Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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)
August 2, 2018 (August 2, 2018)

Diversicare Healthcare Services, Inc.
(Exact Name of Registrant as Specified in Charter)


Delaware

001-12996

62-1559667
(State or Other Jurisdiction of Incorporation)
(Commission File Number)
(IRS Employer Identification No.)


1621 Galleria Boulevard, Brentwood, TN 37027
(Address of Principal Executive Offices) (Zip Code)

(615) 771-7575
(Registrant's telephone number, including area code)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
 
 
Emerging growth company
 
¨

 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 
¨







Item 2.02 Results of Operation and Financial Condition.

On August 2, 2018, the Registrant announced its results of operation for the three-month and six-month periods ended June 30, 2018. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference in its entirety. The information furnished pursuant to Item 2.02 herein, including Exhibit 99.1, shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.

Item 7.01. Regulation FD Disclosure.

The Registrant is furnishing its Investor presentation update for the period ended June 30, 2018, which is also contained on its website, DVCR.com. See Exhibit 99.2 to this Current Report of Form 8-K.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Number    Exhibit

99.1Press release dated August 2, 2018.

99.2Investor presentation


    
    







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.


Diversicare Healthcare Services, Inc.


By: /s/ James R. McKnight, Jr.
James R. McKnight, Jr.
Chief Executive Officer


Date:    August 2, 2018




Exhibit


http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12386020&doc=4
 

   Company Contact:
      James R. McKnight, Jr.
      Chief Executive Officer
      615-771-7575
 
 
Diversicare Announces 2018 Second Quarter Results

BRENTWOOD, TN, (August 2, 2018) – Diversicare Healthcare Services, Inc. (NASDAQ: DVCR), a premier provider of long-term care services, today announced its results for the second quarter ended June 30, 2018.
On July 26, 2018, the Board of Directors declared a quarterly dividend of $0.055 per common share payable to shareholders of record as of September 30, 2018, to be paid on October 16, 2018.
Second Quarter 2018 Highlights
Under the new Accounting Standard Codification ("ASC") 606, net revenue was $141.1 million in the second quarter of 2018. In accordance with ASC 606, revenue for the second quarter of 2017 was not restated. Revenue for the second quarter of 2018 under legacy GAAP was $144.5 million, compared to $142.6 million in the second quarter of 2017, an increase of $1.9 million or 1.3%.
Net loss from continuing operations was ($0.3) million, or ($0.05) per share, in the second quarter of 2018, compared to net income from continuing operations of $0.4 million, or $0.06 per share, in the second quarter of 2017. The Company recorded $1.2 million in severance related expense for the former Chief Executive Officer in the second quarter of 2018, which contributed significantly to the quarterly operating loss. Three hundred thousand dollars of this expense relates to non-cash shared-based compensation.
Adjusted EBITDA improved sequentially to $4.6 million and facility-level operating income improved year over year by $0.3 million to $29.6 million, or 21.0% of revenue.
See below for a reconciliation of all GAAP and non-GAAP financial results.
CEO Remarks
“As previously announced, Kelly Gill retired as Chief Executive Officer of Diversicare on July 6, 2018. The Diversicare team and I thank Kelly for his contributions and many years of service to the Company. His leadership proved his dedication to and passion for our patients, residents, team members, and industry,” said Jay McKnight, President and Chief Executive Officer of Diversicare.
Mr. McKnight continued, “Our first priority is the care of our residents and patients who have been entrusted to us. Our quality measures continue to lead in our for profit peer group; however, we seek opportunities to continue to improve our service offerings at each of our centers. We have an amazing team at Diversicare and I am excited to have the opportunity to lead them.”
Commenting on the quarter’s results, Jay said, “The end of the quarter marked the first anniversary of our acquisition of Park Place in Selma, AL. We are very pleased with how the center has performed and are proud to report that it has exceeded our initial expectations. At the time of acquisition we shared that we expected an annual revenue contribution in excess of $8.0 million from this new center. The actual revenue for the first year was just over $9.2 million. Speaking to the portfolio as a whole, our second quarter results reflect improvement over the prior year despite industry-wide challenges to obtain skilled patients.”









Second Quarter 2018 Results
The following table summarizes key revenue and census statistics for continuing operations for each period:
 
Three Months Ended June 30,
 
2018
 
 
 
2017
Skilled nursing occupancy
79.8
%
 
 
 
79.8
%
As a percent of total census:
 
 
 
 
 
Medicare census
10.6
%
 
 
 
12.0
%
Medicaid census
68.9
%
 
 
 
68.6
%
Managed Care census
4.2
%
 
 
 
3.6
%
As a percent of total revenues:
 
 
 
 
 
Medicare revenues
25.0
%
 
 
 
27.3
%
Medicaid revenues
52.0
%
 
 
 
51.6
%
Managed Care revenues
8.2
%
 
 
 
7.0
%
Average rate per day:
 
 
 
 
 
Medicare
$
455.29

 
  
 
$
453.02

Medicaid
$
177.58

 
  
 
$
173.92

Managed Care
$
397.49

 
  
 
$
391.60


Patient Revenues
Patient revenues were $141.1 million and $142.6 million for the three months ended June 30, 2018 and 2017, respectively, a decrease of $1.5 million. The following summarizes the revenue fluctuations attributable to our portfolio growth (in thousands):

 
Three Months Ended June 30,
 
2018
2017
 
 
 
As reported
 
As adjusted to Legacy GAAP
 
As reported
 
Change
Same-store revenue
$
138,747

 
$
142,174

 
$
142,550

 
$
(376
)
2017 acquisition revenue
2,335

 
2,335

 

 
2,335

Total revenue
$
141,082

 
$
144,509

 
$
142,550

 
$
1,959

The difference between patient revenues for the second quarter of 2018 is due to the implementation of ASC 606. Refer to Note 4 "Revenue Recognition" to the interim consolidated financial statements.
The overall increase in revenues as adjusted to legacy GAAP of $2.0 million is primarily attributable to revenue contributions from the acquisition of the Park Place operations during the second quarter of 2018 of $2.3 million.
On a same-store center basis, the average Medicare and Medicaid rate per patient day for the second quarter of 2018 increased compared to the second quarter of 2017, resulting in increases in revenue of $0.1 million and $1.3 million, respectively, or 0.4% and 1.8%, respectively. Our same-store Medicare average daily census for the second quarter of 2018 decreased $4.1 million or 12.5%. Conversely, our Managed Care average daily census for the second quarter of 2018 increased $1.3 million or 15.0%. Our ancillary revenue for the second quarter of 2018 increased $1.3 million.






