 )
Net cash used for financing activities (2,800 ) (16,036 ) (5,598 ) (39,070 )
Net increase in cash and cash equivalents 2,917 4,520 7,326 2,491
Cash and cash equivalents at beginning of period 85,572 102,454 81,163 104,483
Cash and cash equivalents at end of period $ 88,489 $ 106,974 88,489 106,974 Cash increased as stated before
Cash Flows statement is still very posistive along with strong earnings company also stated on the CC that they plan to stay cash flow positive and will cut cost to do so very good management team
Now onto the notes this 10q is very long ill read through it and post the important stuff if you want to read it all then click the link above and get to reading
Our subsidiaries provide long-term, post-acute and related specialty healthcare in the United States. We operate through three principal business segments: (i) inpatient services, (ii) rehabilitation therapy services, and (iii) medical staffing services. Inpatient services represent the most significant portion of our business. We operated 199 healthcare centers in 25 states as of June 30, 2011.
Huge Company!!! Over 29,000 Employees!!! 199 health care centers wow thats alot and in 25 states!!! just half the country ya know what that means this company can grow going forward!!! and expand!!!
2) Long-Term Debt and Capital Lease Obligations
Long-term debt and capital lease obligations consisted of the following as of the periods indicated (in thousands):
June 30, 2011 December 31, 2010
Revolving loans $ - $ -
Mortgage notes payable due at various dates through 2042, interest at
rates from 6.7% to 8.5%, collateralized by real property with
carrying values totaling $6.5 million 7,605 7,979
Term loans 142,456 147,492
Capital leases 488 509
Total long-term obligations 150,549 155,980
Less amounts due within one year (11,099 ) (11,050 )
Long-term obligations, net of current portion $ 139,450 $ 144,930 Company has debt but they are well within there debt convants as stated on the CC
For the twelve months ending June 30:
2012 $ 11,099 11 Million can cover this NP Company has 88 Million in CASH
2013 11,013 Can Cover this as well NP
2014 10,982 This one to!!!
2015 10,063 and this one
2016 10,067 so this
Hell they can pay there debts there cash flows and earnings is more then enough to cover these debts!!
Our credit agreement requires that 50% of our term loans be subject to at least a three-year hedging agreement. To satisfy this requirement, we executed two hedging instruments on January 18, 2011; a two-year interest rate cap and a two-year “forward starting” interest rate swap. The two-year interest rate cap limits our exposure to increases in interest rates for $82.5 million of debt through December 31, 2012. This cap is effective when LIBOR rises above 1.75%, effectively fixing the interest rate on $82.5 million of our term loans at 7.5% for two years. The fee for this interest rate cap arrangement was $0.3 million, which will be amortized to interest expense over the life of the arrangement. The two-year “forward starting”
Would be nice if they could refinance this debt and lock in a lower rate! but they can cover this debt none the less
They do hedge the intrest rate so if rates rise they want be effected so thats good!
In November 2010, a jury verdict was rendered in a Kentucky state court against us for $2.75 million in compensatory damages and $40 million in punitive damages. On February 25, 2011, the trial court judge reduced the punitive damage award to $24.75 million. The case involves claims for professional negligence resulting in wrongful death. We disagree with the jury’s verdict and believe that it is not supported by the facts of the case or applicable law. We have appealed this judgment to the Kentucky Court of Appeals. We believe our reserves are adequate for this matter.
That sucks but at least we have insurance so that should cover most of this
6) Income Taxes
The provision for income taxes of $7.2 million and $13.1 million for the three and six months ended June 30, 2011, respectively, results in an effective rate of approximately 41%. The provision for income taxes of $7.1 million and $14.4 million for the three and six months ended June 30, 2010 resulted in an effective tax rate of approximately 40%. The rates for 2011 and 2010 differ from the statutory tax rate of 35% primarily due to state taxes.
dang we pay alot in taxes!
(7) Segment Information
We operate predominantly in the long-term care segment of the healthcare industry. We are a provider of long-term, sub-acute and related ancillary care services to nursing home patients. Our reportable segments are strategic business units that provide different products and services. They are managed separately because each business has different marketing strategies due to differences in types of customers, distribution channels and capital resource needs. More complete descriptions and accounting policies of the segments are described in Note 13 – “Segment Information” and Note 2 – “Summary of Significant Accounting Policies” of our 2010 Form 10-K. The following tables summarize, for the periods indicated, operating results and other financial information, by business segment (in thousands):
Segment operating income (loss) $ 71,792 $ 4,198 $ 2,187 $ (15,213 ) $ - $ 62,964 62.9 Million in EBTIA WOW HOLLY COW!!!
