Skilled Healthcare Group Reports Third Quarter 2012 Adjusted EPS Of $0.21; HUD Approves SKH Portfolio Credit For Up To $460

Skilled Healthcare Group Reports Third Quarter 2012 Adjusted EPS Of $0.21; HUD
    Approves SKH Portfolio Credit For Up To $460 Million On 78 Properties

PR Newswire

FOOTHILL RANCH, Calif., Nov. 5, 2012

FOOTHILL RANCH, Calif., Nov.5, 2012 /PRNewswire/ --Skilled Healthcare Group,
Inc. (NYSE: SKH) today announced its consolidated financial operating results
for the three and nine-month period ended September30, 2012. For the third
quarter of 2012, the Company reported revenue of $216.6 million, Adjusted
EBITDA^1 of $24.1 million, Adjusted net income per share^2 of $0.21, GAAP net
income per share of $0.16 and a $9.8 million reduction in outstanding debt.
Additionally the Company announced that it has received the formal portfolio
conditional credit approval from the U.S. Department of Housing and Urban
Development (HUD) for up to an aggregate of $460 million in HUD insured loans
secured by up to 78 facilities under HUD's Section 232 loan program, which
provides loans for nursing homes, assisted living and related facilities. The
Company has not yet determined the amount of borrowings it will ultimately
seek under the HUD insured loan program, and all loan applications will be
subject to further review and approval by HUD.

"We are excited about the opportunity to secure long-term fixed-rate loans
under the HUD 232 program. Our ability to secure loans of this type with the
real property assets we own exemplifies a significant advantage of owning
rather than leasing the real property of over 77% of the skilled nursing and
assisted living facilities operated by our subsidiaries. Our senior secured
credit facility allows us to borrow up to $250 million in HUD insured loans if
we use the net proceeds to pay down existing term debt under the senior
secured credit facility. HUD insured borrowings beyond $250 million will
necessitate either refinancing the senior secured credit facility in full or
otherwise seeking a waiver or amendment from the senior secured lenders. We
anticipate savings of approximately $10 million annually in interest expense
from the first $250 million in HUD insured loans that we are able to close.
Due to the lengthy processing time required for HUD loans, we would not expect
that the loan applications we submit would begin to close until at least the
first quarter of 2013. We believe that lowering our debt service by such a
substantial annual amount under these fully amortizing 35 year loans would
better position us to weather the continued challenges in the healthcare
services profession. In particular, our long-term care segment has seen our
skilled census affected by the continued shift of traditional Medicare to
Medicare Advantage, or managed care, patients this quarter, who contribute a
lower daily revenue rate than our traditional Medicare patients," said Boyd
Hendrickson, Chairman and Chief Executive Officer of Skilled Healthcare Group.

Mr. Hendrickson continued, "In spite of the challenging environment that
persisted through the third quarter of 2012, we generated strong cash flows
from operating activities of $30.9 million so far this year, which enabled us
to reduce debt from $475.5 million as of December 31, 2011 to $453.5 million
at September 30, 2012."

"I am particularly proud of the exemplary work of the professional staff in
our agencies and facilities to provide high quality patient care. The quality
and performance initiatives by our operating subsidiaries to reduce hospital
readmissions, improve five-star scores, and improve other quality measures has
been satisfying to say the least. The bleak reimbursement and dynamic
operating environment have not dimmed the enthusiasm amongst the team to
continually improve," Mr. Hendrickson stated.

Third Quarter 2012 Results
Revenue for the quarter ended September30, 2012 was $216.6 million, a
decrease of 0.1% when compared to $216.8 million in the third quarter of
2011. Skilled mix^3 decreased 100 basis points to 21.7% in the third quarter
of 2012 from 22.7% in the third quarter of 2011. Quality mix^4 in the third
quarter of 2012 decreased 190 basis points to 68.8%, compared to 70.7% in the
prior year period.