Operating Expense
Operating expense decreased in the second quarter of 2018 to $111.4 million as compared to $113.2 million in the second quarter of 2017. Operating expense decreased as a percentage of revenue at 79.0% for the second quarter of 2018 as compared to 79.4% for the second quarter of 2017. The following table summarizes the expense increases attributable to our portfolio growth (in thousands):
 
Three Months Ended June 30,
 
2018
2017
 

 
As reported
 
As adjusted to Legacy GAAP
 
As reported
 
Change
Same-store operating expense
$
109,758

 
$
113,547

 
$
113,166

 
$
381

2017 acquisition expense
1,682

 
1,682

 

 
1,682

Total expense
$
111,440

 
$
115,229

 
$
113,166

 
$
2,063

The overall increase in operating expense of $2.1 million is partially attributable to the acquisition of the Park Place operations during the second quarter of 2018 of $1.7 million.
On a same-store center basis, operating expenses increased by $0.4 million, which is attributable to unfavorable variances in salaries and related taxes and maintenance and utilities of $1.1 million and $0.2 million, respectively, in second quarter of 2018 compared to the second quarter of 2017.
One of the largest components of operating expenses is wages, which increased to $67.8 million during the second quarter of 2018 as compared to $65.8 million in the second quarter of 2017, which is due primarily to acquisition activity.
Lease expense in the second quarter of 2018 remained consisted with the second quarter of 2017 at $13.7 million.
Professional liability expense was $3.2 million and $2.7 million in the second quarters of 2018 and 2017, respectively. Our cash expenditures for professional liability costs of continuing operations were $1.7 million and $2.3 million for the second quarters of 2018 and 2017, respectively. Professional liability expense and cash expenditures fluctuate from year to year based respectively on the results of our third-party professional liability actuarial studies and on the costs incurred in defending and settling existing claims. See “Liquidity and Capital Resources” for further discussion of the accrual for professional liability.
General and administrative expense was $9.3 million in the second quarter of 2018 as compared to $8.2 million in the second quarter of 2017. General and administrative expense increased as a percentage of revenue to 6.6% in the second quarter of 2018 from 5.8% in the second quarter of 2017. The increase in general and administrative expense is attributable to $1.2 million of executive severance expense recorded in the second quarter of 2018.
Depreciation and amortization expense was approximately $2.8 million in the second quarter of 2018 as compared to $2.6 million in 2017. The increase in depreciation expense relates to the fixed asset acquisition of a center located in Selma, Alabama during the third quarter of 2017 and other capital expenditures.
Gain on the sale of investment in unconsolidated affiliate was $0.3 million for the three months ended June 30, 2018. The Company and its partners entered into an asset purchase agreement to sell the pharmacy joint venture in the fourth quarter of 2016. The subsequent income related to the final liquidation of remaining net assets affiliated with the partnership.
Interest expense was $1.7 million in the second quarter of 2018 and $1.5 million in the second quarter of 2017, an increase of $0.2 million. The increase was primarily attributable to the amendment of the term loan facility that occurred in June 2017.
As a result of the above, continuing operations reported a loss of $0.7 million before income taxes for the second quarter of 2018 as compared to income of $0.5 million for the second quarter of 2017. The benefit for income taxes was $0.4 million for the second quarter of 2018, and the provision for income taxes was $0.1 million for the second quarter of 2017. Both basic and diluted loss per common share from continuing operations were $0.05 for the second quarter of 2018 as compared to both basic and diluted income per common share from continuing operations of $0.06 in the second quarter of 2017.
Receivables
Our net receivables balance decreased $1.3 million to $63.6 million as of June 30, 2018, from $64.9 million as of December 31, 2017.






Conference Call Information
A conference call has been scheduled for Thursday, August 2, 2018 at 4:00 P.M. Central time (5:00 P.M. Eastern time) to discuss second quarter 2018 results. The conference call information is as follows:
 
 
 
Date:
 
Thursday, August 2, 2018
Time:
 
4:00 P.M. Central, 5:00 P.M. Eastern
Webcast Links:
 
www.DVCR.com
Dial in numbers:
 
877.340.2552 (domestic) or 253.237.1159 (International)
Conference ID: 5065409
The Operator will connect you to Diversicare’s Conference Call