(8) Subsequent Events
On July 29, 2011, the Centers for Medicare and Medicaid Services ("CMS") released its final rule for skilled nursing facilities for the 2012 federal fiscal year, which commences on October 1, 2011. In the final rule, CMS adjusted Medicare payment rates to correct what it perceives is a lack of parity between RUGs III and RUGs IV. CMS created the RUGs IV system to be budget neutral, but its analysis of billing data from the first eight months of implementation, October 1, 2010 to May 31, 2011, indicated that the RUGs IV system reimburses at a higher level overall than the RUGs III system. CMS calculated that the aggregate increase in payments was 12.6%. After the application of the market basket increase of 2.7% and the productivity adjustment of 1.0%, the net decrease in rates is 11.1%. The final rule also contains technical changes related to group therapy and Minimum Data Set 3.0 scheduling that may impact the categorization of patients and related payment rates. CMS has not estimated the impact related to these changes. We are evaluating the potential net impact of the CMS final rule on our operations (principally the Inpatient Services business) as well as on our financial position, future earnings and corresponding cash flows, which could result in an impairment of our existing goodwill balance.
In addition, we are currently in discussion with the staff of the Securities and Exchange Commission regarding the determination of our operating segments. We believe that our determination of our operating segments under GAAP is appropriate. However, it is possible that the outcome of this discussion could require us to change how we define and disclose our operating segments. It is also possible that a change in how we define our operating segments would impact our reporting units which may impact any goodwill impairment testing and potentially result in a noncash goodwill impairment charge of up to $348 million (which represents our entire goodwill balance) on a pre-tax basis. This potential noncash goodwill impairment charge, if any, would not impact our operating cash flows as it is noncash in nature.
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Our subsidiaries are providers of nursing, rehabilitative and related specialty healthcare services primarily to the senior population in the United States. Our core business is providing inpatient services, primarily through 165 skilled nursing centers, 14 combined skilled nursing, assisted and independent living centers, 10 assisted living centers, two independent living centers and eight mental health centers with 22,898 licensed beds located in 25 states as of June 30, 2011. Our subsidiaries also provide hospice services, rehabilitation therapy services and temporary medical staffing services to skilled nursing centers. 22,898 Beds wow thats alot!
In March 2010, the Patient Protection and Affordable Care Act (the “PPACA”) and the Health Care and Education Reconciliation Act of 2010 were signed into law. The combined laws create the Affordable Care Act (the “ACA”). Together, these two measures make the most sweeping and fundamental changes to the U.S. health care system since the creation of Medicare and Medicaid. These new laws include a large number of health-related provisions that are scheduled to take effect over the next four years, including expanding Medicaid eligibility, requiring most individuals to have health insurance, establishing new regulations on health plans, establishing health insurance exchanges, and modifying certain payment systems to encourage more cost-effective care and a reduction of inefficiencies and waste, including through new tools to address fraud and abuse. We cannot predict the effect these laws or any future legislation or regulation will have on our future operations, including future reimbursement rates and occupancy in our inpatient facilities.
But they said on the CC that it would only effect them by about 3% total revenues
not bad esp given what the stock did it wayyyy over reacted on the news
creating one hell of a buying opt and bargain
Here is how the payments breakdown they have a chart
Revenues from Medicare, Medicaid and Other Sources
We receive revenues from Medicare, Medicaid, commercial insurance, self-pay residents, other third party payors and healthcare centers that utilize our specialty medical services. The sources and amounts of our inpatient services revenues are determined by a number of factors, including the number of licensed beds and occupancy rates of our centers, the acuity level of patients and the rates of reimbursement among payors. Federal and state governments continue to focus on methods to curb spending on health care programs such as Medicare and Medicaid, and pressures on federal and state budgets resulting from the current economic conditions in the United States may intensify these efforts. This focus has not been limited to skilled nursing centers, but includes specialty services provided by us, such as skilled therapy services, to third parties. We cannot at this time predict the extent to which proposals limiting federal or state expenditures will be adopted or, if adopted and implemented, what effect, if any, such proposals will have on us. Efforts to impose reduced coverage, greater discounts and more stringent cost controls by government and other payors are expected to continue.