Adjusted EBITDA was $24.1 million, or 11.1% of revenue, for the quarter ended
September30, 2012, a decrease of 28.6% compared to $33.8 million, or 15.6% of
revenue, in the same period a year ago. Adjusted EBITDAR^5 was $28.8 million,
or 13.3% of revenue, for the quarter ended September30, 2012, a decrease of
24.6% compared to $38.2 million, or 17.6% of revenue, for the quarter ended
September30, 2011.

Net income for the quarter ended September30, 2012 totaled $6.1 million, as
compared to a net loss ^ of $232.8 million for the third quarter of 2011,
which was attributable in large part to a non-cash intangible asset impairment
charge of $270.5 million. Adjusted net income for the quarter ended
September30, 2012, totaled $8.0 million, a decrease of 32.7% compared to
adjusted net income of $11.9 million for the third quarter of 2011. Adjusted
net income^2 excludes certain items as described in the Adjusted Net Income
Reconciliation table at the end of this press release.

Net income per diluted share was $0.16 for the quarter ended September30,
2012, as compared to a net loss per diluted share of $6.26 for the same period
in 2011. Adjusted net income per diluted share was $0.21 for the quarter
ended September30, 2012, a decrease of 34.4% compared to adjusted net income
per diluted share of $0.32 for the quarter ended September30, 2011.

Long-Term Care Services Segment
Revenue for our long-term care services segment in the quarter ended
September30, 2012 was $164.6 million, a decrease of $7.6 million, or 4.4%, as
compared to $172.2 million for the same period a year ago. Revenue for this
segment represented 76.0% of total revenue in the third quarter of 2012,
compared to 79.4% of total revenue in the third quarter of 2011. The decrease
in revenue was primarily related to lower per patient day (PPD) rates from the
impact of the October 2011 Medicare rate cut, a decrease in our skilled mix,
and a shift from Medicare days to Managed Medicare days as more seniors elect
Medicare Advantage.

Therapy Services Segment
Revenue for Hallmark Rehabilitation, our rehabilitation therapy services
segment, was $26.1 million for the quarter ended September30, 2012, an
increase of $3.0 million, or 13.0%, compared to the same period a year ago.
Third-party rehabilitation therapy accounted for 12.1% of total revenue in the
third quarter of 2012, compared to 10.7% of total revenue in the third quarter
of 2011.

Hospice and Home Health Services Segment
Revenue for Signature Hospice and Home Health, our hospice and home health
care services segment, was $25.9 million in the third quarter of 2012, an
increase of $4.4 million, or 20.5%, compared to $21.5 million in the third
quarter of 2011. Average daily hospice census grew to 1,433 for the
three-months ended September30, 2012 from 1,131 for the three-months ended
September30, 2011, an increase of 26.7%. The increase in census was due in
significant part to our October 2011 acquisition of the two Cornerstone
hospice agencies.

Year-to-Date 2012 Results
Revenue for the nine months ended September 30, 2012 was $653.4 million, a
decrease of 0.1% when compared to $654.3 million in the nine months ended
September 30, 2011. Skilled mix decreased 130 basis points to 22.3% in the
first nine months of 2012 from 23.6% in the first nine months of 2011.
Quality mix in the first nine months of 2012 decreased 140 basis points to
69.7%, compared to 71.1% in the prior year period.

Adjusted EBITDA was $77.0 million, or 11.8% of revenue, for the nine months
ended September 30, 2012, a decrease of 25.9% compared to $103.9 million, or
15.9% of revenue, in the same period a year ago. Adjusted EBITDAR was $90.7
million, or 13.9% of revenue, for the first nine months of 2012, a decrease of
22.8% compared to $117.5 million, or 18.0% of revenue, for the first nine
months of 2011.

Net income for the nine months ended September 30, 2012, totaled $15.9
million, as compared to a net loss ^ of $210.8 million for the nine months
ended September 30, 2011, which was attributable in large part to a non-cash
intangible asset impairment charge of $270.5 million in the third quarter of
2011. Adjusted net income for the nine months ended September 30, 2012,
totaled $21.1 million, a decrease of 40.4% compared to adjusted net income of
$35.4 million for the nine months ended September 30, 2011. Adjusted net
income for the nine months ended September 30, 2012, excludes certain items as
described in the Reconciliation of Income Before Provision for Income Taxes to
Adjusted Net Income table at the end of this press release.

