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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

~~For the quarterly period ended March 31, 2020.~~

For the quarterly period ended June 30, 2020.

☐ Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to .

Commission file number: 001-33459

Genesis Healthcare, Inc.

(Exact name of registrant as specified in its charter)

Delaware		20-3934755
(State or other jurisdiction ofincorporation or organization)		(IRS EmployerIdentification No.)
101 East State Street
Kennett Square, Pennsylvania		19348
(Address of principal executive offices)		(Zip Code)


Delaware		20-3934755
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

101 East State Street
Kennett Square, Pennsylvania		19348
(Address of principal executive offices)		(Zip Code)

(610) 444-6350

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each Class		Trading Symbol(s)	Name of each exchange on which registered

Class A common stock, $0.001 par value per share		GEN	New York Stock Exchange
Title of each Class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, $0.001 par value per share	GEN	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

~~Large~~Indicate by check mark whether the registrant is a large accelerated filer, ☐an ~~Accelerated~~accelerated ~~Filer~~filer, ☒a ~~Emerging~~non-accelerated filer, a smaller reporting company, or an emerging growth company. ☐See ~~Non-~~the definitions of “large accelerated filer,” ☐“accelerated ~~Smaller~~filer,” “smaller reporting company,” ☒and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐	Accelerated Filer ☒	Emerging growth company ☐

Non-accelerated filer ☐	Smaller reporting company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

~~The number of shares outstanding of each of the issuer’s classes of common stock, as of the close of business on May 26, 2020, was:~~

~~Class A~~The number of shares outstanding of each of the issuer’s classes of common stock, ~~$0.001~~as ~~par~~of ~~value~~the –close ~~110~~of business on August 7,~~124~~ 2020,~~460~~ ~~shares~~ was:

Class A common stock, $0.001 par value – 110,584,200 shares

Class B common stock, $0.001 par value – 744,396 shares

Class C common stock, $0.001 par value – 55,409,742 shares

Table of Contents

Genesis Healthcare, Inc.

Form 10-Q

Index

		PageNumber
Part I.	Financial Information
Item 1.	Financial Statements (Unaudited)	3
	Consolidated Balance Sheets — March 31, 2020 and December 31, 2019	3
	Consolidated Statements of Operations — Three months ended March 31, 2020 and 2019	4
	Consolidated Statements of Comprehensive Income (Loss) — Three months ended March 31, 2020 and 2019	5
	Consolidated Statements of Stockholders’ Deficit — Three months ended March 31, 2020 and 2019	6
	Consolidated Statements of Cash Flows — Three months ended March 31, 2020 and 2019	8
	Notes to Unaudited Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	38
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	58
Item 4.	Controls and Procedures	58
Part II.	Other Information
Item 1.	Legal Proceedings	59
Item 1A.	Risk Factors	59
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 3.	Defaults Upon Senior Securities	60
Item 4.	Mine Safety Disclosures	60
Item 5.	Other Information	60
Item 6.	Exhibits	61
Signatures		62

		Page Number
Part I.	Financial Information

Item 1.	Financial Statements (Unaudited)	3

	Consolidated Balance Sheets — June 30, 2020 and December 31, 2019	3
	Consolidated Statements of Operations — Three and six months ended June 30, 2020 and 2019	4
	Consolidated Statements of Comprehensive Income (Loss) — Three and six months ended June 30, 2020 and 2019	5
	Consolidated Statements of Stockholders’ Deficit — Three and six months ended June 30, 2020 and 2019	6
	Consolidated Statements of Cash Flows — Six months ended June 30, 2020 and 2019	8
	Notes to Unaudited Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	73

Item 4.	Controls and Procedures	73

Part II.	Other Information

Item 1.	Legal Proceedings	74

Item 1A.	Risk Factors	74

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	75

Item 3.	Defaults Upon Senior Securities	75

Item 4.	Mine Safety Disclosures	75

Item 5.	Other Information	75

Item 6.	Exhibits	76

Signatures		77

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

~~GENESIS HEALTHCARE, INC. AND SUBSIDIARIES~~

~~CONSOLIDATED~~GENESIS ~~BALANCE~~HEALTHCARE, ~~SHEETS~~ INC. AND SUBSIDIARIES

~~(IN~~CONSOLIDATED ~~THOUSANDS,~~BALANCE ~~EXCEPT SHARE AND PER SHARE DATA)~~ SHEETS

(~~UNAUDITED~~IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

	March 31, 2020		December 31, 2019
Assets:
Current assets:
Cash and cash equivalents	$	23,502	$	12,097
Restricted cash and equivalents		47,285		63,101
Restricted investments in marketable securities		31,855		31,855
Accounts receivable		553,520		567,636
Prepaid expenses		73,774		108,908
Other current assets		43,845		44,079
Assets held for sale		—		1,171
Total current assets		773,781		828,847
Property and equipment, net of accumulated depreciation of $415,948 and $431,361 at March 31, 2020 and December 31, 2019, respectively		853,793		962,105
Finance lease right-of-use assets, net of accumulated amortization of $24,436 and $23,401 at March 31, 2020 and December 31, 2019, respectively		33,791		37,097
Operating lease right-of-use assets		2,353,477		2,399,505
Restricted cash and equivalents		50,766		50,608
Restricted investments in marketable securities		99,266		105,087
Other long-term assets		109,400		85,725
Deferred income taxes		4,391		3,772
Identifiable intangible assets, net of accumulated amortization of $77,553 and $76,243 at March 31, 2020 and December 31, 2019, respectively		86,136		87,446
Goodwill		85,642		85,642
Assets held for sale		38,538		16,306
Total assets	$	4,488,981	$	4,662,140
Liabilities and Stockholders' Deficit:
Current liabilities:
Current installments of long-term debt	$	106,088	$	162,426
Current installments of finance lease obligations		2,926		2,839
Current installments of operating lease obligations		142,191		140,887
Accounts payable		195,356		238,384
Accrued expenses		226,692		226,092
Accrued compensation		154,058		153,698
Self-insurance reserves		149,655		146,476
Current portion of liabilities held for sale		728		368
Total current liabilities		977,694		1,071,170
Long-term debt		1,355,148		1,450,994
Finance lease obligations		38,845		39,335
Operating lease obligations		2,632,831		2,681,403
Deferred income taxes		4,792		5,245
Self-insurance reserves		412,189		406,864
Liabilities held for sale		44,913		19,789
Other long-term liabilities		64,704		69,905
Commitments and contingencies
Stockholders’ deficit:
Class A common stock, (par $0.001, 1,000,000,000 shares authorized, issued and outstanding - 108,163,948 and 107,888,854 at March 31, 2020 and December 31, 2019, respectively)		108		108
Class B common stock, (par $0.001, 20,000,000 shares authorized, issued and outstanding - 744,396 and 744,396 at March 31, 2020 and December 31, 2019, respectively)		1		1
Class C common stock, (par $0.001, 150,000,000 shares authorized, issued and outstanding - 55,902,144 and 56,172,193 at March 31, 2020 and December 31, 2019, respectively)		56		56
Additional paid-in-capital		247,876		248,594
Accumulated deficit		(976,788)		(1,010,296)
Accumulated other comprehensive income		1,243		602
Total stockholders’ deficit before noncontrolling interests		(727,504)		(760,935)
Noncontrolling interests		(314,631)		(321,630)
Total stockholders' deficit		(1,042,135)		(1,082,565)
Total liabilities and stockholders’ deficit	$	4,488,981	$	4,662,140

(UNAUDITED)

See accompanying notes to unaudited consolidated financial statements.


	June 30, 2020		December 31, 2019
Assets:
Current assets:
Cash and cash equivalents	$	251,651	$	12,097
Restricted cash and equivalents		62,664		63,101
Restricted investments in marketable securities		39,682		31,855
Accounts receivable		459,354		567,636
Prepaid expenses		69,617		108,908
Other current assets		41,723		44,079
Assets held for sale		—		1,171
Total current assets		924,691		828,847
Property and equipment, net of accumulated depreciation of $430,333 and $431,361 at June 30, 2020 and December 31, 2019, respectively		831,333		962,105
Finance lease right-of-use assets, net of accumulated amortization of $20,652 and $23,401 at June 30, 2020 and December 31, 2019, respectively		32,956		37,097
Operating lease right-of-use assets		2,134,233		2,399,505
Restricted cash and equivalents		51,061		50,608
Restricted investments in marketable securities		92,335		105,087
Other long-term assets		108,563		85,725
Deferred income taxes		4,702		3,772
Identifiable intangible assets, net of accumulated amortization of $78,864 and $76,243 at June 30, 2020 and December 31, 2019, respectively		84,826		87,446
Goodwill		85,642		85,642
Assets held for sale		15,992		16,306
Total assets	$	4,366,334	$	4,662,140
Liabilities and Stockholders' Deficit:
Current liabilities:
Current portion of long-term debt	$	19,116	$	162,426
Current portion of finance lease obligations		2,947		2,839
Current portion of operating lease obligations		135,853		140,887
Accounts payable		210,870		238,384
Accrued expenses		364,973		226,092
Accrued compensation		147,281		153,698
Self-insurance reserves		149,793		146,476
Current portion of liabilities held for sale		394		368
Total current liabilities		1,031,227		1,071,170
Long-term debt		1,359,710		1,450,994
Finance lease obligations		36,268		39,335
Operating lease obligations		2,476,384		2,681,403
Deferred income taxes		4,815		5,245
Self-insurance reserves		404,863		406,864
Liabilities held for sale		24,043		19,789
Other long-term liabilities		99,305		69,905
Commitments and contingencies
Stockholders’ deficit:
Class A common stock, (par $0.001, 1,000,000,000 shares authorized, issued and outstanding - 110,584,200 and 107,888,854 at June 30, 2020 and December 31, 2019, respectively)		111		108
Class B common stock, (par $0.001, 20,000,000 shares authorized, issued and outstanding - 744,396 and 744,396 at June 30, 2020 and December 31, 2019, respectively)		1		1
Class C common stock, (par $0.001, 150,000,000 shares authorized, issued and outstanding - 55,409,742 and 56,172,193 at June 30, 2020 and December 31, 2019, respectively)		55		56
Additional paid-in-capital		242,108		248,594
Accumulated deficit		(998,793)		(1,010,296)
Accumulated other comprehensive income		1,591		602
Total stockholders’ deficit before noncontrolling interests		(754,927)		(760,935)
Noncontrolling interests		(315,354)		(321,630)
Total stockholders' deficit		(1,070,281)		(1,082,565)
Total liabilities and stockholders’ deficit	$	4,366,334	$	4,662,140

~~Table~~See ofaccompanying ~~Contents~~ notes to unaudited consolidated financial statements.

~~GENESIS HEALTHCARE, INC. AND SUBSIDIARIES~~ 3

~~CONSOLIDATED~~Table ~~STATEMENTS~~of ~~OF OPERATIONS~~ Contents

~~(IN~~GENESIS ~~THOUSANDS~~HEALTHCARE, ~~EXCEPT~~INC. ~~PER~~AND ~~SHARE DATA)~~ SUBSIDIARIES

~~(UNAUDITED)~~ CONSOLIDATED STATEMENTS OF OPERATIONS

	Three months ended March 31,
	2020		2019
Net revenues	$	1,092,250	$	1,161,640
Salaries, wages and benefits		580,533		642,410
Other operating expenses		340,481		342,538
General and administrative costs		39,617		35,532
Lease expense		98,020		94,061
Depreciation and amortization expense		25,988		38,195
Interest expense		36,240		51,516
Loss on early extinguishment of debt		4,039		—
Investment income		(1,156)		(1,864)
Other income		(84,832)		(16,917)
Transaction costs		5,591		1,261
Long-lived asset impairments		9,700		—
Equity in net income of unconsolidated affiliates		127		(61)
Income (loss) before income tax (benefit) expense		37,902		(25,031)
Income tax (benefit) expense		(779)		51
Net income (loss)		38,681		(25,082)
Less net (income) loss attributable to noncontrolling interests		(5,173)		9,819
Net income (loss) attributable to Genesis Healthcare, Inc.	$	33,508	$	(15,263)
Earnings (loss) per common share:
Basic:
Weighted-average shares outstanding for basic net income (loss) per share		109,721		103,715
Basic net income (loss) per common share attributable to Genesis Healthcare, Inc.	$	0.31	$	(0.15)
Diluted:
Weighted-average shares outstanding for diluted net income (loss) per share		167,414		103,715
Diluted net income (loss) per common share attributable to Genesis Healthcare, Inc.	$	0.24	$	(0.15)

(IN THOUSANDS, EXCEPT PER SHARE DATA)

~~See accompanying notes to unaudited consolidated financial statements.~~ (UNAUDITED)

~~Table of Contents~~

GENESIS HEALTHCARE, INC. AND SUBSIDIARIES


	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
Net revenues	$	956,259	$	1,145,052	$	2,048,509	$	2,306,692
Salaries, wages and benefits		616,944		626,159		1,197,477		1,268,569
Other operating expenses		317,274		332,528		657,755		675,066
General and administrative costs		39,769		35,562		79,386		71,094
Lease expense		96,395		94,586		194,415		188,647
Depreciation and amortization expense		33,816		28,268		59,804		66,463
Interest expense		31,907		52,975		68,147		104,491
Loss (gain) on early extinguishment of debt		1,421		(24)		5,460		(24)
Investment income		(961)		(2,143)		(2,117)		(4,007)
Other income		(44,100)		(23,413)		(128,932)		(40,330)
Transaction costs		5,543		8,823		11,134		10,084
Long-lived asset impairments		77,100		900		86,800		900
Federal stimulus - COVID-19 other income		(185,500)		—		(185,500)		—
Equity in net income of unconsolidated affiliates		(3,576)		(24)		(3,449)		(85)
(Loss) income before income tax benefit		(29,773)		(9,145)		8,129		(34,176)
Income tax benefit		(457)		(162)		(1,236)		(111)
Net (loss) income		(29,316)		(8,983)		9,365		(34,065)
Less net loss attributable to noncontrolling interests		7,311		4,164		2,138		13,983
Net (loss) income attributable to Genesis Healthcare, Inc.	$	(22,005)	$	(4,819)	$	11,503	$	(20,082)
(Loss) earnings per common share:
Basic:
Weighted-average shares outstanding for basic net (loss) income per share		111,232		106,846		110,477		105,289
Basic net (loss) income per common share attributable to Genesis Healthcare, Inc.	$	(0.20)	$	(0.05)	$	0.10	$	(0.19)

Diluted:
Weighted-average shares outstanding for diluted net (loss) income per share		111,232		106,846		166,866		105,289
Diluted net (loss) income per common share attributable to Genesis Healthcare, Inc.	$	(0.20)	$	(0.05)	$	0.07	$	(0.19)

~~CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)~~

~~(IN~~See ~~THOUSANDS)~~ accompanying notes to unaudited consolidated financial statements.

~~(UNAUDITED)~~

	Three months ended March 31,
	2020		2019
Net income (loss)	$	38,681	$	(25,082)
Net unrealized gain on marketable securities, net of tax		978		496
Comprehensive income (loss)		39,659		(24,586)
Less: comprehensive (income) loss attributable to noncontrolling interests		(5,510)		9,720
Comprehensive income (loss) attributable to Genesis Healthcare, Inc.	$	34,149	$	(14,866)

~~See~~Table ~~accompanying~~of ~~notes to unaudited consolidated financial statements.~~ Contents

5 GENESIS HEALTHCARE, INC. AND SUBSIDIARIES

~~Table~~CONSOLIDATED ofSTATEMENTS ~~Contents~~ OF COMPREHENSIVE INCOME (LOSS)

~~GENESIS~~(IN ~~HEALTHCARE, INC. AND SUBSIDIARIES~~ THOUSANDS)

~~CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT~~ (UNAUDITED)

~~(IN THOUSANDS)~~

(UNAUDITED)


	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
Net (loss) income	$	(29,316)	$	(8,983)	$	9,365	$	(34,065)
Net unrealized gain on marketable securities, net of tax		502		622		1,480		1,118
Comprehensive (loss) income		(28,814)		(8,361)		10,845		(32,947)
Less: comprehensive loss attributable to noncontrolling interests		7,157		3,948		1,647		13,668
Comprehensive (loss) income attributable to Genesis Healthcare, Inc.	$	(21,657)	$	(4,413)	$	12,492	$	(19,279)

														Accumulated
														other						Total
	Class A Common Stock			Class B Common Stock			Class C Common Stock			Additional		Accumulated		comprehensive		Stockholders'		Noncontrolling		stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		paid-in capital		deficit		income		deficit		interests		deficit
Balance at December 31, 2019	107,889	$	108	744	$	1	56,172	$	56	$	248,594	$	(1,010,296)	$	602	$	(760,935)	$	(321,630)	$	(1,082,565)
Net income	—		—	—		—	—		—		—		33,508		—		33,508		5,173		38,681
Net unrealized gain on marketable securities, net of tax	—		—	—		—	—		—		—		—		641		641		337		978
Share based compensation	—		—	—		—	—		—		1,894		—		—		1,894		—		1,894
Issuance of common stock	5		—	—		—	—		—		—		—		—		—		—		—
Conversion of common stock among classes	270		—	—		—	(270)		—		(2,612)		—		—		(2,612)		2,612		—
Distributions to noncontrolling interests	—		—	—		—	—		—		—		—		—		—		(1,123)		(1,123)
Balance at March 31, 2020	108,164	$	108	744	$	1	55,902	$	56	$	247,876	$	(976,788)	$	1,243	$	(727,504)	$	(314,631)	$	(1,042,135)

See accompanying notes to unaudited consolidated financial statements.

~~Table of Contents~~ 5

~~GENESIS~~Table ~~HEALTHCARE,~~of ~~INC. AND SUBSIDIARIES~~ Contents

~~CONSOLIDATED~~GENESIS ~~STATEMENTS~~HEALTHCARE, OFINC. ~~STOCKHOLDERS’~~AND ~~DEFICIT~~ SUBSIDIARIES

~~(IN~~CONSOLIDATED ~~THOUSANDS)~~ STATEMENTS OF STOCKHOLDERS’ DEFICIT

(~~UNAUDITED~~IN THOUSANDS)

														Accumulated
														other						Total
	Class A Common Stock			Class B Common Stock			Class C Common Stock			Additional		Accumulated		comprehensive		Stockholders'		Noncontrolling		stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		paid-in capital		deficit		(loss) income		deficit		interests		deficit
Balance at December 31, 2018	101,236	$	101	744	$	1	59,701	$	60	$	270,408	$	(1,609,828)	$	(262)	$	(1,339,520)	$	(705,346)	$	(2,044,866)
Net loss	—		—	—		—	—		—		—		(15,263)		—		(15,263)		(9,819)		(25,082)
Net unrealized gain on marketable securities, net of tax	—		—	—		—	—		—		—		—		397		397		99		496
Share based compensation	—		—	—		—	—		—		2,087		—		—		2,087		—		2,087
Issuance of common stock	100		—	—		—	—		—		—		—		—		—		—		—
Conversion of common stock among classes	3,081		3	—		—	(3,081)		(3)		(18,175)		—		—		(18,175)		18,175		—
Distributions to noncontrolling interests	—		—	—		—	—		—		64		—		—		64		(1,202)		(1,138)
Contributions from noncontrolling interests	—		—	—		—	—		—		—		—		—		—		18,500		18,500
Cumulative effect of accounting change	—		—	—		—	—		—		—		584,913		—		584,913		340,129		925,042
Balance at March 31, 2019	104,417	$	104	744	$	1	56,620	$	57	$	254,384	$	(1,040,178)	$	135	$	(785,497)	$	(339,464)	$	(1,124,961)

(UNAUDITED)

See accompanying notes to unaudited consolidated financial statements.


