Genesis Healthcare Earnings 2019-06-30

GEN 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

10-Q 1 gen-20190630x10q.htm 10-Q gen_Current folio_10Q

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2019.

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to .

Commission file number: 001-33459

Genesis Healthcare, Inc.

(Exact name of registrant as specified in its charter)


Delaware		20-3934755
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

101 East State Street
Kennett Square, Pennsylvania		19348
(Address of principal executive offices)		(Zip Code)

(610) 444-6350

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each Class

Trading Symbol(s)

Name of each exchange on which registered

Class A common stock, $0.001 par value per share

GEN

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐	Accelerated Filer ☒	Emerging growth company ◻

Non-accelerated filer ☐	Smaller reporting company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of each of the issuer’s classes of common stock, as of the close of business on August 8, 2019, was:

Class A common stock, $0.001 par value – 107,413,398 shares

Class B common stock, $0.001 par value – 744,396 shares

Class C common stock, $0.001 par value – 56,620,453 shares

Table of Contents

Genesis Healthcare, Inc.

Form 10-Q

Index

		Page Number
Part I.	Financial Information

Item 1.	Financial Statements (Unaudited)	3

	Consolidated Balance Sheets — June 30, 2019 and December 31, 2018	3
	Consolidated Statements of Operations — Three and six months ended June 30, 2019 and 2018	4
	Consolidated Statements of Comprehensive Loss — Three and six months ended June 30, 2019 and 2018	5
	Consolidated Statements of Stockholders’ Deficit — Three and six months ended June 30, 2019 and 2018	6
	Consolidated Statements of Cash Flows — Six months ended June 30, 2019 and 2018	8
	Notes to Unaudited Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	65

Item 4.	Controls and Procedures	66

Part II.	Other Information

Item 1.	Legal Proceedings	66

Item 1A.	Risk Factors	66

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66

Item 3.	Defaults Upon Senior Securities	66

Item 4.	Mine Safety Disclosures	66

Item 5.	Other Information	67

Item 6.	Exhibits	67

Signatures		68

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

GENESIS HEALTHCARE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

(UNAUDITED)


	June 30, 2019		December 31, 2018
Assets:
Current assets:
Cash and cash equivalents	$	11,857	$	20,865
Restricted cash and equivalents		32,600		73,762
Restricted investments in marketable securities		35,950		35,631
Accounts receivable		558,907		622,717
Prepaid expenses		67,038		82,747
Other current assets		33,702		36,528
Assets held for sale		6,574		3,375
Total current assets		746,628		875,625
Property and equipment, net of accumulated depreciation of $438,610 and $976,802 at June 30, 2019 and December 31, 2018, respectively		673,911		2,887,554
Finance lease right-of-use assets, net of accumulated amortization of $65,889 at June 30, 2019		516,537		—
Operating lease right-of-use assets		2,200,252		—
Restricted cash and equivalents		52,334		47,649
Restricted investments in marketable securities		108,500		100,522
Other long-term assets		119,479		125,595
Deferred income taxes		5,482		5,867
Identifiable intangible assets, net of accumulated amortization of $70,992 and $99,160 at June 30, 2019 and December 31, 2018, respectively		92,397		119,082
Goodwill		85,642		85,642
Assets held for sale		41,418		16,087
Total assets	$	4,642,580	$	4,263,623
Liabilities and Stockholders' Deficit:
Current liabilities:
Current installments of long-term debt	$	108,639	$	122,531
Current installments of finance lease obligations		2,678		2,171
Current installments of operating lease obligations		110,156		—
Current installments of financing obligations		—		2,001
Accounts payable		230,474		234,786
Accrued expenses		218,105		227,813
Accrued compensation		155,639		172,726
Self-insurance reserves		137,111		149,545
Current portion of liabilities held for sale		1,257		639
Total current liabilities		964,059		912,212
Long-term debt		1,142,079		1,082,933
Finance lease obligations		839,196		967,942
Operating lease obligations		2,250,790		—
Financing obligations		—		2,732,939
Deferred income taxes		5,999		6,281
Self-insurance reserves		435,920		453,993
Liabilities held for sale		55,038		25,942
Other long-term liabilities		82,478		126,247
Commitments and contingencies
Stockholders’ deficit:
Class A common stock, (par $0.001, 1,000,000,000 shares authorized, issued and outstanding - 107,413,398 and 101,235,935 at June 30, 2019 and December 31, 2018, respectively)		107		101
Class B common stock, (par $0.001, 20,000,000 shares authorized, issued and outstanding - 744,396 and 744,396 at June 30, 2019 and December 31, 2018, respectively)		1		1
Class C common stock, (par $0.001, 150,000,000 shares authorized, issued and outstanding - 56,620,453 and 59,700,801 at June 30, 2019 and December 31, 2018, respectively)		57		60
Additional paid-in-capital		248,287		270,408
Accumulated deficit		(1,044,997)		(1,609,828)
Accumulated other comprehensive income (loss)		541		(262)
Total stockholders’ deficit before noncontrolling interests		(796,004)		(1,339,520)
Noncontrolling interests		(336,975)		(705,346)
Total stockholders' deficit		(1,132,979)		(2,044,866)
Total liabilities and stockholders’ deficit	$	4,642,580	$	4,263,623