Net income per diluted share was $0.42 for the nine months ended September 30,
2012, as compared to net loss per share of $5.67 for the same period in 2011.
Adjusted net income per diluted share was $0.56 for the nine months ended
September 30, 2012, a decrease of 41.1% compared to adjusted net income per
diluted share of $0.95 for the same period in 2011. Additionally, outstanding
debt has been reduced by $22.0 million since December 31, 2011.

Long-Term Care Services Segment
Revenue for our long-term care services segment in the nine months ended
September 30, 2012 was $495.7 million, a decrease of $31.2 million, or 5.9%,
as compared to $526.9 million for the same period a year ago. Revenue for
this segment represented 75.9% of total revenue in the first nine months of
2012, compared to 80.5% of total revenue in the first nine months of 2011.
The decrease in revenue was primarily related to lower PPD rates from the
impact of the October 2011 Medicare rate cut, a decrease in our skilled mix,
and a shift from Medicare days to Managed Medicare days as more seniors elect
Medicare Advantage.

Therapy Services Segment
Revenue for Hallmark Rehabilitation, our rehabilitation therapy services
segment, was $78.7 million for the nine months ended September 30, 2012, an
increase of $9.7 million, or 12%, compared to the same period a year ago.
Third-party rehabilitation therapy accounted for 12.0% of total revenue in the
first nine months of 2012, compared to 10.5% of total revenue in the first
nine months of 2011.

Hospice and Home Health Services Segment
Revenue for Signature Hospice and Home Health, our hospice and home health
care services segment, was $79.0 million in the first nine months of 2012, an
increase of $20.6 million, or 35.3%, compared to $58.4 million in the first
nine months of 2011. Average daily hospice census grew to 1,404 for the nine
months ended September 30, 2012 from 1,070 for the nine months ended September
30, 2011, an increase of 31.2%. The increase in census was due in significant
part to our October 2011 acquisition of the two Cornerstone hospice agencies.

2012 Guidance
Skilled Healthcare Group, Inc. has revised its 2012 guidance based upon
current occupancy and skilled mix levels in its long-term care operating
segment combined with the negative impact of the Medicare Part B therapy cap
exception process that became effective October 1, 2012. The Company now
anticipates 2012 consolidated revenue to be between $870.0 million and $875.0
million, Adjusted EBITDA to be in the range of $102.0 million to $104.0
million, Adjusted EBITDAR to be in the range of $120.5 million to $122.5
million and adjusted net income per common diluted share to be between $0.74
and $0.76. Adjusted EBITDA and EBITDAR are not adjusted for the reconciling
items of approximately $2.8 million that were adjusting items for Adjusted EPS
for the three months ended September 30, 2012; these were the 2011 hospice cap
adjustment, non-routine legal expense and IT outsourcing evaluation costs as
noted in the Reconciliation of Forecasted Adjusted Net Income per Share to
Forecasted Net Income per Share in this release. This guidance also assumes
the following:

  oMarket basket increase of 1.7% in Medicare beginning October 1, 2012.
  o2012 capital expenditures of approximately $17 to $20 million.
  oAverage interest rate on outstanding debt of approximately 7.5%.
  oAn effective tax rate of 38%.
  oNo additional acquisitions, developments or divestitures.

Conference Call
A conference call and webcast will be held tomorrow, Tuesday, November 6, at
9:00 a.m. Pacific Time (12:00 noon Eastern Time) to discuss Skilled Healthcare
Group's consolidated financial results for the three and nine-month period
ended September30, 2012 and its outlook for the full year 2012.

To participate in the call, interested parties may dial (800) 847-9525 and
reference conference ID 44824910. Alternatively, interested parties may
access the call in listen-only mode at www.skilledhealthcaregroup.com. A
replay of the conference call will be available after 12:00 noon Pacific Time
at www.skilledhealthcaregroup.com.