A replay of the conference call will be accessible two hours after its completion through August 9, 2018, by dialing 855-859-2056 (domestic) or 404-537-3406 (international) and entering Conference ID 5065409.
FORWARD-LOOKING STATEMENTS
The “forward-looking statements” contained in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are predictive in nature and are frequently identified by the use of terms such as “may,” “will,” “should,” “expect,” “believe,” “estimate,” “intend,” and similar words indicating possible future expectations, events or actions. These forward-looking statements reflect our current views with respect to future events and present our estimates and assumptions only as of the date of this release. Actual results could differ materially from those contemplated by the forward-looking statements made in this release. In addition to any assumptions and other factors referred to specifically in connection with such statements, other factors, many of which are beyond our ability to control or predict, could cause our actual results to differ materially from the results expressed or implied in any forward-looking statements including, but not limited to, our ability to successfully integrate the operations of our new nursing center in Alabama, as well as successfully operate all of our centers, our ability to increase census at our renovated centers, changes in governmental reimbursement, government regulation, the impact of the recently adopted federal health care reform or any future health care reform, any increases in the cost of borrowing under our credit agreements, our ability to comply with covenants contained in those credit agreements, our ability to renew or extend our leases at or prior to the end of the existing lease terms, the outcome of professional liability lawsuits and claims, our ability to control ultimate professional liability costs, the accuracy of our estimate of our anticipated professional liability expense, the impact of future licensing surveys, the outcome of proceedings alleging violations of state or Federal False Claims Acts, laws and regulations governing quality of care or other laws and regulations applicable to our business including HIPAA and laws governing reimbursement from government payors, the costs of investing in our business initiatives and development, our ability to control costs, changes to our valuation of deferred tax assets, changes in occupancy rates in our centers, changing economic and competitive conditions, changes in anticipated revenue and cost growth, changes in the anticipated results of operations, the effect of changes in accounting policies as well as others. The Company has provided additional information in its Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as well as in its other filings with the Securities and Exchange Commission, which readers are encouraged to review for further disclosure of other factors. These assumptions may not materialize to the extent assumed, and risks and uncertainties may cause actual results to be different from anticipated results. These risks and uncertainties also may result in changes to the Company’s business plans and prospects. Diversicare Healthcare Services, Inc. is not responsible for updating the information contained in this press release beyond the published date, or for changes made to this document by wire services or Internet services.
Diversicare provides long-term care services to patients in 76 nursing centers and 8,456 skilled nursings beds. For additional information about the Company, visit Diversicare's web site: www.DVCR.com.
-Financial Tables to Follow-







DIVERSICARE HEALTHCARE SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
 
 
 
June 30,
2018
 
December 31,
2017
 
 
(Unaudited)
 
 
ASSETS:
 
 
 
 
Current Assets
 
 
 
 
Cash and cash equivalents
 
$
3,811

 
$
3,524

Receivables, net
 
63,591

 
64,929

Current assets of discontinued operations
 
20

 
45

Other current assets
 
6,426

 
4,160

Total current assets
 
73,848

 
72,658

 
 
 
 
 
Property and equipment, net
 
54,301

 
69,204

Deferred income taxes
 
15,052

 
15,154

Acquired leasehold interest, net
 
6,499

 
6,691

Assets held for sale, net
 
13,269

 

Other assets, net
 
5,220

 
3,862

TOTAL ASSETS
 
$
168,189

 
$
167,569

 
 
 
 
 
LIABILITIES AND EQUITY:
 
 
 
 
Current Liabilities
 
 
 
 
Current portion of long-term debt and capitalized lease obligations
 
$
12,760

 
$
13,065

Trade accounts payable
 
14,969

 
14,080

Current liabilities of discontinued operations
 
461

 
461

Accrued expenses:
 
 
 
 
Payroll and employee benefits
 
20,059

 
20,013

Current portion of self-insurance reserves
 
9,044

 
8,792

Other current liabilities
 
7,284

 
7,856

Total current liabilities
 
64,577

 
64,267

Noncurrent Liabilities
 
 
 
 
Long-term debt and capitalized lease obligations, less current portion and deferred financing costs, net
 
74,236

 
74,603

Self-insurance reserves, less current portion
 
17,393

 
13,458

Other noncurrent liabilities
 
5,826

 
8,779

Total noncurrent liabilities
 
97,455

 
96,840

 
 
 
 
 
SHAREHOLDERS’ EQUITY
 
6,157

 
6,462

 
 
 
 
 
TOTAL LIABILITIES AND EQUITY
 
$
168,189

 
$
167,569

 
 
 
 
 







DIVERSICARE HEALTHCARE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data, unaudited)
 
Three Months Ended June 30,
 
2018
 
2017
PATIENT REVENUES, net
$
141,082

 
$
142,550

Operating expense
111,440

 
113,166

Facility-level operating income
29,642

 
29,384

 
 
 
 
EXPENSES:
 
 
 
Lease and rent expense
13,725

 
13,763

Professional liability
3,182

 
2,724

General and administrative
9,295

 
8,221

Depreciation and amortization
2,847

 
2,620

Total expenses less operating
29,049

 
27,328

OPERATING INCOME
593

 
2,056

OTHER INCOME (EXPENSE):
 
 
 
Gain on sale of investment in unconsolidated affiliate
308

 

Interest expense, net
(1,661
)
 
(1,541
)
Other income
28

 

Total other expense
(1,325
)
 
(1,541
)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
(732
)
 
515

BENEFIT (PROVISION) FOR INCOME TAXES
425

 
(134
)
INCOME (LOSS) FROM CONTINUING OPERATIONS
(307
)
 
381

LOSS FROM DISCONTINUED OPERATIONS:
 
 
 
OPERATING LOSS
(4
)
 
(28
)
NET INCOME (LOSS)
$
(311
)
 
$
353

 
 
 
 
NET INCOME (LOSS) PER COMMON SHARE:
 
 
 
Per common share – basic
 
 
 
Continuing operations
$
(0.05
)
 
$
0.06

Discontinued operations

 

 
$
(0.05
)
 
$
0.06

 
 
 
 
Per common share – diluted
$
(0.05
)
 
$
0.06

Continuing operations

 

Discontinued operations
$
(0.05
)
 
$
0.06

 
 
 
 
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK
$
0.055

 
$
0.055

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
 
 
 
Basic
6,370

 
6,294

Diluted
6,370

 
6,472







DIVERSICARE HEALTHCARE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data, unaudited)
 
Six Months Ended June 30,
 
2018
 
2017
PATIENT REVENUES, net
$
282,367

 
$
284,050

Operating expense
223,718

 
223,833

Facility-level operating income
58,649

 
60,217

 
 
 
 
EXPENSES:
 
 
 
Lease and rent expense
27,438

 
27,506

Professional liability
5,957

 
5,394

General and administrative
17,434

 
17,194

Depreciation and amortization
5,728

 
5,107

Total expenses less operating
56,557

 
55,201

OPERATING INCOME
2,092

 
5,016

OTHER INCOME (EXPENSE):
 
 
 
Gain on sale of investment in unconsolidated affiliate
308

 
733

Interest expense, net
(3,330
)
 
