SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) November 24, 1999
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SUN HEALTHCARE GROUP, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 1-12040 85-0410612
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
101 SUN AVENUE, N.E., ALBUQUERQUE, NEW MEXICO 87109
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (505) 821-3355
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NOT APPLICABLE
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(Former name or former address, if changed since last report.)
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ITEM 5. OTHER EVENTS
On October 26, 1999, Sun Healthcare Group, Inc. (the "Company") announced
that it had reached an agreement in principle with representatives of its bank
lenders and holders of approximately two-thirds of its outstanding senior
subordinated bonds on the terms of an overall restructuring of the Company's
capital structure. As part of the negotiations with these bank lenders and
senior subordinated bondholders, the Company provided summary financial
projections (the "August Summary Projections") to them. The Company agreed to
disclose publicly the August Summary Projections after the commencement of its
chapter 11 bankruptcy case. The August Summary Projections are attached as
Exhibit 99.1 and are incorporated by reference herein and made a part hereof,
and such August Summary Projections are qualified in their entirety by the
statements made therein.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
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(c) Exhibits.
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99.1 Sun Healthcare Group, Inc. Summary Financial Projections dated August
27, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SUN HEALTHCARE GROUP, INC.
/s/ Robert D. Woltil
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Name: Robert D. Woltil
Title: Chief Financial Officer
Dated: November 24, 1999
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INDEX TO EXHIBITS
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EXHIBIT NO. IDENTITY OF EXHIBIT
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99.1 Sun Healthcare Group, Inc. Summary Financial Projections dated
August 27, 1999.
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EXHIBIT 99.1
SUN HEALTHCARE GROUP, INC.
Summary Financial Projections
Dated August 27, 1999
The following information is a summary of projections of the Company's
financial performance, on a consolidated basis, for the years ended December 31,
1999, 2000, 2001, 2002 and 2003 (the "August Summary Projections"). The August
Summary Projections were prepared as of August 27, 1999 and have not been
updated since that date. The August Summary Projections, although presented with
numerical specificity, were based on a large number of estimates and
assumptions, some of which may no longer be accurate. Although the Company
considered these estimates and assumptions to be reasonable when taken as a
whole on August 27, 1999, they are inherently subject to significant business,
economic, competitive and regulatory uncertainties and contingencies beyond the
control of the Company. For example, because of a significant increase in the
number and size of professional liability claims which the nursing home industry
has been experiencing, the Company has learned that it should expect a
multimillion dollar increase in its professional liability insurance premiums as
early as the year 2000. This increase was not included in the August Summary
Projections below, and likewise any additional information that the Company has
learned subsequent to August 27, 1999 was not included in the August Summary
Projections.
Forecasts and projections are necessarily speculative in nature, and it can
be expected that, in addition to new information learned by the Company
subsequent to the date of their preparation, one or more of the assumptions in
the August Summary Projections will not materialize or will vary significantly
from actual results. The likelihood of such variances will increase over time.
Accordingly, actual results achieved during the periods covered will vary from
the August Summary Projections, and these variations may be material and
adverse. In particular, the August Summary Projections assume the consummation
of certain restructuring initiatives that were under consideration by the
Company as of August 27, 1999. These initiatives included the anticipated
rejection of certain skilled nursing facility leases, the anticipated effects of
rent relief and the anticipated sale of the assisted living division. If some or
all of these initiatives do not occur or are materially delayed, the August
Summary Projections may not be achieved. Furthermore, the August Summary
Projections were not prepared with a view toward compliance with published
guidelines of the Securities and Exchange Commission, the American Institute of
Certified Public Accountants or generally accepted accounting principles
("GAAP"). The Company's independent accountants did not prepare or compile the
August Summary Projections and, accordingly, do not express an opinion or any
form of assurance with respect to the August Summary Projections. Due to the
foregoing, investors should not place undue reliance on the August Summary
Projections as indicators of the future results of the Company.
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The Company generally does not publicly disclose financial projections.
Although the Company is disclosing publicly the August Summary Projections
pursuant to an agreement with certain of its senior subordinated bondholders, it
has no present intention to disclose publicly any update to the August Summary
Projections. Neither the publication of the August Summary Projections nor any
statement herein shall, under any circumstances, create an implication that the
following August Summary Projections remain accurate or reasonable at any time
subsequent to August 27, 1999.