														Accumulated
														other						Total
	Class A Common Stock			Class B Common Stock			Class C Common Stock			Additional		Accumulated		comprehensive		Stockholders'		Noncontrolling		stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		paid-in capital		deficit		income		deficit		interests		deficit
Balance at December 31, 2019	107,889	$	108	744	$	1	56,172	$	56	$	248,594	$	(1,010,296)	$	602	$	(760,935)	$	(321,630)	$	(1,082,565)
Net income	—		—	—		—	—		—		—		33,508		—		33,508		5,173		38,681
Net unrealized gain on marketable securities, net of tax	—		—	—		—	—		—		—		—		641		641		337		978
Share based compensation	—		—	—		—	—		—		1,894		—		—		1,894		—		1,894
Issuance of common stock	5		—	—		—	—		—		—		—		—		—		—		—
Conversion of common stock among classes	270		—	—		—	(270)		—		(2,612)		—		—		(2,612)		2,612		—
Distributions to noncontrolling interests	—		—	—		—	—		—		—		—		—		—		(1,123)		(1,123)
Balance at March 31, 2020	108,164	$	108	744	$	1	55,902	$	56	$	247,876	$	(976,788)	$	1,243	$	(727,504)	$	(314,631)	$	(1,042,135)
Net loss	—		—	—		—	—		—		—		(22,005)		—		(22,005)		(7,311)		(29,316)
Net unrealized gain on marketable securities, net of tax	—		—	—		—	—		—		—		—		348		348		154		502
Share based compensation	—		—	—		—	—		—		1,831		—		—		1,831		—		1,831
Issuance of common stock	1,928		2	—		—	—		—		(2)		—		—		—		—		—
Conversion of common stock among classes	492		1	—		—	(492)		(1)		(7,597)		—		—		(7,597)		7,597		—
Distributions to noncontrolling interests	—		—	—		—	—		—		—		—		—		—		(1,163)		(1,163)
Balance at June 30, 2020	110,584	$	111	744	$	1	55,410	$	55	$	242,108	$	(998,793)	$	1,591	$	(754,927)	$	(315,354)	$	(1,070,281)

~~Table~~See ofaccompanying ~~Contents~~ notes to unaudited consolidated financial statements.

~~GENESIS HEALTHCARE, INC. AND SUBSIDIARIES~~ 6

~~CONSOLIDATED~~Table ~~STATEMENTS~~of ~~OF CASH FLOWS~~ Contents

~~(IN~~GENESIS ~~THOUSANDS)~~ HEALTHCARE, INC. AND SUBSIDIARIES

~~(UNAUDITED)~~ CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

	Three months ended March 31,
	2020		2019
Cash flows from operating activities
Net income (loss)	$	38,681	$	(25,082)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Non-cash interest and leasing arrangements, net		5,901		5,222
Other non-cash gain, net		(84,832)		(16,917)
Share based compensation		1,894		2,087
Depreciation and amortization expense		25,988		38,195
Reduction in the carrying amount of operating lease right-of-use assets		31,506		29,574
Provision (recovery) for losses on accounts receivable		201		(685)
Equity in net income of unconsolidated affiliates		127		(61)
Benefit for deferred taxes		(1,331)		(835)
Loss on early extinguishment of debt		1,328		—
Long-lived asset impairments		9,700		—
Changes in assets and liabilities:
Accounts receivable		7,321		20,974
Accounts payable and other accrued expenses and other		7,277		(18,759)
Operating lease obligations		(28,511)		(21,567)
Net cash provided by operating activities		15,250		12,146
Cash flows from investing activities:
Capital expenditures		(21,278)		(23,529)
Purchases of marketable securities		(12,359)		(14,700)
Proceeds on maturity or sale of marketable securities		19,416		8,257
Purchases of assets		(9,146)		(252,475)
Sales of assets		161,408		79,000
Restricted deposits		749		—
Investments in joint venture		(14,886)		—
Loan provided to joint venture		(9,000)		—
Other, net		32		28
Net cash provided by (used in) investing activities		114,936		(203,419)
Cash flows from financing activities:
Borrowings under revolving credit facilities		1,093,643		1,163,000
Repayments under revolving credit facilities		(1,143,692)		(1,194,676)
Proceeds from issuance of long-term debt		7,339		170,565
Repayment of long-term debt		(89,654)		(4,467)
Repayment of finance lease obligations		(712)		(575)
Debt issuance costs		(240)		(3,708)
Contributions from noncontrolling interests		—		18,500
Distributions to noncontrolling interests and stockholders		(1,123)		(1,138)
Net cash (used in) provided by financing activities		(134,439)		147,501
Net decrease in cash, cash equivalents and restricted cash and equivalents		(4,253)		(43,772)
Cash, cash equivalents and restricted cash and equivalents:
Beginning of period		125,806		142,276
End of period	$	121,553	$	98,504
Supplemental cash flow information:
Interest paid	$	31,815	$	45,620
Net taxes paid		1,430		1,081
Non-cash investing and financing activities:
Finance lease obligations, net gross up (write-down) due to lease activity	$	309	$	(131,842)
Assets subject to finance lease obligations, net (gross-up) write-down due to lease activity		(310)		61,512
Operating lease obligations, net gross-up due to lease activity		(18,757)		2,408,557
Assets subject to operating leases, net (gross-up) due to lease activity		14,320		(2,264,702)
Financing obligations, net write-down due to lease activity		—		(2,734,940)
Assets subject to financing obligations, net write-down due to lease activity		—		1,718,507

(IN THOUSANDS)

~~See accompanying notes to unaudited consolidated financial statements.~~ (UNAUDITED)


														Accumulated
														other						Total
	Class A Common Stock			Class B Common Stock			Class C Common Stock			Additional		Accumulated		comprehensive		Stockholders'		Noncontrolling		stockholders'
	Shares	Amount		Shares	Amount		Shares	Amount		paid-in capital		deficit		(loss) income		deficit		interests		deficit
Balance at December 31, 2018	101,236	$	101	744	$	1	59,701	$	60	$	270,408	$	(1,609,828)	$	(262)	$	(1,339,520)	$	(705,346)	$	(2,044,866)
Net loss	—		—	—		—	—		—		—		(15,263)		—		(15,263)		(9,819)		(25,082)
Net unrealized gain on marketable securities, net of tax	—		—	—		—	—		—		—		—		397		397		99		496
Share based compensation	—		—	—		—	—		—		2,087		—		—		2,087		—		2,087
Issuance of common stock	100		—	—		—	—		—		—		—		—		—		—		—
Conversion of common stock among classes	3,081		3	—		—	(3,081)		(3)		(18,175)		—		—		(18,175)		18,175		—
Distributions to noncontrolling interests	—		—	—		—	—		—		64		—		—		64		(1,202)		(1,138)
Contributions from noncontrolling interests	—		—	—		—	—		—		—		—		—		—		18,500		18,500
Cumulative effect of accounting change	—		—	—		—	—		—		—		584,913		—		584,913		340,129		925,042
Balance at March 31, 2019	104,417	$	104	744	$	1	56,620	$	57	$	254,384	$	(1,040,178)	$	135	$	(785,497)	$	(339,464)	$	(1,124,961)
Net loss	—		—	—		—	—		—		—		(4,819)		—		(4,819)		(4,164)		(8,983)
Net unrealized gain on marketable securities, net of tax	—		—	—		—	—		—		—		—		406		406		216		622
Share based compensation	—		—	—		—	—		—		1,748		—		—		1,748		—		1,748
Issuance of common stock	2,996		3	—		—	—		—		(3)		—		—		—		—		—
Conversion of common stock among classes	—		—	—		—	—		—		(7,842)		—		—		(7,842)		7,842		—
Distributions to noncontrolling interests	—		—	—		—	—		—		—		—		—		—		(1,405)		(1,405)
Balance at June 30, 2019	107,413	$	107	744	$	1	56,620	$	57	$	248,287	$	(1,044,997)	$	541	$	(796,004)	$	(336,975)	$	(1,132,979)

~~Table of Contents~~

~~GENESIS~~See ~~HEALTHCARE,~~accompanying ~~INC.~~notes ~~AND~~to ~~SUBSIDIARIESNOTES~~unaudited TOconsolidated ~~CONSOLIDATED~~financial ~~FINANCIAL STATEMENTS(UNAUDITED)~~ statements.

~~Description of Business~~ 7

~~Genesis~~Table Healthcare, Inc. is a healthcare services holding company that, through its subsidiaries (collectively, the Company or Genesis), owns and operates skilled nursing facilities, assisted/senior living facilities and a rehabilitation therapy business. The Company has an administrative services company that provides a full complement of administrative and consultative services that allows its affiliated operators and third-party operators with whom the Company contracts to better focus on delivery of healthcare services. At March 31, 2020, the Company provided inpatient services through 376 skilled nursing, assisted/senior living and behavioral health centers located in 26 states. Revenues of the Company’s owned, leased and otherwise consolidated inpatient businesses constitute approximately 87% of its revenues. Contents

The Company provides a range of rehabilitation therapy services, including speech pathology, physical therapy, occupational therapy and respiratory therapy. These services are provided by rehabilitation therapists and assistants employed or contracted at substantially all of the centers operated by the Company, as well as by contract to healthcare facilities operated by others. The Company has expanded its delivery model for providing rehabilitation services to community-based and at-home settings, as well as internationally in China. After the elimination of intercompany revenues, the rehabilitation therapy services business constitutes approximately 10% of the Company’s revenues.

~~The~~GENESIS ~~Company provides an array of other specialty medical services~~HEALTHCARE, ~~including~~INC. ~~management~~AND ~~services, physician services, staffing services, and other healthcare related services, which comprise the balance of the Company’s revenues.~~ SUBSIDIARIES

~~Reliance~~CONSOLIDATED onSTATEMENTS ~~SEC~~OF ~~Relief~~CASH ~~from Filing Requirements~~ FLOWS

~~The Company, relying on the Order of the U.S. Securities and Exchange Commission~~ (~~the~~IN ~~SEC~~THOUSANDS) issued on March 25, 2020, delayed the filing of this Quarterly Report on Form 10-Q for the three months ended March 31, 2020 due to circumstances related to the 2019 novel coronavirus (COVID-19). In particular, the Company’s operations and corporate facilities are located throughout the United States with its corporate headquarters in Kennett Square, Pennsylvania. Various government-imposed restrictions in many of the areas in which the Company operates, including its corporate offices, have limited access to its corporate facilities which have, in turn, slowed the timely completion of the Company’s financial reporting process, including evaluating the various impacts of COVID-19 on its historical and projected financial statements, such as occupancy and expense forecasts.

~~Basis of Presentation~~ (UNAUDITED)

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP). In the opinion of management, the consolidated financial statements include all necessary adjustments for a fair presentation of the financial position and results of operations for the periods presented.

The consolidated financial statements of the Company include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation. The Company presents noncontrolling interests within the stockholders’ deficit section of its consolidated balance sheets. The Company presents the amount of net income (loss) attributable to Genesis Healthcare, Inc. and net income (loss) attributable to noncontrolling interests in its consolidated statements of operations.


	Six months ended June 30,
	2020		2019
Cash flows from operating activities
Net income (loss)	$	9,365	$	(34,065)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Non-cash interest and leasing arrangements, net		11,924		13,818
Other non-cash gain, net		(128,932)		(40,330)
Share based compensation		3,725		3,835
Depreciation and amortization expense		59,804		66,463
Reduction in the carrying amount of operating lease right-of-use assets		63,067		59,529
Provision (recovery) for losses on accounts receivable		40		(746)
Equity in net income of unconsolidated affiliates		(3,449)		(85)
Benefit for deferred taxes		(1,753)		(1,114)
Loss on early extinguishment of debt		1,682		(630)
Long-lived asset impairments		86,800		900
Changes in assets and liabilities:
Accounts receivable		105,971		61,415
Accounts payable and other accrued expenses and other		31,651		(50,864)
Medicare advance payments		156,823		—
Operating lease obligations		(56,121)		(42,045)
Net cash provided by operating activities		340,597		36,081
Cash flows from investing activities:
Capital expenditures		(32,096)		(36,550)
Purchases of marketable securities		(36,187)		(27,269)
Proceeds on maturity or sale of marketable securities		42,985		20,517
Purchases of assets		(9,846)		(252,475)
Sales of assets		207,845		134,373
Investments in joint venture		(16,886)		—
Loan provided to joint venture		(9,000)		—
Other, net		(213)		(804)
Net cash provided by (used in) investing activities		146,602		(162,208)
Cash flows from financing activities:
Borrowings under revolving credit facilities		2,484,841		2,372,000
Repayments under revolving credit facilities		(2,620,802)		(2,382,934)
Proceeds from issuance of long-term debt		34,032		170,565
Repayment of long-term debt		(141,492)		(89,966)
Repayment of finance lease obligations		(1,442)		(1,271)
Debt issuance costs		(479)		(3,708)
Contributions from noncontrolling interests		—		18,500
Distributions to noncontrolling interests and stockholders		(2,287)		(2,544)
Net cash (used in) provided by financing activities		(247,629)		80,642
Net increase (decrease) in cash, cash equivalents and restricted cash and equivalents		239,570		(45,485)
Cash, cash equivalents and restricted cash and equivalents:
Beginning of period		125,806		142,276
End of period	$	365,376	$	96,791
Supplemental cash flow information:
Interest paid	$	54,715	$	91,543
Net taxes paid		1,896		1,610
Federal stimulus - COVID-19 other income		185,500		—
Non-cash investing and financing activities:
Finance lease obligations, net write-down due to lease activity	$	(1,517)	$	(131,842)
Assets subject to finance lease obligations, net write-down due to lease activity		(463)		(530,025)
Operating lease obligations, net (write-down) gross-up due to lease activity		(153,933)		2,402,991
Assets subject to operating leases, net write-down (gross-up) due to lease activity		124,582		(2,259,781)
Financing obligations, net write-down due to lease activity		—		(2,734,940)
Assets subject to financing obligations, net write-down due to lease activity		—		1,718,507

The consolidated financial statements include the accounts of all entities controlled by the Company through its ownership of a majority voting interest and the accounts of variable interest entities (VIEs) where the Company is subject to a majority of the risk of loss from the VIE's activities, or entitled to receive a majority of the entity's residual returns, or both. The Company assesses the requirements related to the consolidation of VIEs, including a qualitative assessment of control and economics that considers whether the Company has the power to direct the activities that most significantly impact the VIE's economic performance and has the obligation to absorb losses of, or the right to receive benefits that could be potentially significant to the VIE.

9 See accompanying notes to unaudited consolidated financial statements.

~~Table of Contents~~

The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for Form 10-Q and do not include all of the disclosures normally required by U.S. GAAP or those normally required in annual reports on Form 10-K. Accordingly, these financial statements should be read in conjunction with the audited consolidated financial statements of the Company for the year ended December 31, 2019 filed with the SEC on Form 10-K on March 16, 2020. 8

~~Financial~~Table ~~Condition~~of ~~and Liquidity Considerations~~ Contents

~~The~~GENESIS ~~accompanying consolidated financial statements have been prepared on the basis that the Company will continue as a going concern~~HEALTHCARE, ~~which~~INC. ~~contemplates~~AND ~~the~~SUBSIDIARIESNOTES ~~realization~~TO ofCONSOLIDATED ~~assets~~FINANCIAL ~~and the satisfaction of liabilities in the normal course of business.~~ STATEMENTS(UNAUDITED)

In evaluating the Company’s ability to continue as a going concern, management considered the conditions and events that could raise substantial doubt about the Company’s ability to continue as a going concern for 12 months following the date the Company’s financial statements were issued (~~May 27, 2020~~1). ~~Management~~General considered the recent results of operations as well as the Company’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows and the Company’s conditional and unconditional obligations due before May 27, 2021. Based upon such considerations, management determined that there are no known or knowable conditions or events that raise substantial doubt about the Company’s ability to continue as a going concern for 12 months following the date of issuance of these financial statements (May 27, 2020). Information

The Company’s results of operations continue to be negatively impacted by the persistent pressure of healthcare reforms enacted in recent years and more recently by the COVID-19 pandemic. This challenging operating environment has been most acute in the Company’s inpatient segment, but also has had a detrimental effect on the Company’s rehabilitation therapy segment and its customers. In recent years, the Company has implemented a number of cost mitigation strategies to offset the negative financial implications of this challenging operating environment and with respect to COVID-19, it has access to certain grants and subsidy programs by federal and state governments.

~~The~~Description Company expects to continue to pursue cost mitigation and other strategies in response to the operating environment and liquidity requirements. Although the Company is and projects to be in compliance with all of its material debt and lease covenants through May 27, 2021, the ongoing uncertainty related to the impact of healthcare reform initiatives, including private and public responses to COVID-19, may have an adverse impact on the Company’s ability to remain in compliance with the covenants. Should the Company fail to comply with its debt and lease covenants at a future measurement date, it could, absent necessary and timely waivers and/or amendments, be in default under certain of its existing debt and lease agreements. To the extent any cross-default provisions apply, the default could have a more significant impact on the Company’s financial position. Business

~~Recently Adopted Accounting Pronouncements~~

InGenesis ~~August 2018~~Healthcare, ~~the~~Inc. ~~Financial~~is ~~Accounting~~a ~~Standards~~healthcare ~~Board~~services holding company that, through its subsidiaries (collectively, the ~~FASB~~Company or Genesis), ~~issued~~owns ~~Accounting~~and ~~Standard~~operates ~~Update~~skilled ~~(ASU)~~nursing ~~2018-13~~facilities, ~~Fair~~assisted/senior ~~Value~~living ~~Measurement~~facilities ~~(Topic~~and ~~820):~~a ~~Disclosure~~rehabilitation ~~Framework~~therapy –business. The ~~Changes~~Company tohas ~~the~~an ~~Disclosure~~administrative ~~Requirements~~services ~~for~~company ~~Fair~~that ~~Value~~provides ~~Measurement,~~a ~~which~~full ~~simplifies~~complement ~~the~~of ~~fair~~administrative ~~value~~and ~~measurement~~consultative ~~disclosure~~services ~~requirements.~~that ~~The~~allows ~~Company~~its ~~adopted~~affiliated operators and third-party operators with whom the ~~new~~Company ~~standard~~contracts to better focus on ~~January~~delivery 1,of ~~2020~~healthcare services. ~~The~~At ~~adoption~~June 30, 2020, ofthe ~~ASU~~Company ~~2018-13~~provided ~~did~~inpatient ~~not~~services ~~have~~through a361 ~~material~~skilled ~~impact~~nursing, onassisted/senior living and behavioral health centers located in 25 states. Revenues of the Company’s owned, leased and otherwise consolidated ~~financial~~inpatient ~~statements~~businesses ~~and~~constitute ~~related~~approximately ~~disclosures~~87% of its revenues.