(3,024
)
Other income
79

 

Total other expense
(2,943
)
 
(2,291
)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
(851
)
 
2,725

BENEFIT (PROVISION) FOR INCOME TAXES
463

 
(996
)
INCOME (LOSS) FROM CONTINUING OPERATIONS
(388
)
 
1,729

LOSS FROM DISCONTINUED OPERATIONS:
 
 
 
OPERATING LOSS
(26
)
 
(43
)
NET INCOME (LOSS)
$
(414
)
 
$
1,686

 
 
 
 
NET INCOME (LOSS) PER COMMON SHARE:
 
 
 
Per common share – basic
 
 
 
Continuing operations
$
(0.06
)
 
$
0.28

Discontinued operations

 
(0.01
)
 
$
(0.06
)
 
$
0.27

 
 
 
 
Per common share – diluted
$
(0.06
)
 
$
0.27

Continuing operations

 
(0.01
)
Discontinued operations
$
(0.06
)
 
$
0.26

 
 
 
 
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK
$
0.11

 
$
0.11

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
 
 
 
Basic
6,342

 
6,263

Diluted
6,342

 
6,458








DIVERSICARE HEALTHCARE SERVICES, INC.
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
(In thousands)
 
 
 
For Three Months Ended
 
 
June 30, 2018
 
March 31, 2018
 
December 31, 2017
 
September 30, 2017
 
June 30, 2017
 
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
Net income (loss)
 
$
(311
)
 
$
(103
)
 
$
(5,933
)
 
$
(580
)
 
$
353

Loss from discontinued operations, net of tax
 
4

 
22

 
(14
)
 
(1
)
 
28

Income tax provision (benefit)
 
(425
)
 
(38
)
 
6,092

 
(345
)
 
134

Interest expense
 
1,661

 
1,669

 
1,677

 
1,668

 
1,541

Depreciation and amortization
 
2,847

 
2,881

 
2,807

 
2,988

 
2,620

EBITDA
 
3,776

 
4,431

 
4,629

 
3,730

 
4,676

 
 
 
 
 
 
 
 
 
 
 
EBITDA adjustments:
 
 
 
 
 
 
 
 
 
 
Acquisition & disposition related costs (a)
 

 
46

 
2

 
72

 
133

Hurricane costs (b)
 

 

 

 
232

 

Lease termination receipts (c)
 

 

 

 
(180
)
 

Gain on sale of investment in unconsolidated affiliate (d)
 
(308
)
 

 

 

 

Gain on bargain purchase (e)
 

 

 
(925
)
 

 

Executive severance (f)
 
1,172

 

 

 

 

Adjusted EBITDA
 
$
4,640

 
$
4,477

 
$
3,706

 
$
3,854

 
$
4,809

 

(a)
Represents non-recurring costs associated with acquisition and disposition-related transactions.
(b)
Represents non-recurring hurricane costs related to Hurricanes Harvey and Irma during the third quarter 2017.
(c)
Represents non-recurring lease termination receipts, net of expenses, related to the termination of the Carthage, Mississippi operating lease in September 2017.
(d)
Represents non-recurring gain on the sale of an unconsolidated affiliate in November 2016.

(e)
Represents non-recurring gain on bargain purchase related to the Selma acquisition in July 2017.
(f)
Represents non-recurring costs associated with severance expenses for the former Chief Executive Officer.
 




 





DIVERSICARE HEALTHCARE SERVICES, INC.
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME (LOSS)
(In thousands, except per share data)
 
 
 
For Three Months Ended
 
 
June 30, 2018
 
March 31, 2018
 
December 31, 2017
 
September 30, 2017
 
June 30, 2017
 
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
Net income (loss)
 
$
(311
)
 
$
(103
)
 
$
(5,933
)
 
$
(580
)
 
$
353

Adjustments:
 

 
 
 
 
 
 
 
 
Acquisition and disposition related costs (a)
 

 
46

 
2

 
72

 
133

Hurricane costs (b)
 

 

 

 
232

 

Gain on sale of unconsolidated affiliate (c)
 
(308
)
 

 

 

 

Gain on bargain purchase (d)
 

 

 
(925
)
 

 

Lease termination receipts (e)
 

 

 

 
(180
)
 

Executive severance (f)
 
1,172

 
 
 
 
 
 
 
 
Tax impact of above adjustments (g)
 
(474
)
 
(15
)
 
600

 
(43
)
 
(53
)
Discontinued operations, net of tax
 
4

 
22

 
(14
)
 
(1
)
 
28

Adjusted net income (loss)
 
$
83

 
$
(50
)
 
$
(6,270
)
 
$
(500
)
 
$
461

 
 
 
 
 
 
 
 
 
 
 
Adjusted net income (loss) per common share
 
 
 
 
 
 
 
 
 
 
Basic
 
$
0.01

 
$
(0.01
)
 
$
(1.00
)
 
$
(0.08
)
 
$
0.07

Diluted
 
$
0.01

 
$
(0.01
)
 
$
(1.00
)
 
$
(0.08
)
 
$
0.07

 
 
 
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
 
 
 
 
 
 
 
 
 
 
Basic
 
6,370

 
6,314

 
6,295

 
6,294

 
6,294

Diluted
 
6,470

 
6,314

 
6,295

 
6,294

 
6,472

 
 
 
 
 
 
 
 
 
 
 


(a)
Represents non-recurring costs associated with acquisition and disposition-related transactions.
(b)
Represents non-recurring hurricane costs related to Hurricanes Harvey and Irma during the third quarter 2017.
(c)
Represents non-recurring gain on the sale of an unconsolidated affiliate in November 2016.
(d)
Represents non-recurring gain on bargain purchase related to the Selma acquisition in July 2017.
(e)
Represents non-recurring lease termination receipts, net of expenses, related to the termination of the Carthage, Mississippi operating lease in September 2017.
(f)
Represents non-recurring costs associated with severance expenses for the former Chief Executive Officer.
(g)
Represents tax provision for the cumulative adjustments for each period.
 





