SOURCE: Sun Healthcare Group, Inc.

Sun Healthcare Group, Inc.

August 01, 2011 17:15 ET

Sun Healthcare Group, Inc. Reports 2011 Second-Quarter Results and EPS of $0.40

IRVINE, CA--(Marketwire - Aug 1, 2011) - Sun Healthcare Group, Inc. (NASDAQ: SUNH) today announced its operating results for the second quarter ended June 30, 2011.

Results for the second-quarter period ended June 30, 2011

--  consolidated revenues rose 3.3 percent to $487.7 million, compared to
    the same period in 2010, driven primarily by growth in rate and skilled
    mix in the inpatient services segment;
--  consolidated adjusted EBITDAR increased 7.0 percent to $67.4 million
    and adjusted EBITDAR margin grew 50 basis points to 13.8 percent,
    compared to normalized data for the same period in 2010;
--  diluted earnings per share from continuing operations was $0.40 on
    26.2 million weighted-average diluted shares; and
--  free cash flow was $6.1 million.

Regarding the Company's second-quarter results, William A. Mathies, Sun's chairman and chief executive officer, stated, "Revenue growth and EBITDAR margin growth in the quarter were in line with our expectations, leading to $0.40 EPS for the quarter from continuing operations. Our focus on attracting and caring for high-acuity, short-stay patients resulted in a 70 basis point increase in skilled mix days for the quarter, compared to the second quarter of 2010. We have been particularly pleased with the performance of our hospice business line, including the integration of the recently acquired Countryside Hospice operations." Mathies concluded, "We are reviewing the impact of the recently published CMS final rule, and I note that our $88.5 million of cash provides us with flexibility to meet the challenges that the CMS action presents."

Segment Updates

Sun's inpatient services business reported year-over-year revenue growth in the quarter of $16.7 million, or 4.0 percent, and adjusted EBITDAR of $76.8 million for the quarter, up $5.0 million or 6.9 percent compared to the same quarter prior year. Adjusted EBITDAR margin for inpatient services in the quarter was 17.6 percent, up 50 basis points from the same period in 2010. Skilled mix revenue as a percent of total revenue increased by 310 basis points (to 41.3 percent) compared to the same quarter of 2010, driven by continued growth in new admissions and stabilization in patient length of stay. In the quarter, the number of Rehab Recovery Suites® (RRS) beds was increased by an additional 80 beds, enhancing the ability to attract high acuity patients. These additional beds bring total available RRS beds to 2,072, an increase of 26.9 percent over the same quarter in 2010.

Included in the inpatient segment, revenues from SolAmor, Sun's hospice business, increased $3.5 million from $11.4 million in the second quarter of 2010 to $14.9 million in the second quarter of 2011. Same-store revenue growth in the quarter was 9.7 percent or $1.1 million. An additional $2.4 million of revenue growth was attributable to the Countryside acquisition.

SunDance, Sun's rehabilitation therapy services business, reported adjusted EBITDAR of $3.8 million, down from the prior-year quarter due to changes in concurrent therapy reimbursement, which was effective on Oct. 1, 2010, and also due to the implementation of the multiple procedure payment reduction (MPPR), which was effective on Jan. 1, 2011. For the quarter, SunDance's adjusted EBITDAR margin was 6.0 percent, an improvement of 100 basis points sequentially over the first quarter 2011.

CareerStaff, Sun's medical staffing services segment, reported revenues of $22.7 million for the quarter, down 2.9 percent compared to revenues in the same quarter of 2010. Despite the decline in revenues, CareerStaff achieved adjusted EBITDAR of $1.8 million and an adjusted EBITDAR margin of 8.0 percent for the quarter.

Cash Flow, Capital Structure and Rent Expense

At June 30, 2011, Sun had $88.5 million in cash and $150.5 million of long-term debt. Sun's free cash flow for the second quarter of 2011 was $6.1 million, after taking into account $9.3 million of cash used for capital expenditures in the quarter. Rent expense in the quarter reflected the second full quarter in which the increased rents resulting from Sun's 2010 restructuring were paid. Rent expense in the second quarter totaled $37.0 million, consistent with first quarter rent of $36.9 million.

Withdrawal of Full-Year 2011 Guidance

On July 29, 2011, the Centers for Medicare and Medicaid Services ("CMS") published its final rule for skilled nursing facilities, which establishes Medicare rates for fiscal year 2012 commencing on Oct. 1, 2011. The CMS final rule includes, among other things, a parity adjustment that decreases rates by as much as 11.1 percent and adjustments related to reimbursement for therapy services. Based on the complex nature of the final rule and its impact on the Company's business, Sun is withdrawing its previously announced financial guidance to investors for 2011. Sun anticipates providing updated guidance for the remainder of 2011 later this quarter.

Conference Call

As previously announced, investors and the general public are invited to listen to a conference call with Sun's senior management on Tuesday, Aug. 2, 2011, at 10 a.m. Pacific / 1 p.m. Eastern, to discuss the Company's second-quarter results for the period ended June 30, 2011.

To listen to the conference call, dial (877) 681-3378 and refer to Sun Healthcare Group. A recording of the call will be available from 4 p.m. Eastern on Aug. 2, 2011, until midnight Eastern on Sept. 2, 2011, by calling (888) 203-1112 and using access code 8470544.