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

GENESIS HEALTHCARE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE DATA)

(UNAUDITED)


	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
Net revenues	$	1,145,052	$	1,272,360	$	2,306,692	$	2,573,432
Salaries, wages and benefits		626,159		705,754		1,268,569		1,441,524
Other operating expenses		332,528		370,555		675,066		754,715
General and administrative costs		35,562		39,046		71,094		78,921
Lease expense		94,586		32,111		188,647		65,182
Depreciation and amortization expense		28,268		63,495		66,463		114,998
Interest expense		52,975		117,955		104,491		232,992
(Gain) loss on early extinguishment of debt		(24)		(501)		(24)		9,785
Investment income		(2,143)		(1,631)		(4,007)		(2,678)
Other income		(23,413)		(22,220)		(40,330)		(22,152)
Transaction costs		8,823		3,112		10,084		15,207
Long-lived asset impairments		900		27,257		900		55,617
Goodwill and identifiable intangible asset impairments		—		1,132		—		1,132
Equity in net (income) loss of unconsolidated affiliates		(24)		38		(85)		258
Loss before income tax benefit		(9,145)		(63,743)		(34,176)		(172,069)
Income tax benefit		(162)		(886)		(111)		(539)
Net loss		(8,983)		(62,857)		(34,065)		(171,530)
Less net loss attributable to noncontrolling interests		4,164		23,245		13,983		63,380
Net loss attributable to Genesis Healthcare, Inc.	$	(4,819)	$	(39,612)	$	(20,082)	$	(108,150)
Loss per common share:
Basic and diluted:
Weighted-average shares outstanding for loss from continuing operations per share		106,846		100,596		105,289		99,430
Net loss attributable to Genesis Healthcare, Inc.	$	(0.05)	$	(0.39)	$	(0.19)	$	(1.09)

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

GENESIS HEALTHCARE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(IN THOUSANDS)

(UNAUDITED)


	Three months ended June 30,				Six months ended June 30,
	2019		2018		2019		2018
Net loss	$	(8,983)	$	(62,857)	$	(34,065)	$	(171,530)
Net unrealized gain (loss) on marketable securities, net of tax		622		277		1,118		(61)
Comprehensive loss		(8,361)		(62,580)		(32,947)		(171,591)
Less: comprehensive loss attributable to noncontrolling interests		3,948		23,275		13,668		63,534
Comprehensive loss attributable to Genesis Healthcare, Inc.	$	(4,413)	$	(39,305)	$	(19,279)	$	(108,057)

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

GENESIS HEALTHCARE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(IN THOUSANDS)

(UNAUDITED)