About Skilled Healthcare Group, Inc.
Skilled Healthcare Group, Inc., based in Foothill Ranch, California, is a
holding company with subsidiary healthcare services companies, which in the
aggregate had trailing twelve month revenue of approximately $868 million and
approximately 15,000 employees as of September30, 2012. Skilled Healthcare
Group and its wholly-owned companies, collectively referred to as the
"Company," operate long-term care facilities and provide a wide range of
post-acute care services, with a strategic emphasis on sub-acute specialty
health care. The Company operates long-term care facilities in California,
Iowa, Kansas, Missouri, Nebraska, Nevada, New Mexico and Texas, including 74
skilled nursing facilities that offer sub-acute care and rehabilitative and
specialty health skilled nursing care, and 22 assisted living facilities that
provide room and board and social services. In addition, the Company provides
physical, occupational and speech therapy in Company-operated facilities and
unaffiliated facilities. Furthermore, the Company provides hospice and home
health care in Arizona, California, Idaho, Montana, New Mexico and Nevada. The
Company leases 5 skilled nursing facilities in California to an unaffiliated
third party operator. References made in this release to "Skilled Healthcare,"
"the Company," "we," "us" and "our" refer to Skilled Healthcare Group, Inc.
and each of its wholly-owned companies. More information about Skilled
Healthcare is available at www.skilledhealthcaregroup.com.

Footnotes
(1) Adjusted earnings before interest, taxes, depreciation and
amortization, or Adjusted EBITDA, reflects the non-GAAP adjustments to net
income that are reflected in the Reconciliation of Net Income to EBITDA,
Adjusted EBITDA and Adjusted EBITDAR in this press release. EBITDA is net
income before depreciation, amortization and interest expense (net of interest
income) and the provision for income taxes. EBITDAR is EBITDA excluding
facility rent expense.

(2) Adjusted net income per diluted share and adjusted net income each
reflect the non-GAAP adjustments to income before provision for income taxes
that are reflected in the Adjusted Net Income Reconciliation table in this
press release.

(3) Skilled mix represents the number of Medicare and non-Medicaid
managed care patient days at Skilled Healthcare Group's affiliated skilled
nursing facilities divided by the total number of patient days at Skilled
Healthcare Group's affiliated skilled nursing facilities for any given period.

(4) Quality mix represents non-Medicaid revenue as a percentage of total
revenue.

(5) Adjusted EBITDAR is Adjusted EBITDA excluding facility rent expense
as reflected in the Reconciliation of Net Income to EBITDA, Adjusted EBITDA
and Adjusted EBITDAR table in this press release.

Forward-Looking Statements
This release includes "forward-looking statements." You can identify these
statements by the fact that they do not relate strictly to historical or
current facts. These statements contain words such as "may," "will,"
"project," "might," "expect," "believe," "anticipate," "intend," "could,"
"would," "estimate," "continue" or "pursue," or the negative or other
variations thereof or comparable terminology. They include statements about
Skilled Healthcare's expectations for 2012 full year consolidated revenue,
Adjusted EBITDA, Adjusted EBITDAR and adjusted net income per diluted share,
as well as statements regarding the Company's pursuit of HUD-insured loans.
These forward-looking statements are based on current expectations and
projections about future events.

Investors are cautioned that forward-looking statements are not guarantees of
future performance or results and involve risks and uncertainties that cannot
be predicted or quantified and, consequently, the actual performance of
Skilled Healthcare may differ materially from that expressed or implied by
such forward-looking statements. For example, there can be no assurance that
the Company will ultimately be approved for any HUD-insured loans, what the
timing of any approvals would be, or what the actual interest rates on any
HUD-insured loans would be. The HUD loan approval process is subject to a
number of contingencies, many of which are beyond our control.

Additionally, the Company faces a number of other risks and uncertainties,
including, but are not limited to, the factors described in Skilled
Healthcare's Annual Report on Form 10-K for the year ended December31, 2011
filed with the Securities and Exchange Commission (including the sections
entitled "Risk Factors" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained therein) and in our subsequent
reports on Form 10-Q and Form 8-K.