~~Table~~The Company provides a range of ~~Contents~~ rehabilitation therapy services, including speech pathology, physical therapy, occupational therapy and respiratory therapy. These services are provided by rehabilitation therapists and assistants employed or contracted at substantially all of the centers operated by the Company, as well as by contract to healthcare facilities operated by others. The Company has expanded its delivery model for providing rehabilitation services to community-based and at-home settings, as well as internationally in China. After the elimination of intercompany revenues, the rehabilitation therapy services business constitutes approximately 10% of the Company’s revenues.

~~GENESIS HEALTHCARE, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)~~

~~Recently~~The ~~Issued~~Company ~~Accounting~~provides ~~Pronouncements~~ an array of other specialty medical services, including management services, physician services, staffing services, and other healthcare related services, which comprise the balance of the Company’s revenues.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which is intended to improve financial reporting by requiring earlier recognition of credit losses on certain financial assets, such as available-for-sale debt securities. The standard replaces the current incurred loss impairment model that recognizes losses when a probable threshold is met with a requirement to recognize lifetime expected credit losses immediately when a financial asset is originated or purchased. Further, the FASB issued ASU 2019-04 and ASU 2019-05 to provide additional guidance on the credit losses standard. The standard is effective for fiscal years beginning after December 15, 2022, for smaller reporting companies, including interim periods within those annual periods, with early adoption permitted. The Company is currently evaluating the effect that the standard will have on its consolidated financial statements and related disclosures.

InBasis ~~December~~of 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which serves to remove or amend certain requirements associated with the accounting for income taxes. The standard is effective for fiscal years beginning after December 15, 2020, including interim periods within those annual periods, with early adoption permitted. The Company is currently evaluating the effect, if any, that the standard will have on its consolidated financial statements and related disclosures. Presentation

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), which provides practical expedients and exceptions for reference rate reform related activities that impact debt, leases, and other contracts. The guidance is optional and may be applied as reference rate activities occur. For a contract that meets the criteria, this ASU generally allows an entity to account for and present modifications as an event that does not require remeasurement at the modification date or reassessment of a previous accounting determination. The guidance was effective upon issuance and can be applied through December 31, 2022. The Company is currently evaluating the potential impact that this ASU will have on its consolidated financial statements and related disclosures.

The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (2U.S. GAAP) ~~Certain~~. In ~~Significant~~the ~~Risks~~opinion of management, the consolidated financial statements include all necessary adjustments for a fair presentation of the financial position and ~~Uncertainties~~ results of operations for the periods presented.

~~COVID-19~~

The ~~COVID-19~~consolidated ~~pandemic~~financial ~~has~~statements ~~materially~~of ~~and~~the ~~adversely~~Company ~~affected,~~include ~~and~~the ~~will~~accounts ~~continue~~of ~~to materially and adversely affect,~~ the Company’s ~~patients, staff~~ and ~~operations,~~its ~~which~~wholly-owned insubsidiaries. ~~turn~~All ~~has~~intercompany ~~materially~~transactions ~~and~~have ~~adversely~~been ~~affected~~eliminated ~~its~~in ~~revenues and expenses~~consolidation. The Company ~~began~~presents tononcontrolling ~~experience~~interests ~~the~~within ~~negative impact of~~ the ~~COVID-19~~stockholders’ ~~pandemic~~deficit ~~beginning~~section inof ~~late~~its ~~February~~consolidated ~~2020. The~~balance ~~negative impact escalated quickly subsequent to March 31, 2020~~sheets. ~~For~~ aThe ~~more~~Company ~~detailed~~presents ~~discussion of~~ the ~~impact~~amount of ~~COVID-19~~net on(loss) ~~the~~income ~~Company’s~~attributable ~~operations,~~to ~~net~~Genesis ~~revenues~~Healthcare, ~~operating~~Inc. ~~expenses~~ and ~~liquidity,~~net ~~see~~(loss) ~~Note~~income 17attributable –to ~~“Subsequent~~noncontrolling ~~Events~~interests –in ~~COVID-19~~its consolidated statements of operations.”

~~Revenue Sources~~

The ~~Company~~consolidated ~~receives~~financial ~~revenues~~statements ~~from~~include ~~Medicare,~~the ~~Medicaid,~~accounts ~~private~~of ~~insurance,~~all ~~self-pay~~entities ~~residents,~~controlled ~~other~~by ~~third-party~~the ~~payors~~Company through its ownership of a majority voting interest and ~~long-term~~the ~~care~~accounts ~~facilities~~of ~~that~~variable ~~utilize~~interest ~~its~~entities ~~rehabilitation~~(VIEs) ~~therapy~~where ~~and~~the ~~other~~Company ~~services~~is subject to a majority of the risk of loss from the VIE's activities, or entitled to receive a majority of the entity's residual returns, or both. The Company’s ~~inpatient~~assesses ~~services~~the ~~segment~~requirements ~~derives~~related ~~approximately~~to ~~79%~~the consolidation of ~~its~~VIEs, ~~revenue~~including ~~from~~a ~~Medicare~~qualitative assessment of control and ~~various~~economics ~~state~~that ~~Medicaid~~considers ~~programs.~~whether ~~The~~the ~~following~~Company ~~table~~has ~~depicts~~the power to direct the ~~Company’s~~activities ~~inpatient~~that ~~services~~most ~~segment~~significantly ~~revenue~~impact bythe ~~source~~VIE's ~~for~~economic performance and has the ~~three~~obligation ~~months~~to ~~ended~~absorb ~~March 31~~losses of, ~~2020~~ ~~and~~or ~~2019:~~ the right to receive benefits that could be potentially significant to the VIE.

	Three months ended March 31,
	2020		2019
Medicare	21	%	21	%
Medicaid	58	%	58	%
Insurance	12	%	12	%
Private	7	%	7	%
Other	2	%	2	%
Total	100	%	100	%

The ~~sources~~accompanying ~~and~~unaudited ~~amounts~~consolidated offinancial ~~the~~statements ~~Company’s~~have ~~revenues~~been ~~are~~prepared ~~determined~~in byaccordance awith ~~number~~the ofinstructions ~~factors,~~for ~~including~~Form ~~licensed~~10-Q ~~bed~~and ~~capacity~~do ~~and~~not ~~occupancy~~include ~~rates~~all of ~~inpatient~~the ~~facilities,~~disclosures ~~the~~normally ~~mix~~required ofby ~~patients~~U.S. ~~and~~GAAP ~~the~~or ~~rates~~those ofnormally ~~reimbursement~~required ~~among~~in ~~payors~~annual reports on Form 10-K. ~~Likewise~~ Accordingly, ~~payment~~these ~~for~~financial ~~ancillary~~statements ~~medical~~should ~~services,~~be ~~including~~read ~~services~~in ~~provided~~conjunction bywith the audited consolidated financial statements of the Company’s ~~rehabilitation~~for ~~therapy~~the ~~services~~year ~~business~~ended December 31, 2019 ~~varies~~filed ~~based~~with ~~upon~~the U.S. Securities and Exchange Commission (SEC) on Form 10-K on March 16, 2020.

~~Table~~Going ofConcern ~~Contents~~ Considerations

~~GENESIS HEALTHCARE, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)~~

~~the~~On ~~type~~March of11, ~~payor~~2020, ~~and~~the ~~payment~~World ~~methodologies. Changes~~Health inOrganization ~~the~~declared ~~case~~COVID-19 ~~mix~~a ofpandemic. COVID-19 ~~the~~is ~~patients~~a ascomplex ~~well~~and aspreviously ~~payor~~unknown ~~mix~~virus ~~among~~which ~~Medicare,~~disproportionately ~~Medicaid~~impacts ~~and~~older ~~private~~adults, ~~pay~~particularly ~~can~~those ~~significantly~~having ~~affect~~other ~~the~~underlying ~~Company’s~~health ~~profitability~~conditions.

It is not possible to quantify fully the effect of legislative changes, public and private subsidy and grant programs related to COVID-19, the interpretation or administration of such legislation or other governmental initiatives on the Company’s business and the business of the customers served by the Company’s rehabilitation therapy business. The potential impact of reforms to the United States healthcare system, including potential material changes to the delivery of healthcare services and the reimbursement paid for such services by the government or other third party payors, is uncertain at this time. Also, initiatives among managed care payors, conveners and referring acute care hospital systems to reduce lengths of stay and avoidable hospital admissions and to divert referrals to home health or other community-based care settings could have an adverse impact on the Company’s business. Accordingly, there can be no assurance that the impact of any future healthcare legislation, regulation or actions by participants in the health care continuum will not adversely affect the Company’s business. There can be no assurance that payments under governmental and private third-party payor programs will be timely, will remain at levels similar to present levels or will, in the future, be sufficient to cover the costs allocable to patients eligible for reimbursement pursuant to such programs. The Company’s financial condition and results of operations are and will continue to be affected by the reimbursement process, which in the healthcare industry is complex and can involve lengthy delays between the time that revenue is recognized and the time that reimbursement amounts are settled.

Laws and regulations governing the Medicare and Medicaid programs, and the Company’s business generally, are complex and are often subject to a number of ambiguities in their application and interpretation. The Company believes that it is in substantial compliance with all applicable laws and regulations. However, from time to time the Company and its affiliates are subject to pending or threatened lawsuits and investigations involving allegations of potential wrongdoing, some of which may be material or involve significant costs to resolve and/or defend, or may lead to other adverse effects on the Company and its affiliates including, but not limited to, fines, penalties and exclusion from participation in the Medicare and/or Medicaid programs. 9

~~Concentration~~Table of ~~Credit Risk~~ Contents

~~The~~GENESIS ~~Company is exposed to the credit risk of its third-party customers~~HEALTHCARE, ~~many of whom are in similar lines of business as the Company and are exposed to the same systemic industry risks of operations as the Company, resulting in a concentration of risk~~INC. ~~These~~AND ~~include~~SUBSIDIARIESNOTES ~~organizations~~TO ~~that~~CONSOLIDATED ~~utilize~~FINANCIAL the Company’s rehabilitation services, staffing services and physician service offerings, engaged in similar business activities or having economic features that would cause their ability to meet contractual obligations, including those to the Company, to be similarly affected by changes in regulatory and systemic industry conditions. STATEMENTS(UNAUDITED)

~~Management assesses its exposure to loss on accounts at the customer level.~~ The ~~greatest concentration of risk exists in the~~ Company’s ~~rehabilitation~~primary ~~therapy~~focus ~~services~~as ~~business~~the ~~where~~effects itof ~~has~~COVID-19 ~~over~~began ~~140~~to ~~distinct~~impact ~~customers,~~the ~~many~~United ~~being~~States ~~chain~~was ~~operators~~the ~~with~~health ~~more~~and ~~than~~safety ~~one location. One~~ of ~~the~~its ~~Company’s~~patients, ~~customers~~residents, aemployees ~~related~~and ~~party,~~their ~~comprises~~respective ~~$30~~families.1 ~~million,~~The orCompany ~~approximately~~implemented ~~36%,~~various ofmeasures ~~the~~to ~~gross~~provide ~~outstanding contract receivables in~~ the ~~rehabilitation~~safest ~~services~~possible ~~business~~environment atwithin ~~March 31, 2020. See~~its ~~Note~~sites 11of –service ~~“Related~~during ~~Party Transactions.” A future adverse event impacting~~ this ~~customer~~pandemic orand ~~several~~will ~~other~~continue ~~large~~to ~~customers,~~do ~~resulting in their insolvency or other economic distress, would have a material impact on the Company~~so.

The Company’s business is subject to a number of other known and unknown risks and uncertainties, which are discussed in Part II. Item 1A, “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, which was filed with the SEC on March 16, 2020, and in the Company’s Quarterly Reports on Form 10-Q, including the risk factors discussed herein in Part II. Item 1A.

~~Covenant~~The ~~Compliance~~ United States broadly continues to experience the pandemic caused by COVID-19, which has significantly disrupted, and likely will continue to disrupt for some period, the nation’s economy, the healthcare industry and the Company’s businesses. The rapid spread of the virus has led to the implementation of various responses, including federal, state and local government-imposed quarantines, shelter-in-place mandates, sweeping restrictions on travel, and substantial changes to selected protocols within the healthcare system across the United States. A significant number of the Company’s facilities and operations are geographically located and highly concentrated in markets with close proximity to areas of the United States that have experienced widespread and severe COVID-19 outbreaks. COVID-19 is having and will likely continue to have a material and adverse effect on the Company’s operations and supply chains, resulting in a reduction in its operating occupancy and related revenues, and an increase in its expenditures.

Should the Company fail to comply with its debt and lease covenants at a future measurement date, it could, absent necessary and timely waivers and/or amendments, be in default under certain of its existing debt and lease agreements. To the extent any cross-default provisions may apply, the default could have an even more significant impact on the Company’s financial position.

12 The Company performed an assessment to determine whether there are conditions or events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date the financial statements are issued. Initially, this assessment does not consider the potential mitigating effect of management’s plans that have not been fully implemented. When substantial doubt exists, management assesses the mitigating effect of its plans to determine if it is probable that (1) the plans will be effectively implemented within one year after the date the financial statements are issued, and (2) when implemented, the plans will mitigate the relevant conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern.

~~Table of Contents~~

~~GENESIS~~In ~~HEALTHCARE~~completing its going concern assessment, ~~INC~~the Company considered the uncertainties around the impact of COVID-19 on its future results of operations as well as its current financial condition and liquidity sources, including current funds available, forecasted future cash flows and the Company’s conditional and unconditional obligations due within 12 months following the date its financial statements were issued. ~~AND~~Without ~~SUBSIDIARIESNOTES~~giving TOeffect ~~CONSOLIDATED~~to ~~FINANCIAL~~the ~~STATEMENTS(UNAUDITED)~~ prospect of timely and adequate future governmental funding support and other mitigating plans, many of which are beyond the Company’s control, it is unlikely that the Company will be able to generate sufficient cash flows to meet its required financial obligations, including its rent obligations, its debt service obligations and other obligations due to third parties. The existence of these conditions raises substantial doubt about the Company’s ability to continue as a going concern for the twelve-month period following the date the financial statements are issued.

Although the Company is in compliance, and projects to remain in compliance, with the covenants required by its material debt and lease agreements, the ongoing uncertainty related to the impact of healthcare reform initiatives and the effect of the COVID-19 pandemic may have an adverse impact on the Company’s ability to remain in compliance with its financial covenants through May 27, 2021.

~~The~~In ~~Company’s~~response ~~ability~~ to maintain compliance with financial covenants required by its debt and lease agreements depends in part on management’s ability to increase revenues and control costs and receive adequate compensatory grants and subsidies from governmental authorities relative to the COVID-19, ~~pandemic. Due to continuing changes in~~ the ~~healthcare~~Company ~~industry,~~has astaken ~~well as~~ the ~~uncertainty~~following ~~with~~measures ~~respect~~ to ~~changing~~improve ~~referral patterns, patient mix, and reimbursement rates, it is possible that future operating performance may not generate sufficient operating results to maintain compliance with~~ its ~~quarterly~~liquidity ~~debt~~position: ~~and lease covenant requirements.~~

~~There can be no assurance that the confluence of these and other factors will not impede the Company’s ability to meet covenants required by its debt and lease agreements in the future.~~

~~(3) Significant~~● ~~Transactions~~The Company applied for and ~~Events~~ received government-sponsored financial relief related to the pandemic;

~~Strategic~~● ~~Partnerships~~ The Company is utilizing the Coronavirus Aid, Relief, and Economic Security Act of 2020 (CARES Act) payroll tax deferral program to delay payment of a portion of payroll taxes incurred through December 2020, with 50% to be repaid in December 2021 and the remaining 50% to be repaid in December 2022;

~~Vantage~~● ~~Point~~While ~~Partnership~~ it vigorously advocates, for itself and the skilled nursing industry, regarding the need for additional government sponsored funding, the Company continues to explore and take advantage of existing government sponsored funding programs implemented to support businesses impacted by COVID-19;

On● ~~January~~The ~~10,~~Company ~~2020,~~continues ~~Welltower,~~to ~~Inc.~~implement ~~(Welltower)~~measures ~~sold~~to ~~the~~adapt ~~real~~successfully ~~estate~~its ofoperational ~~one~~model ~~skilled nursing facility located in Massachusetts~~ to ~~the~~function ~~Vantage~~for ~~Point Partnership. The sale represents~~ the ~~final~~long-term ~~component of a transaction that occurred on September 12, 2019, whereby the Company acquired an approximately 30% membership interest~~ in ~~the real estate of 18 facilities previously leased from Welltower and Second Spring Healthcare Investments. As~~ a result of the January 10, 2020 transaction, the Company will receive an annual rent credit of $0.7 million from Welltower and recorded a gain of $0.2 million as a result of the lease termination. The Vantage Point Partnership acquired this skilled nursing facility for a purchase price of $9.1 million. The consolidation of this additional skilled nursing facility primarily resulted in property and equipment of $9.1 million, nonCOVID-~~recourse~~19 ~~debt~~environment; of $7.3 million with the balance of the purchase price settled primarily with proceeds held in escrow from the September 12, 2019 closing. The Company will continue to operate the facility under the master lease agreement with the Vantage Point Partnership along with the other 18 facilities. and

~~NewGen~~● ~~Partnership~~ The Company has pursued, and will continue to pursue, creative and accretive opportunities to sell assets and enter into joint venture structures in order to provide liquidity.

On February 1, 2020, the Company transitioned operational responsibility for 19 facilities in the states of California, Washington and Nevada to New Generation Health, LLC (NewGen). The Company sold the real estate and operations of six skilled nursing facilities and transferred the operations to 13 skilled nursing, behavioral health and assisted living facilities for $78.7 million. Net transaction proceeds were used by the Company to repay indebtedness, including prepayment penalties, of $33.7 million, fund its initial 50% equity contribution and working capital requirement of $14.9 million, and provide financing to the partnership of $9.0 million. The Company recorded a gain on sale of assets and transition of leased facilities of $58.8 million and loss on early extinguishment of debt of $1.0 million. Concurrently, the facilities have entered, or will enter upon regulatory approval, into management services agreements with NewGen for the day-to-day operations of the facilities. The Company will continue to provide administrative and back office services to the facilities pursuant to administrative support agreements, as well as therapy services pursuant to therapy services agreements. Subsequent to February 1, 2020, the Company has applied the equity method of accounting for its 50% interest in these operations.