In addition, we have experienced, and may continue to experience, due to current economic conditions, reduced demand for the specialty services that we provide to third parties. We are unable to predict the future impact or extent of such reduced demand.
The following table sets forth the total nonaffiliated revenues and percentage of revenues by payor source for our continuing operations, on a consolidated and on an inpatient operations only basis, for the periods indicated (data is in thousands and includes revenues for acquired centers following the date of acquisition only):
For the For the
Three Months Ended Six Months Ended
Sources of Revenues June 30, 2011 June 30, 2010 June 30, 2011 June 30, 2010
Medicaid $ 186,482 38.2 % $ 188,903 40.0 % $ 371,161 38.2 % $ 376,209 39.9 %
Medicare 160,078 32.8 140,717 29.8 317,699 32.7 282,240 30.0
Private pay and other 116,207 23.9 118,348 25.1 233,336 24.0 235,540 25.0
Managed care and
commercial insurance 24,907 5.1 23,940 5.1 49,375 5.1 48,334 5.1
Total $ 487,674 100.0 % $ 471,908 100.0 % $ 971,571 100.0 % $ 942,323 100.0 %
Medicaid $ 186,461 42.8 % $ 188,875 45.1 % $ 371,089 42.8 % $ 376,145 45.0 %
Medicare 155,595 35.7 136,000 32.5 308,573 35.6 273,065 32.6
Private pay and other 69,007 15.8 70,490 16.8 138,679 16.0 139,729 16.7
Managed care and
commercial insurance 24,620 5.7 23,645 5.6 48,819 5.6 47,758 5.7
Total $ 435,683 100.0 % $ 419,010 100.0 % $ 867,160 100.0 % $ 836,697 100.0 %
So 70% of there revenues comes from the goverment in medicare and medicade payments but the payments decrease is only around 3% and this may change as they lobby congress
Medicare is available to nearly every United States citizen 65 years of age and older. It is a broad program of health insurance designed to help the nation’s elderly meet hospital, hospice, home health and other health care costs. Health insurance coverage extends to certain persons under age 65 who qualify as disabled or those having end-stage renal disease. Medicare is comprised of four related health insurance programs. Medicare Part A provides for inpatient services including hospital, skilled long-term care, hospice and home healthcare. Medicare Part B provides for outpatient services including physicians’ services, diagnostic service, durable medical equipment, skilled therapy services and medical supplies. Medicare Part C is a managed care option (“Medicare Advantage”) for beneficiaries who are entitled to Part A and enrolled in Part B. Medicare Part D is a benefit that provides prescription drug benefits for both Medicare and Medicare/Medicaid dually eligible patients.
Medicare i might add there is 70,000 Baby Boomers a WEEK Reaching AGE 65 And this trend will continue for the next 19 years!
Sounds like to me that the US goverment is going to go broke but there not there yet
Medicaid is a state-administered program financed by state funds and federal matching funds. The program provides for medical assistance to the indigent and certain other eligible persons. Although administered under broad federal regulations, states are given flexibility to construct programs and payment methods. Each state in which we operate nursing and rehabilitation centers has its own unique Medicaid reimbursement system.
Medicaid outlays are a significant component of state budgets, and there have been cost containment pressures on Medicaid outlays for skilled nursing centers. The current economic downturn has caused many states to institute freezes on or reductions in Medicaid spending to address state budget concerns.
Twenty-one of the states in which we operate impose a provider tax on skilled nursing centers as a method of increasing federal matching funds paid to those states for Medicaid. Those states that have imposed the provider tax have used some or all of the matching funds to fund Medicaid reimbursement to skilled nursing centers.
The following table sets forth the average amounts of inpatient Medicaid revenues per patient, per day ( excluding any impact of individually identifiable state-imposed provider taxes), recorded by our healthcare centers for the periods indicated:
Basically just telling you about medicade and medicare intresting none the less you can learn alot reading these reports
The rest of the report just breaks down there revenues and goes into detail you can read it if you want to i did for the most part not going post it here tho kinda boring read to be honest
Operating salaries and benefits expenses decreased $4.6 million, or 2.2%, to $202.3 million for the three months ended June 30, 2011 from $206.9 million for the three months ended June 30, 2010. The decrease was attributable to the following: Good Job!!!
