Irvine, Calif. (Nov. 19, 2003) -- Sun Healthcare Group, Inc. (OTC-SUHG.OB) today announced its operating results for its third quarter ended Sept. 30, 2003.
      For the quarter ended Sept. 30, 2003, Sun reported total net revenues from continuing operations of $226.5 million and a net loss, before income taxes and gain and loss from discontinued operations, of $13.6 million, compared with total net revenues from continuing operations of $215.5 million and a net loss, before income taxes and loss from discontinued operations, of $23.6 million for the three month period ended Sept. 30, 2002. The Company operated 124 long-term and other inpatient care facilities with 12,544 licensed beds on Sept. 30, 2003, as compared with 239 facilities with 27,100 licensed beds on Sept. 30, 2002.
      For the quarter ended Sept. 30, 2003, Sun’s net revenues from its continuing ancillary business operations (comprised primarily of SunDance Rehabilitation Corporation, CareerStaff Unlimited, SunPlus Home Health Services, Inc. and Shared Healthcare Systems, Inc.), net of intersegment eliminations, increased $13.3 million, from $57.0 million for the three months ended Sept. 30, 2002, to $70.3 million for the same period in 2003. The net segment income, before restructuring costs, gain on sale of assets, income taxes and discontinued operations for those operations, decreased $3.0 million over the same period, from net income of $7.6 million to net income of $4.6 million. This decrease was the result of multiple factors, including reimbursement cuts, labor increases and start-up costs associated with new CareerStaff offices.  
      Net revenues from the long-term and inpatient care operations, which comprised 69 percent of Sun’s total revenue from continuing operations in the third quarter of 2003, decreased $2.3 million to $156.2 million for the three months ended Sept. 30, 2003, from $158.5 million for the same period in 2002. The net segment income, before restructuring costs, gain on sale of assets, income taxes and discontinued operations from the long-term and inpatient care operations increased $15.7 million from a loss of $14.0 million for the three months ended Sep. 30, 2002, to income of $1.7 million for the same period in 2003. The third quarter 2002 loss was primarily due to a net $14.0 million charge for general and professional liability and workers’ compensation that the company recorded as a result of a periodic actuarial analysis for policy years 2000 and 2001. Sun’s inpatient care results of operations continue to be negatively impacted by the September 2002 reductions in Medicare reimbursement rates, which resulted in a decrease in revenues and net operating income of $8.7 million, but which was partially offset by a market basket increase of $2.2 million.
      As previously announced, on Sept. 8, 2003, Sun and its affiliates entered into a new $75 million senior secured revolving credit facility with CapitalSource Finance LLC, as collateral agent, and certain other lenders. The CapitalSource revolving credit facility has a term of two years and will be used to fund working capital and other corporate obligations of Sun and its affiliates. The credit facility has increased the Company’s liquidity by approximately $20 million due primarily to the release of reserves previously imposed by the former senior lenders.
      On Nov. 7, 2003, Shared Healthcare Systems, Inc., a majority owned subsidiary of Sun that developed software for the long-term care industry, sold substantially all of its assets to Accu-Med Services of Washington LLC, a wholly owned subsidiary of Omnicare, Inc. The purchase price of approximately $5.5 million was paid $5 million at closing, with up to $500,000 of additional purchase price due to be paid in December 2004. Concurrently with the sale to Accu-Med, the Company also entered into a software license agreement with Accu-Med, pursuant to which Sun licensed the software for its inpatient facilities and therapy operations.
      Sun’s corporate overhead costs, including depreciation and interest, for the third quarter of 2003 decreased $2.4 million to $15.1 million from $17.5 million for the same period in 2002. This decrease is due to the Company’s efforts to trim its corporate infrastructure to match the decreasing size of the enterprise as the restructuring of the Company continues.
      "The refinancing we completed during this quarter, coupled with the sale of certain assets, has made it possible for us to explore more options for improving the Company’s operations and financial position in 2004," said Richard K. Matros, Sun’s chairman and chief executive officer. Matros continued, "The results we have shown in our long-term and inpatient operations through third quarter were heartening, especially since we achieved those results despite ongoing reimbursement challenges and the distractions associated with the breadth of our restructuring."
      Sun continues to restructure its long-term care facility portfolio to transition certain under-performing facilities to other operators. Pursuant to this initiative, Sun divested 33 facilities between Jun. 30, 2003, and Sept. 30, 2003. Those 33 facilities accounted for $3.5 million in losses during the third quarter of 2003. Sun divested an additional five facilities in October 2003, and it may divest approximately an additional 19 long-term care facilities as part of the current restructuring, resulting in the Company operating approximately 100 facilities upon completion of the restructuring.
      Sun’s senior management will hold a conference call to discuss the Company’s third quarter operating results on Thursday, Nov. 20, at 12 p.m. EST / 9 a.m. PST. To listen to the conference call, dial (877) 516-8526 and refer to Sun Healthcare Group. A recording of the conference call will be available from 3 p.m. EST on Nov. 20 until midnight EST on Nov. 27 by dialing (800) 642-1687 and using access code 3141311.