13 These measures and other plans and initiatives of the Company are designed to provide it with adequate liquidity to meet its obligations for at least the twelve-month period following the date its financial statements are issued. However, such plans and initiatives are dependent on factors that are beyond the Company’s control or may not be available on terms acceptable to the Company, or at all. Accordingly, management determined it could not be certain that the plans and initiatives would be effectively implemented within one year after the date the financial statements are issued. Further, even if the Company receives additional funding support from government sources and/or is able to execute successfully all of its plans and initiatives, given the current

~~Table of Contents~~ 10

~~GENESIS~~Table ~~HEALTHCARE,~~of ~~INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)~~ Contents

~~Divestiture~~GENESIS ofHEALTHCARE, ~~Non-Strategic~~INC. ~~Facilities~~ AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)

Onchallenging ~~January~~environment the ~~31,~~Company’s ~~2020,~~operating ~~Omega~~plans ~~Healthcare~~and ~~Investors,~~resulting ~~Inc.~~cash ~~(Omega)~~flows ~~sold~~along ~~the~~with ~~real~~its ~~estate~~cash ofand ~~one~~cash ~~skilled~~equivalents ~~nursing~~and ~~facility~~other ~~located~~sources inof ~~Massachusetts.~~liquidity ~~The~~may ~~Company~~not ~~leased~~be ~~the~~sufficient ~~facility~~to ~~under~~fund aoperations ~~master~~for ~~lease~~the ~~agreement,~~twelve-month ~~but~~period ~~closed~~following the ~~facility~~date onthe ~~July~~financial 1,statements ~~2019. The~~are ~~sale~~issued, ~~resulted~~which incould aforce ~~gain on~~ the ~~lease~~Company ~~termination~~to ofseek ~~$0.2~~reorganization ~~million~~under ~~and~~the anU.S. ~~annual~~Bankruptcy ~~rent credit of $0~~Code.~~4 million.~~

On February 1, 2020, the Company sold two owned skilled nursing facilities in North Carolina and one owned skilled nursing facility in Maryland for $61.8 million. Proceeds were used to retire $29.1 million of U.S. Department of Housing and Urban Development (HUD) financed debt. The three facilities generated revenues of $38.7 million and pre-tax income of $0.5 million. The transactions resulted in a gain on sale of $24.5 million and loss on early extinguishment of debt of $2.6 million.

OnThe ~~February~~accompanying ~~26,~~consolidated ~~2020,~~financial ~~the~~statements ~~Company~~have ~~completed~~been prepared assuming the ~~sale~~Company ofwill ~~one~~continue ~~owned~~as ~~HUD-insured~~a ~~skilled~~going ~~nursing~~concern, ~~facility~~which incontemplates ~~California~~continuity ~~for~~of ~~$20.8~~operations, ~~million. The~~realization ~~facility~~of ~~had~~assets ~~been~~and ~~classified~~the assatisfaction anof ~~asset~~liabilities ~~held~~in ~~for~~the ~~sale~~normal ascourse of ~~December~~business ~~31,~~for ~~2019. Proceeds~~the ~~were~~twelve-month ~~used~~period tofollowing ~~retire~~the ~~$20.5~~date ~~million~~the offinancial ~~HUD~~statements ~~financed~~are ~~debt~~issued. ~~The~~ ~~facility~~As ~~generated~~such, ~~revenues~~the ofaccompanying ~~$14.0~~consolidated ~~million~~financial ~~and~~statements ~~pre-tax~~do ~~loss~~not ofinclude ~~$0.1~~any ~~million. See~~adjustments ~~Note~~relating 14to –the ~~“Assets~~recoverability ~~Held~~and ~~for~~classification ~~Sale.” The~~of ~~transactions~~assets ~~resulted~~and intheir acarrying ~~gain~~amounts, onor ~~sale~~the amount and classification of ~~$3.0~~liabilities ~~million~~that ~~and~~may ~~loss~~result onshould ~~early~~the ~~extinguishment~~Company ofbe ~~debt~~unable ofto ~~$0.4~~continue ~~million~~as a going concern.

On March 4, 2020, the Company divested the operations of one leased assisted/senior living facility in Montana. The lease termination resulted in an annual rent credit of $0.7 million. The facility generated revenues of $2.5 million and pre-tax income of $0.1 million.

~~Gains~~Recently ~~and~~Adopted ~~losses~~Accounting ~~associated with transactions and divestitures are included in other income on the consolidated statements of operations. See Note 12 – “Other Income.”~~ Pronouncements

~~(4) Net Revenues and Accounts Receivable~~

~~Revenue~~ ~~Streams~~ In August 2018, the Financial Accounting Standards Board (the FASB) issued Accounting Standard Update (ASU) 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which simplifies the fair value measurement disclosure requirements. The Company adopted the new standard on January 1, 2020. The adoption of ASU 2018-13 did not have a material impact on the Company’s consolidated financial statements and related disclosures.

~~Inpatient Services~~

~~The~~Recently ~~Company~~Issued ~~generates~~Accounting revenues primarily by providing services to patients within its facilities. The Company uses interdisciplinary teams of experienced medical professionals to provide services prescribed by physicians. These teams include registered nurses, licensed practical nurses, certified nursing assistants and other professionals who provide individualized comprehensive nursing care. Many of the Company’s facilities are equipped to provide specialty care, such as on-site dialysis, ventilator care, cardiac and pulmonary management, as well as standard services, such as room and board, special nutritional programs, social services, recreational activities and related healthcare and other services. The Company assesses collectibility on all accounts prior to providing services. Pronouncements

~~Rehabilitation Therapy Services~~

~~The~~In ~~Company~~June ~~generates~~2016, ~~revenues~~the FASB issued ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, which is intended to improve financial reporting by ~~providing~~requiring ~~rehabilitation~~earlier ~~therapy~~recognition ~~services~~of credit losses on certain financial assets, ~~including~~such ~~speech~~as available-~~language~~for-sale ~~pathology,~~debt ~~physical~~securities. ~~therapy~~The standard replaces the current incurred loss impairment model that recognizes losses when a probable threshold is met with a requirement to recognize lifetime expected credit losses immediately when a financial asset is originated or purchased. Further, ~~occupational~~the ~~therapy~~FASB issued ASU 2019-04 and ~~respiratory~~ASU ~~therapy~~2019-05 atto ~~its~~provide ~~skilled~~additional ~~nursing~~guidance ~~facilities~~on ~~and~~the ~~assisted/senior~~credit ~~living~~losses ~~facilities~~standard. The standard is effective for fiscal years beginning after December 15, as2022, ~~well~~for assmaller ~~facilities~~reporting ofcompanies, ~~third-party~~including ~~skilled~~interim ~~nursing~~periods ~~operators~~within ~~and~~those ~~other~~annual ~~outpatient~~periods, ~~settings~~with early adoption permitted. The ~~majority~~Company ofis ~~revenues~~currently ~~generated~~evaluating bythe ~~rehabilitation~~effect ~~therapy~~that ~~services~~the ~~rendered~~standard ~~are~~will ~~billed~~have toon ~~contracted~~its ~~third~~consolidated ~~party~~financial ~~providers~~statements and related disclosures.

~~Other Services~~

~~The~~In ~~Company~~December ~~generates~~2019, ~~revenues~~the byFASB ~~providing~~issued anASU ~~array~~2019-12, ofIncome ~~other~~Taxes ~~specialty~~(Topic ~~medical~~740): ~~services~~Simplifying the Accounting for Income Taxes, which serves to remove or amend certain requirements associated with the accounting for income taxes. The standard is effective for fiscal years beginning after December 15, 2020, including ~~physician~~interim ~~services~~periods within those annual periods, ~~staffing~~with ~~services~~early adoption permitted. The Company is currently evaluating the effect, ~~and~~if ~~other~~any, ~~healthcare~~that the standard will have on its consolidated financial statements and related ~~services~~disclosures.

~~Table~~(2) Certain ofSignificant ~~Contents~~ Risks and Uncertainties

~~GENESIS HEALTHCARE, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)~~

~~Disaggregation of Revenues~~ COVID-19

The Company disaggregates revenue from contracts with customers by reportable operating segments and payor type. The Company notes that disaggregation of revenue into these categories achieves the disclosure objectives to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The payment terms and conditions within the Company's revenue-generating contracts vary by contract type and payor source. Payments are generally received within 30 to 60 days after billing. See Note 6 – “Segment Information.”

The ~~composition~~COVID-19 ofpandemic ~~net~~has ~~revenues~~materially byand ~~payor~~adversely ~~type~~affected, and ~~operating~~will ~~segment~~continue ~~for~~to materially and adversely affect, the ~~three~~Company’s ~~months~~patients, ~~ended~~staff ~~March 31~~and operations, ~~2020~~ which in turn has materially and ~~2019~~adversely ~~was~~affected asits ~~follows~~revenues (and expenses. The Company began to experience the negative impact of the COVID-19 pandemic beginning in ~~thousands):~~ late February 2020. For a more detailed discussion of the impact of COVID-19 on the Company’s operations, net revenues, operating expenses and liquidity, see Note 3 – “Significant Transactions and Events – COVID-19.”

	Three months ended March 31, 2020
				Rehabilitation
	Inpatient			Therapy			Other
	Services			Services			Services			Total
Medicare	$	197,036		$	21,909		$	—		$	218,945
Medicaid		550,990			490			—			551,480
Insurance		112,271			5,455			—			117,726
Private		75,069	(1)		110			—			75,179
Third party providers		—			73,106			18,617			91,723
Other		17,584	(2)		4,399	(2)		15,214	(3)		37,197
Total net revenues	$	952,950		$	105,469		$	33,831		$	1,092,250

	Three months ended March 31, 2019
				Rehabilitation
	Inpatient			Therapy			Other
	Services			Services			Services			Total
Medicare	$	207,968		$	22,752		$	—		$	230,720
Medicaid		580,947			555			—			581,502
Insurance		125,080			5,234			—			130,314
Private		76,933	(1)		111			—			77,044
Third party providers		—			89,529			20,607			110,136
Other		16,564	(2)		2,659	(2)		12,701	(3)		31,924
Total net revenues	$	1,007,492		$	120,840		$	33,308		$	1,161,640

~~(1)~~Table ~~Includes Assisted/Senior living revenue~~ of ~~$21.8 million and $23.6 million for the three months ended March 31, 2020 and 2019, respectively. Such amounts do not represent contracts with customers under ASC 606.~~Contents

~~(2)~~GENESIS ~~Primarily~~HEALTHCARE, ~~consists~~INC. ofAND ~~revenue~~SUBSIDIARIESNOTES ~~from~~TO ~~Veteran~~CONSOLIDATED ~~Affairs~~FINANCIAL ~~and administration of third party facilities.~~STATEMENTS(UNAUDITED)

~~(3)~~Revenue ~~Includes net revenues from all payors generated by the other services, excluding third party providers.~~Sources

~~(5) Earnings (Loss) Per Share~~

The Company ~~has~~receives ~~three~~revenues ~~classes~~from ofMedicare, ~~common~~Medicaid, ~~stock. Classes~~private Ainsurance, ~~and~~self-pay Bresidents, ~~are~~other ~~identical~~third-party inpayors ~~economic~~ and ~~voting~~long-term ~~interests. Class~~care Cfacilities ~~has~~that autilize ~~1:1~~its ~~voting~~rehabilitation ~~ratio~~therapy ~~with~~and ~~each~~other ofservices. ~~the~~The ~~other~~Company’s ~~two~~inpatient ~~classes,~~services ~~representing~~segment ~~the~~derives ~~voting~~approximately ~~interests~~82% of ~~the~~its ~~legacy~~revenue ~~FC-GEN~~from ~~Operations~~Medicare ~~Investment,~~and ~~LLC~~various ~~(FC-GEN)~~state ~~owners~~Medicaid programs. ~~Class~~The Cfollowing ~~common~~table ~~stock~~depicts isthe aCompany’s ~~participating~~inpatient ~~security;~~services ~~however,~~segment itrevenue ~~shares~~by insource afor dethe ~~minimis~~three ~~economic interest~~ and issix ~~therefore~~months ~~excluded~~ended ~~from~~June 30, 2020 ~~the~~and ~~denominator of the basic earnings (loss) per share (EPS) calculation.~~ 2019:

Basic EPS was computed by dividing net income (loss) attributable to Genesis Healthcare, Inc. by the weighted-average number of outstanding common shares for the period. Diluted EPS is computed by dividing net income (loss) attributable to Genesis Healthcare, Inc. plus the effect of any assumed conversions of noncontrolling interests by the weighted-average number of outstanding common shares after giving effect to all potential dilutive common stock.


	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
Medicare	20	%	20	%	21	%	20	%
Medicaid	62	%	58	%	60	%	58	%
Insurance	9	%	12	%	10	%	12	%
Private	7	%	8	%	7	%	7	%
Other	2	%	2	%	2	%	3	%
Total	100	%	100	%	100	%	100	%

~~Table of Contents~~

~~GENESIS~~The ~~HEALTHCARE~~sources and amounts of the Company’s revenues are determined by a number of factors, ~~INC~~including licensed bed capacity and occupancy rates of inpatient facilities, the mix of patients and the rates of reimbursement among payors. Likewise, ~~AND~~payment ~~SUBSIDIARIESNOTES~~for TOancillary ~~CONSOLIDATED~~medical ~~FINANCIAL~~services, ~~STATEMENTS(UNAUDITED)~~ including services provided by the Company’s rehabilitation therapy services business, varies based upon the type of payor and payment methodologies. Changes in the case mix of the patients as well as payor mix among Medicare, Medicaid and private pay can significantly affect the Company’s profitability.

~~A reconciliation of the numerator and denominator used in the calculation of basic net income (loss) per common share follows (in thousands, except per share data):~~

	Three months ended March 31,
	2020		2019
Numerator:
Net income (loss)	$	38,681	$	(25,082)
Less: Net (income) loss attributable to noncontrolling interests		(5,173)		9,819
Net income (loss) attributable to Genesis Healthcare, Inc.	$	33,508	$	(15,263)
Denominator:
Weighted-average shares outstanding for basic net income (loss) per share		109,721		103,715
Basic net income (loss) per common share attributable to Genesis Healthcare, Inc.	$	0.31	$	(0.15)

It is difficult to quantify fully the effect of legislative changes, public and private subsidy and grant programs related to COVID-19, the interpretation or administration of such legislation or other governmental initiatives on the Company’s business and the business of the customers served by the Company’s rehabilitation therapy business. The potential impact of reforms to the United States healthcare system, including potential material changes to the delivery of healthcare services and the reimbursement paid for such services by the government or other third party payors, is uncertain at this time. Also, initiatives among managed care payors, conveners and referring acute care hospital systems to reduce lengths of stay and avoidable hospital admissions and to divert referrals to home health or other community-based care settings could have an adverse impact on the Company’s business. Accordingly, there can be no assurance that the impact of any future healthcare legislation, regulation or actions by participants in the health care continuum will not adversely affect the Company’s business. There can be no assurance that payments under governmental and private third-party payor programs will be timely, will remain at levels similar to present levels or will, in the future, be sufficient to cover the costs allocable to patients eligible for reimbursement pursuant to such programs. The Company’s financial condition and results of operations are and will continue to be affected by the reimbursement process, which in the healthcare industry is complex and can involve lengthy delays between the time that revenue is recognized and the time that reimbursement amounts are settled.

~~A reconciliation of the numerator and denominator used in the calculation of diluted net income (loss) per common share follows (in thousands, except per share data):~~

	Three months ended March 31,
	2020		2019
Numerator:
Net income (loss)	$	38,681	$	(25,082)
Less: Net (income) loss attributable to noncontrolling interests		(5,173)		9,819
Net income (loss) attributable to Genesis Healthcare, Inc.	$	33,508	$	(15,263)
Plus: Assumed conversion of noncontrolling interests		6,268		—
Net income (loss) available to common stockholders after assumed conversions	$	39,776	$	(15,263)
Denominator:
Weighted-average common shares outstanding		109,721		103,715
Plus: Assumed conversion of noncontrolling interests		56,023		—
Plus: Unvested restricted stock units and stock warrants		1,670		—
Adjusted weighted-average common shares outstanding, diluted		167,414		103,715
Diluted net income (loss) per common share attributable to Genesis Healthcare, Inc.	$	0.24	$	(0.15)

Laws and regulations governing the Medicare and Medicaid programs, and the Company’s businesses generally, are complex and are often subject to a number of ambiguities in their application and interpretation. The Company believes that it is in substantial compliance with all applicable laws and regulations. However, from time to time the Company and its affiliates are subject to pending or threatened lawsuits and investigations involving allegations of potential wrongdoing, some of which may be material or involve significant costs to resolve and/or defend, or may lead to other adverse effects on the Company and its affiliates including, but not limited to, fines, penalties and exclusion from participation in the Medicare and/or Medicaid programs.

As the Company was in a net loss position for the three months ended March 31, 2019, the computation of diluted net loss per common share for this period excludes the effects of 60.0 million anti-dilutive shares attributable to the assumed conversion of noncontrolling interests, unvested restricted stock units, and stock warrants. As of March 31, 2019, there were 56.6 million units attributable to the noncontrolling interests outstanding.

16 Concentration of Credit Risk

~~Table of Contents~~

~~GENESIS~~The ~~HEALTHCARE~~Company is exposed to the credit risk of its third-party customers, ~~INC~~many of whom are in similar lines of business as the Company and are exposed to the same systemic industry risks of operations as the Company, resulting in a concentration of risk. ~~AND~~These ~~SUBSIDIARIESNOTES~~include TOorganizations ~~CONSOLIDATED~~that ~~FINANCIAL~~utilize ~~STATEMENTS(UNAUDITED)~~ the Company’s rehabilitation services, staffing services and physician service offerings, engaged in similar business activities or having economic features that would cause their ability to meet contractual obligations, including those to the Company, to be similarly affected by changes in regulatory and systemic industry conditions.

~~(6) Segment Information~~

The Company has three reportable operating segments: (i) inpatient services; (ii) rehabilitation therapy services; and (iii) other services. For additional information on these reportable segments, see Note 1 – “General Information – Description of Business.” 12

ATable ~~summary~~ of ~~the Company’s segmented revenues follows (in thousands, except percentages):~~ Contents

	Three months ended March 31,
	2020				2019				Increase / (Decrease)
	Revenue		Revenue		Revenue		Revenue
	Dollars		Percentage		Dollars		Percentage		Dollars		Percentage
Revenues:
Inpatient services:
Skilled nursing facilities	$	929,873	85.1	%	$	982,396	84.6	%	$	(52,523)	(5.3)	%
Assisted/Senior living facilities		21,822	2.0	%		23,649	2.0	%		(1,827)	(7.7)	%
Administration of third party facilities		2,041	0.2	%		2,247	0.2	%		(206)	(9.2)	%
Elimination of administrative services		(786)	(0.1)	%		(800)	—	%		14	1.8	%
Inpatient services, net		952,950	87.2	%		1,007,492	86.8	%		(54,542)	(5.4)	%
Rehabilitation therapy services:
Total therapy services		164,796	15.1	%		195,071	16.8	%		(30,275)	(15.5)	%
Elimination of intersegment rehabilitation therapy services		(59,327)	(5.4)	%		(74,231)	(6.4)	%		14,904	20.1	%
Third party rehabilitation therapy services, net		105,469	9.7	%		120,840	10.4	%		(15,371)	(12.7)	%
Other services:
Total other services		54,823	5.0	%		42,118	3.6	%		12,705	30.2	%
Elimination of intersegment other services		(20,992)	(1.9)	%		(8,810)	(0.8)	%		(12,182)	(138.3)	%
Third party other services, net		33,831	3.1	%		33,308	2.8	%		523	1.6	%
Net revenues	$	1,092,250	100.0	%	$	1,161,640	100.0	%	$	(69,390)	(6.0)	%

GENESIS HEALTHCARE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

AManagement ~~summary~~assesses its exposure to loss on accounts at the customer level. The greatest concentration of risk exists in the Company’s ~~unaudited~~rehabilitation ~~condensed~~therapy ~~consolidated~~services ~~statement~~business where it has over 140 distinct customers, many being chain operators with more than one location. One of ~~operations~~the ~~follows~~Company’s (customers, a related party, comprises $31.0 million, or approximately 40%, of the gross outstanding contract receivables in ~~thousands):~~ the rehabilitation services business at June 30, 2020. See Note 11 – “Related Party Transactions.” A future adverse event impacting this customer or other large customers, resulting in their insolvency or other economic distress, would have a material impact on the Company.

