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Enter Symbol
or Name
USA
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SUN HEALTHCARE GROUP INC
Symbol U : SUNH
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Sun Healthcare Group, Inc. Reports 2012 Third-Quarter Operating Results; Normalized EPS from Continuing Operations of $0.17

2012-10-29 16:30 ET - News Release

IRVINE, CA -- (Marketwire) -- 10/29/12

Sun Healthcare Group, Inc. (NASDAQ: SUNH) today announced its operating results for the third quarter ended Sept. 30, 2012.

Highlights of continuing operations:

  • consolidated revenues were $460.5 million for the quarter;
  • consolidated normalized adjusted EBITDAR was $57.9 million for the quarter representing a normalized adjusted EBITDAR margin of 12.6 percent; and
  • normalized earnings per share was $0.17 for the quarter.

Transaction Update
The closing date for the Company's pending transaction with Genesis HealthCare LLC has not yet been finalized but is expected to occur in December 2012, subject to receipt of a few remaining regulatory approvals and the satisfaction of customary closing conditions. In connection with the pending transaction, the Company incurred $2.9 million of transaction costs through the nine months ended Sept. 30, 2012, which were primarily comprised of legal fees and financial advisory fees. The Company will not hold a quarterly conference call to discuss its third-quarter results.

Commenting on the expected completion of the transaction, William A. Mathies, Sun's chairman and chief executive officer, stated, "I am extremely proud of our thousands of caregivers and employees, who have maintained their focus on providing high-quality care for our patients and residents throughout the transaction process while continuing to execute toward our operational goals for this year. As we enter into our merger with Genesis HealthCare, I'm confident that we bring skills, dedication, and capabilities that will contribute to the success of the combined company."

Segment Updates
Sun's inpatient services business produced revenue in the third quarter totaling $409.8 million, down $8.3 million, or 2.0 percent, from the third quarter of 2011. The decrease in year-over-year revenues resulted principally from the reduction in Medicare rates as mandated by the CMS Final Rule and implemented in the prior year on Oct. 1, 2011. Inpatient services adjusted EBITDAR for the quarter was $66.3 million, down $8.4 million, or 11.2 percent, from the prior year third quarter, and adjusted EBITDAR margin for the quarter was 16.2 percent, down 170 basis points from the prior year third quarter.

Sun's hospice division, SolAmor, is included in Sun's inpatient services business segment and produced revenue in the third quarter of $15.7 million, up $0.8 million, or 5.6 percent, from the third quarter of 2011. SolAmor's adjusted EBITDAR was $3.9 million in the third quarter and adjusted EBITDAR margin was 24.6 percent.

Sun's rehabilitation therapy services business, SunDance, reported third-quarter revenues of $60.9 million, adjusted EBITDAR of $4.5 million and an adjusted EBITDAR margin of 7.4 percent, up 310 basis points year over year.

Sun's medical staffing services business, CareerStaff, reported third-quarter revenues of $22.1 million, up 1.7 percent year over year, adjusted EBITDAR of $1.6 million and an adjusted EBITDAR margin of 7.2 percent.

Cash Flow
At Sept. 30, 2012, Sun had $63.8 million in cash and cash equivalents and $88.9 million of long-term debt. During the third quarter, Sun generated cash flow from operations of $26.4 million and used net cash of $5.9 million for capital investments.

About Sun Healthcare Group, Inc.
Sun Healthcare Group, Inc. (NASDAQ: SUNH) is a healthcare services company, serving principally the senior population, with consolidated annual revenues in excess of $1.9 billion and approximately 28,000 employees in 46 states. Sun's services are provided through its subsidiaries: as of Sept. 30, 2012, SunBridge Healthcare and its subsidiaries' continuing operations include 158 skilled nursing centers, 13 combined skilled nursing, assisted and independent living centers, 10 assisted living centers, two independent living centers and seven mental health centers with an aggregate of 21,324 licensed beds in 23 states; SunDance Rehabilitation provides rehabilitation therapy services to affiliated and non-affiliated centers in 36 states; CareerStaff Unlimited provides medical staffing services in 40 states; and SolAmor Hospice provides hospice services in 11 states. For more information, go to www.sunh.com.

Forward-looking Statements
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. Forward-looking statements in this release include the Company's expectations regarding the closing of the transaction with Genesis Healthcare. Factors that could cause actual results to differ are identified in filings made by the Company with the Securities and Exchange Commission and include changes in Medicare and Medicaid reimbursements, including with respect to the CMS Final Rule, and the Company's ability to mitigate the impact of such changes; the impact that healthcare reform legislation will have on the Company's business; the ability to maintain the occupancy rates and payor mix at the Company's healthcare centers; potential liability for losses not covered by, or in excess of, insurance; the effects of government regulations and investigations; the ability of the Company to collect its accounts receivable on a timely basis; the amount of the Company's indebtedness; covenants in debt agreements and leases that may restrict the Company's activities, including the Company's ability to make acquisitions and incur more indebtedness on favorable terms; the impact of the economic downturn on the business; increasing labor costs and the shortage of qualified healthcare personnel; the Company's ability to receive increases in reimbursement rates from government payors to cover increased costs; delays in or failure to satisfy required conditions to the closing of the proposed merger with Genesis Healthcare, including the receipt of required regulatory approvals with respect to the transaction; failure to consummate or delay in consummating the transaction for other reasons; and disruption from the transaction making it more difficult to maintain relationships with customers and employees. More information on factors that could affect the Company's business and financial results are included in Sun's filings made with the Securities and Exchange Commission, including its 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. There may be additional risks of which the Company is presently unaware or that it currently deems immaterial.

The forward-looking statements involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company's control. Sun cautions investors that any forward-looking statements made by Sun are not guarantees of future performance and are only made as of the date of this release. Sun disclaims 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, adjusted EBITDA, adjusted EBITDAR and free cash flow, as used in this press release and in the accompanying tables, which are non-GAAP financial measures, are each reconciled to their respective GAAP-recognized financial measures in the accompanying tables.


                SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES

                        KEY INCOME STATEMENT FIGURES
                                CONSOLIDATED
                   (in thousands, except per share data)

                                                  For the        For the
                                                Three Months   Three Months
                                                   Ended          Ended
                                               September 30,  September 30,
                                                    2012           2011
                                               -------------  -------------


Revenue                                        $     460,470  $     468,676

Center rent expense                                   36,647         35,952

Depreciation and amortization                          8,654          8,163

Interest expense, net                                  4,458          4,834

Pre-tax income                                         6,921       (305,172)

Income tax expense                                     2,932          2,203

Income (loss) from continuing operations               3,989       (307,375)

Loss from discontinued operations                     (2,702)        (2,031)
                                               -------------  -------------

Net income (loss)                              $       1,287  $    (309,406)
                                               =============  =============


Diluted (loss) income per share                $        0.05  $      (11.81)
                                               =============  =============


----------------------------------------------------------------------------

Adjusted EBITDAR                               $      56,869  $      64,103
Margin - Adjusted EBITDAR                               12.4%          13.7%

Adjusted EBITDAR normalized                    $      57,902  $      64,103
Margin - Adjusted EBITDAR normalized                    12.6%          13.7%

----------------------------------------------------------------------------


----------------------------------------------------------------------------

Adjusted EBITDA                                $      20,222  $      28,151
Margin - Adjusted EBITDA                                 4.4%           6.0%

Adjusted EBITDA normalized                     $      21,255  $      28,151
Margin - Adjusted EBITDA normalized                      4.6%           6.0%

----------------------------------------------------------------------------


----------------------------------------------------------------------------

Pre-tax income continuing operations -
 normalized                                    $       7,954  $      14,345

Income tax expense - normalized                $       3,335  $       4,951

Income from continuing operations - normalized $       4,619  $       9,394

Diluted earnings per share from continuing
 operations - normalized                       $        0.17  $        0.36

----------------------------------------------------------------------------


See definitions of Adjusted EBITDA and Adjusted EBITDAR in the table
 "Reconciliation of Net Loss to Adjusted EBITDA and Adjusted EBITDAR."

See normalizing adjustments in the table "Normalizing Adjustments - Quarter
 Comparison."



                SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES

                        KEY INCOME STATEMENT FIGURES
                                CONSOLIDATED
                   (in thousands, except per share data)

                                                  For the        For the
                                                Nine Months    Nine Months
                                                   Ended          Ended
                                               September 30,  September 30,
                                                    2012           2011
                                               -------------  -------------


Revenue                                        $   1,376,105  $   1,405,558

Center rent expense                                  109,546        107,394

Depreciation and amortization                         25,588         23,241

Interest expense, net                                 13,297         14,688

Pre-tax income                                        14,842       (269,596)

Income tax expense                                     6,021         16,715

Income (loss) from continuing operations               8,821       (286,311)

Loss from discontinued operations                     (8,301)        (5,036)
                                               -------------  -------------

Net income (loss)                              $         520  $    (291,347)
                                               =============  =============


Diluted (loss) income per share                $        0.02  $      (11.19)
                                               =============  =============


----------------------------------------------------------------------------

Adjusted EBITDAR                               $     163,462  $     196,355
Margin - Adjusted EBITDAR                               11.9%          14.0%

Adjusted EBITDAR normalized                    $     166,333  $     196,355
Margin - Adjusted EBITDAR normalized                    12.1%          14.0%

----------------------------------------------------------------------------


----------------------------------------------------------------------------

Adjusted EBITDA                                $      53,916  $      88,961
Margin - Adjusted EBITDA                                 3.9%           6.3%

Adjusted EBITDA normalized                     $      56,787  $      88,961
Margin - Adjusted EBITDA normalized                      4.1%           6.3%

----------------------------------------------------------------------------


----------------------------------------------------------------------------

Pre-tax income continuing operations -
 normalized                                    $      17,713  $      49,921

Income tax expense - normalized                $       7,141  $      19,463

Income from continuing operations - normalized $      10,572  $      30,458

Diluted earnings per share from continuing
 operations - normalized                       $        0.40  $        1.17

----------------------------------------------------------------------------


See definitions of Adjusted EBITDA and Adjusted EBITDAR in the table
 "Reconciliation of Net Loss to Adjusted EBITDA and Adjusted EBITDAR."

See normalizing adjustments in the table "Normalizing Adjustments - Quarter
 Comparison."



                SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES

                        CONSOLIDATED BALANCE SHEETS
                   (in thousands, except per share data)


                                     September 30, 2012   December 31, 2011
                                     ------------------  ------------------
                                         (unaudited)         (unaudited)
               ASSETS

Current assets:
  Cash and cash equivalents          $           63,801  $           57,908
  Restricted cash                                14,252              15,706
  Accounts receivable, net                      199,787             202,229
  Prepaid expenses and other assets              27,323              29,075
  Assets held for sale                            4,946                   -
  Deferred tax assets                            61,629              63,170
                                     ------------------  ------------------

    Total current assets                        371,738             368,088

Property and equipment, net                     143,288             148,298
Intangible assets, net                           33,358              35,294
Goodwill                                         34,905              34,496
Restricted cash, non-current                        354                 353
Deferred tax assets                             125,409             123,974
Other assets                                     40,792              45,163
                                     ------------------  ------------------

    Total assets                     $          749,844  $          755,666
                                     ==================  ==================


LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                   $           47,427  $           55,888
  Accrued compensation and benefits              58,212              61,101
  Accrued self-insurance
   obligations, current portion                  58,273              57,810
  Other accrued liabilities                      47,602              43,139
  Current portion of long-term debt
   and capital lease obligations                    944               1,017
                                     ------------------  ------------------

  Total current liabilities                     212,458             218,955

Accrued self-insurance obligations,
 net of current portion                         158,224             157,267
Long-term debt and capital lease
 obligations, net of current portion             87,989              88,768
Unfavorable lease obligations, net                5,268               7,110
Other long-term liabilities                      55,500              58,110
                                     ------------------  ------------------

