sunh - investor presentation - july 2010

8/9/2019 SUNH - Investor Presentation - July 2010

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Leerink SwannNon-Deal Roadshow

July 2010


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References are made in this presentation to EBITDA, EBITDA margin, EBITDAR, EBITDAR marg in and FFO, which are non-GAAPfinancial measures. These non-GAAP financial measures are reconciled to the corresponding GAAP financial measures in theAppendices included at the end of this presentation.

EBITDA is def ined as net income before loss (gain) on discontinued operations, interest expense (net of interest income), income taxexpense (benef it) and depreciation and amortization. EBITDA margin is EBITDA as a percentage of revenue. EBITDAR is EBITDAbefore center rent expense and EBITDAR margin is EBITDAR as a percentage of revenue. Sun believes that the presentation ofEBITDA, EBITDA margin and EBITDA R provides useful information regarding Suns operational performance because they enhance theoverall understanding of the financial performance and prospects for the future of Suns core business activities, provides consistency inSuns f inancial reporting and provides a basis for the comparison of results of core business operations betw een current, past and futureperiods. These measures are also some of the primary indicators Sun uses for planning and forecasting in future periods, includingtrending and analyzing the core operating perf ormance of its business from period to period w ithout the effect of GAAP expenses,revenues and gains that are unrelated to day-to-day performance.

FFO is defined in accordance w ith the definition used by the National Association of Real Estate Invest ments Trusts and is def ined asnet income, excluding gains (or losses) from sales of property, plus depreciation and amortization, and af ter adjustments forunconsolidated partnerships and joint ventures. FFO is useful to investors in comparing operating and financial results betw een periods.This is especially true because FFO excludes real estate depreciation and amort ization, and real estate values fluctuate based onmarket conditions rather than depreciate ratably on a straight-line basis over time. In addition, a presentation of FFO also provides amore meaningful measure of operating results of other real estate investment trusts.


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Recent Developments /Restructuring Transactions


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On 05/24/10 Sun Healthcare announced plans to separate into two separatepublicly traded companies

Will own Suns operating

subsidiariesWill continue to serviceall of its 203 centers

Will manage and growancillary services

Will own Suns current real

estate portfolioWill lease property to theOperating Company

Will grow and diversify throughacquisitions and new tenantrelationships

Operations

OperatingCompany

REIT

Spin Off SurvivingEntity

Leases

Real EstateSun Healthcare Group

Sabra Health Care REIT, Inc.Sun Healthcare Group, Inc.

Unlocks Value of Suns Real Estate Assets

Creates Two Companies Well Positioned To Execute Growth Strategies


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REIT Focused on Diverse Expansion in the Health Care Sector

Establishes Industry Focused REIT Well Positioned to Build a Broad-basedHealthcare Real Estate Portfolio

Healthcare has proven to be a stable asset class vs. other property typesHealthcare REITs have meaningfully outperformed the overall REIT universe and broadermarket

Significant Growth Opportunities within the Sector

Large and growing opportunity in current and other healthcare real estate asset classesDiversify asset base (e.g., ALFs, ILFs, Hospitals, MOBs)

Size provides opportunity to pursue attractive tuck-in acquisitions

Leverage industry operator relationships

Experienced Management Team

Rick Matros, CEO and Chairman Designate

Harold Andrews, CFO Designate


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Key Portfolio Metrics

Number of Facilities 87

Property Type:Skilled NursingCCRCSNF/AL/ILAL/ILMental Health

68 (78%)1 (1%)9 (11%)7 (8%)2 (2%)

Beds:

LicensedAvailable

9,7409,403

States 20

3/31/10 PF EBITDARMMargin

$35.2M19.4%

SNF Skilled Mix 3/31/10 21.0%

Occupancy 3/31/10 89.1%

Facilities w/Specialty Units:RRS UnitsSolana Units

3021

Geographically diversified portfolio of skilled nursing and senior housing assets


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Historical Portfolio Occupancy

Histor ical Portfolio SNF Skilled Mix

Favorable Operating Trends in the Underlying Portfolio

* Pro Forma for Harborside acquisition in 2007


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Master lease on all 87 facilities

10-15 year term, with 5 year renewal options

Renewal options at existing rates

Lesser of CPI or 2.5% escalators

1.6x lease coverage

No purchase options

Visibility of tenant public entity

Strong structural protections to the REIT with positive operating flexibility to theoperating company


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Trend in Cert ified Nursing Facilities , Beds and Residents US Seniors Populat ion Trends (70+ years old) (1)

Implied Demand Growth of 35,000 per year While certified beds and patient occupancy rates remains relativelystable, the number of skilled nursing facilities Continues to decline,

signifying that demand for SNFs will exceed supply

(figures in 000s)

is Substantially Greater than New Supply

Senior Hous ing Construction Starts in Top 31 Metros (Units) (2)

Source: American Health Care Association (AHCA).