DIVERSICARE HEALTHCARE SERVICES, INC.
FUNDS PROVIDED BY OPERATIONS
(In thousands, except per share data, unaudited)
 
Six Months Ended June 30,
 
2018
 
2017
NET INCOME (LOSS)
$
(414
)
 
$
1,686

Discontinued operations
(26
)
 
(43
)
Net income (loss) from continuing operations
(388
)
 
1,729

Adjustments to reconcile net income (loss) from continuing operations to funds provided by operations:
 
 
 
Depreciation and amortization
5,728

 
5,107

Provision for doubtful accounts

 
4,187

Deferred income tax provision (benefit)
(34
)
 
403

Provision for self-insured professional liability, net of cash payments
1,722

 
(309
)
Stock based compensation
765

 
504

 Gain on sale of investment in unconsolidated affiliate
(308
)
 
(733
)
 Provision for leases in excess of cash payments
(916
)
 
(304
)
Deferred bonus

 
600

Other
283

 
247

FUNDS PROVIDED BY OPERATIONS
$
6,852

 
$
11,431

 
 
 
 
FUNDS PROVIDED BY OPERATIONS PER COMMON SHARE:
 
 
 
Basic
$
1.08

 
$
1.82

Diluted
$
1.06

 
$
1.77

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING :
 
 
 
Basic
6,370

 
6,294

Diluted
6,470

 
6,472

We have included certain financial measures in this press release, including EBITDA, Adjusted EBITDA, Adjusted Net income (loss) and Funds Provided by Operations which are “non-GAAP financial measures” using accounting principles generally accepted in the United States (GAAP) and using adjustments to GAAP (non-GAAP). These non-GAAP measures are not measurements under GAAP. These measurements should be considered in addition to, but not as a substitute for, the information contained in our financial statements prepared in accordance with GAAP. We define EBITDA as net income (loss) adjusted for loss (income) from discontinued operations, interest expense, income tax and depreciation and amortization. We define Adjusted EBITDA as EBITDA adjusted for acquisition and disposition related costs, hurricane costs, lease termination receipts, gain on sale of unconsolidated center, gain on bargain purchase and executive severance. We define Adjusted Net income (loss) as Net income (loss) adjusted for acquisition and disposition related costs, hurricane costs, lease termination receipts, gain on sale of unconsolidated center, gain on bargain purchase, executive severance, tax impact related to those adjustments, and discontinued operations, net of tax. Funds Provided by Operations is defined as net income from operating activities adjusted for the cash effect of professional liability and other non-cash charges. Management believes that Funds Provided by Operations is an important performance measurement because it eliminates the effect of actuarial assumptions on our professional liability reserves, includes the cash effect of professional liability payments, and does not include the effects of deferred tax benefit and other non-cash charges.
Our measurements of EBITDA, Adjusted EBITDA, Adjusted Net income (loss) and Funds Provided by Operations may not be comparable to similarly titled measures of other companies. We have included information concerning EBITDA, Adjusted EBITDA, Adjusted Net income (loss) and Funds Provided by Operations in this press release because we believe that such information is used by certain investors as measures of a company’s historical performance. Management believes that Adjusted EBITDA and Adjusted Net income (loss) are important performance measurements because they eliminate certain nonrecurring start-up losses and separation costs. Management believes that Funds Provided by Operations is an important performance measurement because it eliminates the effect of actuarial assumptions on our professional liability reserves, includes the cash effect of professional liability payments, and does not include the effects of deferred taxes and other non-cash items. Our presentation of EBITDA, Adjusted EBITDA, Adjusted Net income (loss) and Funds Provided by Operations should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.





DIVERSICARE HEALTHCARE SERVICES, INC.
SELECTED OPERATING STATISTICS
(Unaudited)
Three Months Ended June 30, 2018
 
 
 




As of June 30, 2018
 
 




Occupancy (Note 2)
 
 
 
 
 
 
 
 
Region
(Note 1)
 
Licensed Nursing Beds
Note (4)
 
Available Nursing Beds
Note (4)
 
Skilled Nursing Weighted Average Daily Census
 
Licensed Nursing Beds
 
Available
 Nursing
 Beds
 
Medicare
 Utilization
2018 Q2
 Revenue
($ in millions)
 
Medicare Room and Board Revenue PPD
 (Note 3)
 
Medicaid Room and Board Revenue PPD
 (Note 3)
 
Alabama
 
2,464

 
2,367

 
2,107

 
85.5
%
 
89.0
%
 
10.6
%
 
$
44.7

 
$
438.13

 
$
187.60

 
Kansas
 
464

 
462

 
407

 
87.8
%
 
88.2
%
 
10.8
%
 
7.9

 
434.12

 
170.72

 
Kentucky
 
1,285

 
1,291

 
1,116

 
86.8
%
 
86.4
%
 
11.6
%
 
26.0

 
475.01

 
189.28

 
Mississippi
 
1,039

 
978

 
885

 
85.1
%
 
90.4
%
 
13.6
%
 
19.2

 
437.35

 
187.72

 
Missouri
 
339

 
335

 
225

 
66.5
%
 
67.3
%
 
6.5
%
 
3.8

 
489.14

 
137.34

 
Ohio
 
403

 
392

 
351

 
87.1
%
 
89.5
%
 
13.1
%
 
9.0

 
498.10

 
188.38

 
Tennessee
 
617

 
546

 
430

 
69.7
%
 
78.8
%
 
11.8
%
 
8.8

 
446.96

 
174.01

 
Texas
 
1,845

 
1,613

 
1,225

 
66.4
%
 
75.9
%
 
7.1
%
 
21.7

 
481.67

 
150.31

 
Total
 
8,456

 
7,984

 
6,746

 
79.8
%
 
84.5
%
 
10.6
%
 
$
141.1

 
$
455.29

 
$
177.58

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note 1:
The Alabama region includes nursing centers in Alabama and Florida. The Kentucky region includes one nursing center in Indiana.
 
