Skilled Healthcare Group Reports Record Results for Second Quarter Ended June 30,...

Skilled Healthcare Group Reports Record Results for Second Quarter Ended June 30, 2008

FOOTHILL RANCH, Calif.--(Business Wire)--
Skilled Healthcare Group, Inc. (NYSE: SKH) today announced its
unaudited consolidated financial operating results for the three- and
six-month periods ended June 30, 2008.

Consolidated Results of Operations for the Second Quarter of 2008

For the second quarter of 2008, Skilled Healthcare reported net
income of $8.9 million, or $0.24 per diluted share, as compared to a
net loss attributable to common stockholders of $4.1 million, or $0.18
per diluted share, in the second quarter of 2007.

Revenues in the second quarter of 2008 totaled $180.3 million, an
increase of 19.3% from $151.1 million in the corresponding prior year
period. Revenues in the second quarter of 2008 from Skilled
Healthcare's long-term care services segment, comprising skilled
nursing and assisted living facilities, were $159.0 million, an
increase of 20.4% from the second quarter of 2007. Approximately $20.1
million or 15.2 percentage points of the increase in long-term care
services revenues resulted from healthcare facilities acquired or
developed after April 1, 2007. Revenues in the second quarter of 2008
from Skilled Healthcare's ancillary services segment, comprising
rehabilitation therapy and hospice services, were $21.4 million, an
increase of 12.6% from the second quarter of 2007. Approximately $2.1
million, or 11.1 percentage points, of the increase in ancillary
services revenues resulted from the acquisition of two hospice
businesses in New Mexico in September 2007.

Adjusted earnings before interest, taxes, depreciation and
amortization, or Adjusted EBITDA, were $28.9 million in the second
quarter of 2008, an increase of $3.8 million, or 15.1%, over the
second quarter of 2007. Adjusted EBITDA reflects the non-GAAP
adjustments to net income that are reflected in the financial tables
of this press release. Skilled mix was 24.6% in the second quarter of
2008, as compared to 24.7% in the second quarter of 2007. Excluding
the ten skilled nursing facilities in New Mexico, which Skilled
Healthcare acquired in September 2007, skilled mix was 25.4% in the
second quarter of 2008. Skilled mix is defined as the number of
Medicare and non-Medicaid managed care patient days at the company's
skilled nursing facilities divided by the total number of patient days
at the company's skilled nursing facilities for any given period.

"I am pleased with our overall performance in the second quarter
and for the first half of the year," commented Boyd Hendrickson,
Chairman and Chief Executive Officer. "I am particularly proud of the
continued success of our innovative product offerings, such as our
Express Recovery(TM) Units. Our skilled nursing facilities with
Express Recovery(TM) Units show considerable improvement in skilled
mix and typically have better over-all performance than those without
one. For the second quarter of 2008, our skilled nursing facilities
with an Express Recovery(TM) Unit reported skilled mix of 28.7%, while
those skilled nursing facilities without an Express Recovery(TM) Unit
reported skilled mix of 20.0%. In the second quarter, we expanded one
existing Express Recovery(TM) Unit. We plan to add another 19 new
units and will expand eight more of our existing units by the end of
the year. I am also excited to report that our new development
activity is progressing well. Our new skilled nursing facility
development projects, designed to advance the state of the art in high
acuity skilled nursing models, are a key part of our future. In that
same regard I would like to praise the Centers for Medicare and
Medicaid Services and the Congress on their approval of the market
basket funding for Medicare and maintaining the recent high acuity
Rate Utilization Groups that have facilitated continued growth of our
quality improvement programs and promoted advancement in our skilled
nursing service levels."

Consolidated Results of Operations for the First Six Months of
2008

For the first six months of 2008, Skilled Healthcare reported net
income of $17.4 million, or $0.47 per diluted share, as compared to a
net loss attributable to common stockholders of $4.3 million, or $0.24
per diluted share, in the first six months of 2007.

Revenues in the first six months of 2008 totaled $361.1 million,
an increase of 22.1% from $295.7 million in the corresponding prior
year period. Revenues in the first six months of 2008 from Skilled
Healthcare's long-term care services segment were $317.8 million, an
increase of 23.1% from the first six months of 2007. Approximately
$45.2 million, or 17.5 percentage points, of the increase in long-term
care services revenues resulted from healthcare facilities acquired or
developed after December 31, 2006. Revenues in the first six months of
2008 from Skilled Healthcare's ancillary services segment were $43.3
million, an increase of 15.2% from the first six months of 2007.
Approximately $4.2 million, or 11.1 percentage points, of the increase
in ancillary services revenues resulted from the acquisition of two
hospice businesses in New Mexico in September 2007.

