Lifecare Holdings: modeFinance Credit Report

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modeFinanceTM HeadquarterBuilding A - AREA Science ParkPadriciano 99 - 34149 Trieste - ItalyPh.: +39 040 375 5337Fax: +39 040 375 [email protected]

askMORETM is a registered mark of modeFinanceTM

LIFECARE HOLDINGS, INC.Wednesday, 12 December 2012

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D C CC CCC B BB BBB A AA AAA

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D C CC CCC B BB BBB A AA AAAnot

available

non return extremlypathological

pathological highdanger

weak sufficient adequate good very

strongextremely

strong

Company name LIFECARE HOLDINGS, INC.

Identification number US10 - 123 - 0931

Country United States of America

ZIP code and city 75024 - PLANO

Address 5340 LEGACY DR STE 150

+1 469 241 2100

www.lifecare - hospitals.com

Not available

Legal form Not available

Account Consolidated

Incorporation date 1993

NACE 2 Sector 8610 - Hospital activities

Listed

Status Active

MORE Credit limit Not assessable on the base of the available informations

31/12/2011 31/12/2010 31/12/2008

Turnover (th e) 321,051 267,972 252,907

Rating C CC C

Probability of default 57.00% 42.00% 57.00%

Confidence Level 67% 67% 67%

Solvency ratios

Leverage ratio -12.06 -42.57 -23.52

Total asset/Total liabilities 0.92 0.98 0.96

Liquidity ratios

Current Ratio 1.29 2.32 1.60

Quick Ratio 1.29 2.32 1.60

Profitability and economic equili-

brium ratios

Return on investement ROI (%) - - -

Return on equity ROE (%) -75.21 -22.92 -102.54

Asset turnover - - -

Interest paid weight - - -

EBITDA/Sales - - -

Interest Coverage ratios

EBIT interest coverage ratio - - -

EBITDA interest coverage ratio - - -

Analysis and trend of financial

strength


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modeFinance TM srlVAT number [email protected]

Area Science Park,Padriciano 99. 34149 Trieste, ItalyTel. +39 040 3755337Fax +39 040 3756741

Sector Analysis

Company Healthy Balanced Vulnerable Risky

Solvency ratios

Leverage ratio -12.06 0.26 1.41 3.20 -3.28

Total asset/Total liabilities 0.92 4.80 1.71 1.12 0.93

Liquidity ratios

Current Ratio 1.29 5.08 2.61 1.43 0.98

Quick Ratio 1.29 4.97 2.57 1.39 0.97

Profitability and economic equilibrium ratios

Return on investement ROI (%) - 10.86 5.55 2.35 -2.57

Return on equity ROE (%) -75.21 8.59 7.05 -2.83 -69.77

Asset turnover - 0.00 0.00 0.00 0.00

Interest paid weight - 0.01 0.15 0.37 -0.13

EBITDA/Sales - 0.20 0.23 0.08 -0.04

Interest Coverage ratios

EBIT interest coverage ratio - 80.91 4.54 0.44 -2.84

EBITDA interest coverage ratio - 76.00 8.10 2.43 -2.14

Cash Conversion Cycle (days)

Days Sales Of Inventory (DIO) 0 2 2 3 3

Days Sales Outstanding (DSO) 80 54 56 56 56

Days Payable Outstanding (DPO) 63 5 6 10 11

Cash Conversion Cycle (DIO + DSO - DPO) 17 50 51 47 50

Numer of analyzed companies - 391 1,535 487 81

(Average) Rating C A BBB B CC

The sector has been chosen according to:

international companies in the sector NACE 2 8610 with financial data of year 2011.