														Accumulated
														other						Total
	Class A Common Stock			Class B Common Stock			Class C Common Stock			Additional		Accumulated		comprehensive		Stockholders'		Noncontrolling		stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		paid-in capital		deficit		income (loss)		deficit		interests		deficit
Balance at December 31, 2018	101,236	$	101	744	$	1	59,701	$	60	$	270,408	$	(1,609,828)	$	(262)	$	(1,339,520)	$	(705,346)	$	(2,044,866)
Net loss	—		—	—		—	—		—		—		(15,263)		—		(15,263)		(9,819)		(25,082)
Net unrealized gain on marketable securities, net of tax	—		—	—		—	—		—		—		—		397		397		99		496
Share based compensation	—		—	—		—	—		—		2,087		—		—		2,087		—		2,087
Issuance of common stock	100		—	—		—	—		—		—		—		—		—		—		—
Conversion of common stock among classes	3,081		3	—		—	(3,081)		(3)		(18,175)		—		—		(18,175)		18,175		—
Distributions to noncontrolling interests	—		—	—		—	—		—		64		—		—		64		(1,202)		(1,138)
Contributions from noncontrolling interests	—		—	—		—	—		—		—		—		—		—		18,500		18,500
Cumulative effect of accounting change	—		—	—		—	—		—		—		584,913		—		584,913		340,129		925,042
Balance at March 31, 2019	104,417	$	104	744	$	1	56,620	$	57	$	254,384	$	(1,040,178)	$	135	$	(785,497)	$	(339,464)	$	(1,124,961)
Net loss	—		—	—		—	—		—		—		(4,819)		—		(4,819)		(4,164)		(8,983)
Net unrealized gain on marketable securities, net of tax	—		—	—		—	—		—		—		—		406		406		216		622
Share based compensation	—		—	—		—	—		—		1,748		—		—		1,748		—		1,748
Issuance of common stock	2,996		3	—		—	—		—		(3)		—		—		—		—		—
Conversion of common stock among classes	—		—	—		—	—		—		(7,842)		—		—		(7,842)		7,842		—
Distributions to noncontrolling interests	—		—	—		—	—		—		—		—		—		—		(1,405)		(1,405)
Balance at June 30, 2019	107,413	$	107	744	$	1	56,620	$	57	$	248,287	$	(1,044,997)	$	541	$	(796,004)	$	(336,975)	$	(1,132,979)

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

GENESIS HEALTHCARE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

(IN THOUSANDS)

(UNAUDITED)


														Accumulated
														other						Total
	Class A Common Stock			Class B Common Stock			Class C Common Stock			Additional		Accumulated		comprehensive		Stockholders'		Noncontrolling		stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		paid-in capital		deficit		income (loss)		deficit		interests		deficit
Balance at December 31, 2017	97,101	$	97	744	$	1	61,561	$	61	$	290,573	$	(1,374,597)	$	(362)	$	(1,084,227)	$	(595,905)	$	(1,680,132)
Net loss	—		—	—		—	—		—		—		(68,538)		—		(68,538)		(40,135)		(108,673)
Net unrealized loss on marketable securities, net of tax	—		—	—		—	—		—		—		—		(214)		(214)		(124)		(338)
Share based compensation	—		—	—		—	—		—		2,427		—		—		2,427		—		2,427
Issuance of common stock	40		—	—		—	—		—		—		—		—		—		—		—
Conversion of common stock among classes	830		1	—		—	(830)		(1)		(8,635)		—		—		(8,635)		8,635		—
Distributions to noncontrolling interests	—		—	—		—	—		—		—		—		—		—		(14)		(14)
Balance at March 31, 2018	97,971	$	98	744	$	1	60,731	$	60	$	284,365	$	(1,443,135)	$	(576)	$	(1,159,187)	$	(627,543)	$	(1,786,730)
Net loss	—		—	—		—	—		—		—		(39,612)		—		(39,612)		(23,245)		(62,857)
Net unrealized loss on marketable securities, net of tax	—		—	—		—	—		—		—		—		307		307		(30)		277
Share based compensation	—		—	—		—	—		—		2,130		—		—		2,130		—		2,130
Issuance of common stock	2,008		2	—		—	—		—		(2)		—		—		—		—		—
Conversion of common stock among classes	1,030		1	—		—	(1,030)		(1)		(20,283)		—		—		(20,283)		20,283		—
Distributions to noncontrolling interests	—		—	—		—	—		—		—		—		—		—		(566)		(566)
Balance at June 30, 2018	101,009	$	101	744	$	1	59,701	$	59	$	266,210	$	(1,482,747)	$	(269)	$	(1,216,645)	$	(631,101)	$	(1,847,746)

