News Release Details
Pennant Reports Fiscal Year 2020 First Quarter Financial Results
First Quarter Highlights
- Total revenue was
$91.8 million , an increase of$13.9 or 17.9% over the prior year quarter and Adjusted EBITDA for the first quarter was$7.5 million , an increase of$1.2 million or 18.3% over the prior year quarter;
- GAAP earnings per share of
$0.10 represents an increase of 100.0% over the prior year quarter, adjusted earnings per share of$0.16 represents an increase of 23.1% over the spin-adjusted prior year quarter(2), and adjusted EBITDA for the first quarter was$7.5 million , an increase of$1.2 million or 18.3% over the prior year quarter;
Home Health and Hospice Services segment revenue was$56.8 million , an increase of$10.6 million or 23.1% over the prior year quarter, and segment adjusted EBITDAR from operations(2) was$9.7 million , an increase of$2.5 million or 33.8% over the prior year quarter.
- Total home health total admissions increased 12.8% over the prior year quarter, and average Medicare revenue per completed episode increased 4.2% over the prior year quarter.
- Hospice average daily census was 1,871, an increase of 32.2% over the prior year quarter, and Hospice total admissions were 1,676, an increase of 25.6% over the prior year quarter.
- Senior Living Services segment revenue was
$35.1 million , an increase of$3.3 million or 10.4% over the prior year quarter; and segment adjusted EBITDAR from operations(3) was$12.4 million , an increase of 2.3% over the prior year quarter.
- Senior living occupancy was 80.2% as of the end of the quarter, an increase of 40 basis points over the prior year quarter, and average monthly revenue per occupied unit increased 2.7% over the prior year quarter.
(1) See “Reconciliation of GAAP to Non-GAAP Financial Information.”
(2) First quarter spin-adjusted earnings per share of
(3) Segment Adjusted EBITDAR from Operations is defined and outlined in Note 6 on Form 10-Q and is the segment GAAP measure of profit and loss.
Operating Results
Mr.
Commenting on the health of our operations during the first quarter,
Noting that the Company's senior living business saw measurable improvement across the platform,
During the quarter, the Company announced that it completed the acquisition of one home health agency, one hospice agency and one senior living community. Pennant also recently announced that we entered into a definitive agreement with
A discussion of the company's use of non-GAAP financial measures is set forth below. A reconciliation of net income to EBITDA, adjusted EBITDAR and adjusted EBITDA, as well as a reconciliation of GAAP earnings per share, net income to adjusted net earnings per share and adjusted net income, appear in the financial data portion of this release. More complete information is contained in the company’s Quarterly Report on Form 10-Q for the three months ended
PDGM Update
“Our implementation of PDGM continues to progress consistent with our expectations,” said
COVID-19 Impact and Mitigation
Commenting on COVID-19 and its impact on our business,
The Company’s results during the first quarter do not include the impact of any stimulus funds. Since quarter end, the Company received approximately
In addition to monitoring these and other stimulus efforts, the Company has taken steps to ensure it maintains healthy liquidity into the foreseeable future. In an effort to counteract increased labor and supplies expenses incurred in the second half of March and into the second quarter, we have reduced spending on labor at our service centers, non-essential supplies, travel costs and all other discretionary items, and we have delayed non-essential capital expenditure projects. Additionally, the Board of Directors, the executive team and other key leaders throughout the organization have voluntarily reduced their base salaries and foregone annual wage increases while the pandemic persists. “These measures demonstrate the resilience of our localized operating model in responding to dynamic healthcare environments that vary by state and in some cases by county,” remarked
“Despite the difficulties stemming from COVID-19 and the unknowns that persist about the timing and full impact of the virus, we believe we have the balance sheet strength, leadership depth and operating model needed to successfully maneuver through these challenges and continue to grow our business this year and beyond. Like other disruptive events that benefit stronger operators over the long term, we see opportunity for resilient, clinically-focused operators to achieve success in this environment. The historic unemployment landscape caused by the pandemic should provide better recruiting opportunities and staffing patterns. The near-term pressures as governmental assistance wanes and the full effects of PDGM and other regulatory pressures are felt should reveal additional acquisition opportunities for patient operators armed with strong balance sheets. There are promising developments in how in-home care is sourced and delivered with recent regulations allowing expanded telehealth services, limited non-physician recertification and other measures intended to assist providers expanding access to critical services in the home. The public health emergency has underscored the urgent need for quality clinical care in the home, and both of our businesses are poised to be instrumental providers in this landscape,” said
2020 Guidance Maintained
Management is maintaining guidance of total revenue of
The Company’s 2020 guidance is based on diluted weighted average shares outstanding of approximately 30.0 million and a 26.4% effective tax rate. In addition, the guidance assumes, among other things, anticipated reimbursement rate adjustments, including the impact of PDGM, no unannounced acquisitions, the impact of the sequestration holiday, and no resurgence of COVID-19. It excludes costs at start-up operations, share-based compensation, acquisition-related costs and certain redundant or nonrecurring general and administrative costs incurred during the transition services period.