Adjusted earnings before interest, taxes, depreciation and
amortization, or Adjusted EBITDA, were $57.4 million in the first six
months of 2008, an increase of $8.5 million, or 17.4%, over the first
six months of 2007. Skilled mix was 25.2% in the first six months of
2008, as compared to 25.0% in the first six months of 2007.

Outlook

Skilled Healthcare is increasing its 2008 full year guidance and
expects revenue to be between $730 and $740 million and net income per
diluted share between $0.98 and $1.03. EBITDA is expected to be in the
range of $118 million to $122 million and EBITDAR is expected to be in
the range of $136 million and $140 million.

The increased guidance reflects the final ruling on July 31, 2008
by the Centers for Medicare and Medicaid Services that resulted in an
increase in the market basket for skilled nursing facilities of 3.4%
for fiscal 2009. The final ruling also deferred refinements to the
nine new case-mix groups developed under the prospective payment
system which would have recalibrated all of the RUG classifications
and reduced payments to skilled nursing facilities by $770 million.

Conference Call

A conference call and webcast will be held today, Tuesday, August
5, 2008, at 10:00 a.m. Pacific Time (1:00 p.m. Eastern Time) to
discuss Skilled Healthcare's consolidated financial results for the
second quarter of 2008 and its outlook for the future.

To participate in the call, interested parties may dial
866-825-3308 and reference passcode 81490895. Alternatively,
interested parties may access the call in listen-only mode via Skilled
Healthcare's Web site, www.skilledhealthcaregroup.com. A replay of the
conference call will be available on Skilled Healthcare's Web site or
by dialing 888-286-8010 and referencing passcode 59633079.

About Skilled Healthcare Group

Skilled Healthcare Group, Inc. subsidiaries operate skilled
nursing facilities and a rehabilitation therapy business, which focus
on creating a culture that attracts and retains an innovative, caring
and ethical team that provides high-quality care to patients, and has
a strong reputation for treating patients who require a high level of
skilled nursing care and extensive rehabilitation therapy. We also
provide other related healthcare services, including assisted living
care and hospice care. References made in this release to Skilled
Healthcare, "the company", "we", "us" and "our", refer to Skilled
Healthcare Group, Inc and each of its subsidiaries. More information
about Skilled Healthcare is available at its Web site --
www.skilledhealthcaregroup.com.

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. In
particular, they include the statements made by Mr. Hendrickson and
the outlook for Skilled Healthcare's financial performance and future
actions of Skilled Healthcare. 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. Such risks and uncertainties include, but are not limited
to, the factors described in Skilled Healthcare's Annual Report on
Form 10-K for the year ended December 31, 2007 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).

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.

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Skilled Healthcare Group, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)

Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2008 2007 2008 2007
--------- --------- --------- ---------
(Unaudited)
Revenue $180,348 $151,091 $361,075 $295,746
Expenses:
Cost of services (exclusive
of rent cost of revenue
and depreciation and
amortization shown below) 142,252 119,522 284,396 233,472
Rent cost of revenue 4,478 2,527 8,962 5,221
General and administrative 5,557 4,375 11,760 9,135
Depreciation and
amortization 5,073 4,239 10,233 8,200
--------- --------- --------- ---------
157,360 130,663 315,351 256,028
--------- --------- --------- ---------
Other income (expenses):
Interest expense (9,162) (11,926) (18,815) (24,018)
Premium on redemption of
debt and write-off of
related deferred financing
costs -- (11,648) -- (11,648)
Interest income 123 587 337 914
Other 87 97 309 97
Equity in earnings of joint
venture 718 353 1,109 893
Change in fair value of
interest rate hedge -- -- -- (33)
--------- --------- --------- ---------
Total other income (expenses),
net (8,234) (22,537) (17,060) (33,795)
--------- --------- --------- ---------
Income (loss) before provision
for income taxes 14,754 (2,109) 28,664 5,923
Provision for (benefit from)
income taxes 5,830 (556) 11,296 2,822
--------- --------- --------- ---------
Net income (loss) 8,924 (1,553) 17,368 3,101
Accretion on preferred stock -- (2,583) -- (7,354)
--------- --------- --------- ---------
Net income (loss) attributable
to common stockholders $ 8,924 $ (4,136) $ 17,368 $ (4,253)
========= ========= ========= =========
Net income (loss) per share
data:
Net income (loss) per
common share, basic $ 0.24 $ (0.18) $ 0.48 $ (0.24)
========= ========= ========= =========
Net income (loss) per
common share, diluted $ 0.24 $ (0.18) $ 0.47 $ (0.24)
========= ========= ========= =========
Weighted average common shares
outstanding, basic 36,558 23,437 36,554 17,729
========= ========= ========= =========
Weighted average common shares
outstanding, diluted 36,871 23,437 36,877 17,729
========= ========= ========= =========
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Skilled Healthcare Group, Inc.
Consolidated Balance Sheet and Cash Flow Data
(In thousands)
(Unaudited)