	Three months ended March 31, 2020
			Rehabilitation
	Inpatient		Therapy		Other
	Services		Services		Services		Corporate		Eliminations		Consolidated
Net revenues	$	953,736	$	164,796	$	54,039	$	784	$	(81,105)	$	1,092,250
Salaries, wages and benefits		411,042		134,569		34,922		—		—		580,533
Other operating expenses		395,526		8,502		17,683		—		(81,230)		340,481
General and administrative costs		—		—		—		39,617		—		39,617
Lease expense		96,982		312		427		299		—		98,020
Depreciation and amortization expense		21,634		1,686		198		2,489		(19)		25,988
Interest expense		13,566		14		10		23,830		(1,180)		36,240
Loss on early extinguishment of debt		—		—		—		4,039		—		4,039
Investment income		—		—		—		(2,336)		1,180		(1,156)
Other (income) loss		(85,112)		—		280		—		—		(84,832)
Transaction costs		—		—		—		5,591		—		5,591
Long-lived asset impairments		9,700		—		—		—		—		9,700
Equity in net income of unconsolidated affiliates		—		—		—		188		(61)		127
Income (loss) before income tax benefit		90,398		19,713		519		(72,933)		205		37,902
Income tax benefit		—		—		—		(779)		—		(779)
Net income (loss)	$	90,398	$	19,713	$	519	$	(72,154)	$	205	$	38,681

17 The Company’s business is subject to a number of other known and unknown risks and uncertainties, which are discussed in Part II. Item 1A, “Risk Factors” of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, which was filed with the SEC on March 16, 2020, and in the Company’s Quarterly Reports on Form 10-Q, including the risk factors discussed herein in Part II. Item 1A.

~~Table of Contents~~

~~GENESIS~~Covenant ~~HEALTHCARE, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)~~ Compliance

	Three months ended March 31, 2019
			Rehabilitation
	Inpatient		Therapy		Other
	Services		Services		Services		Corporate		Eliminations		Consolidated
Net revenues	$	1,008,292	$	195,071	$	42,065	$	53	$	(83,841)	$	1,161,640
Salaries, wages and benefits		456,762		157,092		28,556		—		—		642,410
Other operating expenses		401,932		10,957		13,489		—		(83,840)		342,538
General and administrative costs		—		—		—		35,532		—		35,532
Lease expense		92,966		330		342		423		—		94,061
Depreciation and amortization expense		31,872		3,164		174		2,985		—		38,195
Interest expense		27,040		14		9		24,453		—		51,516
Investment income		—		—		—		(1,864)		—		(1,864)
Other income		(16,841)		(76)		—		—		—		(16,917)
Transaction costs		—		—		—		1,261		—		1,261
Equity in net (income) loss of unconsolidated affiliates		—		—		—		(524)		463		(61)
Income (loss) before income tax expense		14,561		23,590		(505)		(62,213)		(464)		(25,031)
Income tax expense		—		—		—		51		—		51
Net income (loss)	$	14,561	$	23,590	$	(505)	$	(62,264)	$	(464)	$	(25,082)

~~The~~Should ~~following~~the ~~table~~Company ~~presents~~fail ~~the~~to ~~segment~~comply ~~assets~~with asits ofdebt ~~March 31~~and lease covenants at a future measurement date, ~~2020~~ ~~compared~~it tocould, ~~December 31~~absent necessary and timely waivers and/or amendments, ~~2019~~ (be in ~~thousands):~~ default under certain of its existing debt and lease agreements. To the extent any cross-default provisions may apply, the default could have a significant impact on the Company’s financial position.

	March 31, 2020		December 31, 2019
Inpatient services	$	4,076,856	$	4,221,579
Rehabilitation therapy services		274,785		281,978
Other services		50,354		49,877
Corporate and eliminations		86,986		108,706
Total assets	$	4,488,981	$	4,662,140

~~The~~Although ~~following~~the ~~table~~Company ~~presents~~is ~~segment~~in ~~goodwill~~compliance aswith ofthe ~~March 31~~covenants required by its material debt and lease agreements at June 30, 2020, ~~compared~~the ongoing uncertainty related to ~~December 31, 2019~~the (impact of healthcare reform initiatives and the effect of the COVID-19 pandemic may have an adverse impact on the Company’s ability to remain in ~~thousands):~~ compliance with its financial covenants through August 10, 2021. Without giving effect to the prospect of timely and adequate future governmental funding support and other mitigating plans, many of which are beyond the Company’s control, it is unlikely that the Company will be able to generate sufficient cash flows to meet its required financial obligations, including its rent obligations, its debt service obligations and other obligations due to third parties. The existence of these conditions raises substantial doubt about the Company’s ability to continue as a going concern for the twelve-month period following the date the financial statements are issued.

	Rehabilitation Therapy Services		Other Services		Consolidated
Balance at December 31, 2019
Goodwill	$	73,814	$	11,828	$	85,642
Accumulated impairment losses		—		—		—
	$	73,814	$	11,828	$	85,642
Balance at March 31, 2020
Goodwill		73,814		11,828		85,642
Accumulated impairment losses		—		—		—
	$	73,814	$	11,828	$	85,642

~~(7) Property~~The Company’s ability to maintain compliance with financial covenants required by its debt and ~~Equipment~~ lease agreements depends in part on management’s ability to increase revenues and control costs and receive adequate compensatory grants and subsidies from governmental authorities relative to the COVID-19 pandemic as well as possible waivers, deferrals and/or adjustments of debt and lease terms. Due to continuing changes in the healthcare industry, as well as the uncertainty with respect to changing referral patterns, patient mix, and reimbursement rates, it is possible that future operating performance may not generate sufficient operating results to maintain compliance with its quarterly debt and lease covenant requirements.

~~Property~~ ~~and equipment consisted of the following as of March 31, 2020 and December 31, 2019 (in thousands):~~

	March 31, 2020		December 31, 2019
Land, buildings and improvements	$	895,787	$	1,004,447
Equipment, furniture and fixtures		371,138		386,248
Construction in progress		2,816		2,771
Gross property and equipment		1,269,741		1,393,466
Less: accumulated depreciation		(415,948)		(431,361)
Net property and equipment	$	853,793	$	962,105

There can be no assurance that the confluence of these and other factors will not impede the Company’s ability to meet covenants required by its debt and lease agreements in the future.

~~Net property and equipment included $540.9 million and $535.9 million at March 31, 2020 and December 31, 2019, respectively, associated with the Company's consolidated VIEs.~~

18 (3) Significant Transactions and Events

~~Table of Contents~~

~~GENESIS HEALTHCARE, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)~~ COVID-19

~~During the three months ended March 31, 2020, the Company sold 10 skilled nursing facilities resulting in a reduction in net property and equipment of $75.0 million.~~

~~During~~As discussed in Note 1 – “General Information – Going Concern Considerations,” the ~~three~~Company’s ~~months~~operations ~~ended~~and ~~March 31~~supply chains have been materially and adversely affected by the COVID-19 pandemic, ~~2020~~ resulting in a reduction in its operating occupancy and related revenues, and an increase in its expenditures. Although the ~~Company~~ultimate ~~recorded~~impact ~~long~~of the pandemic remains uncertain, the following disclosures serve to outline the estimated impact of COVID-~~lived~~19 ~~asset~~on ~~impairment~~its ~~charges~~business through June 30, 2020, including the impact of ~~$7.1~~emergency ~~million.~~legislation, temporary changes to regulations and reimbursements issued in response to COVID-19.

~~(8) Leases~~ 13

~~The~~Table ~~Company leases the majority~~ of the skilled nursing facilities and assisted/senior living facilities used in its operations, most of which are subject to triple-net leases, meaning that in addition to rent, the Company is responsible for paying property taxes, insurance, and maintenance and repair costs. As of March 31, 2020, the Company leased approximately 76% of its centers; 45% were leased pursuant to master lease agreements with four landlords. The Company also leases certain office space, land, and equipment. Contents

~~The~~GENESIS ~~Company’s real estate leases generally have initial lease terms of 10 to 15 years or more and typically include one or more options to renew~~HEALTHCARE, ~~with renewal terms that generally extend the lease term for an additional five to ten years or more~~INC. ~~Exercise~~AND ofSUBSIDIARIESNOTES ~~the~~TO ~~renewal~~CONSOLIDATED ~~options~~FINANCIAL is generally subject to the satisfaction of certain conditions which vary by contract and generally follow payment terms that are consistent with those in place during the initial term. The Company assesses renewal options using a “reasonably certain” threshold, which is understood to be a high threshold and, therefore, the majority of its leases’ terms do not include renewal periods for accounting purposes. For leases where the Company is reasonably certain to exercise its renewal option, the option periods are included within the lease term and, therefore, the measurement of the right-of-use STATEMENTS(~~ROU~~UNAUDITED) asset and lease liability. The payment structure of the Company’s leases generally contain annual escalation clauses that are either fixed or variable in nature, some of which are dependent upon published indices. Leases with an initial term of 12 months or less are not recorded on the balance sheet; expense for these leases is recognized on a straight-line basis over the lease term as an other operating expense.

As of March 31, 2020, the Company held fixed-price options to purchase 57 facilities, 23 of which are subject to third-party leases and 34 of which are subject to lease arrangements with the Company’s consolidated VIEs. The Company assesses the likelihood of exercising the purchase option using a “reasonably certain” threshold, which is understood to be a high threshold and, therefore, purchase options are generally accounted for when a compelling economic reason to exercise the option exists. Certain leases include options to terminate the lease, the terms and conditions of which vary by contract. Such options allow the contract parties to terminate their obligations under the lease contract, typically in return for an agreed financial consideration. The Company’s lease agreements do not contain any material residual value guarantees. The Company leases certain facilities from affiliates of related parties. See Note 11 – “Related Party Transactions.” Operations

~~The~~ Company makes certain assumptions in determining the discount rate. As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate for collateralized borrowings, based on the information available at commencement date, in determining the present value of lease payments. In order to apply the incremental borrowing rate, a portfolio approach was utilized to group assets based on similar lease terms in a manner whereby the Company reasonably expects that the application does not differ materially from application to individual leases.

~~Subsequent~~The ~~to lease commencement date, the~~ Company’s ~~reassesses~~first ~~lease~~report ~~classification~~of ~~when~~a ~~there~~positive iscase aof ~~contract~~COVID-19 ~~modification~~in ~~that~~one isof ~~not~~its ~~accounted~~facilities ~~for~~occurred ason aMarch ~~separate contract~~16, a2020. Since ~~change~~that ~~in lease term~~time, or241 aof ~~change in~~ the ~~assessment~~Company’s of361 ~~whether~~facilities ~~the~~have ~~lessee~~experienced isone ~~reasonably~~or ~~certain~~more topositive ~~exercise~~cases anof ~~option~~COVID-19 toamong ~~purchase~~patients ~~the~~and ~~underlying asset~~residents. Over ~~This~~77% ~~reassessment~~of isthe ~~made~~patient ~~using current facts, circumstances~~ and ~~conditions.~~resident Aspositive aCOVID-19 ~~result~~cases ofin aits ~~lease’s~~facilities ~~modification,~~have ~~the~~occurred ~~remaining consideration~~ in the ~~contract~~states isof ~~reallocated~~New toJersey, ~~lease and non-lease components~~Connecticut, ~~as applicable~~Massachusetts, Pennsylvania and ~~the~~Maryland, ~~lease~~which ~~liability~~correspond isto ~~remeasured~~many ~~using~~of the ~~applicable~~largest ~~discount~~community ~~rate~~outbreak atareas ~~the~~across ~~effective date of~~ the ~~modification~~country. The ~~remeasurement~~Company’s offacilities ~~the lease liability will result~~ in ~~adjustment~~these tofive ~~the~~states ~~corresponding~~represent ~~ROU~~45% ~~asset,~~of ~~unless~~its ~~the~~total ~~lease~~operating ~~is fully or partially terminated, in which case, a gain or loss will be recognized~~beds.

~~During the three months ended March 31, 2020, the Company recognized ROU asset impairments of $2.6 million.~~

The Company’s occupancy decreased in the early months of the pandemic following the efforts by referring hospitals to cancel or reschedule elective procedures in anticipation of an increasing number of COVID-19 cases in their communities. As the pandemic progressed, occupancy was further decreased by, among other things, implementation of self-imposed admission holds in facilities having exposure to positive cases of COVID-19 among patients, residents and employees. These self-imposed restrictions on admissions were instituted to limit risks of potential spread of the virus by individuals that either tested positive for COVID-19, exhibited symptoms of COVID-19 but had not yet been tested positive due to a severe shortage of testing materials, or were asymptomatic of COVID-19 but potentially positive and contagious.

~~Table of Contents~~

~~GENESIS~~Net ~~HEALTHCARE, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)~~ Revenues

~~The maturity of total operating and finance lease obligations at March 31, 2020 is as follows (in thousands):~~

Year ending December 31,	Operating Leases		Finance Leases (1)
2020 (excluding the three months ended March 31, 2020)	$	283,563	$	5,780
2021		381,752		7,526
2022		379,771		7,323
2023		379,007		7,108
2024		384,735		6,893
Thereafter		3,021,964		35,930
Total lease payments		4,830,792		70,560
Less interest		(2,055,770)		(28,789)
Total lease obligations		2,775,022		41,771
Less current portion		(142,191)		(2,926)
Long-term lease obligations	$	2,632,831	$	38,845

The Company’s net revenues for the three and six months ended June 30, 2020 were materially impacted by a significant decline in occupancy as a result of COVID-19. The Company’s skilled nursing facility operating occupancy decreased from 88.2% for the three months ended March 31, 2020 to 77.0% for the three months ended June 30, 2020. However, the revenue lost from the decline in occupancy was partially offset by incremental state sponsored funding programs, changes in payor mix, and the enactment of COVID-19 relief programs, as discussed below. See Regulatory and Reimbursement Relief. After considering a commensurate reduction in operating expenses, the Company estimates lost revenue caused by COVID-19, decreased earnings by approximately $67.0 million and $74.0 million for the three and six months ended June 30, 2020, respectively.

~~(1) Finance lease payments include $37.2 million related to options to extend lease terms that are reasonably certain of being exercised.~~

~~The~~Operating ~~following table provides lease costs and income by line item on the consolidated statements of operations for the three months ended March 31, 2020 (in thousands):~~ Expenses

		Three months ended
	Classification	March 31, 2020
Operating lease cost	Lease expense	$	98,020
Finance lease cost:
Amortization of finance lease right-of-use assets	Depreciation and amortization expense		1,016
Interest on finance lease obligations	Interest expense		1,219
Total finance lease expense			2,235
Variable lease cost	Other operating expenses		8,775
Short-term leases	Other operating expenses		5,383
Sublease income	Net revenues		(975)
Total		$	113,438

The ~~following~~Company’s ~~table~~operating ~~provides~~expenses ~~remaining~~for ~~lease~~the ~~term~~three and ~~discount~~six ~~rates~~months byended ~~lease~~June ~~classification~~30, 2020 were materially and adversely impacted due to increases in costs as a result of the pandemic, with more dramatic increases occurring at facilities with positive COVID-19 cases among patients, residents and employees. During the three months and six months ended ~~March 31~~June 30, 2020: , the Company estimates it incurred approximately $145.3 million and $152.5 million, respectively, of incremental operating expenses to prepare for and respond to the pandemic. Increases in cost primarily stemmed from higher labor costs, including increased use of overtime and bonus pay, as well as a significant increase in both the cost and usage of personal protective equipment, medical equipment, food service supplies for staff, enhanced cleaning and environmental sanitation costs, the impact of utilizing less efficient modes of providing therapy in order to avoid the grouping of patients and workers compensation expense.

Lease Term and Discount Rate	March 31, 2020
Weighted-average remaining lease term (years)
Operating leases		12.3
Finance leases		9.9
Weighted-average discount rate
Operating leases		9.5%
Finance leases		12.1%

The ~~following~~Company ~~table~~is ~~includes~~not ~~supplemental~~reasonably ~~lease~~able ~~information~~to ~~for~~predict the ~~three~~total ~~months~~amount ~~ended~~of ~~March 31, 2020~~costs (it will incur related to the pandemic and to what extent such incremental costs can be reduced or will be borne by or offset by actions taken by public and private entities in ~~thousands):~~ response to the pandemic.

	Three months ended
Other information	March 31, 2020
Cash paid for amounts included in the measurement of lease obligations
Operating cash flows from operating leases	$	94,288
Operating cash flows from finance leases		1,931
Financing cash flows from finance leases
Right-of-use assets obtained in exchange for new lease obligations
Operating leases		5,274
Finance leases		373

20 14

Table of Contents

GENESIS HEALTHCARE, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)

~~Lease Covenants~~ Liquidity

The Company’s lease agreements generally contain covenant requirements that, among other things, and subject to certain exceptions, impose operating and financial restrictions on the Company and its subsidiaries. These leases also require the Company to meet defined financial covenants, such as a minimum level of consolidated liquidity, a maximum consolidated net leverage ratio and a minimum consolidated fixed charge coverage. Certain of the Company’s leases include cross-default provisions with each other and certain material debt instruments. At March 31, 2020, the Company was in compliance with the financial covenants contained in its leases containing cross-default provisions, with the exception of one master lease agreement involving two of its facilities. However, on May 4, 2020, the Company received a waiver for these covenant breaches through July 1, 2021.

AtThe ~~March 31~~Company has taken, ~~2020,~~ ~~the~~and ~~Company~~will ~~did~~continue ~~not~~to ~~meet~~take, ~~certain~~actions ~~financial~~to ~~covenants~~enhance ~~contained~~and into ~~one~~preserve ~~lease~~its ~~related~~liquidity toin ~~two~~response ofto ~~its~~the ~~facilities~~pandemic. ~~The~~ During ~~Company~~the ~~is,~~three and ~~expects~~six tomonths ~~continue~~ended toJune be30, ~~current~~2020, in the ~~timely~~Company’s ~~payment~~usual sources of ~~its~~liquidity ~~obligations~~have been supplemented by grants and advanced Medicare payments under ~~such~~programs ~~leases. These~~expanded ~~leases~~or docreated ~~not~~under ~~have~~the ~~cross-default~~Coronavirus ~~provisions~~Aid, ~~nor~~Relief, doand ~~they~~Economic ~~trigger~~Security ~~cross-default~~Act ~~provisions~~(CARES Act). Specifically, in ~~any~~April of2020, the Company’s ~~other~~applied ~~loan~~for orand ~~lease~~received ~~agreements~~$156. ~~The~~8 million of advanced Medicare payments and in April and May 2020 received $185.5 million of relief grants. In addition, the Company ~~will~~has ~~continue~~elected to ~~work~~implement ~~with~~ the ~~related~~CARES ~~credit~~Act ~~parties~~payroll tax deferral program, which is expected to ~~amend~~preserve ~~such~~on ~~leases~~an ~~and~~interest ~~the~~free ~~related~~basis ~~financial~~approximately ~~covenants. The~~$90 ~~Company~~million ~~does~~of ~~not~~cash ~~believe~~representing the ~~breach~~employer portion of ~~such~~payroll ~~financial~~taxes ~~covenants~~estimated atto be incurred between March 27, 2020 and December 31, 2020. The ~~will~~advance ~~have~~Medicare apayments ~~material~~of ~~adverse~~$156.8 ~~impact~~million, which are also interest free, are scheduled to be recouped between August 2020 and November 2020, while one-half of the payroll tax deferral amount will become due on ~~it. The~~each ~~Company~~of ~~has~~December ~~been~~31, ~~afforded~~2021 ~~certain~~and ~~cure~~December ~~rights~~31, 2022. In addition to ~~such~~relief ~~defaults~~funding under the CARES Act, funding has been committed by ~~posting~~a ~~collateral~~number of states in which the ~~form~~Company ofoperates, ~~additional~~currently ~~letters~~estimated ofat ~~credit~~$55.5 ormillion, ~~security~~since ~~deposit~~the outset of the pandemic.

