The graying of America is adding up to green for Sun Healthcare Group Inc.
Sun, an Irvine operator of nursing homes, came in at No. 40 on this week’s list of fastest-growing Orange County public companies based on revenue.
Sun’s revenue has grown 54% in the past three years.
It grew sales from $812 million in the 12 months through June 2004 to $1.3 billion for the 12 months through June 30.
Sun earned $13 million in the second quarter, a 78% increase from the $7.3 million profit a year earlier.
Quarterly revenue shot up 73% to $446.7 million.
“We are happy with our performance,” Chief Executive Richard Matros said in a recent interview. “Our initial goal was to just try and save the company.
“But once we got past that point, we really saw the opportunity to reconstruct this company,” Matros said.
Wall Street likes what it sees,Sun’s shares are up 25% this year, giving it a market value of about $675 million at recent check.
Last month, UBS analyst Donald Hooker said in a research note that he expected a “banner” fourth quarter, as changes in Medicare rates benefit Sun and other providers with rural locations.
Hooker, who raised his rating on Sun to “buy” from “neutral,” also said that the company’s short-term rehabilitation centers should receive a greater number of patients in the quarter.
Sun has combined growth on its own with deals to boost revenue.
Earlier this year, it closed a $350 million buy of Harborside Healthcare, which was based in Boston.
The Harborside deal gave it 75 skilled nursing, assisted living and independent living facilities with about 9,000 licensed beds in 10 states.
Sun inherited and refinanced Harborside’s debt.
The company also said it got a $485 million line of credit from several companies led by Credit Suisse.
Getting Harborside in the fold was part of a strategy shift.
“Having completely deconstructed and reconstructed Sun’s asset base during the last five years, management believes it now has a strong platform with which to grow the company organically and without dependence on additional acquisitions to achieve competitive margins,” Matros said.
Sun now has 216 facilities and nearly 25,000 licensed beds.
Population Benefit
The company got a boost back in June, when a SmartMoney.com article said it and others that serve seniors would benefit from the country’s aging population.
The Census Bureau expects America’s 65 and older population to reach 72 million by 2030, doubling its 2000 count.
The article suggested people should plan early for the health and other care they’ll need when they are old: “Once you’ve sorted that out, consider investing in senior care. The trends are excellent,” author Jack Hough wrote.
The article cited the role of Matros in Sun’s turnaround story.
Matros took over Sun in 2001 after leading two other bankrupt nursing home operators to recovery.
Sun filed for bankruptcy protection in 1999, two years after the government slashed Medicare reimbursements to nursing homes. That cut hit hard,at one time, five of the top seven nursing home operators sought refuge in bankruptcy court.
Matros has made extensive changes at Sun, Hough wrote, including unloading 100 struggling facilities, renegotiating leases on others, selling Sun’s pharmacy business, cutting “corporate waste” and working to improve the company’s reputation.
“This company is well on the way toward establishing itself as a leading long-term care provider in terms of patient-care quality and operational strength,” CIBC analyst Michael Wiederhorn said in a May research report.
Another SmartMoney article predicted that Sun should “collect a nice share” of an expected doubling of nursing home spending by 2020, according to the Centers for Medicare and Medicaid Services.
The company was incorporated in 1993 and moved its corporate office to Irvine when Matros took over as chief executive.
THE NUMBERS
Three-year growth: 54%
Yearly sales through June 30: $1.3 billion
Yearly profit: $22.6 million
Market value: $675 million
Employees: 33,000, 135 in OC
Company: healthcare services provider
