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LifeCare Holdings, Inc. Announces 2012 First Quarter Results

04:20 EDT 7 Aug 2017 | PR Newswire

PLANO, Texas, May 15, 2012 /PRNewswire/ -- LifeCare Holdings, Inc. (the "Company") today announced its operating results for the first quarter ended March 31, 2012.

Net Revenues

Our net patient service revenue of $126.4 million for the three months ended March 31, 2012, increased by $31.5 million, or 33.2%, from the comparable period in 2011. Patient days increased by 22,526, or 37.5%, while admissions increased by 962, or 45.6%, for the three months ended March 31, 2012, as compared to the same period in 2011. On a same store basis, which excludes hospitals acquired during 2011 and a new transitional care unit which opened in 2011, patient days increased by 1,779, or 3.0%, and admissions increased by 156, or 7.4%, for the three months ended March 31, 2012, as compared to the same period in 2011.

The increase of $31.5 million in net patient service revenue was attributable to an increase of $28.4 million from the recently acquired hospitals and the new transitional care unit and an increase of $3.1 million on a same store basis. The net increase on a same store basis was comprised of a favorable variance of $2.8 million attributable to an increase in patient days and a net increase of $0.7 million attributable to a decrease in adjustments related to changes in estimates and settlements on cost reports filed with the Medicare program, offset by an unfavorable variance of $0.4 million as the result of the decrease in net patient service revenue on a per patient day basis. During the three months ended March 31, 2012 and 2011, we recorded reductions in net patient service revenue of $0.1 million and $0.8 million, respectively, related to changes in estimates and settlements on cost reports filed with the Medicare program.

Our net patient service revenue per patient day during the three months ended March 31, 2012 and 2011, was $1,531 and $1,581, respectively. However, on a same store basis and exclusive of the cost report reimbursement adjustments, net patient service revenue per patient day for the three months ended March 31, 2012 and 2011, was $1,587 and $1,595, respectively.

Expenses

Total expenses increased by $31.7 million to $130.2 million for the three months ended March 31, 2012, as compared to the same period in 2011. A portion of this increase was attributable to the addition of the recently acquired hospitals and the new transitional care unit. On a same store basis, total expenses increased $6.1 million for the three months ended March 31, 2012, as compared to the same period in 2011.

The same store increase of $6.1 million in expenses was primarily attributable to an increase of $6.1 million in net interest expense, offset by a $2.8 million loss related to the write-off of deferred financing cost as a result of the refinancing of the senior secured credit facility during 2011. The $6.1 million increase in net interest expense was the result of the higher margin rate associated with the new senior secured credit agreement and interest on the additional borrowing related to the purchase of the acquired hospitals. The principal amount outstanding under our term loan facility at March 31, 2012 and 2011, was $316.8 million and $258.1 million, respectively, and had an average interest rate of 13.80% and 10.43% for the three months ended March 31, 2012 and 2011, respectively.

Net Earnings

We reported a net loss of $4.6 million for the three months ended March 31, 2012, as compared to a net loss of $3.6 million during the three months ended March 31, 2011. The difference between the 2012 and 2011 periods was primarily attributable to the result of higher net interest expense as previously discussed.

Credit Agreement EBITDA

For the quarter ended March 31, 2012, adjusted EBITDA as defined in our senior secured credit facility, which we refer to as Credit Agreement EBITDA, was $16.4 million. Credit Agreement EBITDA reflects the elimination of start-up costs and certain other non-recurring/operational expenditures as defined in our credit agreement.

Liquidity and Capital Resources

At March 31, 2012, our outstanding indebtedness consisted of $119.3 million aggregate principal amount of senior subordinated notes due 2013, a $316.8 million senior secured term loan facility that was scheduled to mature in 2016, and a note payable in an outstanding principal amount of $3.8 million, which is scheduled to mature in 2013. At March 31, 2012, the weighted average interest rate applicable to the $316.8 million under our term loan facility was 13.83%.