Note 2:
The number of Licensed Nursing Beds is based on the licensed capacity of the facility. The Company has historically reported its occupancy based on licensed nursing beds, and excludes a limited number of assisted living, independent living, and personal care beds. The number of Available Nursing Beds represents licensed nursing beds less beds removed from service. Available nursing beds is subject to change based upon the needs of the facilities, including configuration of patient rooms, common usage areas and offices, status of beds (private, semi-private, ward, etc.) and renovations. Occupancy is measured on a weighted average basis.
 
Note 3:
These Medicare and Medicaid revenue rates include room and board revenues, but do not include any ancillary revenues related to these patients.
 
Note 4:
The Licensed and Available Nursing Bed counts above include only licensed and available SNF beds.

###
 



investorslidesfy18q2
Nasdaq: DVCR Investor Update As of June 30, 2018


 
Nasdaq: DVCR Forward-Looking Statements Forward-looking statements made in this presentation involve a number of risks and uncertainties, but not limited to:  the outcome of proceedings alleging violations of state or Federal  our ability to increase patients served at our renovated centers False Claims Acts  our ability to successfully integrate the operations of our new  laws and regulations governing quality of care or other laws and nursing centers in Alabama and Mississippi, as well as successfully regulations applicable to our business including laws governing operate all of our centers reimbursement from government payers  changes in governmental reimbursement  changes in occupancy rates in our centers  the impact of the recently adopted federal health care reform or  changes in anticipated revenue and cost growth and the anticipated any future healthcare reform results of operations  any increases in the cost of borrowing under our credit  our ability to comply with covenants contained in those credit agreements agreements  our ability to renew real estate investment trust leases under  the accuracy of our estimate of our anticipated professional liability reasonable terms expense  the outcome of professional liability lawsuits and claims  our ability to control ultimate professional liability costs  the costs of investing in our business initiatives and development  Our ability to control costs  the impact of future licensing surveys  the effect of changes in accounting policies  changing economic and competitive conditions  changes to our valuation of deferred tax assets as well as other risk factors detailed in the Company's Securities and Exchange Commission filings. The Company has provided additional information in its Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as well as in other filings with the Securities and Exchange Commission, which readers are encouraged to review for further disclosure of other factors that could cause actual results to differ materially from those indicated in the forward-looking statements. 2


 
Nasdaq: DVCR Non-GAAP Information This presentation contains certain non-GAAP financial measures, including, EBITDA, Adjusted EBITDA and Adjusted EBITDAR. EBITDA is a non-GAAP financial measure which consists of net (loss) income before interest, income taxes, and depreciation and amortization. Adjusted EBITDA, also a non-GAAP financial measure, is EBITDA adjusted to add back non-recurring items such as (i) acquisition related costs, (ii) lease termination costs, (iii) gain on the sale of an unconsolidated affiliate, (iv) gain on bargain purchase, (v) hurricane costs and (vi) executive severance expense. Adjusted EBITDAR is Adjusted EBITDA adjusted to add back lease expense. Our presentation of EBITDA, Adjusted EBITDA and Adjusted EBITDAR should not be construed as an implication that our future results will be unaffected by unusual or non-recurring items. The presentation of the non-GAAP financial information is not intended to be considered in isolation or as a substitute for any measure prepared in accordance with GAAP. Because non-GAAP financial measures presented in this presentation are not measurements determined in accordance with GAAP and are susceptible to varying calculations, these non-GAAP financial measures, as presented, may not be comparable to other similarly titled measures presented by other companies. Diversicare believes that these non-GAAP financial measures facilitate making period-to-period comparisons and are meaningful indications of its operating performance. We have also presented Adjusted EBITDA in this presentation because we believe it is useful to provide investors and other users of our financial statements this performance measure to align with how management assesses our results of operations. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is included in the attached Appendix A to this presentation. 3


 
Nasdaq: DVCR Investment Highlights Leading Skilled Nursing Provider Compelling Demographic Trends Management’s Strategic Vision Yielding Results Improving Patient Quality Measures, Census And Skilled Mix Demonstrated Ability To Grow And Enhance Portfolio Positively Trending Financial Results 4


 
Nasdaq: DVCR Executive Leadership Jay McKnight Leslie Campbell Chief Executive Officer Chief Operating Officer • Joined Diversicare in 2012 as CFO • Joined Diversicare in 2012 • 10+ Years of senior finance • 20+ years of experience in the LTC positions in the healthcare industry industry • Previous senior leadership positions • Previous senior leadership positions at: at: ‒ NuscriptRX ‒ Golden Living ‒ Take Care Health Systems • Licensed Physical Therapist ‒ I-TRAX, Inc. (CHD Meridian) • Licensed Nursing Home Administrator 5


 
Nasdaq: DVCR Diversicare at a Glance 2017 Q2 Revenue $142.6M – 2018 Q2 Reported Revenue $141.1M – 2018 Q2 legacy GAAP Revenue $144.5M; 1.4% Growth Currently – 75 SNFs, 1 ALF – 8,456 Licensed Skilled Nursing Beds – 10 States Headquartered in Brentwood, TN PA IA NE OH (5) IL IN (1) CO WV KS (6) MO VA (3) KY (13) NC TN (5) OK AR SC MS AL GA (20) (9) TX (13) LA FL (1) 6


 
Nasdaq: DVCR Company Profile . Public Company since 1994 . NASDAQ Listed Company Symbol: DVCR . Added to Russell Microcap Index in 2014 . 52 week range $6.55 – $12.00 . Historically paid $0.22 annual dividend . Headquartered in Brentwood, TN 7


 
Nasdaq: DVCR Long Term Care Industry Overview • Compelling Demographic Trends • High Quality Clinical Outcomes • Relative Low Cost of Care • Risks to the Industry and the Company 8