(1) Source: US Census Bureau.

(2) Source: Q110 NIC Map Data Construction Monitor for the top 31 metro markets.

Sabra will be opportunistic in its investing strategy, but initially will be focused onskilled nursing and senior housing opportunity


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6.5x

15.0x

Source: CapitalIQ as of 5/16/10

Long Term Car e Index: EXE, SKH, ENSG, KND, SUNH, Manor Care, GenesisHC REIT Index: VTR, NHP, HR, HCP, HCN, LTC, SNH, OHI

Forward FFO Multiple and Forward EBITDAR Multiple 2003-2010 YTD

5.0x

6.0x

7.0x

8.0x

9.0x

10.0x

11.0x

12.0x

13.0x

14.0x

15.0x

16.0x

17.0x

18.0x

Jan-03 Mar-04 Jun-05 Sep-06 Nov-07 Feb-09 May-10

HC REIT Index Forward FFO Multiple LTC Index Forward EBITDAR Multiple


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SunBridge (Skilled Nursing)203 inpatient facilities19,700 patients/residents

SunDance (Rehab)

460+ contracts/330 non-affiliatedContract services, rehab agency,management services

CareerStaff (Staffing)More than 50% of business is in

hospital settings (also serves SNFs,schools, prisons)More than 50% of billings are fortherapist (also provide nursing andpharmacy services)

SolAmor (Hospice)Targeted growth businessLTM revenues increased 93% in theyear-over-year LTM 3/31/10 period

3/31/10 LTM Net RevenueTotal: $ 1.9 billion

Medicaid

25.0% 35.0%

40.0%

Private Payand Other Skilled Mix

CareerStaff

Inpatient

% of 3/31/10 LTM Net RevenueBy Business Unit

5.2%

89.1%

5.7 %SunDance

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Focused Organization Positioned for Optimal Operating Execution

High Quality Portfolio and Premium Assets

Geographically diversified with strong operating metrics

Proven track record of public company performanceAbility to manage higher acuity patients and drive better margins

Attractive Financial Position

Strong balance sheet and consistent cash flow

Provides flexibility to access the capital markets in the future

Experienced Management Team

Bill Mathies, CEO and Chairman Designate

No Changes in the rest of the management team


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Significant Growth Opportunities within the Sector

Well positioned to pursue acquisition opportunities and leverage existing infrastructure intargeted growth segments

Organic Growth Activity Focused on Continued Development of Rehab RecoverySuites (RRS)

Currently 66 centers with RRS units totaling 1632 beds

Accretive Acquisition Activity Focused on :

Hospice Business Synergistic to inpatient business Looking for small tuck-ins or large regional players located near our centers

Skilled Nursing Centers

Mid year 2011, post reimbursement change/stabilized environment Individual and regional targets Complement our 25 s tate footprints individual/regional multi targets


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New Sun Healthcare Group, Inc. Sabra Health Care REIT, Inc.

Pro Forma

(Dollars in millions)

(1) Adj usted for one-time expenses related to net restructuring costs and net loss on sale of assets.(2) Calc ulated in accordance with NAREITs defini tion of FFO except that there are no adjus tments for gains (or losses) from sales of propertyor adjustments for unconsolidated partnerships and joint ventures.

2009 Q1 10

Revenue $1,881.8 $473.3

EBITDAR

(1)

243.8 61.4

EBITDA

(2)

98.7 24.8

Net Income 36.7 8.8

2009 Q110

Revenue $71.9 $18.0

EBITDA 69.5 17.4

Net Income 25.5 6.4

FFO 46.4 11.6

(1)


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(1) The actual amount of the New Sun and/or New Sabra indebtedness may be less than the amount shown above if cash collections fromoperation s between March 31, 2010 and the date of the Separation are received in accordance with Sun's projections.


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NON GAAP RECONCILIATION


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As Reported Reconciliation SectionAs Reported Reconciliation Section

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(Dollars in millions) For the Three For the Three

Months Ended Months EndedMarch 31, 2010 March 31, 2009

Revenue 473.3$ 468.1$

Income from continuing operations 10.5 11.6

Add:Income tax expense 7.3 8.1 D&A 12.4 10.7 Interest 12.0 12.7

EBITDA 42.2$ 43.1$Margin - EBITDA 8.9% 9.2%

Center rent expense 18.6 18.4

EBITDAR 60.8$ 61.5$Margin - EBITDAR 12.8% 13.1%

Sun Healthcare Group, Inc. Reconciliation toReported EBITDA and EBITDAR


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Pro Forma Reconciliation SectionPro Forma Reconciliation Section

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(Dollars in mil lions) Proforma ProformaFor the Tw elve For the Three

Months Ended Months EndedDecember 31, 2009 March 31, 2010

Revenue 1,881.8$ 473.3$

Net income from continuing operations 36.7 8.8

Add:Income tax expense 25.5 6.1 D&A 24.6 7.2 Interest 10.7 2.7 Restructuring costs and net loss on sale of assets 1.3 -