As a result of the impending maturities and increasingly more restrictive covenant requirements under our previous senior secured credit facility, we completed a refinancing of our previous senior secured credit facility with a new senior secured credit facility that consisted of an initial $257.5 million senior secured term loan (subject to paid-in-kind interest options as discussed below) and a new $30.0 million senior secured revolving credit facility on February 1, 2011 (the "Credit Agreement"). The proceeds of this new Credit Agreement along with cash on hand were utilized to pay off our previous senior secured credit facility, revolving credit facility and the fees and expenses associated with the new Credit Agreement.

The Credit Agreement also imposes certain financial covenants on us including: a maximum ratio of 6.0x consolidated EBITDA to total senior secured indebtedness tested quarterly on a trailing 12 month basis, beginning on the last day of the fourth quarter of 2011; and a minimum ratio of 1.25x consolidated EBITDA to consolidated cash interest expense, tested quarterly on a trailing 12 month basis beginning on the last day of the fourth fiscal quarter of 2011. The maximum leverage ratio is scheduled to adjust to 5.75x beginning with the trailing four quarter period ending June 30, 2012. We are currently in compliance with the covenants under our senior secured credit facility for the quarterly period ended March 31, 2012.

The term loan and revolving credit facility under the Credit Agreement have scheduled maturity dates of February 1, 2016, and February 1, 2015, respectively. However, if our outstanding senior subordinated notes are not refinanced, purchased or defeased in full by May 15, 2013, then the term loan and the then outstanding balance under the revolving credit facility will be due in full on May 15, 2013.

Borrowings under the term loan facility of the Credit Agreement bear interest at a rate per annum equal to an applicable margin plus, at our option, either (a) an alternate base rate determined by reference to the highest of (1) the prime rate of JPMorgan Chase Bank, N.A., (2) the federal funds rate in effect on such date plus 1/2 of 1% and (3) the LIBOR rate for a one month interest period plus 1% or (b) a LIBOR rate determined by reference to the cost of funds for U.S. dollar deposits for the relevant interest period adjusted for certain additional costs. The applicable margin percentage is 12.25% for term loans that are alternate base rate loans and 13.25% for term loans based on the LIBOR rate. For the term loans, we may, in our discretion, elect for the relevant interest period (a) to pay the entire amount of interest in cash or (b) to pay 5.50% of such interest "in-kind" by adding such interest to the outstanding principal of the term loans as of the applicable interest payment date. The applicable margin percentage for revolving loans is 6.75% for alternate base loans and 7.75% for LIBOR loans.

We may not be able to continue to satisfy the covenant requirements in subsequent periods. In the event we are unable to comply with the covenants under the Credit Agreement, an event of default may occur. If we are unable to obtain waivers or amendments to cure such event of default, the lenders would be entitled to take various actions, including the acceleration of amounts due under the Credit Agreement, terminating our access to our revolving credit facility and all actions permitted to be taken by a secured creditor. Acceleration under the Credit Agreement would further create a cross-default under our senior subordinated notes indenture. Such acceleration would have a material adverse effect on our financial position, results of operations and cash flow.

We are continuing to pursue operational and strategic objectives that may result in profitability and lower total indebtedness in order to remain in compliance with the financial covenants under the Credit Agreement. These objectives include, among other items, increasing the occupancy levels of our hospitals, reducing administrative and operating expenses, and reducing days of net patient service revenue in accounts receivable. We also continue to seek opportunities to refinance our senior subordinated notes and explore various strategic transactions, such as an acquisition, as a means to reduce our leverage and strengthen our operating and financial conditions.