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Sector Analysis - Graphs


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Balance Sheet

BALANCE SHEET (th e) 31/12/2011 31/12/2010 31/12/2008

Accounting practice Local GAAP Local GAAP Local GAAP

Exchange rate USD - EUR 0.77286 0.748 0.71855

Number of months 12 12 12

Total assets 396,078 356,943 332,565

Fixed assets 308,608 261,334 259,935

Intangible fixed assets 234,048 197,309 188,744

Tangible fixed assets 0 0 0

Other fixed assets 74,560 64,025 71,191

Current assets 87,470 95,609 72,630

Stocks 0 0 0

Debtors 70,611 50,322 48,001

Other current assets 16,858 45,288 24,629

Cash & cash equivalent 8,941 40,818 18,152

Shareholders funds -35,796 -8,587 -14,765

Capital 135,591 131,230 123,565

Other shareholders funds -171,387 -139,817 -138,330

Total liabilities 431,873 365,530 347,330

Non current liabilities 364,126 324,288 301,923

Long term debt 364,126 324,288 301,923

Other non-current liabilities 0 0 0

Current liabilities 67,747 41,242 45,407

Loans 4,569 2,071 2,732

Creditors 55,168 35,371 19,180

Other current liabilities 8,010 3,800 23,495

Total shareh. funds & liab. 396,078 356,943 332,565

NET DEBT (th e) 31/12/2011 31/12/2010 31/12/2008

Short term debts 4,569 2,071 2,732

Long term debt 364,126 324,288 301,923

Cash & cash equivalent 8,941 40,818 18,152

Net debt 359,754 285,541 286,503

31/12/2011 31/12/2010 31/12/2008

Working capital 15,443 14,950 28,821

Net Current Assets 19,723 54,367 27,223

31/12/2011 31/12/2010 31/12/2008

Days Sales Of Inventory (DIO) 0 0 0

Days Sales Outstanding (DSO) 80 69 69

Days Payable Outstanding (DPO) 63 48 28

Cash Conversion Cycle (DIO + DSO - DPO) 17 21 41


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Income Statement

INCOME STATEMENT (th e) 31/12/2011 31/12/2010 31/12/2008

Accounting practice Local GAAP Local GAAP Local GAAP

Exchange rate USD - EUR 0.77286 0.748 0.71855

Number of months 12 12 12

Sales - - -

Revenues growth (%) - - -

Other revenues +/- variation in inventories and contract in progress + Fixed assets

own construction capitalized- - -

Operating revenue / turnover 321,051 267,972 252,907

Total costs - - -

Costs growth (%) - - -

Service costs - - -

Material costs - - -

Costs of employees - - -

EBITDA - - -

Depreciation - - -

EBIT -26,694 1,665 -14,134

Financial P/L 336 543 0

Financial revenue 336 543 -

Financial expenses - - -

Interest paid - - -

P/L before tax -26,358 2,208 -14,134

Extr. and other P/L - - -

Extr. and other revenue - - -

Extr. and other expenses - - -

P/L before tax + Extr. and other P/L - - -

Taxation 566 240 1,006

P/L for period -26,923 1,968 -15,140

31/12/2011 31/12/2010 31/12/2008

Cash flow - - -

Added value - - -

31/12/2011 31/12/2010 31/12/2008

Number of employees - - -


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Evolutions and trends


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Qualitative information

Full overview The company is a holding company for long term acute care hospitals and skilled care nursing homes. It was

incorporated in 1998 and has its headquarters located in Plano, Texas. The company provides inpatient nursing

and rehabilitative services. The care is generally provided for an extended period of time to individuals requiring

nursing care. It has a permanent core staff of registered or licensed practical nurses who, along with other staff,

provide nursing and continuous personal care services. Some of the company’s wholly - owned subsidiaries include

Colorado Acute Special Care; LifeCare Hospitals of Milwaukee Inc. ; LifeCare Hospitals of North Carolina, LLC;

LifeCare Hospitals of North Texas LP; and LifeCare Hospitals of Northern Nevada, Inc., operates as a medical and

surgical hospitals.

History Not available.

Primary business line A holding company for long term acute care hospitals and skilled care nursing homes.

Secondary business line Not available.

Main activity Services.

Secondary activity Not available.

Main products and services A holding company.

Size estimate Not available.

Strategy, organization and policy Not available.

Strategic alliances Not available.

Membership of a network Not available.

Main brand names Not available.

Main domestic country United States of America.

Main foreign countries or regions Not available.

Main production sites Not available.

Main distribution sites Not available.

Main sales representation sites Not available.

Main customers Not available.


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Auditor/Advisor/Bank

name type address

KPMG, LLP, Dallas, Texas Auditor -

Board

Not available.