The Company’s ability to maintain compliance with its lease covenants depends in part on management’s ability to increase revenue, control costs and receive adequate compensatory grants and subsidies from governmental authorities relative to the COVID-19 pandemic. Due to continuing changes in the healthcare industry, as well as the uncertainty with respect to changing referral patterns, patient mix, and reimbursement rates, it is possible that future operating performance may not generate sufficient operating results to maintain compliance with its quarterly lease covenant compliance requirements. Should the Company fail to comply with its lease covenants at a future measurement date, it would, absent necessary and timely waivers and/or amendments, be in default under certain of its existing lease agreements. To the extent any cross-default provisions may apply, the default would have an even more significant impact on the Company’s financial position.

~~(9) Long~~The Company continues to seek opportunities to enhance and to preserve its liquidity, including through reducing expenses, continuing to evaluate its capital structure and seeking further government-~~Term~~sponsored ~~Debt~~ financial relief related to the pandemic. The Company cannot provide assurance that such efforts will be successful, timely or adequate to offset the lost revenue and escalating operating expenses as a result of the pandemic. See Note 1 – “General Information – Going Concern Considerations.”

~~Long-term debt at March 31, 2020 and December 31, 2019 consisted of the following (in thousands):~~

	March 31, 2020		December 31, 2019
Asset based lending facilities, net of debt issuance costs of $7,935 and $8,615 at March 31, 2020 and December 31, 2019, respectively	$	362,977	$	412,346
Term loan agreements, net of debt issuance costs of $943 and $1,084 and debt premium balance of $4,159 and $4,816 at March 31, 2020 and December 31, 2019, respectively		200,130		196,714
Real estate loans, net of debt issuance costs of $3,467 and $3,846 and debt premium balance of $16,912 and $19,328 at March 31, 2020 and December 31, 2019, respectively		230,669		265,700
HUD insured loans, net of debt issuance costs of $1,147 and $2,909 at March 31, 2020 and December 31, 2019, respectively		44,876		117,117
Notes payable		110,952		116,952
Mortgages and other secured debt (recourse)		6,375		6,369
Mortgages and other secured debt (non-recourse), net of debt issuance costs of $9,167 and $9,349 and debt premium balance of $1,398 and $1,422 at March 31, 2020 and December 31, 2019, respectively		505,257		498,222
		1,461,236		1,613,420
Less: Current installments of long-term debt		(106,088)		(162,426)
Long-term debt	$	1,355,148	$	1,450,994

Regulatory and Reimbursement Relief

~~Asset Based Lending Facilities~~

~~The~~On ~~Company~~March ~~maintains~~18, a2020, ~~$555.0~~the ~~million~~Families ~~asset~~First ~~based~~Coronavirus ~~lending~~Response ~~facility,~~Act aswas ~~amended~~enacted, ~~comprised~~which ofprovided (a) atemporary ~~$285~~6.02% ~~million~~increase ~~first~~to ~~lien~~each ~~term~~qualifying ~~loan~~state’s ~~facility,~~Medicaid Federal Medical Assistance Percentage (bFMAP) aeffective ~~$240~~January 1, 2020.0 ~~million~~The ~~first~~temporary ~~lien~~FMAP ~~revolving~~increase ~~credit~~will ~~facility~~extend through the last day of the calendar quarter in which the COVID-19 public health emergency declared by the U.S. Department of Health and Human Services (cHHS), including any extensions or termination, which currently expires October 25, 2020. As part of the requirements for receiving the temporary FMAP increase, states must cover testing services and treatments for COVID-19 and may not impose deductibles, copayments, coinsurance or other cost sharing charges for any quarter in which the temporarily increased FMAP is claimed. Further, a ~~$30~~number of additional states in which the Company operates have implemented incremental FMAP related reimbursement provisions and other forms of support to assist providers.0 ~~million~~For ~~delayed~~the ~~draw~~three ~~term~~and ~~loan~~six ~~facility~~months ~~(collectively~~ended June 30, 2020, the ~~ABL~~Company ~~Credit~~recognized ~~Facilities)~~as ~~with~~net ~~affiliates~~revenues in the consolidated statements of ~~MidCap~~operations ~~Financial~~$40.2 ~~Services~~million and $45.7 million, ~~LLC~~respectively, ~~(MidCap)~~of additional FMAP reimbursement relief. The ~~commitments~~Company ~~under~~cannot predict the extent to which further FMAP funding programs will be implemented in the states in which it operates.

~~Table~~In further response to the pandemic, on March 27, 2020, the President signed into law the bipartisan CARES Act. The CARES Act allocates $100 billion to a Public Health and Social Services Emergency Fund to “reimburse, through grants or other mechanisms, eligible health care providers for health care related expenses or lost revenues that are attributable to coronavirus.” Nursing facility operators participating in Medicare and Medicaid may be eligible to receive compensation for costs incurred in the course of ~~Contents~~ providing medical services, such as those related to obtaining personal protective equipment, COVID-19 related testing supplies, and increased staffing or training, provided that such costs are not compensated by another source. The secretary of the HHS has broad authority and discretion to determine payment eligibility and the amount of such payments.

~~GENESIS HEALTHCARE, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)~~

~~delayed~~The ~~draw~~Company ~~term~~was ~~loan~~impacted ~~facility~~by ~~were~~certain ~~reduced~~provisions toof ~~$27.5~~the ~~million~~CARES ~~on March 31~~Act, ~~2020,~~as ~~and~~summarized ~~will be further reduced to $25~~below.0 ~~million on June 30, 2020, $22.5 million on September 30, 2020, and $20.0 million on December 31, 2020 and thereafter.~~

The Company originally entered into the ABL Credit Facilities in March 2018. The ABL Credit Facilities have a stated maturity of March 6, 2023 and include a springing maturity clause that would accelerate the maturity date 90 days prior to the maturity of the Term Loan Agreements, Welltower Real Estate Loans or MidCap Real Estate Loans (each defined below), in the event those agreements are not extended or refinanced. The revolving credit facility includes a swinging lockbox arrangement whereby the Company transfers all funds deposited within its designated lockboxes to MidCap on a daily basis and then draws from the revolving credit facility as needed. The Company has presented the entire revolving credit facility borrowings balance of $85.9 million in current installments of long-term debt at March 31, 2020. Despite this classification, the Company expects that it will have the ability to borrow and repay on the revolving credit facility through its maturity. Cash proceeds of $50.8 million received under the ABL Credit Facilities remain in a restricted account. This amount is pledged to cash collateralize letters of credit. The Company has classified this deposit and all cash account balances subject to deposit account control agreements that were sprung under the ABL Credit Facilities as restricted cash and equivalents in the consolidated balance sheets at March 31, 2020 and December 31, 2019.

~~Borrowings~~● ~~under~~Temporary ~~the~~suspension ~~term~~of ~~loan~~certain patient coverage criteria and ~~revolving~~documentation ~~credit~~and ~~facility~~care ~~components~~requirements. ofThe ~~the~~CARES ~~ABL~~Act ~~Credit~~and ~~Facilities~~a ~~bear~~series ~~interest~~of attemporary awaivers ~~90-day~~and ~~LIBOR~~guidance ~~rate~~issued ~~(subject~~by tothe aCenters ~~floor~~for ofMedicare ~~0.5%)~~and ~~plus~~Medicaid anServices ~~applicable~~(CMS) ~~margin~~suspend ofvarious ~~6%. Borrowings~~Medicare ~~under~~patient ~~the~~coverage ~~delayed~~criteria ~~draw~~as ~~component~~well ~~bear~~as ~~interest~~certain atdocumentation aand ~~90-day~~care ~~LIBOR~~requirements. ~~rate~~These ~~(subject~~accommodations are intended to aensure ~~floor~~patients ofhave ~~1%)~~access ~~plus~~to ancare ~~applicable~~notwithstanding ~~margin~~the ofburdens ~~11%.~~placed ~~Borrowing~~on ~~levels~~healthcare ~~under~~providers due to the ~~term~~COVID-19 ~~loan~~pandemic. ~~and~~The ~~revolving~~Company ~~credit~~believes ~~facility~~these ~~components~~regulatory ofactions ~~the~~could ~~ABL~~contribute ~~Credit~~to ~~Facilities~~an ~~are~~increase ~~limited~~in tocensus avolumes ~~borrowing~~and ~~base~~skilled mix that ismay ~~computed~~not ~~based~~otherwise ~~upon~~have ~~the~~occurred, ~~level~~but ofcannot ~~eligible~~provide ~~accounts~~any ~~receivable~~assurance as to the impact on its businesses.

In addition to paying interest on the outstanding principal borrowed under the revolving credit facility, the Company is required to pay a commitment fee to the lenders for any unutilized commitments. The commitment fee rate equals 0.5% per annum on the revolving credit facility and 2% on the delayed draw term loan facility.

The term loan facility and revolving credit facility include a termination fee equal to 2% if the loans are prepaid within the first two years and 1.5% thereafter. The term loan facility and revolving credit facility include an exit fee equal to $1.6 million and $1.0 million, respectively, due and payable on the earlier of the loan’s retirement or on the maturity date. 15

~~The~~Table ~~ABL Credit Facilities contain representations and warranties, affirmative covenants, negative covenants, financial covenants and events~~ of default and security interests that are customarily required for similar financings. Financial covenants include a minimum consolidated fixed charge coverage ratio, a maximum leverage ratio and minimum liquidity. Contents

~~Borrowings~~GENESIS ~~and~~HEALTHCARE, ~~interest~~INC. ~~rates~~AND ~~under~~SUBSIDIARIESNOTES ~~the~~TO ~~ABL~~CONSOLIDATED ~~Credit~~FINANCIAL ~~Facilities were as follows at March 31, 2020~~ STATEMENTS(~~dollars in thousands~~UNAUDITED):

					Weighted
					Average
ABL Credit Facilities	Commitment		Borrowings		Interest
Term loan facility	$	285,000	$	285,000	7.45	%
Revolving credit facility (Non-HUD)		168,000		28,924	7.45	%
Revolving credit facility (HUD)		72,000		29,488	7.45	%
Delayed draw term loan facility		30,000		27,500	12.45	%
	$	555,000	$	370,912	7.82	%

●

Relief Funds. During April and May 2020, the Company received $185.5 million of relief grants from CARES Act funds administered by the HHS. The grants are primarily related to the skilled nursing care provided through the Company’s Inpatient Services segment. Grants received are subject to the terms and conditions of the program, including that such funds may only be used to prevent, prepare for, and respond to COVID-19 and will reimburse only for health care related expenses or lost revenues that are attributable to COVID-19. HHS continues to evaluate and provide allocations of, and issue regulation and guidance regarding, grants made under the CARES Act. The Company’s relief funds payments are accounted for as government grants, which are recognized on a systematic and rational basis as other income once there is reasonable assurance that the applicable terms and conditions required to retain the funds will be met. The Company recognizes grants once both of the following conditions are met: (1) it is able to comply with the relevant conditions of the grant and (2) the grant will be received. The terms and conditions note that the relief funds received can be used for health care related expenses or lost revenues that are attributable to COVID-19. For the three and six months ended June 30, 2020, the Company recognized the entire amount of relief grants received within the “Federal stimulus – COVID-19 other income” caption in the consolidated statements of operations.

As of March 31, 2020, the Company had a total borrowing base capacity of $403.1 million with outstanding borrowings under the ABL Credit Facilities of $370.9 million, leaving the Company with approximately $32.2 million of available borrowing capacity under the ABL Credit Facilities.

~~Term~~On ~~Loan~~June ~~Agreements~~ 9, 2020 as part of its ongoing efforts to provide financial relief to healthcare providers impacted by COVID-19, HHS announced the Phase 2 general distribution to Medicaid, Medicaid managed care, Children's Health Insurance Program (CHIP) and dental providers. HHS anticipates distributing approximately $15 billion to eligible providers that participate in state Medicaid and CHIP programs that did not receive a payment from the Provider Relief Fund General Allocation (Phase 1). Eligible applicants will receive 2% of Gross Revenues from Patient Care for calendar years 2017, 2018 or 2019 as selected by applicant. Applications have been submitted for four assisted living facilities which meet the eligibility criteria.

The Company and certain of its affiliates, including FC-GEN (the Borrower) are party to a term loan agreement, as amended, (the Term Loan Agreement) with an affiliate of Welltower and an affiliate of Omega. The Term Loan Agreement originally provided

On July 22 , 2020, President Trump announced that an additional $5 billion of the Provider Relief Program funds will be allocated to Medicare-certified long term care facilities and state veterans’ homes (nursing homes), to build nursing home skills and enhance nursing homes’ response to COVID-19, including enhanced infection control. On August 7, 2020, HHS provided additional details indicating the $5 billion distribution will provide approximately $2.5 billion in upfront funding to support increased testing, staffing and personal protective equipment needs. There will also be funding available to providers who establish COVID-19 isolation facilities. At this time, the Company has insufficient information to estimate the amount or timing of such distributions.

~~Table of Contents~~

~~GENESIS~~● ~~HEALTHCARE~~Medicare Accelerated and Advanced Payment Program. During the three months ended June 30, ~~INC~~2020, the Company applied for and received $156.8 ~~AND~~million ~~SUBSIDIARIESNOTES~~of TOadvanced ~~CONSOLIDATED~~Medicare ~~FINANCIAL~~payments. ~~STATEMENTS(UNAUDITED)~~ The payments represent interest-free advances on future services to be provided to Medicare patients between August 2020 and November 2020. The advanced Medicare payments represent contract liabilities that are reported within accrued expenses in the consolidated balance sheet as of June 30, 2020. The $156.8 million in contract liabilities will be subsequently recouped over time as revenue is recognized for claims submitted for services provided to Medicare patients between August 2020 and November 2020. If there is a remaining balance owed after this period, the Company is required to repay the remaining advance.

for term loans (the Term Loans) in the aggregate principal amount of $120.0 million and later expanded to $160.0 million. The Term Loan Agreement matures on November 30, 2021. The original Term Loan for $120.0 million bears interest at a rate equal to 14.0% per annum, with up to 9.0% per annum to be paid in kind. The additional Term Loan for $40.0 million bears interest at a rate equal to 10.0% per annum, with up to 5.0% per annum to be paid in kind. The Term Loans had an outstanding accreted principal balance of $196.9 million and $193.0 million at March 31, 2020 and December 31, 2019, respectively.

~~The~~● ~~Term~~Payroll ~~Loan~~Tax ~~Agreement~~Deferral. isUnder ~~secured~~the byCARES aAct, ~~first~~the ~~priority~~Company ~~lien~~has elected to defer payment, on ~~the~~an ~~equity~~interest ~~interests~~free basis, of the ~~subsidiaries~~employer portion of ~~the~~social ~~Company~~security ~~and~~payroll ~~the~~taxes ~~Borrower~~incurred asfrom ~~well~~March as27, ~~certain~~2020 ~~other~~to ~~assets~~December 31, 2020. One-half of ~~the~~such ~~Company,~~deferral ~~the~~amount ~~Borrower~~will ~~and~~become ~~their~~due ~~subsidiaries~~on each of December 31, ~~subject~~2021 toand ~~certain~~December ~~exceptions~~31, 2022. The ~~Term~~Company ~~Loan~~has ~~Agreement~~presented isthe ~~also~~balance ~~secured~~of bydeferred apayroll ~~junior~~taxes, ~~lien~~$35.7 onmillion, ~~the~~within ~~assets~~other ~~that~~long ~~secure~~term liabilities in the ~~ABL~~consolidated ~~Credit~~balance ~~Facilities~~sheet onas aof ~~first~~June ~~priority~~30, ~~basis~~2020.

~~Welltower and Omega, or their respective affiliates, are each currently landlords under certain master lease agreements to which the Company and/or its affiliates are tenants.~~

● Temporary Suspension of Medicare Sequestration. The ~~Term~~Budget ~~Loan~~Control ~~Agreement~~Act ~~contains~~of ~~financial~~2011 requires a mandatory, ~~affirmative~~across ~~and~~the ~~negative~~board ~~covenants,~~reduction ~~and~~in ~~events~~federal ofspending, ~~default~~called ~~that~~a ~~are~~sequestration. ~~customary~~Medicare fee for ~~debt~~service ~~securities~~claims ofwith ~~this~~dates ~~type.~~of ~~Financial~~service ~~covenants~~or ~~include~~dates aof ~~maximum~~discharge ~~leverage~~on ~~ratio,~~or aafter ~~minimum~~April ~~interest~~1, ~~coverage~~2013 ~~ratio~~incur ~~and~~ a ~~minimum~~2.0% ~~fixed~~reduction ~~charge~~in ~~coverage~~Medicare ~~ratio,~~payments. ~~the~~All ~~most~~Medicare ~~restrictive~~rate ofpayments ~~which~~and issettlements ~~the~~have ~~minimum~~incurred ~~interest~~this ~~coverage~~mandatory ~~ratio~~reduction ~~which~~and ~~requires~~it ~~the~~will ~~Company~~continue to ~~maintain~~remain ain ~~coverage~~place ~~ratio,~~through asat ~~defined~~least ~~therein~~2023, ofunless noCongress ~~less~~takes ~~than~~further 1action.70 In response to 1COVID-19, the CARES Act temporarily suspended the automatic 2.0% ~~through~~reduction ~~December~~of 31Medicare claim reimbursements for the period of May 1, 2020, ~~and~~through ~~increasing~~December to31, 12020.80 toDuring ~~1.0~~the ~~thereafter.~~ three

~~Real Estate Loans~~ 16

~~MidCap~~Table ~~Real~~of ~~Estate Loans~~ Contents

~~The~~GENESIS Company originally entered into two real estate loans with MidCap (MidCap Real Estate Loans) with combined available proceeds of $75.0 million during March 2018. The MidCap Real Estate Loans are secured by 9 skilled nursing facilities and mature on March 30HEALTHCARE, ~~2023, subject to acceleration of the maturity date in the event the ABL Credit Facilities are repaid in full and terminated~~INC. ~~The~~ ~~loans~~AND ~~are~~SUBSIDIARIESNOTES ~~subject~~TO toCONSOLIDATED ~~principal~~FINANCIAL ~~payments and bear an annual interest rate equal to 30-day LIBOR~~ STATEMENTS(~~subject to a floor of 1.5%~~UNAUDITED) plus an applicable margin of 5.85%, with the balance due at maturity. Proceeds from the MidCap Real Estate Loans were used to repay partially the Welltower Real Estate Loans (defined below). On November 8, 2018, one of the MidCap Real Estate Loans was amended with an additional borrowing of $10.0 million. The proceeds were used to retire a maturing mortgage loan on a corporate office building. The office building has been added as collateral and the loan maturity remains March 30, 2023. The $10.0 million additional loan is subject to an annual interest rate equal to 30-day LIBOR (subject to a floor of 2.0%) plus an applicable margin of 6.25% with principal amortizing immediately and the balance due at maturity. During 2019, the Company divested the real property and operations of six facilities that were subject to the MidCap Real Estate Loans, using the sale proceeds to repay $39.8 million on the loans. During the first quarter of 2020, the Company divested the real property and operations of three facilities that were subject to the MidCap Real Estate Loans, using the sale proceeds to repay $14.1 million on the loans. The MidCap Real Estate Loans had an outstanding principal balance of $27.9 million and $42.2 million at March 31, 2020 and December 31, 2019, respectively. Additionally, two facilities that are subject to the MidCap Real Estate Loans were classified as held for sale as of March 31, 2020, resulting in the classification of $11.7 million in long term debt as held for sale.