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 30,000 employees in 46 states. Sun's services are provided through its subsidiaries: as of June 30, 2011, SunBridge Healthcare and its subsidiaries operate 165 skilled nursing centers, 14 combined skilled nursing, assisted and independent living centers, 10 assisted living centers, two independent living centers and eight mental health centers with an aggregate of 22,898 licensed beds in 25 states; SunDance Rehabilitation provides rehabilitation therapy services to affiliated and non-affiliated centers in 38 states; CareerStaff Unlimited provides medical staffing services in 45 states; and SolAmor Hospice provides hospice services in 10 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 expectation that its $88.5 million of cash provides flexibility to meet the challenges in the industry as well as all other statements regarding the expected results of operations, growth opportunities and plans and objectives of management for future operations, including expectations concerning the expansion of the Company's RRS portfolio, acquisitions and the impact of changes in the Medicare payment system. 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 CMS's recently announced 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; and the Company's ability to receive increases in reimbursement rates from government payors to cover increased costs. 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. In addition, normalizing adjustments to adjusted EBITDAR and other financial measures, as discussed in this press release and shown in the accompanying tables, are non-GAAP adjustments, and are reconciled to GAAP 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      Three
                                                       Months     Months
                                                       Ended      Ended
                                                      June 30,   June 30,
                                                        2011       2010
                                                      ---------  ---------

Revenue                                               $ 487,674  $ 471,908

Depreciation and amortization                             7,762     12,462

Interest expense, net                                     4,855     11,689

Pre-tax income                                           17,563     17,760

Income tax expense                                        7,201      7,135

Income from continuing operations                        10,362     10,625

Loss from discontinued operations                          (416)      (652)
                                                      ---------  ---------

Net income                                            $   9,946  $   9,973
                                                      =========  =========


Diluted earnings per share                            $    0.38  $    0.67
                                                      =========  =========


Adjusted EBITDAR                                      $  67,361  $  60,716
Margin - Adjusted EBITDAR                                  13.8%      12.9%

Adjusted EBITDAR normalized                           $  67,361  $  62,964
Margin - Adjusted EBITDAR normalized                       13.8%      13.3%
                                                      ---------  ---------


Adjusted EBITDA                                       $  30,347  $  41,911
Margin - Adjusted EBITDA                                    6.2%       8.9%

Adjusted EBITDA normalized                            $  30,347  $  44,159
Margin - Adjusted EBITDA normalized                         6.2%       9.4%
                                                      ---------  ---------


Pre-tax income continuing operations - normalized     $  17,563  $  20,008

Income tax expense - normalized                       $   7,201  $   8,057

Income from continuing operations - normalized        $  10,362  $  11,951

Diluted earnings per share from continuing operations
 - normalized                                         $    0.40  $    0.80

Net income - normalized                               $   9,946  $  11,299

Diluted earnings per share - normalized               $    0.38  $    0.76
                                                      ---------  ---------

See definitions of Adjusted EBITDA and Adjusted EBITDAR in the table
"Reconciliation of Net Income 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
                                                        Six        Six
                                                       Months     Months
                                                       Ended      Ended
                                                      June 30,   June 30,
                                                        2011       2010
                                                      ---------  ---------

Revenue                                               $ 971,571  $ 942,323

Depreciation and amortization                            15,341     24,810

Interest expense, net                                     9,854     23,578

Pre-tax income                                           31,885     35,859

Income tax expense                                       13,073     14,431

Income from continuing operations                        18,812     21,428

Loss from discontinued operations                          (754)    (1,257)
                                                      ---------  ---------

Net income                                            $  18,058  $  20,171
                                                      =========  =========


Diluted earnings per share                            $    0.70  $    1.36
                                                      =========  =========


Adjusted EBITDAR                                      $ 131,309  $ 121,599
Margin - Adjusted EBITDAR                                  13.5%      12.9%

Adjusted EBITDAR normalized                           $ 131,309  $ 123,847
Margin - Adjusted EBITDAR normalized                       13.5%      13.1%
                                                      ---------  ---------


Adjusted EBITDA                                       $  57,383  $  84,247
Margin - Adjusted EBITDA                                    5.9%       8.9%

Adjusted EBITDA normalized                            $  57,383  $  86,495
Margin - Adjusted EBITDA normalized                         5.9%       9.2%
                                                      ---------  ---------


Pre-tax income continuing operations - normalized     $  31,885  $  38,107

Income tax expense - normalized                       $  13,073  $  15,353

Income from continuing operations - normalized        $  18,812  $  22,754

Diluted earnings per share from continuing operations
 - normalized                                         $    0.72  $    1.54

Net income - normalized                               $  18,058  $  21,497

Diluted earnings per share - normalized               $    0.70  $    1.45
                                                      ---------  ---------


See definitions of Adjusted EBITDA and Adjusted EBITDAR in the table
"Reconciliation of Net Income 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)

                                                  June 30,    December 31,
                                                    2011          2010
                                                ------------  ------------
                                                (unaudited)   (unaudited)
                       ASSETS

Current assets:
  Cash and cash equivalents                     $     88,489  $     81,163
  Restricted cash                                     17,256        15,329
  Accounts receivable, net                           221,152       218,040
  Prepaid expenses and other assets                   22,990        16,859
  Deferred tax assets                                 71,511        69,800
                                                ------------  ------------
    Total current assets                             421,398       401,191

Property and equipment, net                          143,880       139,860
Intangible assets, net                                40,559        41,967
Goodwill                                             348,256       348,047
Restricted cash, non-current                             351           350
Deferred tax assets                                  115,266       126,540
Other assets                                          46,596        23,803
                                                ------------  ------------
      Total assets                              $  1,116,306  $  1,081,758
                                                ============  ============


        LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                              $     46,895  $     49,993
  Accrued compensation and benefits                   61,074        61,518
  Accrued self-insurance obligations, current
   portion                                            60,633        52,093
  Other accrued liabilities                           53,555        53,945
  Current portion of long-term debt and capital
   lease obligations                                  11,099        11,050
                                                ------------  ------------
  Total current liabilities                        233,256       228,599

Accrued self-insurance obligations, net of
 current portion                                     151,258       133,405
Long-term debt and capital lease obligations,
 net of current portion                              139,450       144,930
Unfavorable lease obligations, net                     8,452         9,815
Other long-term liabilities                           52,379        52,566
                                                ------------  ------------
  Total liabilities                                  584,795       569,315


Stockholders' equity:
  Preferred stock of $.01 par value, authorized
   3,333 shares, zero shares were issued and
   outstanding as of June 30, 2011
   and December 31, 2010                                   -             -
  Common stock of $.01 par value, authorized
   41,667 shares, 25,137 and 24,974 shares issued
   and outstanding as of June 30, 2011 and
   December 31, 2010, respectively                       251           250
  Additional paid-in capital                         722,481       720,854
  Accumulated deficit                               (190,603)     (208,661)
  Accumulated other comprehensive loss, net             (618)            -
                                                ------------  ------------
                                                     531,511       512,443
                                                ------------  ------------
      Total liabilities and stockholders'
       equity                                   $  1,116,306  $  1,081,758
                                                ============  ============




                SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES

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

                                                    For the      For the
                                                     Three        Three
                                                    Months       Months
                                                     Ended        Ended
                                                    June 30,     June 30,
                                                      2011         2010
                                                  -----------  -----------
                                                  (unaudited)  (unaudited)

Total net revenues                                $   487,674  $   471,908
                                                  -----------  -----------
Costs and expenses:
  Operating salaries and benefits                     272,923      266,015
  Self-insurance for workers' compensation and
   general and professional liability insurance        15,267       14,461
  Operating administrative costs                       13,476       13,301
  Other operating costs                                98,986       95,094
  Center rent expense                                  37,014       18,805
  General and administrative expenses                  14,952       15,157
  Depreciation and amortization                         7,762       12,462
  Provision for losses on accounts receivable           4,709        4,916
  Interest, net of interest income of $82 and $73,
   respectively                                         4,855       11,689
  Transaction costs                                         -        2,248
  Integration costs                                       167            -
                                                  -----------  -----------
Total costs and expenses                              470,111      454,148
                                                  -----------  -----------

Income before income taxes and discontinued
 operations                                            17,563       17,760
Income tax expense                                      7,201        7,135
                                                  -----------  -----------
Income from continuing operations                      10,362       10,625
                                                  -----------  -----------

Loss from discontinued operations, net of related
 taxes                                                   (416)        (652)
                                                  -----------  -----------

Net income                                        $     9,946  $     9,973
                                                  ===========  ===========


Basic income per common and common equivalent
 share:
  Income from continuing operations               $      0.40  $      0.72
  Loss from discontinued operations, net                (0.02)       (0.04)
                                                  -----------  -----------
Net income                                        $      0.38  $      0.68
                                                  ===========  ===========

Diluted income per common and common equivalent
 share:
  Income from continuing operations               $      0.40  $      0.71
  Loss from discontinued operations, net                (0.02)       (0.04)
                                                  -----------  -----------
Net income                                        $      0.38  $      0.67
                                                  ===========  ===========

Weighted average number of common and
 common equivalent shares outstanding:
  Basic                                                26,146       14,744
  Diluted                                              26,187       14,863




                SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES

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


                                                    For the      For the
                                                  Six Months   Six Months
                                                     Ended        Ended
                                                    June 30,     June 30,
                                                      2011         2010
                                                  -----------  -----------
                                                  (unaudited)  (unaudited)

Total net revenues                                $   971,571  $   942,323
                                                  -----------  -----------
Costs and expenses:
  Operating salaries and benefits                     545,025      531,104
  Self-insurance for workers' compensation and
   general and professional liability insurance        30,529       28,901
  Operating administrative costs                       26,756       25,589
  Other operating costs                               197,577      191,746
  Center rent expense                                  73,926       37,352
  General and administrative expenses                  30,331       30,424
  Depreciation and amortization                        15,341       24,810
  Provision for losses on accounts receivable          10,044       10,712
  Interest, net of interest income of $141 and
   $163, respectively                                   9,854       23,578
  Transaction costs                                         -        2,248
  Integration costs                                       303            -
                                                  -----------  -----------
Total costs and expenses                              939,686      906,464
                                                  -----------  -----------

Income before income taxes and discontinued
 operations                                            31,885       35,859
Income tax expense                                     13,073       14,431
                                                  -----------  -----------
Income from continuing operations                      18,812       21,428
                                                  -----------  -----------

Loss from discontinued operations, net                   (754)      (1,257)
                                                  -----------  -----------

Net income                                        $    18,058  $    20,171
                                                  ===========  ===========


Basic income per common and common equivalent
 share:
  Income from continuing operations               $      0.73  $      1.46
  Loss from discontinued operations, net                (0.03)       (0.09)
                                                  -----------  -----------
Net income                                        $      0.70  $      1.37
                                                  ===========  ===========

Diluted income per common and common equivalent
 share:
  Income from continuing operations               $      0.72  $      1.45
  Loss from discontinued operations, net                (0.02)       (0.09)
                                                  -----------  -----------
Net Income                                        $      0.70  $      1.36
                                                  ===========  ===========

