Skilled Healthcare Announces Restatement
June 10, 2009
June 10, 2009
In a surprise announcement early today, which one analyst referred to as coming "in the middle of the night," Skilled Healthcare Group revealed that it will have to restate all of its annual and quarterly financial statements from January 1, 2006 through March 31, 2009, and that investors should no longer rely on past financial statements for those periods. This is somewhat reminiscent of Sunrise Senior Living's announcement a few years ago, but this one appears to be much smaller and will be much less damaging.
Apparently, improper dating of accounts receivable by a "former employee who appears to have acted in ways that were inconsistent with the Company's accounting policies and practices" resulted in understated reserves for the periods involved. This will result in a cumulative after-tax charge of between $8 million and $9 million. Why the auditors didn't pick this up earlier is a concern, however.
The company has forecast that it will make between $1.02 and $1.08 per diluted share in 2009, about six cents to eight cents lower than previous estimates. Investors almost seemed to shrug off the news, sending the shares down by just 10% in morning trading. We assumed it would be at least a 20% plunge given that investors are looking for more reasons to sell than buy today. The good news is that the future is still relatively bright for the company and we don't believe they will be bogged down with the restatement like Sunrise was. Unless, of course, they find other problems during their review, but that is not anticipated at this point in time.