~~Welltower~~and ~~Real~~six ~~Estate~~months ~~Loans~~ ended June 30, 2020, the suspension of sequestration resulted in net revenues of approximately $2.0 million.

The Company is subject to two real estate loan agreements with Welltower (Welltower Real Estate Loans). The Welltower Real Estate Loans are subject to payments of interest only during the term with a balloon payment due at maturity, provided, that to the extent the subsidiaries receive any net proceeds from the sale and/or refinance of the underlying facilities such net proceeds are required to be used to repay the outstanding principal balance of the Welltower Real Estate Loans. The Welltower Real Estate Loans have a maturity date of January 1, 2022 and an annual interest rate of 12.0%, of which 7.0% will be paid in cash and 5.0% will be paid in kind. The Company agreed to make commercially reasonable efforts to secure commitments to repay no less than $105.0 million of the Welltower Real Estate Loan obligations. As of March 31, 2020, the Company has not yet secured the total required repayments or commitments. As a result, the annual cash component of the interest payments was increased by approximately $2.0 million with a corresponding decrease in the paid in kind component of interest. At March 31, 2020, the Welltower Real Estate

23 ● Employee Retention Tax Credit. The employer payroll tax credit provisions of the CARES Act grant eligible companies a credit against applicable payroll taxes for each calendar quarter in an amount equal to 50% of qualified wages with a maximum credit of $5,000 per employee. The refundable tax credit is available to employers that fully or partially suspend operations during any calendar quarter in 2020 due to orders from an appropriate governmental authority limiting commerce, travel, or group meetings due to COVID-19. Qualified employees are those who are not providing services as a result of such orders of a government authority. The impact of the employee retention tax credit program was not material for the three and six months ended June 30, 2020.

~~Table of Contents~~

~~GENESIS~~Strategic ~~HEALTHCARE, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)~~ Partnerships

Loans are unsecured. The Welltower Real Estate Loans contain a conversion option, whereby up to $50.0 million of the balance can be converted into Class A common stock of the Company or a 10-year note bearing 2% paid in kind interest. The conversion option is available to the Company upon the satisfaction of certain conditions, the most significant include: the raise of new capital and application thereof to existing Welltower debt instruments, the repayment of $105.0 million to Welltower, as described above, the partial repayment of the Term Loans, and the partial repayment of the Welltower Real Estate Loans, such that the remaining outstanding principal balance does not exceed $50.0 million. During the first quarter of 2020, the Company divested the real property and operations of the remaining facility that was subject to the Welltower Real Estate Loans, using the sale proceeds to repay $9.0 million on the loans. The Welltower Real Estate Loans had an outstanding accreted principal balance of $218.0 million and $208.0 million at March 31, 2020 and December 31, 2019, respectively.

~~HUD~~Vantage ~~Insured~~Point ~~Loans~~ Partnership

As of March 31, 2020, the Company had 10 owned skilled nursing facility loans insured by HUD. The HUD insured loans have an original amortization term of 30 to 35 years and an average remaining term of 28.7 years with fixed interest rates ranging from 3.0% to 3.5% and a weighted average interest rate of 3.3%. Depending on the mortgage agreement, prepayments are generally allowed only after 12 months from the inception of the mortgage. Prepayments are subject to a penalty of 10% of the remaining principal balances in the first year and the prepayment penalty decreases each subsequent year by 1% until no penalty is required thereafter. Any further HUD insured loans will require additional HUD approval. All HUD insured loans are non-recourse loans to the Company. All loans are subject to HUD regulatory agreements that require escrow reserve funds to be deposited with the loan servicer for mortgage insurance premiums, property taxes, insurance and for capital replacement expenditures. As of March 31, 2020, the Company has total escrow reserve funds of $7.6 million with the loan servicer that are reported within prepaid expenses in the consolidated balance sheets.

~~During~~On ~~the~~January ~~first~~10, ~~quarter of~~ 2020, ~~the~~Welltower, ~~Company~~Inc. (Welltower) sold the real ~~property~~estate ~~and operations~~ of ~~six~~one skilled nursing ~~facilities~~facility ~~that~~located ~~were~~in ~~subject~~Massachusetts to ~~HUD~~the ~~financing,~~Vantage ~~one~~Point ofPartnership. The ~~which~~sale ~~was~~represents ~~classified~~the asfinal ~~held~~component ~~for~~of ~~sale~~a attransaction ~~December~~that 31occurred on September 12, 2019~~. The~~, ~~sale~~whereby ~~proceeds~~the ~~were~~Company ~~used~~acquired toan ~~retire~~approximately ~~HUD~~30% ~~insured~~membership ~~loans~~interest ~~totaling~~in ~~$59.3~~the ~~million. The~~partnership, ~~HUD~~which ~~insured~~acquired ~~loans~~the ~~for~~real ~~owned~~estate of 18 facilities ~~had~~previously leased from Welltower and Second Spring Healthcare Investments (Second Spring). As a result of the January 10, 2020 transaction, the Company will receive an ~~aggregate~~annual ~~principal~~rent ~~balance~~credit of $800.87 million from Welltower and recorded a gain of $~~140~~0.62 million atas ~~March 31, 2020~~a ~~and~~result ~~December 31, 2019,~~of ~~respectively~~the lease termination. ~~Additionally,~~ The ~~the~~Vantage ~~HUD~~Point ~~insured~~Partnership ~~loans~~acquired this skilled nursing facility for a purchase price of ~~four~~$9.1 ~~facilities~~million. The ~~with~~consolidation ~~aggregate~~of ~~principal~~this ~~balances~~additional skilled nursing facility primarily resulted in property and equipment of $349.81 million, ~~were~~non-recourse ~~classified~~debt asof $7.3 million with the balance of the purchase price settled primarily with proceeds held ~~for~~in ~~sale~~escrow atfrom ~~March~~the 31September 12, ~~2020~~2019 closing. The Company operates all 19 facilities owned by the Vantage Point Partnership.

~~Notes Payable~~

InNewGen November 2016, the Company issued a note totaling $51.2 million to Welltower, which accrues cash interest at 3.0% and paid-in-kind interest at 7.0%. Cash interest is paid and paid-in-kind interest accretes the principal amount semi-annually every May 1 and November 1. During 2019, the maturity date of the note was extended to December 15, 2021. Upon the satisfaction of certain conditions, including the repayment of the Term Loans, repayment of the other note payable, noted below, to Welltower, and partial repayment of the Welltower Real Estate Loans, the outstanding note balance in excess of $6.0 million will be forgiven by Welltower. The note had an outstanding accreted principal balance of $64.2 million and $64.2 million at March 31, 2020 and December 31, 2019, respectively. Partnership

In December 2016, the Company issued a second note totaling $11.7 million to Welltower, which accrues cash interest at 3.0% and paid-in-kind interest at 7.0%. Cash interest is paid and paid-in-kind interest accretes the principal amount semi-annually every June 15 and December 15. The note matures on December 15, 2021, and had an outstanding accreted principal balance of $14.6 million and $14.6 million at March 31, 2020 and December 31, 2019, respectively.

InOn ~~October~~February ~~2019~~1, 2020, the Company ~~converted~~transitioned operational responsibility for 19 facilities in the states of California, Washington and Nevada to a partnership with New Generation Health, LLC (the NewGen Partnership). The Company sold the real estate and operations of six skilled nursing facilities and transferred the operations to 13 skilled nursing, behavioral health and assisted living facilities for $2378.27 million. Net transaction proceeds were used by the Company to repay indebtedness, including prepayment penalties, of $33.7 million, fund its ~~trade~~initial ~~payables~~50% ~~into~~equity acontribution ~~note~~and ~~payable~~working capital requirement of $14.9 million, and provide financing to the partnership of $9.0 million. The ~~note~~Company ~~requires~~recorded ~~monthly~~a ~~interest~~gain ~~payments~~on ~~based~~sale of assets and transition of leased facilities of $58.8 million and loss on anearly ~~annual~~extinguishment ~~interest~~of ~~rate~~debt of 3$1.5%0 million. Concurrently, ~~The~~the ~~balance~~facilities have entered, or will enter upon regulatory approval, into management services agreements with NewGen for the day-to-day operations of the ~~note~~facilities. isThe ~~due~~Company onwill continue to provide administrative and back office services to the ~~maturity~~facilities ~~date~~pursuant to administrative support agreements, ~~September~~as 30well as therapy services pursuant to therapy services agreements. The Company does not hold a controlling financial interest in the NewGen Partnership. As such, ~~2022~~the Company has applied the equity method of accounting for its 50% interest in the NewGen Partnership. The Company’s investment in the NewGen Partnership, $20.5 million, is included within other long-term assets in the consolidated balance sheet as of June 30, 2020.

In November 2019, the Company issued a short-term note payable for $15.0 million. During the first quarter of 2020, the Company paid $6.0 million on the note, such that the outstanding principal balance was $9.0 million at March 31, 2020. Subsequent to March 31, 2020, the Company paid an addition $3.0 million on the note. The balance of the note is due on September 30, 2020.

24 On May 15, 2020, the Company transitioned operational responsibility for four additional leased facilities in the state of California to the NewGen Partnership. The four facilities generated annual revenues of $55.0 million and pre-tax loss of $0.5 million. Subsequent to May 15, 2020, the Company has applied the equity method of accounting for its 50% interest in these operations.

~~Table of Contents~~

~~GENESIS HEALTHCARE, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)~~ 17

~~Other~~Table ~~Debt~~ of Contents

~~Mortgages~~GENESIS ~~and~~HEALTHCARE, ~~other secured debt (recourse)~~INC. ~~The~~ ~~Company~~AND ~~carries~~SUBSIDIARIESNOTES ~~mortgage~~TO ~~loans~~CONSOLIDATED ~~and~~FINANCIAL notes payable on certain of its corporate office buildings and other acquired assets. The loans are secured by the underlying real property and have fixed or variable rates of interest with a weighted average interest rate of 1.5% at March 31, 2020, and maturity dates ranging from 2020 to 2024. STATEMENTS(UNAUDITED)

~~Mortgages~~Divestiture ~~and~~of ~~other secured debt (non~~Non-~~recourse). The~~Strategic Company’s consolidated joint ventures and VIEs are subject to various loans, as set forth below. These loans are labeled “non-recourse” because neither the Company nor any of its wholly owned subsidiaries is obligated to perform under the respective loan agreements. Facilities

~~Next Partnership Debt~~

~~The~~On ~~Company~~January ~~holds~~31, a2020, ~~46%~~Omega ~~ownership~~Healthcare ~~interest~~Investors, inInc. a(Omega) ~~partnership~~sold ~~with~~the ~~Next~~real ~~Healthcare~~estate ~~(Next),~~of aone ~~related~~skilled ~~party~~nursing ~~(the~~facility ~~Next~~located ~~Partnership)~~in Massachusetts. The Company ~~has~~leased ~~concluded~~ the ~~Next~~facility ~~Partnership,~~under ~~which~~a ~~includes~~master 15lease ~~facilities,~~agreement ~~qualifies~~but asclosed ~~a VIE and~~ the ~~Company~~facility ison ~~the~~July ~~primary~~1, ~~beneficiary~~2019. As The ~~such,~~sale ~~the~~resulted ~~Company~~in ~~has~~a ~~consolidated~~gain ~~all~~on of the ~~accounts~~lease termination of ~~the~~$0.2 ~~Next~~million ~~Partnership~~and inan ~~the~~annual ~~accompanying~~rent ~~consolidated~~credit ~~financial~~of ~~statements~~$0. 4 million.

The Next Partnership is subject to a term loan agreement with an original principal balance of $142.1 million and maturity date of January 31, 2022. The term loan bears interest at LIBOR plus 3.50% and is subject to interest-only payments through January 31, 2021. Beginning in April 2021, principal payments calculated based on a 25-year amortization schedule, after giving effect to any prior refinancings or other repayments of the term loan, will be applied to the remaining term loan balance. As of March 31, 2020, the term loan had an outstanding principal balance of $103.3 million and was collateralized by 12 facilities.

~~The~~On ~~Next~~February ~~Partnership~~1, is2020, ~~subject~~the toCompany asold ~~mezzanine~~two ~~loan~~owned ~~with~~skilled annursing ~~original~~facilities ~~principal~~in ~~balance~~North ofCarolina and one owned skilled nursing facility in Maryland for $2761.08 million. Proceeds ~~and~~were ~~maturity~~used ~~date~~to ofretire ~~February~~ $29.1, ~~2029~~million of U.S. ~~The~~Department ~~mezzanine~~of ~~loan~~Housing ~~bears~~and ~~interest~~Urban atDevelopment 11(HUD) financed debt.~~50%~~ The ~~and~~three isfacilities ~~subject~~generated torevenues ~~interest~~of $38.7 million and pre-~~only~~tax ~~payments~~income ~~through~~of ~~January~~$0.5 ~~2022,~~million. The ~~with~~transactions ~~payments~~resulted ~~including~~in a ~~principal~~gain ~~component~~on ~~thereafter. As~~sale of ~~March 31, 2020,~~$24.5 ~~the~~million ~~mezzanine~~and ~~loan~~loss ~~had~~on anearly ~~outstanding~~extinguishment ~~principal~~of ~~balance~~debt of $272.06 million.

The Next Partnership includes three facilities that are subject to HUD-insured loans that mature in January 2055. The loans bear interest at 3.15% and as of March 31, 2020, had an aggregate outstanding principal balance of $41.5 million.

~~Vantage~~On ~~Point~~February ~~Partnership~~26, ~~Debt~~ 2020, the Company completed the sale of one owned HUD-insured skilled nursing facility in California for $20.8 million. The facility had been classified as an asset held for sale as of December 31, 2019. Proceeds were used to retire $20.5 million of HUD financed debt. The facility generated revenues of $14.0 million and pre-tax loss of $0.1 million. See Note 14 – “Assets Held for Sale.” The transactions resulted in a gain on sale of $3.0 million and loss on early extinguishment of debt of $0.4 million.

The Company holds an approximately 30% ownership interest in a partnership with Vantage Point Capital, LLC (the Vantage Point Partnership). The Company has concluded the Vantage Point Partnership, which includes 19 facilities, qualifies as a VIE and the Company is the primary beneficiary. As such, the Company has consolidated all of the accounts of the Vantage Point Partnership in the accompanying consolidated financial statements.

~~The~~On ~~Vantage~~March ~~Point~~4, ~~Partnership~~2020, isthe ~~subject~~Company todivested athe ~~term~~operations ~~loan agreement with an aggregate original principal balance~~ of ~~$240.9~~one ~~million~~leased ~~and~~assisted/senior ~~maturity~~living ~~date~~facility ofin ~~September 12, 2026~~Montana. The ~~term~~lease ~~loan~~termination ~~bears~~resulted ~~interest~~in atan ~~LIBOR~~annual ~~(subject~~rent tocredit ~~a floor~~ of 1$0.~~75%)~~7 ~~plus 3~~million.~~75% and is subject to interest-only payments through October 1, 2021.~~ The ~~interest-only~~facility ~~period~~generated ~~can~~revenues ~~be extended through October 1, 2022 upon satisfaction~~ of ~~certain~~$2.5 ~~conditions,~~million ~~such as the achievement of a specified debt service coverage ratio~~ and ~~ratio~~pre-tax ~~of adjusted net operating~~ income to the outstanding term loan balance. Following the interest-only period, principal payments calculated based on a 25-year amortization schedule, after giving effect to any prior refinancings or other repayments of ~~the term loan, will be applied to the remaining term loan balance. As of March 31, 2020, the term loan had an outstanding principal balance of~~ $~~240~~0.91 million ~~and was collateralized by 19 facilities~~.

The Vantage Point Partnership is subject to a promissory note in the amount of $76.8 million, the entire balance of which was outstanding at March 31, 2020. The promissory note bears interest at 14.0% and matures on September 12, 2028.

25 On April 1, 2020, the Company sold two owned skilled nursing facilities in New Jersey and one owned skilled nursing facility in Maryland for $45.8 million. Proceeds were used to retire $15.2 million of HUD financed debt and $7.5 million of MidCap Real Estate Loans. The three facilities generated annual revenues of $35.8 million and pre-tax income was de minimis. The transactions resulted in a gain on sale of $21.8 million and loss on early extinguishment of debt of $1.4 million.

~~Table of Contents~~

~~GENESIS~~On ~~HEALTHCARE~~April 1, ~~INC~~2020, the Company divested the operations and terminated the lease of two skilled nursing facilties in Montana. The ~~AND~~two ~~SUBSIDIARIESNOTES~~facilities TOgenerated ~~CONSOLIDATED~~annual ~~FINANCIAL~~revenues ~~STATEMENTS(UNAUDITED)~~ of $18.8 million and pre-tax income of $0.4 million. The lease termination resulted in an annual rent credit of $1.1 million.

~~Other Non-Recourse Debt~~

~~The~~On ~~Company~~April ~~has~~20, ~~other~~2020, ~~non-recourse~~the ~~loans~~Company ~~consisting~~divested ~~principally~~the operations of ~~revenue~~four ~~bonds~~skilled ~~and~~nursing ~~secured~~facilities ~~bank~~in ~~loans~~Florida ~~with~~and ~~maturities~~two ~~ranging~~skilled ~~from~~nursing ~~2023~~facilities ~~through~~in ~~2034. The~~Maryland ~~loans~~that ~~are~~were ~~secured~~subject byto ~~the~~a ~~underlying~~master ~~real~~lease ~~and~~with ~~personal~~Second ~~property~~Spring. The ofsix ~~individual~~ facilities ~~and~~generated ~~have~~annual ~~fixed~~revenues ~~or variable rates~~ of ~~interest~~$62. At0 ~~March 31, 2020,~~million ~~the~~and ~~loans~~pre-tax ~~had~~loss aof ~~weighted~~$2.3 ~~average~~million. The ~~interest~~lease ~~rate~~termination ofresulted ~~4.5%~~in ~~and~~a annet ~~aggregate~~annual ~~outstanding~~rent ~~principal~~credit ~~balance~~ of $238.5 million.