Sharehoders (the first twenty shareholders ordered by Direct %)

LCI HOLDCO, LLC Rating:

Country ISO code US Operating Revenue (MIL $) 177.7

NACE Rev. 2, Core code - Total Assets (MIL $) -

Direct % MO Number of Employees 3300

Total % - Information date 2012/05

Address : Not available

CARLYLE GROUP L.P. Rating: B


NACE Rev. 2, Core code - Total Assets (MIL $) 24651.7

Direct % - Number of Employees 1300


Address : Not available

Subsidiaries (the first twenty subsidiaries ordered by Direct %)

LIFE CARE HOSPITAL OF DAYTON, INC Rating:

Country ISO code US Operating Revenue (MIL $) -


Direct % MO Number of Employees -



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LIFECARE HOSPITAL OF SHREVEPORT Rating:





LIFECARE HOSPITALS OF CHESTER COUNTY, INC. Rating:





LIFECARE HOSPITALS OF MILWAUKEE INC Rating:





LIFECARE HOSPITALS OF NORTH CAROLINA LLC Rating:





LIFECARE HOSPITALS OF NORTH TEXAS, L.P. Rating: BB





LIFECARE HOSPITALS OF NORTHERN NEVADA, INC. Rating:





LIFECARE HOSPITALS OF PITTSBURGH, INC. Rating: BB





LIFECARE HOSPITALS OF SARASOTA, LLC Rating:






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LIFECARE HOSPITALS OF SOUTH TEXAS Rating:





LIFECARE HOSPITALS OF WISCONSIN Rating:





LIFECARE MANAGEMENT SERVICES, L.L.C. Rating:





NEXTCARE HOSPITALS / MUSKEGON, INC Rating:






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ASKMORE rating guide

General vision A credit rating is an opinion of the general creditworthiness of an obligor (issuer rating), or the creditworthiness of

an obligor in respect of a specific debt security, or other financial obligation (issue rating), based on relevant risk

factors.

The Multi Objective Rating Evaluation (MORE) model is essentially used to assess the level of distress of industrial

companies by using data included in financial statements.

The basic idea of the model is to analyze a set of financial and economic ratios in a predictive corporate bankruptcy

model with the purpose of creating a fundamental credit rating model for each industrial sector. Results of the

model are obtained by applying newly developed numerical methodologies, drawing together financial theory,

data mining and engineering design methodologies. The heart of MORE is a multi dimensional and multi objective

algorithm that produces a classification of each company, by taking into account any attributes (such as sector and

country) characterizing a firm.

The model gives the opportunity to assign a rating to a company even without considering a complete data analysis

and allows to process quality information. It induces a better understanding of a company’s strength and weakness

thanks to sophisticated data mining tools and taking into account the analyst knowledge.

The MORE rating vision is to look at the fundamental economics of the company. The main idea is to evaluate the

rating observing every aspect of the economical and financial behavior of the company: better is the equilibrium

between the different aspects, better will be the final rating.

This is done studying, evaluating and aggregating the most important sections of the financial and economic

behavior of a company such as: profitability, liquidity, solvency, interest coverage and efficiency.


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Rating scale

Rating class Rating macro class Assessment

AAA

Healthy

The company’s capacity to meet its financial commitments is extremely strong. The company shows an excellent

economic and financial flow and fund equilibrium.

AAThe company has very strong creditworthiness. It also has a good capital structure and economic and financial

equilibrium. Difference from AAA is slight.

AThe company has a high solvency. The company is however more susceptible to the adverse effects of changes in

circumstances and economic conditions than companies in higher rated categories.

BBB

Balanced

Capital structure and economic equilibrium are considered adequate. The company’s capacity to meet its financial

commitments could be affected by serious unfavourable events.

BBA company rated BB is more vulnerable than companies rated BBB. Furthermore the company faces major ongoing

uncertainties or exposure to adverse business, financial, or economic conditions.

B

Vulnerable

The company presents vulnerable signals with regards to its fundamentals. Adverse business, financial, or economic

conditions will be likely to impair the company’s capacity or willingness to meet its financial commitments.