Weighted average number of common and
 common equivalent shares outstanding:
  Basic                                                25,899       14,706
  Diluted                                              25,967       14,821




                SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (in thousands)

                                                    For the      For the
                                                     Three        Three
                                                    Months       Months
                                                     Ended        Ended
                                                    June 30,     June 30,
                                                      2011         2010
                                                  -----------  -----------
                                                  (unaudited)  (unaudited)

Cash flows from operating activities:
  Net income                                      $     9,946  $     9,973
  Adjustments to reconcile net income to net cash
   provided by operating activities, including
   discontinued operations:
      Depreciation and amortization                     7,863       12,561
      Amortization of favorable and unfavorable
       lease intangibles                                 (490)        (474)
      Provision for losses on accounts receivable       4,860        5,125
      Stock-based compensation expense                  1,352        1,694
      Deferred taxes                                    7,944        6,755
  Changes in operating assets and liabilities, net
   of acquisitions:
      Accounts receivable                              (7,185)      (4,871)
      Restricted cash                                      18        3,427
      Prepaid expenses and other assets                   439       (1,670)
      Accounts payable                                 (1,582)       7,140
      Accrued compensation and benefits                (4,018)      (4,362)
      Accrued self-insurance obligations               (2,569)       2,805
      Income taxes payable                               (478)        (290)
      Other accrued liabilities                          (216)      (2,457)
      Other long-term liabilities                        (492)      (4,144)
                                                  -----------  -----------
        Net cash provided by operating activities      15,392       31,212
                                                  -----------  -----------

Cash flows from investing activities:
  Capital expenditures                                 (9,319)     (10,656)
  Acquisitions, net of cash acquired                     (356)           -
                                                  -----------  -----------
      Net cash used for investing activities           (9,675)     (10,656)
                                                  -----------  -----------

Cash flows from financing activities:
  Principal repayments of long-term debt and
   capital lease obligations                           (2,800)     (16,036)
                                                  -----------  -----------
      Net cash used for financing activities           (2,800)     (16,036)
                                                  -----------  -----------

Net increase in cash and cash equivalents               2,917        4,520
Cash and cash equivalents at beginning of period       85,572      102,454
                                                  -----------  -----------
Cash and cash equivalents at end of period        $    88,489  $   106,974
                                                  ===========  ===========


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

   Net cash provided by operating activities      $    15,392  $    31,212
   Capital expenditures                                (9,319)     (10,656)
                                                  -----------  -----------
      Free cash flow                              $     6,073  $    20,556
                                                  ===========  ===========


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 debt service and other financing activities.




                SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (in thousands)

                                                    For the      For the
                                                  Six Months   Six Months
                                                     Ended        Ended
                                                    June 30,     June 30,
                                                      2011         2010
                                                  -----------  -----------
                                                  (unaudited)  (unaudited)

Cash flows from operating activities:
  Net income                                      $    18,058  $    20,171
  Adjustments to reconcile net income to net cash
   provided by operating activities, including
   discontinued operations:
      Loss on extinguishment of debt                   15,544       25,007
      Depreciation and amortization                      (974)        (948)
      Amortization of favorable and unfavorable
       lease intangibles                               10,504       11,139
      Stock-based compensation expense                  2,801        3,087
      Deferred taxes                                    9,976       11,691
  Changes in operating assets and liabilities, net
   of acquisitions:
      Accounts receivable                             (12,578)     (11,193)
      Restricted cash                                  (1,928)       2,271
      Prepaid expenses and other assets                   190        2,613
      Accounts payable                                 (3,501)       1,281
      Accrued compensation and benefits                  (580)       4,062
      Accrued self-insurance obligations               (3,912)       4,842
      Income taxes payable                                  -          338
      Other accrued liabilities                          (946)          13
      Other long-term liabilities                      (1,218)      (5,099)
                                                  -----------  -----------
        Net cash provided by operating activities      31,436       69,275
                                                  -----------  -----------

Cash flows from investing activities:
  Capital expenditures                                (18,156)     (27,714)
  Acquisitions, net of cash acquired                     (356)           -
                                                  -----------  -----------
      Net cash used for investing activities          (18,512)     (27,714)
                                                  -----------  -----------

Cash flows from financing activities:
  Principal repayments of long-term debt and
   capital lease obligations                           (5,598)     (36,976)
  Payment to non-controlling interest                       -       (2,025)
  Distribution to non-controlling interest                  -          (69)
                                                  -----------  -----------
      Net cash used for financing activities           (5,598)     (39,070)
                                                  -----------  -----------

Net increase in cash and cash equivalents               7,326        2,491
Cash and cash equivalents at beginning of period       81,163      104,483
                                                  -----------  -----------
Cash and cash equivalents at end of period        $    88,489  $   106,974
                                                  ===========  ===========


Reconciliation of net cash provided by operating
 activities to free cash flow:
   Net cash provided by operating activities      $    31,436  $    69,275
   Capital expenditures                               (18,156)     (27,714)
                                                  -----------  -----------
      Free cash flow                              $    13,280  $    41,561
                                                  ===========  ===========

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 debt service and other financing activities.




              SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES

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

                                                    For the      For the
                                                 Three Months Three Months
                                                     Ended        Ended
                                                    June 30,     June 30,
                                                      2011         2010
                                                  ------------ ------------
                                                  (unaudited)  (unaudited)

Total net revenues                                $    487,674 $    471,908
                                                  ------------ ------------

Net income                                        $      9,946 $      9,973
                                                  ------------ ------------


  Income from continuing operations                     10,362       10,625

  Income tax expense                                     7,201        7,135

  Interest, net                                          4,855       11,689

  Depreciation and amortization                          7,762       12,462
                                                  ------------ ------------

EBITDA                                            $     30,180 $     41,911

  Integration costs                                        167            -
                                                  ------------ ------------

Adjusted EBITDA                                   $     30,347 $     41,911

  Center rent expense                                   37,014       18,805
                                                  ------------ ------------

Adjusted EBITDAR                                  $     67,361 $     60,716
                                                  ============ ============


EBITDA is defined as earnings before loss on discontinued operations,
income taxes, interest, net, depreciation and amortization. Adjusted EBITDA
is defined as EBITDA before integration 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 NET INCOME TO ADJUSTED EBITDA and ADJUSTED EBITDAR
                              (in thousands)

                                                    For the      For the
                                                  Six Months   Six Months
                                                     Ended        Ended
                                                    June 30,     June 30,
                                                      2011         2010
                                                  ------------ ------------
                                                  (unaudited)  (unaudited)

Total net revenues                                $    971,571 $    942,323
                                                  ------------ ------------

Net income                                        $     18,058 $     20,171
                                                  ------------ ------------


  Income from continuing operations                     18,812       21,428

  Income tax expense                                    13,073       14,431

  Interest, net                                          9,854       23,578

  Depreciation and amortization                         15,341       24,810
                                                  ------------ ------------

EBITDA                                            $     57,080 $     84,247

  Integration costs                                        303            -
                                                  ------------ ------------

Adjusted EBITDA                                   $     57,383 $     84,247

  Center rent expense                                   73,926       37,352
                                                  ------------ ------------

Adjusted EBITDAR                                  $    131,309 $    121,599
                                                  ============ ============

EBITDA is defined as earnings before loss on discontinued operations,
income taxes, interest, net, depreciation and amortization. Adjusted EBITDA
is defined as EBITDA before integration 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 June 30, 2011
                                (unaudited)

                       Rehabilit-                     Elimination
                         ation    Medical                 of
            Inpatient   Therapy   Staffing  Other &   Affiliated  Consoli-
            Services    Services  Services  Corp Seg    Revenue    dated
             --------  ---------  --------  --------  ----------  --------
Nonaffiliated
 revenue     $435,683  $  29,979  $ 21,998  $     14  $        -  $487,674
Affiliated
 revenue            -     33,225       699         -     (33,924)        -
             --------  ---------  --------  --------  ----------  --------
  Total
   revenue   $435,683  $  63,204  $ 22,697  $     14  $  (33,924) $487,674
             --------  ---------  --------  --------  ----------  --------

Income (loss)
 from
 continuing
 operations  $ 33,426  $   3,427  $  1,462  $(27,953) $        -  $ 10,362
Income tax
 expense            -          -         -     7,201           -     7,201
Interest,
 net              (30)         -         -     4,885           -     4,855
Depreciation
 and
 amortization   6,487        227       187       861           -     7,762
             --------  ---------  --------  --------  ----------  --------

  EBITDA     $ 39,883  $   3,654  $  1,649  $(15,006) $        -  $ 30,180

Integration
 costs            167          -         -         -           -       167
             --------  ---------  --------  --------  ----------  --------

  Adjusted
   EBITDA    $ 40,050  $   3,654  $  1,649  $(15,006) $        -  $ 30,347

Center rent
 expense       36,717        127       170         -           -    37,014
             --------  ---------  --------  --------  ----------  --------

  Adjusted
   EBITDAR   $ 76,767  $   3,781  $  1,819  $(15,006) $        -  $ 67,361
             ========  =========  ========  ========  ==========  ========

  Normalized
   Adjusted
   EBITDA    $ 40,050  $   3,654  $  1,649  $(15,006) $        -  $ 30,347
  Normalized
   Adjusted
   EBITDAR   $ 76,767  $   3,781  $  1,819  $(15,006) $        -  $ 67,361


   Adjusted
     EBITDA
     margin       9.2%       5.8%      7.3%                            6.2%
   Adjusted
    EBITDAR
     margin      17.6%       6.0%      8.0%                           13.8%
 Normalized
   Adjusted
     EBITDA
     margin       9.2%       5.8%      7.3%                            6.2%
 Normalized
   Adjusted
    EBITDAR
     margin      17.6%       6.0%      8.0%                           13.8%

  See definitions of EBITDA, Adjusted EBITDA and Adjusted EBITDAR in the
   table "Reconciliation of Net Income 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 Six Months Ended June 30, 2011
                                (unaudited)

                        Rehabilit-                     Elimination
                          ation     Medical                of
              Inpatient  Therapy    Staffing  Other &  Affiliated Consoli-
              Services   Services   Services  Corp Seg   Revenue   dated
              --------  ----------  --------  --------  --------  --------
Nonaffiliated
 revenue      $867,160  $   60,076  $ 44,314  $     21  $      -  $971,571
Affiliated
 revenue             -      65,920     1,321         -   (67,241)        -
              --------  ----------  --------  --------  --------  --------
  Total
   revenue    $867,160  $  125,996  $ 45,635  $     21  $(67,241) $971,571
              --------  ----------  --------  --------  --------  --------