June 30, December 31,
2008 2007
------------ ------------
Balance Sheet Data:
ASSETS
Cash and cash equivalents $ 3,713 $ 5,012
Other current assets 142,406 145,292
Property and equipment, net 318,971 294,281
Other assets 527,171 525,522
------------ ------------
Total assets $ 992,261 $ 970,107
============ ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities less current portion of
long-term debt $ 78,321 $ 88,847
Current portion of long-term debt and
capital leases 3,188 6,335
Other long-term liabilities 55,832 48,355
Long-term debt and capital leases, less
current portion 462,717 452,101
Stockholders' equity 392,203 374,469
------------ ------------
Total liabilities and stockholders' equity $ 992,261 $ 970,107
============ ============

Six Months Ended June 30,
-------------------------
2008 2007
------------ ------------
Cash Flow Data:
Net cash provided by operating activities $ 26,706 $ 5,306
Net cash used in investing activities $ (34,037) $ (51,938)
Net cash provided by financing activities $ 6,032 $ 46,144
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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 Six Months Ended
June 30, June 30,
------------------ -----------------------
2008 2007 2008 2007
-------- -------- ---------- ----------

Occupancy statistics
(skilled nursing
facilities):
Available beds in
service at end of
period 9,091 7,867 9,091 7,867
Available patient days 827,281 716,443 1,642,641 1,387,033
Actual patient days 696,813 600,286 1,393,104 1,175,243
Occupancy percentage 84.2% 83.8% 84.8% 84.7%
Skilled mix 24.6% 24.7% 25.2% 25.0%
Percentage of Medicare
days in the upper nine
RUG categories(1) 39.4% 39.3% 40.0% 38.4%
Average daily number of
patients 7,657 6,597 7,654 6,493
EBITDA(2) (in thousands) $ 28,866 $ 13,469 $ 57,375 $ 37,227
Adjusted EBITDA (2) (in
thousands) $ 28,866 $ 25,117 $ 57,375 $ 48,908
Adjusted EBITDA margin 16.0% 16.6% 15.9% 16.5%

Adjusted EBITDAR (2) (in
thousands) $ 33,344 $ 27,644 $ 66,337 $ 54,129

Adjusted EBITDAR margin 18.5% 18.3% 18.4% 18.3%

Revenue per patient day
(skilled nursing
facilities)
Medicare $ 518 $ 488 $ 511 $ 484
Managed care 366 352 358 352
Medicaid 135 129 135 127
Private and other 155 153 154 152
Weighted average for all $ 222 $ 213 $ 222 $ 213
Revenue from:
Medicare 37.0% 37.1% 37.2% 37.6%
Managed care and private
pay 32.3 32.6 32.1 32.5
------- ------- --------- ---------

Quality mix 69.3 69.7 69.3 70.1
Medicaid 30.7 30.3 30.7 29.9
------- ------- --------- ---------

Total 100.0% 100.0% 100.0% 100.0%
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As of June 30,
---------------
2008 2007
------ ------
Facilities:
Skilled nursing facilities (at end of period):
Owned 51 47
Leased 24 17
----- -----

Total skilled nursing facilities 75 64
===== =====

Total licensed beds 9,335 7,986
Assisted living facilities (at end of period):
Owned 12 11
Leased 2 2
----- -----