Center rent expense increased $18.2 million, or 98.4%, to $36.7 million for the three months ended June 30, 2011 from $18.5 million for the three months ended June 30, 2010. The increase is attributable to the new lease agreements entered into with Sabra in conjunction with the Separation and other negotiated rent increases guess they need the buildings wish this was lower though
Our remaining owned centers have no debt. Thats awesome!!! see you read these notes its amazing what you can find!!! in the fine print
Total revenues from the Rehabilitation Therapy Services segment increased $12.1 million, or 23.7%, to $63.2 million for the three months ended June 30, 2011 from $51.1 million for the three months ended June 30, 2010. The revenue increase was the result of an increase of $12.1 million attributable to increased billable minutes, due to the addition of 55 new contracts (net of lost contracts), 48 of which were affiliated contracts primarily resulting from the transfer of therapy employees from our Inpatient Services segment to our Rehabilitation Therapy Services segment.
Thats huge!!! 23% Growth wow
Operating salaries and benefits expenses increased $11.4 million, or 27.1%, to $53.5 million for the three months ended June 30, 2011 from $42.1 million for the three months ended June 30, 2010. The increase was driven by the transfer of therapists from our Inpatient Services segment to our Rehabilitation Therapy services segments associated with the 48 net affiliated contract growth and wage rate increases to remain competitive in local markets.
That kinds sucks at least thats one area where they can cut down on cost going forward
Net revenues increased $29.3 million, or 3.1%, to $971.6 million for the six months ended June 30, 2011 from $942.3 million for the six months ended June 30, 2010. We reported net income for the six month periods ended June 30, 2011 and 2010 of $18.1 million and $20.2 million, respectively.
Operating salaries and benefits increased $13.9 million, or 2.6%, to $545.0 million (56.1% of net revenues) for the six months ended June 30, 2011 from $531.1 million (56.4% of net revenues) for the six months ended June 30, 2010. The increase resulted primarily from increased wage rates and benefits in all segments to remain competitive in local markets. Additionally, costs increased in our Inpatient Services segment due to the acquisition of a hospice company in December 2010 and in our Rehabilitation Therapy Services segment due to an increased nonaffiliated service volume
This one area that they should be able to make cuts i think and they should
Other operating costs increased $7.0 million, or 3.2%, to $224.3 million (23.1% of net revenues) for the six months ended June 30, 2011 from $217.3 million (23.1% of net revenues) for the six months ended June 30, 2010. The increase was primarily due to increases in purchased services, supplies and provider taxes.
Center rent expense increased $36.5 million, or 97.6%, to $73.9 million (7.6% of net revenues) for the six months ended June 30, 2011 from $37.4 million (4.0% of net revenues) for the six months ended June 30, 2010. The increase is primarily attributable to the new lease agreements entered into with Sabra in conjunction with the Separation.
Pretty low given over all revenues just 4%
Operating salaries and benefits expenses decreased $10.3 million, or 2.5%, to $402.8 million for the six months ended June 30, 2011 from $413.1 million for the six months ended June 30, 2010. The decrease was attributable to the following:
- a decrease of $13.8 million in therapist salaries due to their transfer from our Inpatient Services segment to our Rehabilitation Services segment;
Liquidity and Capital Resources
For the three months and six months ended June 30, 2011, our net income was $9.9 million and $18.1 million, respectively. As of June 30, 2011, our working capital was $188.1 million and we had cash and cash equivalents of $88.5 million, $150.5 million in borrowings and $59.6 million available under our revolving credit facility. As of June 30, 2011, we were in compliance with the covenants contained in the credit agreement governing the revolving credit facility and our term loan indebtedness as described under “Loan Agreements” below.
We are evaluating the potential impact of the CMS final rule for skilled nursing facilities for the 2012 federal fiscal year, which resulted in as much as a 11.1% net reduction in reimbursement rates (see “Revenues from Medicare, Medicaid and Other Sources”), on our operations (principally the Inpatient Services business) as well as on our financial position, future earnings and corresponding cash flows. Repercussions could include, but are not limited to, the impairment of goodwill and certain other assets, the incurrence of restructuring costs associated with plans for restructuring our business as a result of the reduction in revenues from the CMS final rule, reduced liquidity and cash flow, and failure to comply with covenants in our credit agreement and certain leases, which could result in our need to seek waivers from our lenders and landlords and/or attempt to renegotiate our credit agreement and the affected lease agreements. We are still estimating the final impact of the rule on our operations and are evaluating various cost reduction measures that we would reasonably expect to implement as a result of the CMS final rule. However, we anticipate that we will be in compliance with covenants in our credit agreement, and be able to utilize the revolving credit facility, at least through 2012.