  Total liabilities                             519,439             530,210


Stockholders' equity:

  Preferred stock of $.01 par value,
   authorized 3,333 shares, zero
   shares were issued and
   outstanding as of September 30,
   2012 and December 31, 2011                         -                   -
  Common stock of $.01 par value,
   authorized 41,667 shares, 25,538
   and 25,146 shares issued and
   outstanding as of September 30,
   2012 and December 31, 2011,
   respectively                                     255                 251
  Additional paid-in capital                    731,473             726,861
  Accumulated deficit                          (499,907)           (500,427)
  Accumulated other comprehensive
   loss, net                                     (1,416)             (1,229)
                                     ------------------  ------------------
                                                230,405             225,456
                                     ------------------  ------------------
    Total liabilities and
     stockholders' equity            $          749,844  $          755,666
                                     ==================  ==================



                SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES

                       CONSOLIDATED INCOME STATEMENTS
                   (in thousands, except per share data)

                                                  For the        For the
                                                Three Months   Three Months
                                                   Ended          Ended
                                               September 30,  September 30,
                                                    2012           2011
                                               -------------  -------------
                                                (unaudited)    (unaudited)

Total net revenues                             $     460,470  $     468,676
                                               -------------  -------------
Costs and expenses:
  Operating salaries and benefits                    259,379        263,932
  Self-insurance for workers' compensation and
   general and professional liability
   insurance                                          15,237         14,545
  Operating administrative costs                      10,635         12,962
  Other operating costs                               97,619         93,705
  Center rent expense                                 36,647         35,952
  General and administrative expenses                 14,447         14,825
  Depreciation and amortization                        8,654          8,163
  Provision for losses on accounts receivable          5,250          4,604
  Interest, net of interest income of $94 and
   $103, respectively                                  4,458          4,834
  Transaction costs                                    1,034              -
  Loss on sale of assets, net                            189            809
  Restructuring costs                                      -          2,426
  Loss on asset impairment                                 -        317,091
                                               -------------  -------------
Total costs and expenses                             453,549        773,848
                                               -------------  -------------

Income (loss) before income taxes and
 discontinued operations                               6,921       (305,172)
Income tax expense                                     2,932          2,203
                                               -------------  -------------
Income (loss) from continuing operations               3,989       (307,375)
                                               -------------  -------------

Loss from discontinued operations, net                (2,702)        (2,031)

                                               -------------  -------------
Net income (loss)                              $       1,287  $    (309,406)
                                               =============  =============


Basic loss per common and common equivalent
 share:
  Income (loss) from continuing operations     $        0.15  $      (11.73)
  Loss from discontinued operations, net               (0.10)         (0.08)
                                               -------------  -------------
Net income (loss)                              $        0.05  $      (11.81)
                                               =============  =============

Diluted loss per common and common equivalent
 share:
  Income (loss) from continuing operations     $        0.15  $      (11.73)
  Loss from discontinued operations, net               (0.10)         (0.08)
                                               -------------  -------------
Net income (loss)                              $        0.05  $      (11.81)
                                               =============  =============

Weighted average number of common and common
 equivalent shares outstanding:
  Basic                                               27,082         26,203
  Diluted                                             27,082         26,203



                SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES

                       CONSOLIDATED INCOME STATEMENTS
                   (in thousands, except per share data)

                                                  For the        For the
                                                Nine Months    Nine Months
                                                   Ended          Ended
                                               September 30,  September 30,
                                                    2012           2011
                                               -------------  -------------
                                                (unaudited)    (unaudited)

Total net revenues                             $   1,376,105  $   1,405,558
                                               -------------  -------------
Costs and expenses:
  Operating salaries and benefits                    779,976        789,874
  Self-insurance for workers' compensation and
   general and professional liability
   insurance                                          43,744         43,643
  Operating administrative costs                      34,744         39,333
  Other operating costs                              289,614        276,999
  Center rent expense                                109,546        107,394
  General and administrative expenses                 46,537         45,156
  Depreciation and amortization                       25,588         23,241
  Provision for losses on accounts receivable         15,157         14,198
  Interest, net of interest income of $229 and
   $243, respectively                                 13,297         14,688
  Transaction costs                                    2,871              -
  Loss on sale of assets, net                            189            809
  Restructuring costs                                      -          2,728
  Loss on asset impairment                                 -        317,091
                                               -------------  -------------
Total costs and expenses                           1,361,263      1,675,154
                                               -------------  -------------

Income (loss) before income taxes and
 discontinued operations                              14,842       (269,596)
Income tax expense                                     6,021         16,715
                                               -------------  -------------
Income (loss) from continuing operations               8,821       (286,311)
                                               -------------  -------------

Loss from discontinued operations, net                (8,301)        (5,036)

                                               -------------  -------------
Net income (loss)                              $         520  $    (291,347)
                                               =============  =============


Basic loss per common and common equivalent
 share:
  Income (loss) from continuing operations     $        0.33  $      (11.00)
  Loss from discontinued operations, net               (0.31)         (0.19)
                                               -------------  -------------
Net income (loss)                              $        0.02  $      (11.19)
                                               =============  =============

Diluted loss per common and common equivalent
 share:
  Income (loss) from continuing operations     $        0.33  $      (11.00)
  Loss from discontinued operations, net               (0.31)         (0.19)
                                               -------------  -------------
Net income (loss)                              $        0.02  $      (11.19)
                                               =============  =============

Weighted average number of common and common
 equivalent shares outstanding:
  Basic                                               26,732         26,038
  Diluted                                             26,732         26,038



                SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES

                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (in thousands)

                                                  For the        For the
                                                Three Months   Three Months
                                                   Ended          Ended
                                               September 30,  September 30,
                                                    2012           2011
                                               -------------  -------------
                                                (unaudited)    (unaudited)