Conference Call
A live webcast will be held tomorrow,
About Pennant
The
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This press release contains, and the related conference call and webcast will include, forward-looking statements that are based on management’s current expectations, assumptions and beliefs about its business, financial performance, operating results, the industry in which it operates and other future events. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," similar expressions, and variations or negatives of these words. These forward-looking statements include, but are not limited to, statements regarding growth prospects, future operating and financial performance, and acquisition activities. They are not guarantees of future results and are subject to risks, uncertainties and assumptions that could cause actual results to materially and adversely differ from those expressed in any forward-looking statement.
These risks and uncertainties relate to the company’s business, its industry and its common stock and include: reduced prices and reimbursement rates for its services; its ability to acquire, develop, manage or improve operations, its ability to manage its increasing borrowing costs as it incurs additional indebtedness to fund the acquisition and development of operations; its ability to access capital on a cost-effective basis to continue to successfully implement its growth strategy; its operating margins and profitability could suffer if it is unable to grow and manage effectively its increasing number of operations; competition from other companies in the acquisition, development and operation of facilities; its ability to defend claims and lawsuits, including professional liability claims alleging that our services resulted in personal injury, and other regulatory-related claims; and the application of existing or proposed government regulations, or the adoption of new laws and regulations, that could limit its business operations, require it to incur significant expenditures or limit its ability to relocate its operations if necessary. Readers should not place undue reliance on any forward-looking statements and are encouraged to review the company’s periodic filings with the
These risks and uncertainties relate to the company’s business, its industry and its common stock and include: reduced prices and reimbursement rates for its services; its ability to acquire, develop, manage or improve operations, its ability to manage its increasing borrowing costs as it incurs additional indebtedness to fund the acquisition and development of operations; its ability to access capital on a cost-effective basis to continue to successfully implement its growth strategy; its operating margins and profitability could suffer if it is unable to grow and manage effectively its increasing number of operations; competition from other companies in the acquisition, development and operation of facilities; its ability to defend claims and lawsuits, including professional liability claims alleging that our services resulted in personal injury, and other regulatory-related claims; and the application of existing or proposed government regulations, or the adoption of new laws and regulations, that could limit its business operations, require it to incur significant expenditures or limit its ability to relocate its operations if necessary. Readers should not place undue reliance on any forward-looking statements and are encouraged to review the company’s periodic filings with the
Contact Information
The
SOURCE: The
THE
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(unaudited, in thousands, except for per-share amounts)
Three Months Ended |
|||||||
2020 | 2019 | ||||||
Revenue | $ | 91,849 | $ | 77,907 | |||
Expense | |||||||
Cost of services | 70,189 | 58,729 | |||||
Rent—cost of services | 9,706 | 8,297 | |||||
General and administrative expense | 6,661 | 8,244 | |||||
Depreciation and amortization | 1,021 | 810 | |||||
Total expenses | 87,577 | 76,080 | |||||
Income from operations | 4,272 | 1,827 | |||||
Other income (expense): | |||||||
Interest expense, net | (403 | ) | — | ||||
Income before provision for income taxes | 3,869 | 1,827 | |||||
Provision for income taxes | 889 | 343 | |||||
Net income | 2,980 | 1,484 | |||||
Less: net income attributable to noncontrolling interest | — | 150 | |||||
Net income and other comprehensive income attributable to The |