Based on current levels of operations and the cost reduction measures mentioned above, we believe that our operating cash flows (which were $15.4 million for the three months ended June 30, 2011 and $31.4 million for the six months ended June 30, 2011), existing cash reserves and availability for borrowing under our $59.6 million revolving credit facility will provide sufficient funds for our operations, capital expenditures (both discretionary and nondiscretionary), scheduled debt service payments and our other commitments described in our 2010 Form 10-K in the table under “Obligations and Commitments” at least through the next twelve months, notwithstanding the negative impact of the multi-year economic downturn on our ability to collect certain of our accounts receivable and the loss of revenue resulting from the CMS final rule. We believe our long term liquidity needs will be satisfied by these same sources. We do not depend on cash flows from discontinued operations or sales of assets to provide for future liquidity. Although our credit agreement, which is described under “Loan Agreements”, contains restrictions on our ability to incur indebtedness, we currently believe that we will be able to incur additional indebtedness, if needed. However, there can be no assurance that we will be able to incur additional indebtedness or access additional sources of capital, such as issuing debt or equity securities, on terms that are acceptable to us or at all.
The State of California has instituted a holdback of 10% on Medicaid payments to providers. The reimbursement rates remain unchanged, but 10% of payment for dates of service from June 1, 2011 to June 30, 2012 will be retained by the state. Legislation requires that the funds be repaid no later than December 31, 2012. Implementation requires that CMS approve a State Plan Amendment.
During the six months ended June 30, 2011, net cash provided by operating activities decreased by $37.8 million as compared to the same period last year. In addition to decreased net income of $2.1 million, the decrease in cash flows from operating activities was the result of (i) our period-over-period decrease in working capital changes of $23.6 million, driven principally by temporary cash usage from the impact of timing differences on scheduled payroll and accounts payable disbursement cycles, plus increased payments of claims accrued in our self-insurance obligations in an effort to settle claims and the related funding of cash restricted for future settlements and (ii) a period-over-period decrease of $12.1 million in non-cash adjustments to net income, principally related to depreciation and amortization expense (as a result of the transfer of substantially all of our real estate to Sabra in the Separation). Increased center rent expense of $36.6 million and reduced interest expense of $13.7 million, which also resulted primarily from the Separation, contributed to the decrease in net cash provided by operating activities. All of these factors are discussed in “Results of Operations” above.
Net cash used for investing activities of $18.2 million for the six months ended June 30, 2011 were for capital expenditures and payments related to a December 2010 hospice acquisition.
SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES
Net cash used for financing activities was $5.6 million for the six months ended June 30, 2011, which was attributable to repayments of long-term debt and capital lease obligations.
We incurred capital expenditures, related primarily to improvements in continuing operations, as reflected in our consolidated statements of cash flows, of $9.3 million and $10.7 million for the three months ended June 30, 2011 and 2010, respectively.
In October 2010, we entered into a $285.0 million senior secured credit facility (the “Credit Agreement”) with a syndicate of financial institutions led by Credit Suisse, as administrative agent and collateral agent. The Credit Agreement provides for $150.0 million in term loans ($142.5 million outstanding at June 30, 2011), a $60.0 million revolving credit facility ($30.0 million of which may be utilized for letters of credit) and a $75.0 million funded letter of credit facility funded by proceeds of additional term loans, which was fully utilized at June 30, 2011. The revolving credit facility is undrawn as of June 30, 2001, but was utilized for $0.4 million of letters of credit. In the event we require additional letters of credit in the future, we will need to utilize availability under the revolving credit facility. The final maturity date of the term loans and the letter of credit facility is October 18, 2016 and the revolving credit facility terminates on October 18, 2015.