Cash flows from operating activities:
  Net income (loss)                            $       1,287  $    (309,406)
  Adjustments to reconcile net income (loss)
   to net cash provided by operating
   activities, including discontinued
   operations:
    Depreciation and amortization                      8,654          8,335
    Amortization of favorable and unfavorable
     lease intangibles                                  (507)          (492)
    Provision for losses on accounts
     receivable                                        5,403          4,975
    Loss on sale of assets, including
     discontinued operations, net                        188          1,925
    Loss on asset impairment                               -        317,091
    Stock-based compensation expense                   1,233          2,359
    Deferred taxes                                       386           (105)
  Changes in operating assets and liabilities,
   net of acquisitions:
    Accounts receivable                                7,641             23
    Restricted cash                                       78             52
    Prepaid expenses and other assets                  1,800         (1,600)
    Accounts payable                                   2,756          1,595
    Accrued compensation and benefits                 (5,666)       (11,717)
    Accrued self-insurance obligations                 3,821          3,618
    Other accrued liabilities                            (36)         2,104
    Other long-term liabilities                         (667)          (880)
                                               -------------  -------------
      Net cash provided by operating
       activities                                     26,371         17,877
                                               -------------  -------------

Cash flows from investing activities:
  Capital expenditures                                (6,722)       (14,190)
  Proceeds from sale of assets                           781          1,809
                                               -------------  -------------
    Net cash used for investing activities            (5,941)       (12,381)
                                               -------------  -------------

Cash flows from financing activities:
  Principal repayments of long-term debt and
   capital lease obligations                            (277)        (2,806)
                                               -------------  -------------
    Net cash used for financing activities              (277)        (2,806)
                                               -------------  -------------

Net increase in cash and cash equivalents             20,153          2,690
Cash and cash equivalents at beginning of
 period                                               43,648         88,489
                                               -------------  -------------
Cash and cash equivalents at end of period     $      63,801  $      91,179
                                               =============  =============

----------------------------------------------------------------------------
Reconciliation of net cash provided by
 operating activities to free cash flow:

    Net cash provided by operating activities  $      26,371  $      17,877
    Capital expenditures                              (6,722)       (14,190)
                                               -------------  -------------
      Free cash flow                           $      19,649  $       3,687
                                               =============  =============

----------------------------------------------------------------------------

Free cash flow is defined as net cash flow provided by operating activities
 less cash used for capital expenditures.
Free cash flow is used by management to evaluate discretionary cash flow
 potentially available for principal repayment and other financing
 activities.



                SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES

                   CONSOLIDATED STATEMENTS OF CASH FLOWS
                               (in thousands)

                                                  For the        For the
                                                Nine Months    Nine Months
                                                   Ended          Ended
                                               September 30,  September 30,
                                                    2012           2011
                                               -------------  -------------
                                                (unaudited)    (unaudited)

Cash flows from operating activities:
  Net income (loss)                            $         520  $    (291,347)
  Adjustments to reconcile net income (loss)
   to net cash provided by operating
   activities, including discontinued
   operations:
    Depreciation and amortization                     25,740         23,879
    Amortization of favorable and unfavorable
     lease intangibles                                (1,527)        (1,466)
    Provision for losses on accounts
     receivable                                       15,866         15,479
    Loss on sale of assets, including
     discontinued operations, net                        257          1,925
    Loss on asset impairment                               -        317,091
    Stock-based compensation expense                   5,041          5,160
    Deferred taxes                                       229          9,871
  Changes in operating assets and liabilities,
   net of acquisitions:
    Accounts receivable                              (13,568)       (12,555)
    Restricted cash                                    1,453         (1,876)
    Prepaid expenses and other assets                  4,125         (1,410)
    Accounts payable                                  (7,358)        (1,906)
    Accrued compensation and benefits                 (2,889)       (12,298)
    Accrued self-insurance obligations                 1,420           (294)
    Other accrued liabilities                          4,386          1,158
    Other long-term liabilities                       (2,920)        (2,098)
                                               -------------  -------------
      Net cash provided by operating
       activities                                     30,775         49,313
                                               -------------  -------------

Cash flows from investing activities:
  Capital expenditures                               (24,551)       (32,346)
  Proceeds from sale of assets                           781          1,809
  Acquisitions, net of cash acquired                    (260)          (356)
                                               -------------  -------------
      Net cash used for investing activities         (24,030)       (30,893)
                                               -------------  -------------

Cash flows from financing activities:
  Principal repayments of long-term debt and
   capital lease obligations                            (852)        (8,404)
                                               -------------  -------------
      Net cash used for financing activities            (852)        (8,404)
                                               -------------  -------------

Net increase in cash and cash equivalents              5,893         10,016
Cash and cash equivalents at beginning of
 period                                               57,908         81,163
                                               -------------  -------------
Cash and cash equivalents at end of period     $      63,801  $      91,179
                                               =============  =============

----------------------------------------------------------------------------
Reconciliation of net cash provided by
 operating activities to free cash flow:

    Net cash provided by operating activities  $      30,775  $      49,313
    Capital expenditures                             (24,551)       (32,346)
                                               -------------  -------------
      Free cash flow                           $       6,224  $      16,967
                                               =============  =============

----------------------------------------------------------------------------

Free cash flow is defined as net cash flow provided by operating activities
 less cash used for capital expenditures.
Free cash flow is used by management to evaluate discretionary cash flow
 potentially available for principal repayment and other financing
 activities.



                SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES

     RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA and ADJUSTED EBITDAR
                               (in thousands)

                                            For the            For the
                                      Three Months Ended Three Months Ended
                                      September 30, 2012 September 30, 2011
                                      ------------------ ------------------
                                          (unaudited)        (unaudited)

Total net revenues                    $          460,470 $          468,676
                                      ------------------ ------------------

Net income (loss)                     $            1,287 $         (309,406)
                                      ------------------ ------------------


  Income (loss) from continuing
   operations                                      3,989           (307,375)

  Income tax expense                               2,932              2,203

  Interest, net                                    4,458              4,834

  Depreciation and amortization                    8,654              8,163
                                      ------------------ ------------------

EBITDA                                $           20,033 $         (292,175)

  Loss on sale of assets, net                        189                809

  Restructuring costs                                  -              2,426

  Loss on asset impairment                             -            317,091

                                      ------------------ ------------------

Adjusted EBITDA                       $           20,222 $           28,151

  Center rent expense                             36,647             35,952
                                      ------------------ ------------------

Adjusted EBITDAR                      $           56,869 $           64,103
                                      ================== ==================

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




                SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES

     RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA and ADJUSTED EBITDAR
                               (in thousands)

                                            For the            For the
                                       Nine Months Ended  Nine Months Ended
                                      September 30, 2012 September 30, 2011
                                      ------------------ ------------------
                                          (unaudited)        (unaudited)

Total net revenues                    $        1,376,105 $        1,405,558
                                      ------------------ ------------------

Net income (loss)                     $              520 $         (291,347)
                                      ------------------ ------------------


  Income (loss) from continuing
   operations                                      8,821           (286,311)

  Income tax expense                               6,021             16,715

  Interest, net                                   13,297             14,688

  Depreciation and amortization                   25,588             23,241
                                      ------------------ ------------------

EBITDA                                $           53,727 $         (231,667)

  Loss on sale of assets, net                        189                809

  Restructuring costs                                  -              2,728

  Loss on asset impairment                             -            317,091
                                      ------------------ ------------------

Adjusted EBITDA                       $           53,916 $           88,961

  Center rent expense                            109,546            107,394
                                      ------------------ ------------------

Adjusted EBITDAR                      $          163,462 $          196,355
                                      ================== ==================

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




                SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES

   RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED
                         EBITDA and ADJUSTED EBITDAR
                              ($ in thousands)

               For the Three Months Ended September 30, 2012
                                (unaudited)

                        Rehabili-                     Elimination
                         tation    Medical                 of
             Inpatient   Therapy  Staffing   Other &   Affiliated  Consoli-
              Services  Services  Services  Corp Seg    Revenue     dated
             ---------  --------  --------  --------  -----------  --------

Nonaffiliated
 revenue     $ 409,750  $ 29,032  $ 21,686  $      2  $         -  $460,470
Affiliated
 revenue             -    31,885       432         -      (32,317)        -
             ---------  --------  --------  --------  -----------  --------
  Total
   revenue   $ 409,750  $ 60,917  $ 22,118  $      2  $   (32,317) $460,470
             ---------  --------  --------  --------  -----------  --------

Income (loss)
 from
 continuing
 operations  $  22,780  $  4,068  $  1,238  $(24,097) $         -  $  3,989

Income tax
 expense             -         -         -     2,932            -     2,932

Interest, net      (53)        -         -     4,511            -     4,458

Depreciation
 and
 amortization    7,276       267       191       920            -     8,654
             ---------  --------  --------  --------  -----------  --------

  EBITDA     $  30,003  $  4,335  $  1,429  $(15,734) $         -  $ 20,033

Loss on sale
 of assets,
 net                 -         -         -       189            -       189
             ---------  --------  --------  --------  -----------  --------

  Adjusted
   EBITDA    $  30,003  $  4,335  $  1,429  $(15,545) $         -  $ 20,222

Center rent
 expense        36,323       154       170         -            -    36,647
             ---------  --------  --------  --------  -----------  --------

  Adjusted
   EBITDAR   $  66,326  $  4,489  $  1,599  $(15,545) $         -  $ 56,869
             =========  ========  ========  ========  ===========  ========


  Normalized
   Adjusted
   EBITDA    $  30,003  $  4,335  $  1,429  $(14,511) $         -  $ 21,256
  Normalized
   Adjusted
   EBITDAR   $  66,326  $  4,489  $  1,599  $(14,511) $         -  $ 57,903


     Adjusted
       EBITDA
       margin      7.3%      7.1%      6.5%                             4.4%

     Adjusted
      EBITDAR
       margin     16.2%      7.4%      7.2%                            12.4%

   Normalized
     Adjusted
       EBITDA
       margin      7.3%      7.1%      6.5%                             4.6%

   Normalized
     Adjusted
      EBITDAR
       margin     16.2%      7.4%      7.2%                            12.6%

See definitions of EBITDA, Adjusted EBITDA and Adjusted EBITDAR in the
 table "Reconciliation of Net Loss to Adjusted EBITDA and Adjusted
 EBITDAR."

See normalizing adjustments in the table "Normalizing Adjustments - Quarter
 Comparison."



                SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES

   RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED
                         EBITDA and ADJUSTED EBITDAR
                              ($ in thousands)

                For the Nine Months Ended September 30, 2012
                                (unaudited)

                         Rehabili-
                          tation    Medical         Elimination of
             Inpatient   Therapy   Staffing  Other &  Affiliated   Consoli-
              Services   Services  Services Corp Seg    Revenue     dated
             ----------  --------  -------  --------  ---------  ----------

Nonaffiliated
 revenue     $1,220,673  $ 88,858  $66,559  $     15  $       -  $1,376,105
Affiliated
 revenue              -    98,152    1,982         -   (100,134)          -
             ----------  --------  -------  --------  ---------  ----------
  Total
   revenue   $1,220,673  $187,010  $68,541  $     15  $(100,134) $1,376,105
             ----------  --------  -------  --------  ---------  ----------

Income (loss)
 from
 continuing
 operations  $   65,104  $ 11,381  $ 4,345  $(72,009) $       -  $    8,821

Income tax
 expense              -         -        -     6,021          -       6,021

Interest, net       (81)        -       (3)   13,381          -      13,297

Depreciation
 and
 amortization    21,420       778      562     2,828          -      25,588
             ----------  --------  -------  --------  ---------  ----------

  EBITDA     $   86,443  $ 12,159  $ 4,904  $(49,779) $       -  $   53,727


Loss on sale
 of assets,
 net                  -         -        -       189          -         189
             ----------  --------  -------  --------  ---------  ----------