Forward-Looking Statements

This press release includes forward-looking statements regarding, among other items, operations, proposed regulations and their possible effect on the Company's results. Such statements are subject to a number of uncertainties and risks that could significantly affect current plans. Furthermore, actual results may differ materially from those experienced or implied by such forward-looking statements. Factors that could cause results to differ materially from those expressed or implied by such forward-looking statements include, but are not limited to, risks relating to operating in a regulated environment, implementing our business plan, maintaining relationships with physicians in our markets, availability of sufficient nurses and therapists, competition, retaining key management, ability to service our debt requirements, litigation matters and availability of insurance. Further information about factors that could affect the Company's financial and other results is included in our Form 10-K as filed on March 30, 2012, which can be viewed on the SEC's website. Many of the factors that will determine the Company's future results are beyond the ability of management to control or predict. As a result, you should not place undue reliance on forward-looking statements, which reflect management's views only as the date hereof. The Company undertakes no obligation to revise or update any forward-looking statement, or to make any other forward-looking statements whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

Credit Agreement EBITDA is used in the calculations of the leverage and interest coverage ratio requirements that are included in the covenants contained in our Credit Agreement. Credit Agreement EBITDA is not a measure of financial performance computed in accordance with GAAP and should not be considered in isolation or as a substitute for operating income, net income, cash flows from operations or other statement of operations or cash flow data prepared in conformity with GAAP, or as measures of profitability or liquidity. In addition, the calculation of Credit Agreement EBITDA is susceptible to varying interpretations and calculations, and the amounts presented may not be comparable to similarly titled measures of other companies. Credit Agreement EBITDA may not be indicative of historical operating results, and we do not mean for it to be predictive of future results of operations or cash flows. For the trailing-twelve month period ended March 31, 2012, Credit Agreement EBITDA on a pro forma basis was $55.5 million.

LifeCare, based in Plano, Texas, operates 27 long-term acute care hospitals located in ten states. Long-term acute care hospitals specialize in the treatment of medically complex patients who typically require extended hospitalization. For more information on LifeCare, visit our website at www.lifecare-hospitals.com.

Contact:
Chris A. Walker
469-241-2116

Schedule 1







Condensed Consolidated Statements of Operations






For the Three Months Ended March 31, 2011 and 2012






(In thousands)







(Unaudited)



























%



2011


2012


Change

Net patient service revenue


$ 94,919


$ 126,409


33.2%








Expenses:







Salaries, wages and benefits


44,400


58,544


31.9%

Supplies


9,291


12,305


32.4%

Rent


6,473


10,574


63.4%

Other operating expense


20,756


27,304


31.5%

Provision for doubtful accounts


1,345


1,599


18.9%

Loss on early extinguishment of debt


2,772


-


-100.0%

Depreciation and amortization


2,116


2,433


15.0%

Interest expense, net


11,335


17,418


53.7%



98,488


130,177


32.2%

Operating loss


(3,569)


(3,768)


-5.6%

Equity in income (loss) of joint venture


193


(101)


-152.3%

Loss before income taxes


(3,376)


(3,869)


-14.6%

Provision for income taxes


225


727


223.1%

Net loss


$ (3,601)


$ (4,596)


-27.6%















Reconciliation to Credit Agreement EBITDA:







Operating loss - per above


$ (3,569)


$ (3,768)



Adjusted for:







Depreciation and amortization


2,116


2,433



Interest expense, net


11,335


17,418



Loss on early extinguishment of debt


2,772


-



Income attributable to unrestricted subsidiary

(1,269)


(5)



Dividend from unrestricted subsidiary


550


-



Non-cash charges


3


3



Hospital closure/relocation/start-up losses


21


160



Non-recurring charges for permitted acquisitions

82


18



Other credit agreement add-back items


315


128










Credit Agreement EBITDA


12,356


16,387










Pro forma permitted acquisition EBITDA prior






to acquisition date


4,470


-










Pro forma Credit Agreement EBITDA


$ 16,826


$ 16,387






























Schedule 2









Condensed Consolidated Balance Sheets







(In thousands)









(Unaudited)


















































December 31,


March 31,

Assets


2011


2012

Current assets:










Cash and cash equivalents




$ 11,569


$ 4,127


Accounts receivable, net





91,364


85,919


Other current assets






10,244


10,707



Total current assets





113,177


100,753

Property and equipment, net





73,767


72,396

Goodwill and other identifiable intangibles, net



302,835


302,770

Other assets, net






22,706


20,076









$ 512,485


$ 495,995












Liabilities and Stockholder's Deficit





Current liabilities:










Payables and accruals





$ 71,526


$ 61,178


Estimated third-party payor settlements




9,287


3,312


Current installments of long-term debt




5,912


6,047


Current installments of obligations under capital leases


414


297


Current installment of lease financing obligation


519


530



Total current liabilities




87,658


71,364

Long-term debt, excluding current installments



431,073


433,891

Obligations under capital leases, excluding current installments

89


72

Lease financing obligation





19,038


18,902

Accrued insurance






4,102


5,019

Other noncurrent liabilities





16,841


17,659



Total liabilities






558,801


546,907












Stockholder's deficit






(46,316)


(50,912)









$ 512,485


$ 495,995












Schedule 3








Condensed Consolidated Statements of Cash Flows




For the three months ended March 31, 2011 and 2012




(In thousands)







(Unaudited)



































2011


2012

Cash flows from operating activities:






Net loss





$ (3,601)


$ (4,596)


Adjustments to reconcile net loss to net cash





used in operating activities:








Depreciation and amortization (including amortization of debt issuance cost)

3,451


5,017



Provision for doubtful accounts


1,345


1,599



Paid in kind interest



551


4,404



Loss on early extinguishment of debt

2,772


-



Equity in (income) loss of joint venture

(193)


101



Deferred income taxes



-


527



Amortization of debt discount


-


144



Changes in operating assets and liabilities:







Accounts receivable


(5,029)


3,846




Income taxes



422


200




Other current assets


(955)


(463)




Other assets



(164)


(55)




Estimated third party payor settlements

875


(5,975)




Accounts payable and accrued liabilities

(3,098)


(10,548)




Other noncurrent liabilities


1,345


1,208




  Net cash used in operating activities

(2,279)


(4,591)

Cash flows from investing activities:






Purchases of property and equipment


(816)


(997)




  Net cash used in investing activities

(816)


(997)

Cash flows from financing activities:






Deferred financing cost



(17,655)


-


Borrowings on revolving credit facility


-


15,000


Payments on revolving credit facility


(35,000)


(15,000)


Proceeds from long-term debt


257,500


-


Payments of long-term debt



(241,613)


(1,595)


Payments on obligations under capital leases

(290)


(134)


Payments on lease financing obligation


(116)


(125)




  Net cash used in financing activities

(37,174)


(1,854)




  Net decrease in cash and cash equivalents

(40,269)


(7,442)

Cash and cash equivalents, beginning of period


54,570


11,569

Cash and cash equivalents, end of period


$ 14,301


$ 4,127


























Schedule 4





Selected Operating Statistics
















Three months


Three months



ended March 31,


ended March 31,



2011


2012


Number of hospitals within hospitals (end of period)

8


8


Number of freestanding hospitals (end of period)

12


19


Number of total hospitals (end of period)

20


27







Licensed long-term acute care beds (end of period)

1,057


1,390


Licensed transitional care unit beds (end of period)

-


40


Total licensed beds (end of period)

1,057


1,430


Average licensed beds (1)

1,057


1,430







Long-term acute care admissions

2,108


2,995


Transitional care unit admissions

-


75


Long-term acute care patient days

60,035


80,096


Transitional care unit patient days

-


2,465







Long-term acute care occupancy rate

63.1%


63.3%


Transitional care unit occupancy rate

-


67.7%







Percent net patient service revenue from Medicare

59.8%


64.6%


Percent net patient service revenue from commercial payors





and Medicaid (2)

40.2%


35.4%


Net patient service revenue per patient day

$1,581


$1,531






















(1) The licensed beds are only calculated on the beds at locations that were
open for operations during the applicable periods.







(2) The percentage of net patient service revenue from Medicaid is less than two percent


for each of the periods presented.

 

SOURCE LifeCare Holdings, Inc.

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