$ | 2,980 | $ | 1,334 | |||
Earnings per share(1): | |||||||
Basic | $ | 0.11 | $ | 0.05 | |||
Dilutive | $ | 0.10 | $ | 0.05 | |||
Weighted average common shares outstanding: | |||||||
Basic | 27,891 | 27,834 | |||||
Dilutive | 29,873 | 27,834 |
(1) The total number of common shares distributed on
THE
CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS
(unaudited, in thousands, except par value)
Assets | |||||||
Current assets: | |||||||
Cash | $ | 4,832 | $ | 402 | |||
Accounts receivable—less allowance for doubtful accounts of |
35,548 | 32,183 | |||||
Prepaid expenses and other current assets | 5,627 | 6,098 | |||||
Total current assets | 46,007 | 38,683 | |||||
Property and equipment, net | 16,772 | 14,644 | |||||
Right-of-use assets | 314,258 | 316,328 | |||||
Escrow deposits | 2,100 | 1,400 | |||||
Restricted and other assets | 2,146 | 1,955 | |||||
Intangible assets, net | 42 | 45 | |||||
42,837 | 41,233 | ||||||
Other indefinite-lived intangibles | 34,825 | 33,462 | |||||
Total assets | $ | 458,987 | $ | 447,750 | |||
Liabilities and equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 8,312 | $ | 8,653 | |||
Accrued wages and related liabilities | 13,647 | 16,343 | |||||
Lease liabilities—current | 12,975 | 12,285 | |||||
Other accrued liabilities | 14,049 | 13,911 | |||||
Total current liabilities | 48,983 | 51,192 | |||||
Long-term lease liabilities—less current portion | 303,377 | 304,044 | |||||
Other long-term liabilities | 2,880 | 2,877 | |||||
Long-term debt, net | 27,562 | 18,526 | |||||
Total liabilities | 382,802 | 376,639 | |||||
Commitments and contingencies | |||||||
Equity: | |||||||
Common stock, |
28 | 28 | |||||
Additional paid-in capital | 76,976 | 74,882 | |||||
Accumulated deficit | (819 | ) | (3,799 | ) | |||
Net parent investment | — | ||||||
Noncontrolling interest | — | — | |||||
Total equity | 76,185 | 71,111 | |||||
Total liabilities and equity | $ | 458,987 | $ | 447,750 | |||
THE
CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
The following table presents selected data from our condensed consolidated and combined statement of cash flows for the periods presented:
Three Months Ended |
|||||||
2020 | 2019 | ||||||
Net cash provided by/(used in) operating activities | $ | 2,090 | $ | (1,413 | ) | ||
Net cash used in investing activities | (6,772 | ) | (2,565 | ) | |||
Net cash provided by financing activities | 9,112 | 3,978 | |||||
Net increase in cash | 4,430 | — | |||||
Cash at beginning of year | 402 | 41 | |||||
Cash at end of year | $ | 4,832 | $ | 41 | |||
THE
REVENUE BY SEGMENT
(unaudited, dollars in thousands)
The following table sets forth our total revenue by segment and as a percentage of total revenue for the periods indicated:
Three Months Ended |
|||||||||||||
2020 | 2019 | ||||||||||||
Revenue Dollars |
Revenue Percentage |
Revenue Dollars |
Revenue Percentage |
||||||||||
Home health and hospice services | |||||||||||||
Home health(a) | $ | 21,444 | 23.3 | % | $ | 19,544 | 25.1 | % | |||||
Hospice | 30,440 | 33.1 | 22,458 | 28.8 | |||||||||
Home care and other(b) | 4,878 | 5.3 | 4,115 | 5.3 | |||||||||
Total home health and hospice services | 56,762 | 61.8 | 46,117 | 59.2 | |||||||||
Senior living services | 35,087 | 38.2 | 31,790 | 40.8 | |||||||||
Total revenue | $ | 91,849 | 100.0 | % | $ | 77,907 | 100.0 | % | |||||
(a) | Home care and other revenue is included with home health revenue in other disclosures in this press release. | |
(b) | Revenue under the PDGM reimbursement model accounted for |
THE
SELECT PERFORMANCE INDICATORS
(unaudited)
The following table summarizes our overall home health and hospice performance indicators for the periods indicated:
Three Months Ended |
|||||||
2020 | 2019 | ||||||
Home health services: | |||||||
Total home health admissions | 6,136 | 5,440 | |||||
Total Medicare home health admissions | 2,809 | 2,603 | |||||
Average Medicare revenue per 60-day completed episode | $ | 3,091 | $ | 2,966 | |||
Hospice services: | |||||||
Average daily census | 1,871 | 1,415 | |||||
Total hospice admissions | 1,676 | 1,334 | |||||
Hospice Medicare revenue per day | $ | 163 | $ | 163 |
The following table summarizes our senior living performance indicators for the periods indicated:
Three Months Ended March 31, |
|||||||
2020 | 2019 | ||||||
Occupancy | 80.2 | % | 79.8 | % | |||
Average monthly revenue per occupied unit | $ | 3,206 | $ | 3,121 |
THE
REVENUE BY PAYOR SOURCE