Any forward-looking statements are made only as of the date of this release.
Skilled Healthcare disclaims any obligation to update the forward-looking
statements. Investors are cautioned not to place undue reliance on these
forward-looking statements.



Skilled Healthcare Group, Inc.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)


                       Three Months Ended          Nine Months Ended September
                       September 30,               30,
                       2012       2011         2012           2011
Revenue:
Net patient service    $ 215,854  $ 216,078    $            $   
revenue                                        651,120       652,855
Lease facility revenue 769        746          2,291          1,492
                       216,623    216,824      653,411        654,347
Expenses:
Cost of services
(exclusive of rent
cost of revenue and    182,243    173,548      545,589        520,258
depreciation and
amortization shown
below)
Rent cost of revenue   4,639      4,413        13,734         13,530
General and            6,021      5,423        18,548         19,553
administrative
Litigation settlement
costs, (net of         —          (4,488)      —              (4,488)
recoveries)
Depreciation and       6,258      6,459        19,124         19,036
amortization
Impairment of          —          270,478      —              270,478
long-lived assets
                       199,161    455,833      596,995        838,367
Other (expenses)
income:
Interest expense       (8,790)    (9,711)      (28,876)       (29,319)
Interest income        125        170          402            553
Other (expense)        (57)       (123)        20             (477
income, net
Equity in earnings of  461        472          1,422          1,583
joint venture
Debt retirement costs  (168)      —            (4,126)        —
Total other (expenses) (8,429)    (9,192)      (31,158)       (27,660)
income, net
Income (loss) before
provision for (benefit 9,033      (248,201)    25,258         (211,680)
from) income taxes
Provision for (benefit 2,965      (15,387)     9,356          (911)
from) income taxes
Net income (loss)      $ 6,068    $ (232,814)  $   15,902     $  (210,769)
Income (loss) per      $ 0.16     $ (6.26)     $   0.42       $  (5.67)
share, basic
Income (loss) per      $ 0.16     $ (6.26)     $        $  (5.67)
share, diluted                                 0.42
Weighted-average
common shares          37,431     37,164       37,372         37,133
outstanding, basic
Weighted-average
common shares          37,503     37,164       37,534         37,133
outstanding, diluted







Skilled Healthcare Group, Inc.

Condensed Consolidated Balance Sheet and Cash Flow Data

(In thousands)


                                         September30, 2012  December31, 2011
                                         (Unaudited)         (Audited)
Balance Sheet Data:
ASSETS
Cash and cash equivalents                $    3,199          $    16,017
Other current assets                     137,958             129,513
Property and equipment and leased        379,759             386,294
facility assets, net
Goodwill                                 85,609              84,299
Other assets                             78,061              81,076
Total assets                             $    684,586        $    697,199
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities less current portion $    95,519         $    99,780
of long-term debt
Current portion of long-term debt        14,493              4,414
Other long-term liabilities              42,656              48,340
Long-term debt, less current portion     439,047             471,069
Stockholders' equity                     92,871              73,596
Total liabilities and stockholders'      $    684,586        $    697,199
equity







                                               Nine Months Ended September 30,
                                               2012             2011
                                               (Unaudited)      (Unaudited)
Cash Flows Data:
Net cash provided by operating activities      $   30,936       $   66,191
Net cash used in investing activities          (12,516)         (24,713)
Net cash used in financing activities          (31,238)         (29,228)
(Decrease) increase in cash and cash           (12,818)         12,250
equivalents
Cash and cash equivalents at beginning of      16,017           4,192
period
Cash and cash equivalents at end of period     $   3,199        $   16,442







Skilled Healthcare Group, Inc.