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($ in millions) Fiscal Year Ended December 31,
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1999 2000 2001 2002 2003
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Total Net Revenues(1) $2,349.2 $2,111.7 $2,175.3 $2,236.1 $2,314.5
Operating Expenses(2) 2,073.1 1,805.3 1,866.0 1,914.0 1,975.1
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EBITDAR(3) 276.1 306.4 309.3 322.1 339.4
MARGIN 11.8% 14.5% 14.2% 14.4% 14.7%
Rent Expense(4) 228.4 187.6 191.8 195.6 202.3
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EBITDA(3) 47.7 118.8 117.5 126.5 137.1
Depreciation 30.7 26.4 29.3 31.8 34.4
Amortization of 29.7 29.8 29.8 29.8 29.8
Goodwill
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OPERATING INCOME(5) (12.7) 62.6 58.4 64.9 72.9
MARGIN (0.5%) 3.0% 2.7% 2.9% 3.2%
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(1) "Total Net Revenues" are based upon anticipated occupancy levels, census
mix, payor rates, and contracts for ancillary services. No adjustments have
been made for potential changes (favorable or unfavorable) in the
regulatory and reimbursement environment. In the second quarter of 1999,
revenues were negatively affected by certain changes in accounting
estimates for third party settlements. No such revenue adjustments have
been included in these projections. Should such additional adjustments be
required, actual results may vary significantly from those shown.
(2) "Operating Expenses" exclude certain non-cash charges and other charges
deemed to be of a non-recurring nature which are otherwise required in
accordance with GAAP. As a result, actual results, as filed in the
Company's periodic reports with the Securities and Exchange Commission, may
differ materially from those presented in these projections.
(3) "EBITDAR" is defined as total net revenues less operating expenses, and
specifically excludes depreciation, amortization, rent expense, interest,
taxes and the write-off of extraordinary items. "EBITDA" is defined as
EBITDAR less rent expense. EBITDA and EBITDAR are presented because the
Company believes they are useful indicators of its capacity to service
and/or incur debt and as measures of its operating performance. EBITDA and
EBITDAR are not measures of performance under GAAP and should not be
considered in isolation or as a substitute for net income (loss), as
defined by GAAP, or cash flows or as a measure of the Company's
profitability or liquidity in assessing the Company's overall financial
condition. The Company's calculation of EBITDA and EBITDAR may not be
comparable to similar calculations used by other companies.
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(4) "Rent Expense" includes the benefits of lease rejections and rent relief
that, as of August 27, 1999, were anticipated by the Company. Since that
date, the Company has continued to analyze and review its lease portfolio.
Once this process is complete, the Company will seek to terminate certain
leases and/or seek rent relief for certain facilities. As such, actual
results may vary materially from those shown.
(5) "Operating Income" is defined as EBITDA less depreciation and amortization
of goodwill, and excludes interest and the write-off of extraordinary
charges. Operating income is not a measure of performance under GAAP and
should not be considered in isolation or as a substitute for net income
(loss), as defined by GAAP, or cash flows or as a measure of the Company's
profitability or liquidity in assessing the Company's overall financial
condition. The Company's calculation of operating income may not be
comparable to similar calculations by other companies.
Certain statements set forth above, including, but not limited to,
statements containing the words "anticipates," "believes," "expects," "intends,"
"will," "may" and similar words constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements were based on the company's expectations and include
known and unknown risks, uncertainties and other factors, many of which the
Company is unable to predict or control, that may cause the Company's actual
results or performance to differ materially from any future results or
performance expressed or implied by such forward-looking statements. These
statements involve risks, uncertainties and other factors detailed from time to
time in the Company's filings with the Securities and Exchange Commission,
including its Annual Report on Form 10-K and its Quarterly Reports on Form 10-Q.
Such factors may include, without limitation, the delays or the inability to
complete the Company's plan of reorganization; the availability and terms of
capital in light of recent losses, cash flow shortfalls and the Company's
chapter 11 bankruptcy filing; adverse actions which may be taken by creditors
and the outcome of various bankruptcy proceedings; the Company's ability to
attract patients given its current financial position; the Company's ability to
control its operating costs; the Company's ability to obtain new ancillary
service contracts with non-affiliated customers; and the effects of healthcare
reform and legislation on the Company's business strategy and operations. The
Company cautions investors that any forward-looking statements made by the
Company are not guarantees of future performance. The Company disclaims any
obligation to update any such factors or to announce publicly the results of any
revisions to any of the forward-looking statements included herein to reflect
future events or developments.
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