(unaudited, dollars in thousands)
The following table presents our total revenue by payor source and as a percentage of total revenue for the periods indicated:
Three Months Ended |
||||||||||||||
2020 | 2019 | |||||||||||||
Revenue Dollars |
Revenue Percentage |
Revenue Dollars |
Revenue Percentage |
|||||||||||
Revenue: | ||||||||||||||
Medicare | $ | 39,256 | 42.7 | % | $ | 31,019 | 39.8 | % | ||||||
Medicaid | 13,952 | 15.2 | 10,504 | 13.5 | ||||||||||
Subtotal | 53,208 | 57.9 | 41,523 | 53.3 | ||||||||||
Managed Care | 7,532 | 8.2 | 6,676 | 8.6 | ||||||||||
Private and Other(a) | 31,109 | 33.9 | 29,708 | 38.1 | ||||||||||
Total revenue | $ | 91,849 | 100.0 | % | $ | 77,907 | 100.0 | % | ||||||
(a) | Private and other payors in our home health and hospice services segment includes revenue from all payors generated in home care operations. |
THE
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(unaudited, in thousands, except per share data)
Three Months Ended |
|||||||
2020 | 2019 | ||||||
Net income (loss) attributable to The |
$ | 2,980 | $ | 1,334 | |||
Add: Net income attributable to noncontrolling interest | — | 150 | |||||
Net income (loss) | 2,980 | 1,484 | |||||
Non-GAAP adjustments | |||||||
Costs at start-up operations(a) | 245 | 242 | |||||
Share-based compensation expense(b) | 1,956 | 619 | |||||
Depreciation and amortization - patient base(c) | — | 11 | |||||
Acquisition related costs(d) | — | 38 | |||||
Spin-off related transaction costs(e) | — | 2,990 | |||||
Transition services costs(f) | 258 | — | |||||
Provision for income taxes on Non-GAAP adjustments(g) | (781 | ) | (1,089 | ) | |||
Non-GAAP net income | $ | 4,658 | $ | 4,295 | |||
Dilutive Earnings Per Share As Reported | |||||||
Net Income | $ | 0.10 | $ | 0.05 | |||
Average number of shares outstanding | 29,873 | 27,834 | |||||
Adjusted Diluted Earnings Per Share | |||||||
Net Income | $ | 0.16 | $ | 0.15 | |||
Average number of shares outstanding | 29,873 | 27,834 | |||||
(a) | Represents results related to start-up operations and acquisition costs that are not capitalizable. This amount excludes rent and depreciation and amortization expense related to such operations. | |||||||||||
Three Months Ended |
||||||||||||
2020 | 2019 | |||||||||||
Revenue | $ | (423 | ) | $ | (177 | ) | ||||||
Cost of services | 655 | 413 | ||||||||||
Rent | 13 | 6 | ||||||||||
Total Non-GAAP adjustment | $ | 245 | $ | 242 | ||||||||
(b) | Represents share-based compensation expense incurred for the periods presented. | |||||||||||
Three Months Ended |
||||||||||||
2020 | 2019 | |||||||||||
Cost of services | $ | 203 | $ | 124 | ||||||||
General and administrative | 1,753 | 495 | ||||||||||
Total Non-GAAP adjustment | $ | 1,956 | $ | 619 | ||||||||
(c) | Included in depreciation and amortization expenses related to patient base intangible assets at newly acquired senior living facilities. | |||||||||||
(d) | Represents costs incurred to acquire an operation that are not capitalizable included in general and administrative expenses. | |||||||||||
(e) | Costs incurred related to the Spin-Off that are included in general and administrative expense. | |||||||||||
(f) | The portion of the costs incurred under the Transition Services Agreement identified as redundant or nonrecurring that are included in general and administrative expense or depreciation and amortization. Total fees under incurred under the Transition Services agreement, net of the Company’s payroll reimbursement, were |
|||||||||||
Three Months Ended |
||||||||||||
2020 | 2019 | |||||||||||
General and administrative | $ | 50 | $ | — | ||||||||
Depreciation and amortization(1) | 208 | — | ||||||||||
Total Non-GAAP adjustment | $ | 258 | $ | — | ||||||||
(1) Consists of depreciation and amortization on IT hardware and software acquired to build infrastructure in anticipation of our transition from Ensign's IT infrastructure. | ||||||||||||
(g) | Represents an adjustment to the provision for income tax to our year to date effective tax rate of 26.4% and 25.0% for three months ended |
THE
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(unaudited, in thousands)
The tables below reconcile Consolidated and Combined Net Income (Loss) to Consolidated and Combined EBITDA, and Consolidated Adjusted EBITDAR for the periods presented:
Three Months Ended |
|||||||
2020 | 2019 | ||||||
Consolidated and combined net income (loss) | $ | 2,980 | $ | 1,484 | |||