Consolidated Key Performance Indicators

(Unaudited)


The following table summarizes our key performance indicators, along with
other statistics, for each of the dates or periods indicated


                        Three Months Ended     Nine Months Ended September
                        September 30,          30,
                        2012      2011         2012          2011
Occupancy statistics
(skilled nursing
facilities):
Available beds in
service at end of       8,813     8,814        8,813         8,814
period
Available patient days  810,303   810,670      2,413,572     2,438,072
Actual patient days     669,531   672,636      2,003,210     2,025,664
Occupancy percentage    82.6%     83.0%        83.0%         83.1%
Average daily number of 7,278     7,311        7,311         7,420
patients
Hospice average daily   1,433     1,131        1,404         1,070
census
Home health
episodic-based          2,083     1,665        6,167         3,516
admissions
Home health
episodic-based          459       264          1,152         563
recertifications
EBITDA (in thousands)   $ 23,956  $ (232,201)  $   72,856    $  (163,878)
Adjusted EBITDA (in     $ 24,124  $ 33,789     $   76,982    $  103,941
thousands)
Adjusted EBITDA margin  11.1%     15.6%        11.8%         15.9%
Adjusted EBITDAR (in    $ 28,763  $ 38,202     $   90,716    $  117,471
thousands)
Adjusted EBITDAR margin 13.3%     17.6%        13.9%         18.0%
Revenue per patient day
(skilled nursing
facilities prior to
intercompany
eliminations):
LTC only Medicare (Part $ 510     $ 572        $   509       $  574
A)
Medicare blended rate   574       636          572           633
(Part A & B)
Managed care (Part A)   382       389          383           388
Managed care blended   391       397          392           391
rate (Part A & B)
Medicaid                160       153          158           154
Private and other       167       175          178           177
Weighted-average for    $ 235     $ 246        $   238       $  251
all
Patient days by payor
(skilled nursing
facilities):
Medicare                85,591    95,771       267,315       311,498
Managed care            59,396    56,841       179,882       166,525
Total skilled mix days  144,987   152,612      447,197       478,023
Private pay and other   108,126   108,799      319,568       323,903
Medicaid                416,418   411,225      1,236,445     1,223,738
Total days              669,531   672,636      2,003,210     2,025,664
Patient days as a
percentage of total
patient days (skilled
nursing facilities):
Medicare                12.8%     14.2%        13.3%         15.4%
Managed care            8.9       8.5          9.0           8.2
Skilled Mix             21.7      22.7         22.3          23.6
Private pay and other   16.1      16.2         16.0          16.0
Medicaid                62.2      61.1         61.7          60.4
Total                   100.0%    100.0%       100.0%        100.0%
Revenue from (total
company):
Medicare                32.9%     36.5%        33.9%         38.1%
Managed care, private   35.9      34.2         35.8          33.0
pay, and other
Quality mix             68.8      70.7         69.7          71.1
Medicaid                31.2      29.3         30.3          28.9
Total                   100.0%    100.0%       100.0%        100.0%





Skilled Healthcare Group, Inc.

Facility Ownership

(Unaudited)


                                                          As of September 30,
                                                          2012       2011
Facilities:
Skilled nursing facilities operated:
Owned                                                     52         52
Leased                                                    22         22
Total skilled nursing facilities operated                 74         74
Total licensed beds                                       9,181      9,180
Skilled nursing facilities leased to unaffiliated third   5          5
party operator
Assisted living facilities
Owned                                                     21         21
Leased                                                    1          2
Total assisted living facilities                          22         23
Total licensed beds                                       1,228      1,312
Total facilities                                          101        102
Percentage owned facilities                               77.2%      76.5%





Skilled Healthcare Group, Inc.

Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Adjusted EBITDAR

(In thousands)

(Unaudited)


                      Three Months Ended       
                      September 30,
                                               Nine Months Ended September 30,
                      2012      2011         2012        2011
Net income (loss)     $ 6,068   $ (232,814)  $ 15,902    $  (210,769)
Interest expense, net 8,665     9,541        28,474      28,766
of interest income
Provision for
(benefit from) income 2,965     (15,387)     9,356       (911)
taxes
Depreciation and      6,258     6,459        19,124      19,036
amortization expense
EBITDA                23,956    (232,201)    72,856      (163,878)
Debt retirement costs 168       —            4,126       —
Disposals of property —         —            —           293
and equipment
Expenses related to
the exploration of    —         —            —           716
strategic
alternatives
Exit costs related to
the Northern          —         —            —           820
California
divestiture
Litigation settlement
costs, (net of        —         (4,488)      —           (4,488)
recoveries)
Impairment of         —         270,478      —           270,478
long-lived assets
Adjusted EBITDA       24,124    33,789       76,982      103,941
Rent cost of revenue  4,639     4,413        13,734      13,530
Adjusted EBITDAR      $ 28,763  $ 38,202     $ 90,716    $  117,471





Skilled Healthcare Group, Inc.