See accompanying notes to unaudited consolidated financial statements.

Table of Contents

GENESIS HEALTHCARE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

(UNAUDITED)


	Six months ended June 30,
	2019		2018
Cash flows from operating activities
Net loss	$	(34,065)	$	(171,530)
Adjustments to reconcile net loss to net cash provided by operating activities:
Non-cash interest and leasing arrangements, net		13,818		39,016
Other non-cash gain, net		(40,330)

10-Q	2019-06-30	Quarter: 2019-06-30
10-Q	2019-03-31	Quarter: 2019-03-31
10-K	2018-12-31	Annual: 2018-12-31
10-Q	2018-09-30	Quarter: 2018-09-30
10-Q	2018-06-30	Quarter: 2018-06-30
10-Q	2018-03-31	Quarter: 2018-03-31
10-K	2017-12-31	Annual: 2017-12-31
10-Q	2017-09-30	Quarter: 2017-09-30
10-Q	2017-06-30	Quarter: 2017-06-30
10-Q	2017-03-31	Quarter: 2017-03-31
10-K	2016-12-31	Annual: 2016-12-31
10-Q	2016-09-30	Quarter: 2016-09-30
10-Q	2016-06-30	Quarter: 2016-06-30
10-Q	2016-03-31	Quarter: 2016-03-31
10-K	2015-12-31	Annual: 2015-12-31
10-Q	2015-09-30	Quarter: 2015-09-30
10-Q	2015-06-30	Quarter: 2015-06-30
10-Q	2015-03-31	Quarter: 2015-03-31
10-K	2014-12-31	Annual: 2014-12-31
10-Q	2014-09-30	Quarter: 2014-09-30
10-Q	2014-06-30	Quarter: 2014-06-30
10-Q	2014-03-31	Quarter: 2014-03-31
10-K	2013-12-31	Annual: 2013-12-31

8-K	2019-08-08	Earnings, Regulation FD, Exhibits
8-K	2019-06-05	Shareholder Vote
8-K	2019-05-09	Earnings, Regulation FD, Exhibits
8-K	2019-03-18	Earnings, Regulation FD, Exhibits
8-K	2019-03-11	Officers
8-K	2019-01-31	Other Events, Exhibits
8-K	2018-11-07	Earnings, Regulation FD, Exhibits
8-K	2018-10-31	Other Events
8-K	2018-10-01	Other Events, Exhibits
8-K	2018-08-07	Earnings, Exhibits
8-K	2018-07-31	Other Events
8-K	2018-06-06	Shareholder Vote
8-K	2018-03-14	Regulation FD, Exhibits
8-K	2018-03-06	Enter Agreement, Other Events, Exhibits
8-K	2018-03-01	Other Events, Exhibits
8-K	2018-02-21	Enter Agreement, Sale of Shares, Other Events, Exhibits
8-K	2018-02-15	Other Events
8-K	2018-01-15	Officers
8-K	2018-01-10	Regulation FD, Exhibits

SSC	Seven Stars Cloud Group	234
CWGL	Crimson Wine Group	218
GRPV	Gripevine	25
NWBB	New Bancorp	14
KAYS	Kaya Holdings	12
DNO	United States Short Oil Fund	9
ACUR	Acura Pharmaceuticals	5
RAS	RAIT Financial Trust	0
ASFT	Appsoft Technologies	0
TDRP	Teardroppers	0

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EX-31.1	gen-20190630ex311da1eb5.htm
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