Less: Net income attributable to noncontrolling interest | — | 150 | |||||
Add: Provision for income taxes (benefit) | 889 | 343 | |||||
Net interest expense | 403 | — | |||||
Depreciation and amortization | 1,021 | 810 | |||||
Consolidated and Combined EBITDA | 5,293 | 2,487 | |||||
Adjustments to Consolidated and Combined EBITDA | |||||||
Add: Costs at start-up operations(a) | 232 | 236 | |||||
Share-based compensation expense(b) | 1,956 | 619 | |||||
Acquisition related costs(c) | — | 38 | |||||
Spin-off related transaction costs(d) | — | 2,990 | |||||
Transition services costs(e) | 50 | — | |||||
Rent related to item (a) above | 13 | 6 | |||||
Consolidated and Combined Adjusted EBITDA | 7,544 | 6,376 | |||||
Rent—cost of services | 9,706 | 8,297 | |||||
Rent related to item (a) above | (13 | ) | (6 | ) | |||
Adjusted rent—cost of services | 9,693 | 8,291 | |||||
Consolidated Adjusted EBITDAR | $ | 17,237 | |||||
(a) | Represents results related to start-up operations. This amount excludes rent and depreciation and amortization expense related to such operations. | |
(b) | Share-based compensation expense incurred which is included in cost of services and general and administrative expense. | |
(c) | Acquisition related costs that are not capitalizable. | |
(d) | Costs incurred related to the Spin-Off are included in general and administrative expense. | |
(e) | The portion of the costs incurred under the Transition Services Agreement identified as redundant or nonrecurring that are included in general and administrative expense or depreciation and amortization. Total fees under incurred under the Transition Services agreement, net of the Company’s payroll reimbursement, were |
THE
RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL INFORMATION
(unaudited, in thousands)
Beginning in the third quarter of 2019, the GAAP segment measure of profit and loss was changed from segment income (loss) before provision for income taxes to Adjusted Segment EBITDAR from Operations. Prior period presentation has been revised to reflect the new measurement.
The following table presents certain financial information regarding our reportable segments. General and administrative expenses are not allocated to the reportable segments and are included in “All Other”:
Three Months Ended |
|||||||||||||||
and Hospice Services |
Senior Living Services |
All Other | Total | ||||||||||||
Segment GAAP Financial Measures: | |||||||||||||||
Three Months Ended |
|||||||||||||||
Revenue | $ | 56,762 | $ | 35,087 | $ | — | $ | 91,849 | |||||||
Segment Adjusted EBITDAR from Operations | $ | 9,729 | $ | 12,397 | $ | (4,889 | ) | $ | 17,237 | ||||||
Three Months Ended |
|||||||||||||||
Revenue | $ | 46,117 | $ | 31,790 | $ | — | $ | 77,907 | |||||||
Segment Adjusted EBITDAR from Operations | $ | 7,271 | $ | 12,117 | $ | (4,721 | ) | $ | 14,667 |
The table below provides a reconciliation of Segment Adjusted EBITDAR from Operations above to income from operations:
Three Months Ended |
|||||||
2020 | 2019 | ||||||
Segment Adjusted EBITDAR from Operations(a) | $ | 17,237 | $ | 14,667 | |||
Less: Depreciation and amortization | 1,021 | 810 | |||||
Rent—cost of services | 9,706 | 8,297 | |||||
Adjustments to Segment EBITDAR from Operations: | |||||||
Less: Costs at start-up operations (b) | 232 | 236 | |||||
Share-based compensation expense (c) | 1,956 | 619 | |||||
Acquisition related costs (d) | — | 38 | |||||
Spin-off related transaction costs (e) | — | 2,990 | |||||
Transition services costs(f) | 50 | — | |||||
Add: Net income attributable to noncontrolling interest | — | 150 | |||||
Consolidated and Combined income (loss) from Operations | $ | 4,272 | $ | 1,827 | |||
(a) | Segment Adjusted EBITDAR from Operations is net income attributable to the Company's reportable segments excluding the interest expense, provision for income taxes, depreciation and amortization expense, rent, and, in order to view the operations performance on a comparable basis from period to period, certain adjustments including: (1) costs at start-up operations, (2) share-based compensation, (3) acquisition related costs, (4) transaction costs, (5) redundant and nonrecurring costs associated with the transition services agreement, (6) operating results of closed operations, and (7) net income attributable to noncontrolling interest. General and administrative expenses are not allocated to the reportable segments, and are included as “All Other”, accordingly the segment earnings measure reported is before allocation of corporate general and administrative expenses. The Company’s Chief Operating Decision Maker (“CODM”) uses Segment Adjusted EBITDAR from Operations as the primary measure of profit and loss for the Company's reportable segments and to compare the performance of its operations with those of its competitors. The Company's segment measures may be different from the calculation methods used by other companies and, therefore, comparability may be limited. | |