Income (loss)
 from
 continuing
 operations   $ 64,851  $    6,199  $  2,861  $(55,099) $      -  $ 18,812
Income tax
 expense             -           -         -    13,073         -    13,073
Interest, net      (36)          -         1     9,889         -     9,854
Depreciation
 and
 amortization   12,824         453       374     1,690         -    15,341
              --------  ----------  --------  --------  --------  --------

  EBITDA      $ 77,639  $    6,652  $  3,236  $(30,447) $      -  $ 57,080

Integration
 costs             303           -         -         -         -       303
              --------  ----------  --------  --------  --------  --------

  Adjusted
   EBITDA     $ 77,942  $    6,652  $  3,236  $(30,447) $      -  $ 57,383

Center rent
 expense        73,329         254       343         -         -    73,926
              --------  ----------  --------  --------  --------  --------

  Adjusted
   EBITDAR    $151,271  $    6,906  $  3,579  $(30,447) $      -  $131,309
              ========  ==========  ========  ========  ========  ========

  Normalized
   Adjusted
   EBITDA     $ 77,942  $    6,652  $  3,236  $(30,447) $      -  $ 57,383
  Normalized
   Adjusted
   EBITDAR    $151,271  $    6,906  $  3,579  $(30,447) $      -  $131,309


   Adjusted
     EBITDA
     margin        9.0%        5.3%      7.1%                          5.9%
   Adjusted
    EBITDAR
     margin       17.4%        5.5%      7.8%                         13.5%
 Normalized
   Adjusted
     EBITDA
     margin        9.0%        5.3%      7.1%                          5.9%
 Normalized
   Adjusted
    EBITDAR
     margin       17.4%        5.5%      7.8%                         13.5%

  See definitions of EBITDA, Adjusted EBITDA and Adjusted EBITDAR in the
   table "Reconciliation of Net Income 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 June 30, 2010
                                (unaudited)



                        Rehabilit-                     Elimination
                          ation     Medical                of
              Inpatient  Therapy    Staffing  Other &  Affiliated Consoli-
              Services   Services   Services  Corp Seg   Revenue   dated
              --------  ----------  --------  --------  --------  --------
Nonaffiliated
 revenue      $419,010  $   30,017  $ 22,875  $      6  $      -  $471,908
Affiliated
 revenue             -      21,034       496         -   (21,530)        -
              --------  ----------  --------  --------  --------  --------
  Total
   revenue    $419,010  $   51,051  $ 23,371  $      6  $(21,530) $471,908
              --------  ----------  --------  --------  --------  --------

Income (loss)
 from
 continuing
 operations   $ 39,370  $    3,921  $  1,802  $(34,468) $      -  $ 10,625
Income tax
 expense             -           -         -     7,135         -     7,135
Interest, net    2,619           -         -     9,070         -    11,689
Depreciation
 and
 amortization   11,319         159       182       802         -    12,462
              --------  ----------  --------  --------  --------  --------

  EBITDA      $ 53,308  $    4,080  $  1,984  $(17,461) $      -  $ 41,911

Integration
 costs               -           -         -         -         -         -
              --------  ----------  --------  --------  --------  --------

  Adjusted
   EBITDA     $ 53,308  $    4,080  $  1,984  $(17,461) $      -  $ 41,911

Center rent
 expense        18,484         118       203         -         -    18,805
              --------  ----------  --------  --------  --------  --------

  Adjusted
   EBITDAR    $ 71,792  $    4,198  $  2,187  $(17,461) $      -  $ 60,716
              ========  ==========  ========  ========  ========  ========

  Normalized
   Adjusted
   EBITDA     $ 53,308  $    4,080  $  1,984  $(15,213) $      -  $ 44,159
  Normalized
   Adjusted
   EBITDAR    $ 71,792  $    4,198  $  2,187  $(15,213) $      -  $ 62,964


    Adjusted
      EBITDA
      margin      12.7%        8.0%      8.5%                          8.9%
    Adjusted
     EBITDAR
      margin      17.1%        8.2%      9.4%                         12.9%
  Normalized
    Adjusted
      EBITDA
      margin      12.7%        8.0%      8.5%                          9.4%
  Normalized
    Adjusted
     EBITDAR
      margin      17.1%        8.2%      9.4%                         13.3%

  See definitions of EBITDA, Adjusted EBITDA and Adjusted EBITDAR in the
   table "Reconciliation of Net Income 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 Six Months Ended June 30, 2010
                                (unaudited)

                        Rehabilit-                     Elimination
                          ation     Medical                of
              Inpatient  Therapy    Staffing  Other &  Affiliated Consoli-
              Services   Services   Services  Corp Seg   Revenue   dated
              --------  ----------  --------  --------  --------  --------
Nonaffiliated
 revenue      $836,697  $   59,381  $ 46,231  $     14  $      -  $942,323
Affiliated
 revenue             -      42,187       640         -   (42,827)        -
              --------  ----------  --------  --------  --------  --------
  Total
   revenue    $836,697  $  101,568  $ 46,871  $     14  $(42,827) $942,323
              --------  ----------  --------  --------  --------  --------

Income (loss)
 from
 continuing
 operations   $ 77,432  $    7,797  $  3,283  $(67,084) $      -  $ 21,428
Income tax
 expense             -           -         -    14,431         -    14,431
Interest, net    5,343           -        (1)   18,236         -    23,578
Depreciation
 and
 amortization   22,501         311       362     1,636         -    24,810
              --------  ----------  --------  --------  --------  --------

  EBITDA      $105,276  $    8,108  $  3,644  $(32,781) $      -  $ 84,247

Integration
 costs               -           -         -         -         -         -
              --------  ----------  --------  --------  --------  --------