EBITDA 98.7$ 24.8$Margin - EBITDA 5.2% 5.2%

Center rent expense 145.0 36.5

EBITDAR 243.8$ 61.4$Margin - EBITDAR 13.0% 13.0%

Sun Healthcare Group, Inc. Reconciliation toPro Forma EBITDA and EBITDAR


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Pro Forma Reconciliation SectionPro Forma Reconciliation Section

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(Dollars in millions) Proforma ProformaFor the Twelve For the ThreeMonths Ended Months Ended

December 31, 2009 March 31, 2010

Revenue 71.9$ 18.0$

Net income 25.5 6.4

Add: D&A 20.9 5.2

FFO 46.4$ 11.6$

Add: Interest 23.1 5.8

EBITDA 69.5$ 17.4$

Sabra Health Care REIT, Inc. Reconciliation toPro Forma FFO and EBITDA


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APPENDIX


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Occupancy

(3) Quality mix includes all non-Medicaid inpatient revenues

Inpatient Revenue Quality Mix

$173$177

$373

$466Inpatient Revenue Per Patient Day

$450$364

$168

Medicaid Private and Other

(Percentages represent change from prior period)

Q1 09 Q1 10

$186

Managed Care/Comm Medicare Part A

3.0%5.1%

3.5%

Skilled Mix as a % of Revenue

SunBridge Performance Metrics

(1) Occupancy excludes hospital

Q1 09

88.8%

Q4 09

87.8%

Q1 10

87.5%

56.3%

Q1 09 Q4 09

54.2%55.0%

Q1 10

(2) SNF beds only ManagedCare

33.9%

Q1 09

40.6%

Medicare

6.7 %

31.1%

Q4 09

6.3%37.4% 6.1%

38.6%

32.5%

Q1 10


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Product Differentiation

RRS and Solana(Same Store Basis)

Q1 09 Q1 10

90.4 %87.7 %

26.6 % 25.4 % 262.26267.92

Q1 09 Q1 10 Q1 09 Q1 10

Occupancy

Centers w/RRS Only

Skilled Mix%

Rates

Q1 09 Q1 10 Q1 09 Q1 10 Q1 09 Q1 10

90.5 % 89.0 %

17.2 % 15.8 %230.73 230.30

Centers w/Solana Only

OccupancySkilled Mix% Rates

Q1 09 Q1 10

86.6 86.6 %

19.6 % 18.9 % 229.94233.87

Q1 09 Q1 10 Q1 09 Q1 10

Centers w/RRS and Solana

Skilled Mix%

Occupancy Rates

Centers w/o RRS or Solana

86.6 %87.3 %

15.9 % 15.1% 210.60214.36

Q1 09 Q1 10 Q1 09 Q1 10 Q1 09 Q1 10

RatesSkilled Mix%

Occupancy

(39) (22)

(24) (120)


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Revenue($ in millions) EBITDA Margin

SolAmor Performance Metrics

ADC

Q1 10Q1 09

$3.4$4.0

$1.7$0.7

$5.7

$1.3$11.0

$5.8

Q1 09 Q1 10

841283 321122

40545

85

450

811

Q1 09 Q1 10

84119.7%19.5%

17.7%

20.3%

14.9%

14.1%

19.4%

: Legacy : Acquisition : DeNovo


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Pharmacy

Q1 10 RevenueBy Type

61.9%

25.9%

6.9%

5.2% Allied

Nursing

Physician Services

EBITDA Margin

Revenue($ in millions)

CareerStaff Unlimited Performance Metrics

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Q1 09

$27.9

Q4 09

$23.6 $23.5

Q1 10

7.9% 9.3%

Q1 09

9.%

Q4 09

10.1%

Q1 10

7.1%

Pharmacy

57.9%28.9%

6.4%

6.8%

Allied

Nursing

Physician Services

Q1 09 RevenueBy Type


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Q4 07 Q4 08 Q4 09

$644$606

$683

$587

Q1 10

Leverage

Net Debt /EBITDA

Net Debt

Q4 09Q4 08

3.9x3.4x

Q4 07

4.9x

3.3x

Q1 10


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p. 2 Letter from Our CEO p. 3 Our Public Commitme nts to Quality Improvement p. 7 About Our Nursing Centers

p. 9 Our Approach to Quality and its Measure ment p. 10 Quality Information p. 18 Enhancing the Quality of Our Residents Lives p. 20 About Our Employees p. 22 Employee Spirit and Achievement p. 24 Investing in Our Future

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Published 1 st annual report on qualityQuality First PledgeAdvancing Excellence Campaign

Key metrics ahead of nationalpeers

(Can be found on our website @ www.sunh.com)

Suns Commitment to Quality

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sunh - investor presentation - july 2010

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