(b) | Represents results related to start-up operations and acquisition costs that are not capitalizable. This amount excludes rent and depreciation and amortization expense related to such operations. | |
(c) | Share-based compensation expense incurred which is included in cost of services and general and administrative expense. | |
(d) | Acquisition related costs that are not capitalizable. | |
(e) | Costs incurred related to the Spin-Off are included in general and administrative expense. | |
(f) | The portion of the costs incurred under the Transition Services Agreement identified as redundant or nonrecurring that are included in general and administrative expense or depreciation and amortization. Total fees under incurred under the Transition Services agreement, net of the Company’s payroll reimbursement, were |
The tables below reconcile segment adjusted EBITDAR from operations to segment EBITDA for each reportable segment for the periods presented:
For The Three Months Ended |
|||||||||||||||
Hospice |
Senior Living | ||||||||||||||
2020 | 2019 | 2020 | 2019 | ||||||||||||
Segment Adjusted EBITDAR from Operations | $ | 9,729 | $ | 7,271 | $ | 12,397 | $ | 12,117 | |||||||
Less: Rent—cost of services | 850 | 635 | 8,856 | 7,662 | |||||||||||
Rent related to costs at start-up operations | (13 | ) | (6 | ) | — | — | |||||||||
Segment Adjusted EBITDA | $ | 8,892 | $ | 6,642 | $ | 3,541 | $ | 4,455 | |||||||
Discussion of Non-GAAP Financial Measures
EBITDA consists of net income before (a) interest expense, net, (b) provisions for income taxes and (c) depreciation and amortization. Adjusted EBITDA consists of net income attributable to the Company before, (a) provisions for income taxes, (b) depreciation and amortization, (c) costs incurred for start-up operations, including rent and excluding depreciation, interest and income taxes, (d) share-based compensation expense, (e) acquisition related costs, (f) spin-off related transaction costs, and (g) redundant or non-recurring transition services costs. Consolidated Adjusted EBITDAR is a valuation measure applicable to current periods only and consists of net income attributable to the Company before (a) interest expense, net, (b) provisions for income taxes, (c) depreciation and amortization, (d) rent-cost of services, (e) costs incurred for start-up operations, excluding rent, depreciation, interest and income taxes, (f) share-based compensation expense, (g) acquisition related costs, (h) proposed spin-off transaction costs, and (i) redundant or non-recurring transition services costs. The company believes that the presentation of EBITDA, adjusted EBITDA, consolidated adjusted EBITDAR, adjusted net income and adjusted earnings per share provides important supplemental information to management and investors to evaluate the company’s operating performance. The company believes disclosure of adjusted net income, adjusted net income per share, EBITDA, adjusted EBITDA and consolidated adjusted EBITDAR has economic substance because the excluded revenues and expenses are infrequent in nature and are variable in nature, or do not represent current revenues or cash expenditures. A material limitation associated with the use of these measures as compared to the GAAP measures of net income and diluted earnings per share is that they may not be comparable with the calculation of net income and diluted earnings per share for other companies in the company's industry. These non-GAAP financial measures should not be relied upon to the exclusion of GAAP financial measures. For further information regarding why the company believes that this non-GAAP measure provides useful information to investors, the specific manner in which management uses this measure, and some of the limitations associated with the use of this measure, please refer to the company's periodic filings with the
Source: Pennant Group, Inc.