  Adjusted
   EBITDA    $   86,443  $ 12,159  $ 4,904  $(49,401) $       -  $   54,105

Center rent
 expense        108,606       432      508         -          -     109,546
             ----------  --------  -------  --------  ---------  ----------

  Adjusted
   EBITDAR   $  195,049  $ 12,591  $ 5,412  $(49,401) $       -  $  163,651
             ==========  ========  =======  ========  =========  ==========


  Normalized
   Adjusted
   EBITDA    $   86,443  $ 12,159  $ 4,904  $(46,530) $       -  $   56,976
  Normalized
   Adjusted
   EBITDAR   $  195,049  $ 12,591  $ 5,412  $(46,530) $       -  $  166,522


     Adjusted
       EBITDA
       margin       7.1%      6.5%     7.2%                             3.9%

     Adjusted
      EBITDAR
       margin      16.0%      6.7%     7.9%                            11.9%

   Normalized
     Adjusted
       EBITDA
       margin       7.1%      6.5%     7.2%                             4.1%

   Normalized
     Adjusted
      EBITDAR
       margin      16.0%      6.7%     7.9%                            12.1%

See definitions of EBITDA, Adjusted EBITDA and Adjusted EBITDAR in the
 table "Reconciliation of Net Loss to Adjusted EBITDA and Adjusted
 EBITDAR."

See normalizing adjustments in the table "Normalizing Adjustments - Year to
 Date Comparison."



                SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES

   RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED
                         EBITDA and ADJUSTED EBITDAR
                              ($ in thousands)

               For the Three Months Ended September 30, 2011
                                (unaudited)

                       Rehabili-                     Elimination
                        tation    Medical                 of
            Inpatient   Therapy  Staffing   Other &   Affiliated   Consoli-
             Services  Services  Services  Corp Seg    Revenue      dated
            ---------  --------  --------  --------  -----------  ---------

Nonaffiliated
 revenue    $ 418,097  $ 29,568  $ 20,996  $     15  $         -  $ 468,676
Affiliated
 revenue            -    32,791       757         -      (33,548)         -
            ---------  --------  --------  --------  -----------  ---------
  Total
   revenue  $ 418,097  $ 62,359  $ 21,753  $     15  $   (33,548) $ 468,676
            ---------  --------  --------  --------  -----------  ---------

Income
 (loss) from
 continuing
 operations $(285,549) $  2,296  $  1,221  $(25,343) $         -  $(307,375)

Income tax
 expense            -         -         -     2,203            -      2,203

Interest,
 net              (33)        -         -     4,867            -      4,834

Depreciation
 and
 amortization   6,770       236       187       970            -      8,163
            ---------  --------  --------  --------  -----------  ---------

  EBITDA    $(278,812) $  2,532  $  1,408  $(17,303) $         -  $(292,175)

Loss on sale
 of assets,
 net              809         -         -         -            -        809

Restructuring
 costs              -         -         -     2,426            -      2,426

Loss on
 asset
 impairment   317,091         -         -         -            -    317,091
            ---------  --------  --------  --------  -----------  ---------

  Adjusted
   EBITDA   $  39,088  $  2,532  $  1,408  $(14,877) $         -  $  28,151

Center rent
 expense       35,642       140       170         -            -     35,952
            ---------  --------  --------  --------  -----------  ---------

  Adjusted
   EBITDAR  $  74,730  $  2,672  $  1,578  $(14,877) $         -  $  64,103
            =========  ========  ========  ========  ===========  =========




    Adjusted
      EBITDA
      margin      9.3%      4.1%      6.5%                              6.0%

    Adjusted
     EBITDAR
      margin     17.9%      4.3%      7.3%                             13.7%


See definitions of EBITDA, Adjusted EBITDA and Adjusted EBITDAR in the
 table "Reconciliation of Net Loss to Adjusted EBITDA and Adjusted
 EBITDAR."



                SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES

   RECONCILIATION OF INCOME (LOSS) FROM CONTINUING OPERATIONS TO ADJUSTED
                         EBITDA and ADJUSTED EBITDAR
                              ($ in thousands)

                For the Nine Months Ended September 30, 2011
                                (unaudited)

                         Rehabili-
                          tation    Medical         Elimination of
             Inpatient   Therapy   Staffing  Other &  Affiliated   Consoli-
              Services   Services  Services Corp Seg    Revenue     dated
             ----------  --------  -------  --------  ---------  ----------

Nonaffiliated
 revenue     $1,250,568  $ 89,645  $65,309  $     36  $       -  $1,405,558
Affiliated
 revenue              -    98,710    2,079         -   (100,789)          -
             ----------  --------  -------  --------  ---------  ----------
  Total
   revenue   $1,250,568  $188,355  $67,388  $     36  $(100,789) $1,405,558
             ----------  --------  -------  --------  ---------  ----------

Income (loss)
 from
 continuing
 operations  $ (217,007) $  8,495  $ 4,082  $(81,881) $       -  $ (286,311)

Income tax
 expense              -         -        -    16,715          -      16,715

Interest, net       (69)        -        1    14,756          -      14,688

Depreciation
 and
 amortization    19,331       689      561     2,660          -      23,241
             ----------  --------  -------  --------  ---------  ----------

  EBITDA     $ (197,745) $  9,184  $ 4,644  $(47,750) $       -  $ (231,667)

Loss on sale
 of assets,
 net                809         -        -         -          -         809

Restructuring
 costs              302         -        -     2,426          -       2,728

Loss on asset
 impairment     317,091         -        -         -          -     317,091
             ----------  --------  -------  --------  ---------  ----------

  Adjusted
   EBITDA    $  120,457  $  9,184  $ 4,644  $(45,324) $       -  $   88,961

Center rent
 expense        106,487       394      513         -          -     107,394
             ----------  --------  -------  --------  ---------  ----------

  Adjusted
   EBITDAR   $  226,944  $  9,578  $ 5,157  $(45,324) $       -  $  196,355
             ==========  ========  =======  ========  =========  ==========




     Adjusted
       EBITDA
       margin       9.6%      4.9%     6.9%                             6.3%

     Adjusted
      EBITDAR
       margin      18.1%      5.1%     7.7%                            14.0%


See definitions of EBITDA, Adjusted EBITDA and Adjusted EBITDAR in the
 table "Reconciliation of Net Loss to Adjusted EBITDA and Adjusted
 EBITDAR."