Availability of amounts under the revolving credit facility is subject to compliance with financial covenants, including an interest coverage test and a leverage covenant. The Credit Agreement contains customary events of default, such as a failure by us to make payment of amounts due, defaults under other agreements evidencing indebtedness, certain bankruptcy events and a change of control (as defined in the Credit Agreement). The Credit Agreement also contains customary covenants restricting certain actions, including incurrence of indebtedness, liens, payment of dividends, repurchase of stock, acquisitions and dispositions, mergers and investments. Our obligations under the Credit Agreement are guaranteed by most of our subsidiaries and are collateralized by our assets and the assets of most of our subsidiaries.
Amounts borrowed under the term loan facility are due in quarterly installments of $2.5 million, with the remaining principal amount due on the maturity date of the term loans. Accrued interest is payable at the end of an interest period, but no less frequently than every three months. Borrowings under the Credit Agreement bear interest on the outstanding unpaid principal amount at a rate equal to an applicable percentage plus, at our option, either (a) the greater of 1.75% or LIBOR, adjusted for statutory reserves or (b) an alternative base rate determined by reference to the highest of (i) the prime rate announced by Credit Suisse, (ii) the federal funds rate plus one-half of 1.0%, and (iii) the greater of 1.75% or one-month LIBOR adjusted for statutory reserves plus 1%. The applicable percentage for term loans and revolving loans is 4.75% for alternative base rate loans and 5.75% for LIBOR loans. Each year, commencing in 2012, within 90 days of the prior fiscal year end, we are required to prepay a portion of the term loans in an amount based on the prior year’s excess cash flows, if any, as defined in the Credit Agreement. In addition to paying interest on outstanding loans under the Credit Agreement, we are required to pay a facility fee of 0.50% per annum to the lenders under the revolving credit facility in respect of the unused revolving commitments.
The Credit Agreement requires that 50% of our term loans be subject to at least a three-year hedging arrangement. To satisfy this requirement, we executed two hedging instruments on January 18, 2011; a two-year interest rate cap and a two-year “forward starting” interest rate swap. The two-year interest rate cap limits our exposure to increases in interest rates for $82.5 million of debt through December 31, 2012. This cap is effective when LIBOR rises above 1.75%, effectively fixing the interest rate on $82.5 million of our term loans at 7.5% for two years. The fee for this interest rate cap arrangement was $0.3 million, which will be amortized to interest expense over the life of the arrangement. The two-year “forward starting” interest rate swap effectively converts the interest rate on $82.5 million of our term loans to fixed rate from January 1, 2013 through December 31, 2014. LIBOR is fixed at 3.185%, making the all-in rate effectively a fixed 8.935% for this portion of the term loans. There was no fee for this swap agreement. Both arrangements qualify for hedge accounting treatment.
They can cut cost and manage there cash flows the fact is this company is EXTREMLY Undervalued here and way oversold I would buy this company out in a heart beat at this market cap if i had the cash to
like i said company pays for its self in less then 10 quaters at the current market cap
trading way below cash and book value
Markets are a bloodbath right now but this is a value play
The decrease in Medicare revenues as a result of the rule issued by the Centers for Medicare and Medicaid Services could have adverse effects on our financial condition and require us to seek waivers from our lenders and landlords.
The final rule issued on July 29, 2011 by CMS for Medicare reimbursement rates for skilled nursing facilities for the 2012 federal fiscal year, which begins October 1, 2011, provides for an 11.1% reduction from rates prevailing in the 2011 federal fiscal year and makes changes in therapy reimbursement that will further reduce our revenues from the Medicare program. The adverse effects resulting from the reduction in Medicare revenues could include, but are not limited to, the impairment of goodwill and certain other assets, the incurrence of restructuring costs associated with plans for restructuring our business as a result of the reduction in revenues, reduced liquidity and cash flows and failure to comply with covenants in our Credit Agreement and certain leases, which could result in our need to seek waivers from our lenders and landlords and/or attempt to renegotiate our Credit Agreement and affected lease agreements. If we are required to seek such waivers and/or renegotiate the terms of such agreements, there is no assurance that we will be successful in obtaining the waivers or amending any such agreement on terms that are acceptable to us, or at all, which could have an adverse effect on our financial position, results of operations and cash flows.
Please also refer to the risk factors set forth in our 2010 Form 10-K.
They discussed this in depth on the CC they will cut cost to bring them in line with the lower revenues remain profitable and cash flow positive and continue to grow the company
RSI 8 Bottom of the chart 3$-15$ 52 Week Range
Value investors wet dream come true techincals investors as well