  Adjusted
   EBITDA     $105,276  $    8,108  $  3,644  $(32,781) $      -  $ 84,247

Center rent
 expense        36,699         240       413         -         -    37,352
              --------  ----------  --------  --------  --------  --------

  Adjusted
   EBITDAR    $141,975  $    8,348  $  4,057  $(32,781) $      -  $121,599
              ========  ==========  ========  ========  ========  ========

  Normalized
   Adjusted
   EBITDA     $105,276  $    8,108  $  3,644  $(30,533) $      -  $ 86,495
  Normalized
   Adjusted
   EBITDAR    $141,975  $    8,348  $  4,057  $(30,533) $      -  $123,847


    Adjusted
      EBITDA
      margin      12.6%        8.0%      7.8%                          8.9%
    Adjusted
     EBITDAR
      margin      17.0%        8.2%      8.7%                         12.9%
  Normalized
    Adjusted
      EBITDA
      margin      12.6%        8.0%      7.8%                          9.2%
  Normalized
    Adjusted
     EBITDAR
      margin      17.0%        8.2%      8.7%                         13.1%

  See definitions of EBITDA, Adjusted EBITDA and Adjusted EBITDAR in the
   table "Reconciliation of Net Income to Adjusted EBITDA and Adjusted
   EBITDAR".
  See normalizing adjustments in the table "Normalizing Adjustments - Year
   to Date Comparison".



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


                        For the                       For the
                  Three Months Ended              Six Months Ended
                        June 30,                      June 30,
                -----------------------       -----------------------
                  2011           2010           2011           2010
Consolidated
 Company

Revenues -
 Non-affiliated
 (in thousands)
  Skilled
   Nursing and
   similar
   facilities   $420,321       $407,091       $837,464       $813,267
  Hospice         14,907         11,369         28,762         22,356
  Other -
   Inpatient
   Services          455            550            934          1,074
                --------       --------       --------       --------
   Inpatient
    Services     435,683        419,010        867,160        836,697

  Rehabilitation
   Therapy
   Services       29,979         30,017         60,076         59,381
  Medical
   Staffing
   Services       21,998         22,875         44,314         46,231
  Other -
   non-core
   businesses         14              6             21             14
                --------       --------       --------       --------
      Total     $487,674       $471,908       $971,571       $942,323
                ========       ========       ========       ========


Revenue Mix -
 Non-affiliated
 (in thousands)
  Medicare      $160,078   33% $140,717   30% $317,699   33% $282,240   30%
  Medicaid       186,482   38%  188,903   40%  371,161   38%  376,209   40%
  Private and
   Other         111,093   23%  113,373   24%  223,104   23%  225,660   24%
  Managed Care/
   Insurance      24,907    5%   23,940    5%   49,375    5%   48,334    5%
  Veterans         5,114    1%    4,975    1%   10,232    1%    9,880    1%
                --------  ---  --------  ---  --------  ---  --------  ---
      Total     $487,674  100% $471,908  100% $971,571  100% $942,323  100%
                ========  ===  ========  ===  ========  ===  ========  ===


Inpatient
 Services Stats

 Number of
  centers:           199            199            199            199
 Number of
  available
  beds:           22,062         22,033         22,062         22,033
 Occupancy %:       86.4%          87.1%          86.7%          87.4%


 Payor Mix %
  based on
  patient days:
   Medicare -
    SNF Beds        15.9%          15.3%          15.8%          15.5%
   Managed care/
    Ins. - SNF
    Beds             4.1%           4.0%           4.1%           4.1%
                --------       --------       --------       --------
       Total SNF
        skilled
        mix         20.0%          19.3%          19.9%          19.6%
                --------       --------       --------       --------
  Medicare          14.6%          14.0%          14.5%          14.1%
  Medicaid          61.8%          62.0%          61.9%          61.9%
  Private and
   Other            18.6%          19.1%          18.6%          19.1%
  Managed Care/
   Insurance         3.8%           3.7%           3.8%           3.7%
  Veterans           1.2%           1.2%           1.2%           1.2%

 Revenue Mix %
  of revenues:
   Medicare -
    SNF Beds        35.2%          32.2%          35.1%          32.4%
   Managed care/
    Ins. - SNF
    Beds             6.1%           6.0%           6.1%           6.1%
                --------       --------       --------       --------
       Total SNF
        skilled
        mix         41.3%          38.2%          41.2%          38.5%
                --------       --------       --------       --------
  Medicare          35.7%          32.5%          35.6%          32.6%
  Medicaid          42.8%          45.1%          42.8%          45.0%
  Private and
   Other            14.6%          15.6%          14.8%          15.5%
  Managed Care/
   Insurance         5.7%           5.6%           5.6%           5.7%
  Veterans           1.2%           1.2%           1.2%           1.2%


 Revenues PPD:
  Medicare
   (Part A)     $ 519.04       $ 464.04       $ 519.97       $ 465.02
  Medicare
   Blended Rate
   (Part A & B) $ 556.75       $ 504.15       $ 556.86       $ 503.17
  Medicaid      $ 174.00       $ 173.03       $ 173.13       $ 172.81
  Medicaid, net
   of provider
   taxes        $ 159.15       $ 159.62       $ 158.38       $ 159.35
  Private and
   Other        $ 185.88       $ 185.61       $ 189.61       $ 185.96
  Managed Care/
   Insurance    $ 376.97       $ 367.37       $ 372.20       $ 365.58
  Veterans      $ 246.89       $ 240.64       $ 246.20       $ 242.28