Total assisted living facilities 14 13
===== =====

Total licensed units 995 931
Total facilities (at end of period) 89 77
Percentage owned facilities (at end of period) 70.8% 75.3%
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(1) As of January 1, 2006, the Medicare resource utilization group,
or RUG, categories were expanded from 44 to 53. This measures
the percentage of our Medicare days that were generated by
patients for whom we are reimbursed under one of the nine
highest paying RUG categories.
(2) EBITDA, Adjusted EBITDA and Adjusted EBITDAR are supplemental
measures of our performance that are not required by, or
presented in accordance with, GAAP. We define EBITDA as net
income before depreciation, amortization and interest expense
(net of interest income) and the provision for (benefit from)
income taxes. Adjusted EBITDA excludes certain special charges
that are included in EBITDA. We define EBITDAR as net income
before depreciation, amortization and interest expense (net of
interest income), the provision for (benefit from) income taxes
and facility rent expense.
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Skilled Healthcare Group, Inc.
Reconciliation of Net Income to EBITDA, Adjusted EBITDA and Adjusted
EBITDAR
(amounts in thousands)

Three months ended Six months ended
June 30, June 30,
------------------- -----------------
2008 2007 2008 2007
---------- -------- --------- -------
Net income $ 8,924 $(1,553) $17,368 $ 3,101
Interest expense, net of
interest income 9,039 11,339 18,478 23,104
Provision for income taxes 5,830 (556) 11,296 2,822
Depreciation and amortization
expense 5,073 4,239 10,233 8,200
---------- -------- --------- -------
EBITDA 28,866 13,469 57,375 37,227
Premium on redemption of debt
and write-off of related
deferred financing costs -- 11,648 -- 11,648
Change in fair value of
interest rate hedge -- -- -- 33
---------- -------- --------- -------
Adjusted EBITDA 28,866 25,117 57,375 48,908
Rent cost of revenue 4,478 2,527 8,962 5,221
---------- -------- --------- -------
Adjusted EBITDAR $33,344 $27,644 $66,337 $54,129
========== ======== ========= =======
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We believe that the presentation of EBITDA, Adjusted EBITDA and
adjusted EBITDAR provide useful information to investors regarding our
operational performance because they enhance an investor's overall
understanding of the financial performance and prospects for the
future of our core business activities. Specifically, we believe that
a report of EBITDA, Adjusted EBITDA and Adjusted EBITDAR provide
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. EBITDA, 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. generally accepted accounting principles, or GAAP, expenses,
revenues and gains (losses) that are unrelated to the day-to-day
performance of our business. We also use EBITDA, Adjusted EBITDA and
Adjusted EBITDAR to benchmark the performance of our business against
expected results, to analyze year-over-year trends, as described
below, and to compare our operating performance to that of our
competitors.

Management uses EBITDA, 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 an administrative services, segment and a facility by facility
level. We typically use Adjusted EBITDA and Adjusted EBITDAR for these
purposes at the administrative services level (because the adjustments
to EBITDA 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: long term
care services, which includes the operation of our skilled nursing and
assisted living facilities; and ancillary services, which includes our
rehabilitation therapy and hospice businesses. EBITDA, Adjusted EBITDA
and Adjusted EBITDAR are useful in this regard because they do not
include such costs as interest expense, income taxes, depreciation and
amortization expense, facility rent expense 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. Adjusted EBITDAR excludes facility rent expense and is
useful in comparing leased facilities to owned facilities. These types
of charges are dependent on factors unrelated to our underlying
business. As a result, we believe that the use of EBITDA and Adjusted
EBITDA provide a meaningful and consistent comparison of our
underlying business between periods by eliminating certain items
required by GAAP which have little or no significance in our
day-to-day operations.

We also make capital allocations to each of our facilities based
on expected EBITDA returns and establish compensation programs and
bonuses for our facility level employees that are based in part upon
the achievement of pre-established EBITDA and Adjusted EBITDA targets.

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Skilled Healthcare Group, Inc.
Reconciliation of Forecasted Net Income to Forecasted EBITDA
Year Ended December 31, 2008
(in millions)
(Unaudited)

Reconciliation of Forecasted Net Income to EBITDA:
Outlook
----------------
Low High
------- --------
GAAP net income guidance $ 36.0 $ 38.0
Interest expense, net of interest income and other 38.0 38.0
Provision for income taxes 23.0 25.0
Depreciation and amortization expense 21.0 21.0
------- --------
EBITDA guidance 118.0 122.0
Rent cost of revenue 18.0 18.0
------- --------
EBITDAR guidance $136.0 $140.0
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Halliburton Investor Relations
Jeff Elliott, 972-458-8000

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