Reconciliation of Income Before Provision for Income Taxes to Adjusted Net
Income

(In thousands, except per share data)

(Unaudited)


                          Three Months Ended         NineMonths Ended
                          September 30,              September 30,
                          2012        2011           2012      2011
Income (loss) from        $  9,033    $  (248,201)   $ 25,258  $ (211,680)
operations
Debt retirement costs     168         —              4,126     —
Double bond interest      —           —              1,192     —
expense for bond
Disposals of property and —           —              —         290
equipment
Impairment of long-lived  —           270,478        —         270,478
assets
Litigation settlement     —           (4,488)        —         (4,488)
costs, net of recoveries
Expenses related to the
exploration of strategic  —           —              —         716
alternatives
Exit costs related to the
Northern California       —           —              —         820
divestiture
Legal Expenses for        592         —              592       —
non-routine matters
IT outsourcing evaluation 374         —              404       —
costs
2011 Hospice cap accrual  1,900       —              1,900     —
Adjusted income before
provision for income      12,067      17,789         33,472    56,136
taxes
Provision for income      4,055       5,888          12,385    21,107
taxes
Add back tax credit
valuation allowance       —           —              —         (388)
related to Northern
California divestiture
Adjusted net income       $  8,012    $  11,901      $ 21,087  $ 35,417
Weighted-average common
shares outstanding,       37,503      37,294         37,534    37,329
diluted
Adjusted net income per   $  0.21     $  0.32        $ 0.56    $ 0.95
share, diluted
Effective tax rate        33.6%       33.1%          37.0%     37.6%



Reconciliation of Forecasted Adjusted Net Income per Share to Forecasted Net
Income per Share

Year Ending December 31, 2012


                                                            Earnings Per Share
Adjusted net income per diluted share guidance
                                                            $0.74 - $0.76

Items excluded, net of tax, from adjusted net income per
share to calculate net income per share


 Debt retirement costs                                  (0.07)
 2011 Hospice cap accrual                               (0.03)
 Double bond interest expense for bond                  (0.02)
 IT outsourcing evaluation costs                        (0.01)
 Legal Expenses for non-routine matters                 (0.01)
Net income per share guidance                               $0.60 - $0.62



Skilled Healthcare Group, Inc.

Reconciliation of Forecasted Net Income to Forecasted EBITDA and Forecasted
EBITDAR

Year Ending December 31, 2012

(In millions, except per share data)

(Unaudited)


                                                  Outlook
                                                  Low              High
Net income guidance                               $   22.3         $  23.3
Bond double interest expense (net of taxes)       0.7              0.7
Debt retirement costs (net of taxes)              2.5              2.5
Interest expense net of bond double interest ^(A) 35.8             35.8
Provision for income taxes                        15.3             16.3
Depreciation and amortization expense             25.4             25.4
Adjusted EBITDA guidance                          102.0            104.0
Rent cost of revenue                              18.5             18.5
Adjusted EBITDAR guidance                         $   120.5        $  122.5

^(A) We paid double interest expense due to our senior subordinated notes
being outstanding for 30 days after we completed the $100.0 million expansion
of our term loan. We were required to provide a 30 day redemption notice for
the senior subordinated notes.

We believe that a report of adjusted net income per share, EBITDA, EBITDAR,
Adjusted EBITDA and Adjusted EBITDAR provides consistency in our financial
reporting and provides a basis for the comparison of results of core business
operations between our current, past and future periods. Adjusted net income
per share, EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR are primary
indicators management uses for planning and forecasting in future periods,
including trending and analyzing the core operating performance of our
business from period-to-period without the effect of U.S. GAAP expenses,
revenues and gains (losses) that are unrelated to the day-to-day performance
of our business. We also use adjusted net income per share, EBITDA, EBITDAR,
Adjusted EBITDA and Adjusted EBITDAR to benchmark the performance of our
business against expected results, analyzing year-over-year trends as
described below and to compare our operating performance to that of our
competitors.