 
Nasdaq: DVCR Compelling Industry Demographics Number of Skilled Nursing Facilities 17,000 16,500 16,000 15,500 Stable Supply Stable 15,000 2000 2002 2004 2006 2008 2010 2012 2014 2016 Age 65+ Population (in millions) 100 80 60 40 20 Rising Demand Rising 0 1990 2000 2010 2020E 2030E 2040E 2050E 2060E Sources: AHCA, CMS OSCAR Data and US Census Bureau, US Administration on Aging 9


 
Nasdaq: DVCR Compelling Industry Demographics • Long term care spending continues to increase ‒ Medicare and Medicaid expenditures for SNFs expected to grow 57% from 2015 to 2025 ‒ Annual spending on older adults is expected to increase 250% by 2040 Medicare and Medicaid SNF Spending (in billions) 80.0 70.0 60.0 50.0 40.0 30.0 20.0 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E Medicare Medicaid Sources: Medpac and US HHS Department 10


 
Nasdaq: DVCR Relative Cost Per Case of Treatment Across Post-Acute Care Providers $115 $120 $100 $75 $80 $67 $60 $45 $34 $31 $40 $26 $26 $18 $17 $11 $20 $8 $9 $6 $10 $0 Stroke Hip Fracture Joint Respiratory w/ Tracheotomy w/ Replacement Vent Vent SNF IRF LTAC SNFs are recognized as high quality, low cost provider of institutional post-acute care Sources: Medpac and US HHS Department 11


 
Nasdaq: DVCR Risks to the Industry and the Company A number of risks may impact the Industry in general and the Company in particular, including litigation risks and Government reimbursement/regulation risks. Litigation Risks include: • The provision of health care services results in numerous professional liability claims. As of June 30, 2018, the Company had 79 professional liability lawsuits pending against it, many of which are substantially self-insured; thus, the Company has significant potential professional liability exposure. • The Industry is subject to extensive regulatory scrutiny and lawsuits alleging violations of the False Claims Act. The Company is currently defending an investigation relating to its therapy services arising from a false claims lawsuit and an investigation related to the completion of preadmission evaluation forms required by the Tennessee Medicaid Program. • The Company is the subject of a purported class action lawsuit against one of its former Arkansas facilities seeking damages for alleged chronic understaffing. 12


 
Nasdaq: DVCR Risks to the Industry and the Company Government Reimbursement Risks include: • In recent years, there have been initiatives on the federal and state levels for comprehensive reforms affecting the availability, payment and reimbursement of healthcare services in the United States. The Industry is subject to ongoing health care reform which is likely to continue to affect the provision of healthcare services and may require changes in the way the Company conducts its business. • The Industry, as well as the Company, is primarily dependent upon reimbursement from third-party payors, including the Medicare and Medicaid programs. Significant reductions in the reimbursements provided by these programs and other changes have been proposed that would, if implemented, negatively impact the Company’s net revenues, net income and cash flows. • The health care industry is subject to numerous laws and regulations of federal, state and local governments. These laws and regulations include, but are not necessarily limited to, matters such as licensure, accreditation, government health care program participation requirements, protection of patient health information, reimbursement for patient services, quality of patient care and Medicare and Medicaid fraud and abuse. The Company must comply with these increased regulations in order to qualify for reimbursement under Medicare and Medicaid Programs. 13


 
Nasdaq: DVCR Company Overview • Mature Company • Provides a full spectrum of post-acute healthcare services • Robust operating platform capable of significant growth expansion 14


 
Nasdaq: DVCR Key Strategic Accomplishments Retooling: Areas of Focus Expanded Platform Operational Facility Focus Now On Development Improvement Renovations Portfolio Growth Launched Q3 2010 Today Investments made in internal improvements and scalability position Diversicare for external growth 15


 
Nasdaq: DVCR Platform Development and Operational Improvements Implement an Electronic Medical Record (EMR) Solution Centralization of Key Processes People – Processes – Resources Completed – Company repositioned for rapid growth 16


 
Nasdaq: DVCR Key Results and Outcomes • Improved Quality Measures • Improved patient mix and reimbursement rates • Improved operating and G&A leverage • Demonstrated growth through acquisitions 17


 
Nasdaq: DVCR Adoption of ASC 606 - Effective January 1, 2018, the Company adopted the new revenue recognition standard in accordance with Accounting Standards Codification (“ASC”) 606. - The Company used the modified retrospective adoption approach. Therefore, prior year revenue was not restated and the comparison of the current year revenue is conformed to the legacy GAAP presentation and then compared to prior year revenue. - The impact on the bottom line of the methodology is minimal and mostly relates to the classification of bad debt expense, which is now being recorded as a reduction of revenue instead of a component of operating expense. 18


 
Nasdaq: DVCR Results for All Centers: 5 Star Quality Measures Relative to For-Profit Peer Group 4.4 4.17 4.2 4.0 3.8 3.6 3.4 3.2 3.0 Overall QM Rating DVCR Industry For-Profit Not-For-Profit Diversicare is an industry leader in 5 Star Quality Measures outcomes. 19


 
Nasdaq: DVCR Results: Rate Increases Driven By Higher Acuity • Medicare rate growth driven by acuity • 17.4% Increase from FY10 Q3 to FY18 Q2 • 4.0% CAGR Medicare Rate Per Day $480 $455 A $430 $388 $380 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 '10 '10 '11 '11 '11 '11 '12 '12 '12 '12 '13 '13 '13 '13 '14 '14 '14 '14 '15 '15 '15 '15 '16 '16 '16 '16 '17 '17 '17 '17 '18 '18 Medicare Rate Per Day RUGS IV Final Rule Impact A – Resulting from a 2% decrease in rates as a result of sequestration beginning April 1, 2013. 20


 
Nasdaq: DVCR Results: Rate Increases Driven By Higher Acuity • Medicaid rates driven by acuity • 20.1% Increase from FY10 Q3 to FY18 Q2 • 4.7% CAGR Medicaid Rate Per Day $180 $178 $175 $170 $165 $160 $148 $155 $150 $145 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 '10 '10 '11 '11 '11 '11 '12 '12 '12 '12 '13 '13 '13 '13 '14 '14 '14 '14 '15 '15 '15 '15 '16 '16 '16 '16 '17 '17 '17 '17 '18 '18 Medicaid Rate Per Day 21