Rehab contracts

 Affiliated          179            131            179            131
 Non-affiliated      342            335            342            335

 Average Qtrly
  Revenue per
  Contract (in
  thousands)    $    121       $    110       $    121       $    109




                SUN HEALTHCARE GROUP, INC. AND SUBSIDIARIES

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



                             AS REPORTED - 2nd QUARTER 2011
             -------------------------------------------------------------
                                                Income from
                     Adjusted  Adjusted         Continuing  Disc     Net
             Revenue  EBITDAR   EBITDA  Pre-tax Operations  Ops    Income
             -------- -------  -------  -------  --------  ------  -------

As Reported
 2nd QUARTER
 2011        $487,674 $67,361  $30,347  $17,563  $ 10,362  $ (416) $ 9,946
  Percent of
     Revenue             13.8%     6.2%     3.6%      2.1%   -0.1%     2.0%

Normalizing
 Adjustments:

 None               -       -        -        -         -       -        -
             -------- -------  -------  -------  --------  ------  -------

Normalized
 As Reported
 - 2nd
 QUARTER
 2011        $487,674 $67,361  $30,347  $17,563  $ 10,362  $ (416) $ 9,946
             ======== =======  =======  =======  ========  ======  =======
  Percent of
     Revenue             13.8%     6.2%     3.6%      2.1%   -0.1%     2.0%

Diluted EPS:
 As Reported                                     $   0.40  $(0.02) $  0.38
          As
  Normalized                                     $   0.40  $(0.02) $  0.38




                             AS REPORTED - 2nd QUARTER 2010
             -------------------------------------------------------------
                                                Income from
                     Adjusted  Adjusted         Continuing  Disc     Net
             Revenue  EBITDAR   EBITDA  Pre-tax Operations  Ops    Income
             -------- -------  -------  -------  --------  ------  -------

As Reported -
 2nd QUARTER
 2010        $471,908 $60,716  $41,911  $17,760  $ 10,625  $ (652) $ 9,973
  Percent of
     Revenue             12.9%     8.9%     3.8%      2.3%   -0.1%     2.1%

Normalizing
 Adjustments:

 REIT
  separation
  transaction
  costs             -   2,248    2,248    2,248     1,326       -    1,326
             -------- -------  -------  -------  --------  ------  -------

Normalized
 As Reported
 - 2nd
 QUARTER
 2010        $471,908 $62,964  $44,159  $20,008  $ 11,951  $ (652) $11,299
             ======== =======  =======  =======  ========  ======  =======
  Percent of
     Revenue             13.3%     9.4%     4.2%      2.5%   -0.1%     2.4%

Diluted EPS:
 As Reported                                     $   0.71  $(0.04) $  0.67
          As
  Normalized                                     $   0.80  $(0.04) $  0.76


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

Normalizing adjustments are transactions or adjustments not related to
ongoing operations and consist of REIT separation transaction costs.

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 - SIX MONTHS 2011
           ---------------------------------------------------------------
                                               Income from
                    Adjusted  Adjusted         Continuing   Disc     Net
           Revenue   EBITDAR   EBITDA  Pre-tax Operations   Ops     Income
           -------- --------  -------  -------  --------  -------  -------

As Reported
 - Six
 Months
 2011      $971,571 $131,309  $57,383  $31,885  $ 18,812  $  (754) $18,058
Percent of
   Revenue              13.5%     5.9%     3.3%      1.9%    -0.1%     1.9%

Normalizing
 Adjustments:

 None             -        -        -        -         -        -        -
           -------- --------  -------  -------  --------  -------  -------

Normalized
 As Reported
 - Six
 Months
 2011      $971,571 $131,309  $57,383  $31,885  $ 18,812  $  (754) $18,058
           ======== ========  =======  =======  ========  =======  =======
Percent of
   Revenue              13.5%     5.9%     3.3%      1.9%    -0.1%     1.9%

Diluted EPS:
        As
  Reported                                      $   0.72  $ (0.02) $  0.70
        As
Normalized                                      $   0.72  $ (0.02) $  0.70





                            AS REPORTED - SIX MONTHS 2010
           ---------------------------------------------------------------
                                               Income from
                    Adjusted  Adjusted         Continuing   Disc     Net
           Revenue   EBITDAR   EBITDA  Pre-tax Operations   Ops     Income
           -------- --------  -------  -------  --------  -------  -------
As Reported
 - Six
 Months
 2010      $942,323 $121,599  $84,247  $35,859  $ 21,428  $(1,257) $20,171
Percent of
   Revenue              12.9%     8.9%     3.8%      2.3%    -0.1%     2.1%

Normalizing
 Adjustments:

 REIT
  separation
  transaction
  costs           -    2,248    2,248    2,248     1,326        -    1,326
           -------- --------  -------  -------  --------  -------  -------

Normalized
 As Reported
 - Six
 Months
 2010      $942,323 $123,847  $86,495  $38,107  $ 22,754  $(1,257) $21,497
           ======== ========  =======  =======  ========  =======  =======
Percent of
   Revenue              13.1%     9.2%     4.0%      2.4%    -0.1%     2.3%


Diluted EPS:
        As
  Reported                                      $   1.45  $ (0.09) $  1.36
        As
Normalized                                      $   1.54  $ (0.09) $  1.45



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

Normalizing adjustments are transactions or adjustments not related to
ongoing operations and consist of REIT separation transaction costs.

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.

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