Management uses adjusted net income per share, EBITDA, EBITDAR, Adjusted
EBITDA and Adjusted EBITDAR to assess the performance of our core business
operations, to prepare operating budgets and to measure our performance
against those budgets on a consolidated and segment level. Segment management
uses these metrics to measure performance on a business unit by business unit
basis. We typically use adjusted net income per share, Adjusted EBITDA and
Adjusted EBITDAR for these purposes on a consolidated basis as the adjustments
to adjusted net income per share, EBITDA and EBITDAR are not generally
allocable to any individual business unit and we typically use EBITDA and
EBITDAR to compare the operating performance of each skilled nursing and
assisted living facility, as well as to assess the performance of our
operating segments. EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR are
useful in this regard because they do not include such costs as interest
expense (net of interest income), income taxes, depreciation and amortization
expense, rent cost of revenue (in the case of EBITDAR and Adjusted EBITDAR)
and special charges, which may vary from business unit to business unit and
period-to-period depending upon various factors, including the method used to
finance the business, the amount of debt that we have determined to incur,
whether a facility is owned or leased, the date of acquisition of a facility
or business, the original purchase price of a facility or business unit or the
tax law of the state in which a business unit operates. These types of
charges are dependent on factors unrelated to the underlying business unit
performance. As a result, we believe that the use of adjusted net income per
share, EBITDA, EBITDAR, Adjusted EBITDA and Adjusted EBITDAR provides a
meaningful and consistent comparison of our underlying business units between
periods by eliminating certain items required by U.S. GAAP which have little
or no significance to their day-to-day operations.

The use of adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA,
Adjusted EBITDAR and other non-GAAP financial measures has certain
limitations. Our presentation of adjusted net income per share, EBITDA,
EBITDAR, Adjusted EBITDA, Adjusted EBITDAR or other non-GAAP financial
measures may be different from the presentation used by other companies and
therefore comparability may be limited. Depreciation and amortization expense,
interest expense, income taxes and other items have been and will be incurred
and are not reflected in the presentation of adjusted net income per share,
EBITDA, EBITDAR, Adjusted EBITDA or Adjusted EBITDAR. Each of these items
should also be considered in the overall evaluation of our results.
Additionally, adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA,
Adjusted EBITDAR do not consider capital expenditures and other investing
activities and should not be considered as a measure of our liquidity. We
compensate for these limitations by providing the relevant disclosure of our
depreciation and amortization, interest and income taxes, capital expenditures
and other items both in our reconciliations to the U.S. GAAP financial
measures and in our consolidated financial statements, all of which should be
considered when evaluating our performance.

Adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA, Adjusted
EBITDAR and certain other non-GAAP financial measures are used in addition to
and in conjunction with results presented in accordance with U.S. GAAP.
Adjusted net income per share, EBITDA, EBITDAR, Adjusted EBITDA, Adjusted
EBITDAR and other non-GAAP financial measures should not be considered as an
alternative to net income, operating income, or any other operating
performance measure prescribed by U.S. GAAP, nor should these measures be
relied upon to the exclusion of U.S. GAAP financial measures. Adjusted net
income per share, EBITDA, EBITDAR, Adjusted EBITDA, Adjusted EBITDAR and other
non-GAAP financial measures reflect additional ways of viewing our operations
that we believe, when viewed with our U.S. GAAP results and the
reconciliations to the corresponding U.S. GAAP financial measures, provide a
more complete understanding of factors and trends affecting our business than
could be obtained absent this disclosure. You are strongly encouraged to
review our financial information in its entirety and not to rely on any single
financial measure.

Investor Contact:
Skilled Healthcare Group, Inc.
Dev Ghose or Chris Felfe
(949) 282-5800

SOURCE Skilled Healthcare Group, Inc.

Website: http://www.skilledhealthcaregroup.com
 
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