              Sun Healthcare Group, Inc. and Subsidiaries
                     Selected Operating Statistics
                         Continuing Operations

                         For the                       For the
                   Three Months Ended             Nine Months Ended
                      September 30,                 September 30,
                 ----------------------      --------------------------
                   2012          2011           2012            2011
Consolidated
 Company
----------------------------------------------------------------------------

Revenues - Non-
 affiliated (in
 thousands)
----------------
 Skilled Nursing
  and similar
  facilities     $393,560      $402,703      $1,172,804      $1,205,479
 Hospice           15,719        14,885          46,491          43,647
 Other -
  Inpatient
  Services            471           509           1,378           1,442
                 --------      --------      ----------      ----------
 Inpatient
  Services        409,750       418,097       1,220,673       1,250,568

 Rehabilitation
  Therapy
  Services         29,032        29,568          88,858          89,645
 Medical
  Staffing
  Services         21,686        20,996          66,559          65,309
 Other - non-
  core
  businesses            2            15              15              36
                 --------      --------      ----------      ----------
  Total          $460,470      $468,676      $1,376,105      $1,405,558
                 ========      ========      ==========      ==========


Revenue Mix -
 Non-affiliated
 (in thousands)
----------------
 Medicare        $128,180  28% $149,147  32% $  397,867  29% $  454,591  32%
 Medicaid         195,441  42%  184,754  39%    570,734  41%    541,977  39%
 Private and
  Other           106,648  24%  106,541  23%    320,285  24%    324,169  23%
 Managed Care /
  Insurance        24,568   5%   22,777   5%     71,311   5%     69,133   5%
 Veterans           5,633   1%    5,457   1%     15,908   1%     15,688   1%
                 -------- ---- -------- ---- ---------- ---- ---------- ----
  Total          $460,470 100% $468,676 100% $1,376,105 100% $1,405,558 100%
                 ======== ==== ======== ==== ========== ==== ========== ====


----------------------------------------------------------------------------

Inpatient
 Services Stats
----------------------------------------------------------------------------

 Number of
  centers:            190           190             190             190
 Number of
  available
  beds:            20,774        20,803          20,774          20,803
 Occupancy %:       87.0%         87.2%           87.1%           87.4%


 Payor Mix %
  based on
  patient days:
   Medicare -
    SNF Beds        13.9%         15.0%           14.6%           15.6%
   Managed care
    / Ins. - SNF
    Beds             4.1%          3.8%            4.1%            4.0%
                 --------      --------      ----------      ----------
    Total SNF
     skilled mix    18.0%         18.8%           18.7%           19.6%
                 --------      --------      ----------      ----------

  Medicare          12.7%         13.7%           13.4%           14.3%
  Medicaid          64.2%         62.8%           63.7%           62.3%
  Private and
   Other            17.9%         18.7%           17.9%           18.5%
  Managed Care /
   Insurance         3.8%          3.5%            3.7%            3.6%
  Veterans           1.4%          1.3%            1.3%            1.3%

 Revenue Mix %
  of revenues:
   Medicare -
    SNF Beds        29.1%         33.7%           30.5%           34.6%
   Managed care
    / Ins. - SNF
    Beds             6.3%          5.8%            6.2%            5.9%
                 --------      --------      ----------      ----------
    Total SNF
     skilled mix    35.4%         39.5%           36.7%           40.5%
                 --------      --------      ----------      ----------

  Medicare          30.2%         34.5%           31.5%           35.2%
  Medicaid          47.7%         44.2%           46.8%           43.3%
  Private and
   Other            14.8%         14.6%           14.6%           14.7%
  Managed Care /
   Insurance         5.9%          5.4%            5.8%            5.5%
  Veterans           1.4%          1.3%            1.3%            1.3%


 Revenues PPD:
  Medicare (Part
   A)            $ 465.80      $ 520.11      $   463.52      $   520.92
  Medicare
   Blended Rate
   (Part A & B)  $ 513.99      $ 563.52      $   509.23      $   559.86
  Medicaid       $ 183.16      $ 176.42      $   180.65      $   175.21
  Medicaid, net
   of provider
   taxes         $ 165.95      $ 160.69      $   163.50      $   159.84
  Private and
   Other         $ 189.42      $ 186.05      $   189.87      $   190.06
  Managed Care /
   Insurance     $ 387.04      $ 384.33      $   380.05      $   377.69
  Veterans       $ 242.67      $ 257.15      $   246.28      $   249.90

----------------------------------------------------------------------------

Rehab contracts
----------------------------------------------------------------------------

 Affiliated           178           178             178             178
 Non-affiliated       338           343             338             343

 Average Qtrly
  Revenue per
  Contract (in
  thousands)     $    118      $    120      $      121      $      121

----------------------------------------------------------------------------



                 SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES

                NORMALIZING ADJUSTMENTS - QUARTER COMPARISON
                    (in thousands, except per share data)

                                 AS REPORTED - 3rd QUARTER 2012
                   ---------------------------------------------------------
                                                    Income
                                                     from              Net
                           Adjusted Adjusted  Pre- Continuing  Disc   (Loss)
                   Revenue  EBITDAR  EBITDA   tax  Operations  Ops    Income
                   -------- ------- ------- ------ -------- -------  -------

As Reported 3rd
 QUARTER 2012     $460,470 $56,869 $20,222 $6,921 $  3,989 $(2,702) $ 1,287
Percent of Revenue            12.4%    4.4%   1.5%     0.9%   -0.6%     0.3%

Normalizing
 Adjustments:
------------------

  Transaction
   costs                  -   1,033   1,033  1,033      630       -      630
                   -------- ------- ------- ------ -------- -------  -------