 
Nasdaq: DVCR Results: Growth in Operated Facilities 80 76 75 70 65 60 55 50 45 45 40 35 30 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 • Our ability to integrate facilities onto our platform is proven by our growth and early accretion of new facilities. • We acquired 22 facilities in the fourth quarter of 2016. • On July 1, 2017, we acquired a facility located in Selma, Alabama. 22


 
Nasdaq: DVCR Results: Impact Of New Centers Acquisitions are Accretive to earnings within a quarter of acquisitions date – the exceptions being development opportunities like new construction, major renovations, etc. Demonstrated Platform Scalability by successful integration of new facilities New Facility Integration, including EMR, implemented during the first quarter of operations at new facilities 23


 
Nasdaq: DVCR Results: Revenue Impact of Acquisitions Quarterly Revenue $160 $140 $120 $100 $80 $60 $40 $20 $- Q1 ’14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 '18 Same-store group* 2015 Acquisitions (3) 2016 Acquisitions (22) 2017 Acquisitions (1) * For the purposes of this chart, the “same-store group” represents all centers operated by the Company prior to January 1, 2015. 24


 
Nasdaq: DVCR Results: New Centers and Same-Store *Same-Store group represents all nursing centers acquired by the Company prior to January 1, 2017. 25


 
Nasdaq: DVCR Results: Revenue Growth and Operating Leverage • Continued Company-wide cost reduction efforts in place o Diligent vendor management and product selection criteria o Centralized purchasing functions drive consistency through all facilities o Revenue and operating expenses increased in the fourth quarter due to the acquisition of 22 new centers Revenue and Facility-Level Operating Profit $150 25.0% $130 20.0% $110 15.0% $90 10.0% $70 5.0% $50 $30 0.0% Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Q2 18 Revenue Operating Profit (%) 26


 
Nasdaq: DVCR Results: G&A Leverage • Continued G&A reduction efforts in place o Right-sized overhead structure for new portfolio o Centralized core functions to leverage skilled teams • Savings from G&A reductions funded strategic investments G&A Expense as a % of Revenue 8.0% A 7.0% B 6.0% 5.0% Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 '15 '15 '15 '15 '16 '16 '16 '16 '17 '17 '17 '17 '18 '18 A – G&A expenses increased in the third quarter of 2016 due to preparation for our acquisition activity of 22 centers in the fourth quarter. B – G&A expenses have been normalized, excluding $1.2 million of executive severance related expenses. 27


 
Nasdaq: DVCR Current Areas of Focus • Continuous quality improvement • Enhancing existing portfolio • Growth through accretive acquisitions 28


 
Nasdaq: DVCR Continue to Enhance Existing Portfolio Continuous improvement of Quality Measures Continue to drive volume of patients served Improve skilled mix / provide high-acuity services Ongoing renovations of existing facilities 29


 
Nasdaq: DVCR Portfolio Growth Achieved goal of doubling the size of the Company in 3 years Target: 5-10 new facilities per year Active acquisition pipeline Expanded operating infrastructure = Scalability Structure flexibility = Several sources of financial capacity 30


 
Nasdaq: DVCR Flexible Structure Broadens Pipeline Acquisition Types 2010 Today • Full Ownership Of Assets Fee-Simple • Participate In Value Appreciation 20% 24% Acquisitions • Enhance Facility Ownership Assumption of • Minimal Capital Required Long-Term Operating • Leverage Turnaround Capabilities 80% 76% Leases • Leverage Strong REIT Relationships 31


 
Nasdaq: DVCR Summary • Improved operational and financial results • Attractive investment dynamics • Repositioned for the future 32


 
Nasdaq: DVCR Key Financial and Operating Statistics Q2 2018 Q1 2018 Q4 2017 Q3 2017 Q2 2017 Average Daily Census 6,746 6,756 6,740 6,854 6,749 Total Average Daily Census – 996 1,086 988 994 1,053 Medicare & Managed Care Skilled Mix % 14.8% 16.1% 14.7% 14.5% 15.6% Occupancy (Available Beds) 84.5% 84.5% 83.3% 84.7% 83.5% Medicare Rate Per Day $455.29 $455.72 $457.02 $455.95 $453.02 Medicaid Rate Per Day $177.58 $176.78 $178.29 $176.26 $173.92 Revenue (Millions) $141.1 $141.3 $144.4 $146.4 $142.6 Facility Level Operating Profit $29.6 $29.0 $28.2 $28.3 $29.4 G&A % of Revenue 6.6% 5.8% 5.6% 5.5% 5.8% Net Income (Loss) ($0.3) $(0.1) $(5.9) $(0.6) $0.4 Adjusted EBITDAR $18.4 $18.2 $17.4 $17.6 $18.6 Adjusted EBITDA $4.6 $4.5 $3.7 $3.9 $4.8 33


 
Nasdaq: DVCR Investment Highlights Leading Skilled Nursing Provider Compelling Demographic Trends Management’s Strategic Vision Yielding Results Improving Patient Quality Measures, Census And Skilled Mix Demonstrated Ability To Grow And Enhance Portfolio Positively Trending Financial Results 34


 
Nasdaq: DVCR Appendix A: Reconciliation of Net Income to Adjusted EBITDA and Adjusted EBITDAR (a) Represents non-recurring costs associated with acquisition-related transactions. (b) Represents non-recurring lease termination receipts, net of expenses, related to the termination of the Carthage, Mississippi operating lease in September 2017. (c) Represents non-recurring hurricane costs related to Hurricanes Harvey and Irma during the third quarter 2017. (d) Represents non-recurring gain on bargain purchase related to the Selma acquisition in July 2017. (e) Represents non-recurring gain on the sale of an unconsolidated affiliate sold in November 2016. (f) Represents non-recurring costs associated with severance related expenses for the former Chief Executive Officer. 35