CCC

A company rated CCC has a dangerous disequilibrium on the capital structure and on its economic and financial

fundamentals. Adverse market events and an inadequate management could affect with high probability the

company’s solvency.

CC

Risky

The company shows signals of high vulnerability. In the event of adverse market and economic conditions, the

company’s strong disequilibrium could increase.

CThe company shows considerable pathological situations. The company’s capacity to meet its financial

commitments is very low.

D The company has not any longer the capacity to meet its financial commitments.


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Fundamental Credit Rating Ratios

Analysis area Ratio Assessment

Solvency ratios

Leverage ratioThis measures the level of total liabilities of the company in comparison

with equity.

Assets to debtThis indicates company’s solvency. The company shows a level of deficit

when the value of this ratio is under one unit.

Financial ratios Fixed Assets coverage ratioThis is calculated only for holdings. It measures the capital structure i.e.

whether a company covers the fixed assets with long term capital.

Liquidity ratios

Current ratioThis measures whether a company has sufficient short-term assets to cover

its short-term liabilities.

Quick ratioThis compares current liabilities only to those assets that can be readily

turned into cash.

Profitability and economic ratios

Return on Investement(ROI)This measures the profitability of company investments without regard to

the way the investment is financed.

Return on Equity(ROE) This measures the profitability of the equity.

Asset turnover

This indicates the investments turnover with regards to sales. The level

assumed from the ratio depends on the sector in which the company

operates.

Profit margin This indicates the profitability of sales.

Interest coverage ratio Interest Paid coverage

This indicate the ability of the company to cover interest expenses through

the economic margins (Gross profit and EBIT) and through the cash flow

from operating activities.


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MORE Credit Limit, Probability of default and Confidence Level

MORE Credit Limit MORE Credit limit is the estimation of the amount of maximum credit that is possible to assign on a commercial

relationship with the analyzed company with an outlook of one year.

modeFinance used the following values associated with the company analyzed while computing the credit limit:

• Size;

• Years in Business;

• Average number of suppliers;

• Liquidity of the company and the comparison with its sector;

• The funds dedicated to be paid to suppliers;

• The likelihood that a company may pay its debts in the next 12 months (MORE Ratings).

The credit limit in this report is merely a suggested value of commercial credit limit calculated on the basis of annual

public data. This value should be reviewed by paying attention to the Confidence Level value and by using other

information such as other business information, news... etc; and private information such as the relationship with

client, history of payments, guarantees and the knowledge of the sector.

Probability of default e Confidence

Level

In addition to the MORE Rating, modeFinance also estimates the probability of default and provides a level of

confidence. The probability of default is the degree of certainty (in quantitative terms) that the company will go

into default.

As the probability of default is strongly affected by the economic climate that the company is operating in,

companies in the same MORE class will not necessarily have the same probability of default.

The MORE model can produce a MORE rating even if there is missing data by using an associated confidence level:

Confidence =

∑Available Information∑

Total Information

The level of confidence does not indicate financial confidence in the company. It is a reflection of the variations in

availability of financial data across Europe due to filing regulations and suggests the degree of financial detail the

MORE rating is able to take into account for each company.

For companies with fully populated records a confidence level of 100% would be applied: companies where no

financial data is provided, 0%. This puts the MORE rating in a context for the user and aids interpretation.


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Notes and disclaimer

NOTES modeFinance has based the present analysis on the company available financial statements, coming from one or

more of the following sources: local providers, Commercial Register (Companies House), websites, modeFinance’s

database etc.

DISCLAIMER All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any

form by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of

the publisher modeFinance. The facts of this report are believed to be correct at the time of publication but cannot

be guaranteed. Please note that the findings, conclusions and recommendations that modeFinance delivers will

be based on information gathered in good faith from both primary and secondary sources, whose accuracy we

are not always in a position to guarantee. As such modeFinance can accept no liability whatever for actions taken

based on any information that may subsequently prove to be incorrect.

Contacts

Company modeFinance

Products MORE rating

Where AREA Science Park

34149 Trieste, via Padriciano 99 - ITALY

Info [email protected]

web www.modefinance.com

Phone +39 040 3755337

Documents

Lifecare Holdings: modeFinance Credit Report