Normalized As
 Reported - 3rd
 QUARTER 2012      $460,470 $57,902 $21,255 $7,954 $  4,619 $(2,702) $ 1,917
                   ======== ======= ======= ====== ======== =======  =======
Percent of Revenue            12.6%    4.6%   1.7%     1.0%   -0.6%     0.4%

       As Reported                                 $   0.15 $ (0.10) $  0.05
Diluted EPS:
     As Normalized                                 $   0.17 $ (0.10) $  0.07


                            AS REPORTED - 3rd QUARTER 2011
          -----------------------------------------------------------------
                                               Income
                                                from                Net
                  Adjusted Adjusted  Pre-    Continuing   Disc    (Loss)
          Revenue  EBITDAR  EBITDA   tax     Operations    Ops    Income
          -------- ------- ------- ---------  ---------  -------  ---------

As Reported
 - 3rd
 QUARTER
 2011     $468,676 $64,103 $28,151 $(305,172) $(307,375) $(2,031) $(309,406)
Percent of
   Revenue           13.7%    6.0%    -65.1%     -65.6%    -0.4%     -66.0%

Normalizing
 Adjustments:
----------

  Restructur-
   ing costs     -       -       -     2,426      1,480        -      1,480
  Impairment
   of assets     -       -       -   317,091    315,289        -    315,289
          -------- ------- ------- ---------  ---------  -------  ---------

Normalized
 As Reported
 - 3rd
 QUARTER
 2011     $468,676 $64,103 $28,151 $  14,345  $   9,394  $(2,031) $   7,363
          ======== ======= ======= =========  =========  =======  =========
Percent of
   Revenue           13.7%    6.0%      3.1%       2.0%    -0.4%       1.6%

        As
  Reported                                    $  (11.73) $ (0.08) $  (11.81)
Diluted EPS:
        As
 Normalized                                   $    0.36  $ (0.08) $    0.28


See definitions of Adjusted EBITDA and Adjusted EBITDAR in the table
 "Reconciliation of Net Loss to Adjusted EBITDA and Adjusted EBITDAR."

Normalizing adjustments are transactions or adjustments not related to
 ongoing operations and consist of transaction costs associated with the
 Company's sale to Genesis Healthcare.

Since normalizing adjustments are not measurements determined in accordance
 with U.S. generally accepted accounting principles and are thus susceptible
 to varying calculations and interpretations, the information presented
 herein may not be comparable to other similarly described information of
 other companies.



                 SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES

              NORMALIZING ADJUSTMENTS - YEAR TO DATE COMPARISON
                    (in thousands, except per share data)

                             AS REPORTED - NINE MONTHS 2012
            ---------------------------------------------------------------
                                                  Income
                                                   from               Net
                      Adjusted  Adjusted  Pre-   Continuing   Disc   (Loss)
            Revenue    EBITDAR  EBITDA    tax    Operations   Ops    Income
            ---------- -------- ------- -------  ---------  -------  ------

As Reported
 - Nine
 Months
 2012       $1,376,105 $163,462 $53,916 $14,842  $   8,821  $(8,301) $  520
 Percent of
    Revenue               11.9%    3.9%    1.1%       0.6%    -0.6%    0.0%

Normalizing
 Adjustments:
-----------

  Transaction
   costs             -    2,871   2,871   2,871      1,751        -   1,751
            ---------- -------- ------- -------  ---------  -------  ------

Normalized As
 Reported -
 Nine
 Months
 2012       $1,376,105 $166,333 $56,787 $17,713  $  10,572  $(8,301) $2,271
            ========== ======== ======= =======  =========  =======  ======
 Percent of
    Revenue               12.1%    4.1%    1.3%       0.8%    -0.6%    0.2%

         As
   Reported                                      $    0.33  $ (0.31) $ 0.02
Diluted EPS:
         As
 Normalized                                      $    0.40  $ (0.32) $ 0.08


                          AS REPORTED - NINE MONTHS 2011
       --------------------------------------------------------------------
                                               Income
                                                from                Net
                 Adjusted  Adjusted  Pre-    Continuing   Disc     (Loss)
        Revenue   EBITDAR   EBITDA   tax     Operations   Ops      Income
       ---------- -------- ------- ---------  ---------  -------  ---------

As
 Reported -
 Nine
 Months
 2011  $1,405,558 $196,355 $88,961 $(269,596) $(286,311) $(5,036) $(291,347)
Percent
     of
Revenue              14.0%    6.3%    -19.2%     -20.4%    -0.4%     -20.7%

Normalizing
 Adjustments:
-------

  Restructur-
   ing costs    -        -       -     2,426      1,480        -      1,480
  Impair-
   ment of
   assets       -        -       -   317,091    315,289        -    315,289
       ---------- -------- ------- ---------  ---------  -------  ---------

Normalized As
 Reported -
 Nine
 Months
 2011  $1,405,558 $196,355 $88,961 $  49,921  $  30,458  $(5,036) $  25,422
       ========== ======== ======= =========  =========  =======  =========
Percent
     of
Revenue              14.0%    6.3%      3.6%       2.2%    -0.4%       1.8%


        As
  Reported                                   $  (11.00) $ (0.19) $  (11.19)
Diluted EPS:
        As
Normalized                                   $    1.17  $ (0.19) $    0.98



See definitions of Adjusted EBITDA and Adjusted EBITDAR in the table
 "Reconciliation of Net Loss to Adjusted EBITDA and Adjusted EBITDAR."

Normalizing adjustments are transactions or adjustments not related to
 ongoing operations and consist of transaction costs associated with the
 Company's sale to Genesis Healthcare.

Since normalizing adjustments are not measurements determined in accordance
 with U.S. generally accepted accounting principles and are thus susceptible
 to varying calculations and interpretations, the information presented
 herein may not be comparable to other similarly described information of
 other companies.


Contact:

Investor Inquiries
(505) 468-2341


Media Inquiries
(505) 468-4582


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