~~Debt Covenants~~

~~The~~On ~~ABL~~June ~~Credit~~1, ~~Facilities~~2020, the ~~Term~~Company ~~Loan~~divested ~~Agreement and~~ the ~~Welltower~~operations ~~Real Estate Loans (collectively, the Credit Facilities) each contain a number~~ of ~~financial,~~four ~~affirmative~~leased ~~and~~skilled ~~negative~~nursing ~~covenants,~~facilities ~~including~~in aIdaho ~~maximum~~that ~~leverage~~were ~~ratio,~~subject ato ~~minimum interest coverage ratio,~~ a ~~minimum~~master ~~fixed~~lease ~~charge~~with ~~coverage ratio and minimum liquidity~~Omega. The ~~Credit~~four ~~Facilities~~facilities ~~include~~generated ~~cross-default~~annual ~~provisions~~revenues ~~with~~of ~~each~~$19.5 ~~other~~million and ~~certain~~pre-tax ~~material~~income ~~lease~~of ~~agreements~~$0. At1 ~~March 31, 2020,~~million. ~~the~~The ~~Company~~lease ~~was~~termination resulted in ~~compliance~~an ~~with~~annual ~~its~~rent ~~financial~~credit ~~covenants~~of ~~contained~~$1.4 ~~in the Credit Facilities~~million.

The Company’s ability to maintain compliance with its debt covenants depends in part on management’s ability to increase revenue, control costs and receive adequate compensatory grants and subsidies from governmental authorities relative to the COVID-19 pandemic. Due to continuing changes in the healthcare industry, as well as the uncertainty with respect to changing referral patterns, patient mix, and reimbursement rates, it is possible that future operating performance may not generate sufficient operating results to maintain compliance with its quarterly debt covenant compliance requirements. Should the Company fail to comply with its debt covenants at a future measurement date, it would, absent necessary and timely waivers and/or amendments, be in default under certain of its existing credit agreements. To the extent any cross-default provisions may apply, the default would have an even more significant impact on the Company’s financial position.

~~The~~Gains ~~maturity~~and oflosses ~~total~~associated ~~debt~~with oftransactions ~~$1,461.4~~and ~~million,~~divestitures ~~excluding~~are ~~debt~~included ~~issuance~~in ~~costs and~~ other ~~non-cash~~income ~~debt~~on ~~discounts~~the ~~and~~consolidated ~~premiums,~~statements atof ~~March 31, 2020~~operations. See isNote as12 ~~follows~~– ~~(in~~“Other ~~thousands):~~ Income.”

Twelve months ended March 31,
2021	$	106,080
2022		586,487
2023		337,843
2024		11,932
2025		9,587
Thereafter		409,497
Total debt maturity	$	1,461,426

(104)~~Income~~ Net ~~Taxes~~ Revenues and Accounts Receivable

The Company effectively owns 66.3% of FC-GEN, which is an entity taxed as a partnership for U.S. income tax purposes and the Company’s only source of taxable income. FC-GEN is subject to income taxes in several U.S. state and local jurisdictions. The income taxes assessed by these jurisdictions are included in the Company’s tax provision, but at its 66.3% ownership of FC-GEN.

~~For~~Revenue the three months ended March 31, 2020, the Company recorded income tax benefit of $0.8 million, representing an effective tax rate of (2.1)%, compared to income tax expense of $0.1 million, representing an effective tax rate of (0.2)%, for the same period in 2019. The change in effective tax rate was caused by the net deferred tax benefit resulting from the Company’s disposition of real estate assets. Streams

The Company continues to assess the requirement for, and amount of, a valuation allowance in accordance with the “more likely than not” standard. Management had previously determined that the Company would not realize its deferred tax assets and established a valuation allowance against the deferred tax assets. As of March 31, 2020, management determined that the valuation allowance is still necessary.

26 Inpatient Services

~~Table of Contents~~

~~GENESIS~~The ~~HEALTHCARE~~Company generates revenues primarily by providing services to patients within its facilities. The Company uses interdisciplinary teams of experienced medical professionals to provide services prescribed by physicians. These teams include registered nurses, ~~INC~~licensed practical nurses, certified nursing assistants and other professionals who provide individualized comprehensive nursing care. ~~AND~~Many ~~SUBSIDIARIESNOTES~~of TOthe ~~CONSOLIDATED~~Company’s ~~FINANCIAL~~facilities ~~STATEMENTS(UNAUDITED)~~ are equipped to provide specialty care, such as on-site dialysis,

The Company’s Bermuda captive insurance company is expected to produce a minimal U.S. federal taxable loss in 2020. The captive is expected to generate positive pre-tax income in future periods to off-set its deferred tax assets. The 2020 U.S. federal taxable loss can be carried back for a five year tax period and then can be carried forward indefinitely, as provided for under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). 18

~~The~~Table ~~Company provides rehabilitation therapy services within the People’s Republic~~ of China and Hong Kong. At March 31, 2020, these business operations do not comprise a significant portion of the Company’s overall operating results. Management does not anticipate these operations will generate significant taxable income in the near term. Contents

~~Exchange~~GENESIS ~~Rights~~HEALTHCARE, ~~and~~INC. ~~Tax~~AND ~~Receivable~~SUBSIDIARIESNOTES ~~Agreement~~ TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)

~~The~~ventilator ~~owners of FC-GEN have the right to exchange their membership units in FC-GEN~~care, ~~along~~ ~~with~~cardiac anand ~~equivalent~~pulmonary ~~number of Class C shares~~management, ~~for~~as ~~shares~~well ofas ~~Class~~standard ~~A common stock of the Company or cash~~services, ~~at the Company’s option. As a result of~~ such ~~exchanges,~~as ~~the~~room ~~Company’s membership interest in FC-GEN would increase~~ and its purchase price would be reflected in its share of the tax basis of FC-GEN’s tangible and intangible assets. Any resulting increases in tax basis are likely to increase tax depreciation and amortization deductions andboard, ~~therefore,~~special ~~reduce~~nutritional the amount of income tax the Company would otherwise be required to pay in the future. Any such increase would also result in a decreased gain (or increased loss) on future dispositions of the affected assets. There were exchanges of 0.3 million FC-GEN units and Class C shares in the three months ended March 31programs, ~~2020~~ ~~equating~~social ~~to 0.3 million Class A shares. The exchanges during the three months ended March 31~~services, ~~2020~~ ~~resulted~~recreational inactivities aand ~~$1.5~~related ~~million~~healthcare ~~internal revenue code (IRC) Section 754 tax basis step-up in the tax deductible goodwill of FC-GEN. There were exchanges of 3.1 million FC-GEN units~~ and ~~Class~~other ~~C shares in the three months ended March 31, 2019 equating to 3~~services.1 ~~million Class A shares.~~ The ~~exchanges~~Company ~~during~~assesses ~~the~~collectibility ~~three~~on ~~months~~all ~~ended~~accounts ~~March 31, 2019~~prior ~~resulted~~to inproviding ~~a $12~~services.9 ~~million IRC Section 754 tax basis step-up in the tax deductible goodwill of FC-GEN.~~

The Company is party to a tax receivable agreement (TRA) with the owners of FC-GEN. The agreement provides for the payment by the Company to the owners of FC-GEN of 90% of the cash savings, if any, in U.S. federal, state and local income tax that the Company actually realizes as a result of (i) the increases in tax basis attributable to the owners of FC-GEN and (ii) tax benefits related to imputed interest deemed to be paid by the Company as a result of the TRA. Under the TRA, the benefits deemed realized by the Company as a result of the increase in tax basis attributable to the owners of FC-GEN generally will be computed by comparing the actual income tax liability of the Company to the amount of such taxes that the Company would have been required to pay had there been no such increase in tax basis.

~~Estimating~~Rehabilitation ~~the~~Therapy amount of payments that may be made under the TRA is by its nature imprecise, insofar as the calculation of amounts payable depends on a variety of factors. The actual increase in tax basis and deductions, as well as the amount and timing of any payments under the TRA, will vary depending upon a number of factors, including: Services

· the timing of exchanges – for instance, the increase in any tax deductions will vary depending on the fair value of the depreciable or amortizable assets of FC-GEN and its subsidiaries at the time of each exchange, which fair value may fluctuate over time;

·The ~~the~~Company ~~price~~generates ofrevenues ~~shares~~by ofproviding ~~Company~~rehabilitation ~~Class~~therapy Aservices, ~~common~~including ~~stock~~speech-language atpathology, ~~the~~physical ~~time~~therapy, ofoccupational ~~the~~therapy ~~exchange—the~~and ~~increase~~respiratory intherapy ~~any~~at ~~tax~~its ~~deductions,~~skilled nursing facilities and ~~the~~assisted/senior ~~tax~~living ~~basis~~facilities, ~~increase~~as inwell ~~other~~as ~~assets~~facilities of FCthird-~~GEN~~party ~~and~~skilled ~~its~~nursing ~~subsidiaries~~operators isand ~~directly~~other ~~proportional~~outpatient tosettings. The ~~the~~majority ~~price~~ of ~~shares~~revenues ofgenerated ~~Company~~by ~~Class~~rehabilitation Atherapy ~~common~~services ~~stock~~rendered atare ~~the~~billed ~~time~~to ofcontracted ~~the~~third ~~exchange;~~party providers.

· the amount and timing of the Company’s income – the Company is required to pay 90% of the deemed benefits as and when deemed realized. If FC-GEN does not have taxable income, the Company is generally not required (absent a change of control or circumstances requiring an early termination payment) to make payments under the TRA for that taxable year because no benefit will have been actually realized. However, any tax benefits that do not result in realized benefits in a given tax year likely will generate tax attributes that may be utilized to generate benefits in previous or future tax years. The utilization of such tax attributes will result in payments under the TRA; and

27 Other Services

~~Table of Contents~~

~~GENESIS~~The ~~HEALTHCARE~~Company generates revenues by providing an array of other specialty medical services, ~~INC.~~including ~~AND~~physician ~~SUBSIDIARIESNOTES~~services, TOstaffing ~~CONSOLIDATED~~services, ~~FINANCIAL~~and ~~STATEMENTS(UNAUDITED)~~ other healthcare related services.

~~· future tax rates of jurisdictions in which the Company has tax liability.~~

~~The TRA also provides that upon certain mergers, asset sales, other forms of business combinations or other changes of control, FC~~COVID-GEN (or its successor’s) obligations under the TRA would be based on certain assumptions defined in the TRA. As a result of these assumptions, FC-GEN could be required to make payments under the TRA that are greater or less than the specified percentage of the actual benefits realized by the Company that are subject to the TRA. In addition, if FC-GEN elects to terminate the TRA early, it would be required to make an early termination payment, which upfront payment may be made significantly in advance of the anticipated future tax benefits. 19

Payments generally are due under the TRA within a specified period of time following the filing of FC-GEN’s U.S. federal and state income tax return for the taxable year with respect to which the payment obligation arises. Payments under the TRA generally will be based on the tax reporting positions that FC-GEN will determine. Although FC-GEN does not expect the IRS to challenge the Company’s tax reporting positions, FC-GEN will not be reimbursed for any overpayments previously made under the TRA, but any overpayments will reduce future payments. As a result, in certain circumstances, payments could be made under the TRA in excess of the benefits that FC-GEN actually realizes in respect of the tax attributes subject to the TRA.

The ~~term~~Company’s ofnet revenues for the ~~TRA~~three ~~generally~~and ~~will~~six ~~continue~~months ~~until~~ended ~~all~~June ~~applicable~~30, ~~tax~~2020 ~~benefits~~were ~~have~~materially ~~been~~impacted ~~utilized~~by orCOVID-19. ~~expired,~~For ~~unless~~discussion of the ~~Company~~impact, ~~exercises~~see ~~its~~Note ~~right~~3 to– ~~terminate~~“Significant ~~the~~Transactions ~~TRA~~ and ~~make~~Events an– ~~early termination payment~~COVID-19. ”

In certain circumstances (such as certain changes in control, the election of the Company to exercise its right to terminate the agreement and make an early termination payment or an IRS challenge to a tax basis increase) it is possible that cash payments under the TRA may exceed actual cash savings.

~~(11)Related~~Disaggregation ~~Party~~of ~~Transactions~~ Revenues

The Company provides rehabilitation services to certain facilities owned and operated by two customers in which certain members of the Company’s board of directors, board observer, and shareholders with greater than 5% of the Company’s Class A common stock beneficially own an ownership interest. In the case of one significant customer, these services resulted in net revenues of $25.8 million and $29.9 million in the three months ended March 31, 2020 and 2019, respectively, and total net accounts receivable balances of $30.1 million and $28.9 million at March 31, 2020 and December 31, 2019, respectively. Further, the Company holds a note receivable from this customer, which was derived from past due accounts receivable, in the amount of $56.3 million. The Company has reserved $55.0 million on the note receivable balance. The reserve represents the judgment of management and does not indicate a forgiveness of any amount owed by this related party customer. The Company is monitoring the financial condition of this customer and will adjust the reserve levels accordingly as new information about their outlook is available. In the case of the other customer, services began in the third quarter of 2018. The Company recorded net revenues of $1.4 million and $1.8 million in the three months ended March 31, 2020 and 2019, respectively, resulting in net accounts receivable balances of $1.4 million at both March 31, 2020 and December 31, 2019.

~~Certain~~The ~~subsidiaries of the~~ Company ~~are~~disaggregates ~~subject~~revenue ~~to a lease of 12 centers in New Hampshire and Florida~~ from 12contracts ~~separate limited liability companies affiliated~~ with ~~Next~~customers ~~(the~~by ~~Next~~reportable ~~Landlord~~operating ~~Entities).~~segments ~~The lease was effective June 1, 2018~~ and ~~the~~payor ~~initial annualized rent to be paid was $13~~type.0 ~~million.~~ The ~~lease~~Company ~~includes~~notes ~~a purchase option~~ that isdisaggregation ~~exercisable~~of inrevenue ~~2022.~~into Inthese ~~addition,~~categories ~~certain~~achieves ~~subsidiaries of~~ the ~~Company~~disclosure ~~are~~objectives ~~subject~~ to adepict ~~lease~~how ~~of 15 centers from 15 separate limited liability companies affiliated with~~ the ~~Next~~nature, ~~Landlord~~amount, ~~Entities.~~timing ~~The~~and ~~Company~~uncertainty ~~owns~~of arevenue ~~46% membership interest in the Next Partnership. The lease was effective February 1, 2019~~ and ~~the~~cash ~~initial~~flows ~~annualized~~are ~~rent~~affected toby beeconomic ~~paid was $19~~factors.~~5 million.~~ The ~~lease~~payment ~~includes~~terms aand ~~purchase~~conditions ~~option~~within ~~that is exercisable during 2024 through 2026. Certain members of~~ the Company’'s ~~board~~revenue-generating ofcontracts ~~directors~~vary ~~each~~by ~~directly~~contract ortype ~~indirectly~~and ~~hold~~payor ansource. Payments ~~ownership~~are ~~interest~~generally inreceived ~~the~~within ~~Next~~30 ~~Landlord~~to ~~Entities~~60 ~~totaling~~days ~~approximately~~after ~~4% in the aggregate~~billing. ~~These~~ See ~~members~~Note ~~have~~6 ~~earned~~– ~~acquisition~~“Segment ~~fees and may earn asset management fees and other fees paid from the Next Landlord Entities~~Information. ”

As of March 31, 2020, Welltower held approximately 8.8% of the shares of the Company’s Class A Common Stock, representing approximately 5.8% of the voting power of the Company’s voting securities. The Company is party to a master lease with an affiliate of Welltower. The initial term of the master lease expires on January 31, 2037 and the Company has one eleven-

28 19

Table of Contents

GENESIS HEALTHCARE, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)

~~year~~The ~~renewal~~composition ~~option. Annual~~of ~~rent~~net ~~escalators~~revenues ~~under~~by ~~the~~payor ~~master~~type ~~lease~~and ~~are~~operating ~~2.0%.~~segment ~~During~~for the three and six months ended ~~March~~June 3130, 2020 and 2019, ~~the~~was ~~Company~~as ~~paid~~follows ~~rent~~(in of approximately $17.7 million and $20.1 million, respectively, to Welltower. The Company holds options to purchase certain facilities subject to the master lease. At March 31, 2020, the Company leased 42 facilities from Welltower. The Company and certain of its affiliates are also party to certain debt instruments with Welltower. See Note 9 – “Long-Term Debt – Term Loan Agreements,” “Long-Term Debt – Real Estate Loans,” and “Long-Term Debt – Notes Payable.” thousands):

~~(12)Other Income~~

In the three months ended March 31, 2020 and 2019, the Company completed multiple transactions, including the divestiture of numerous skilled nursing facilities and the termination or modification of certain lease agreements. See Note 3 – “Significant Transactions and Events.” These transactions resulted in a net (gain) loss recorded as other income in the consolidated statements of operations. The following table summarizes those net (gains) losses (in thousands):


	Three months ended June 30, 2020
				Rehabilitation
	Inpatient			Therapy			Other
	Services			Services			Services			Total
Medicare	$	166,482		$	19,502		$	—		$	185,984
Medicaid		507,871			453			—			508,324
Insurance		66,723			4,822			—			71,545
Private		61,126	(1)		37			—			61,163
Third party providers		—			66,558			25,536			92,094
Other		16,126	(2)		5,152	(2)		15,871	(3)		37,149
Total net revenues	$	818,328		$	96,524		$	41,407		$	956,259

	Three months ended March 31,
	2020		2019
Gain on sale of owned assets (1)	$	(74,580)	$	—
Loss recognized for exit costs associated with divestiture of operations (2)		4,935		3,344
Gain on lease termination or modification (3)		(15,187)		(20,261)
Total other income	$	(84,832)	$	(16,917)

(1) The Company sold 10 owned skilled nursing facilities during the three months ended March 31, 2020. The gain represents sale proceeds in excess of the carrying value of the assets sold. There were no sales of owned assets in the three months ended March 31, 2019.

(2) The Company divested operations of 24 facilities, including the 10 sold facilities noted above, and 10 facilities in the three months ended March 31, 2020 and 2019, respectively. Upon divestiture, the Company recognizes exit costs for uncollectible accounts receivable resulting from a sale, the write-off of inventory balances assumed by the new operator, and other costs associated with the transition of operations.


	Three months ended June 30, 2019
				Rehabilitation
	Inpatient			Therapy			Other
	Services			Services			Services			Total
Medicare	$	201,007		$	22,992		$	—		$	223,999
Medicaid		577,097			573			—			577,670
Insurance		114,619			5,916			—			120,535
Private		79,127	(1)		92			—			79,219
Third party providers		—			88,108			20,486			108,594
Other		17,648	(2)		3,254	(2)		14,133	(3)		35,035
Total net revenues	$	989,498		$	120,935		$	34,619		$	1,145,052

(31) ~~The~~Includes ~~Company~~Assisted/Senior ~~amended~~living ~~numerous~~revenue ~~lease agreements in the three months ended March 31, 2020 and 2019. These transactions resulted in a combination~~ of base rent reductions, annual escalator reductions, lease term extensions or reductions and facility terminations. Each lease amendment triggers a lease reassessment of the respective ROU asset and lease liability with an offsetting adjustment recorded to the consolidated statements of operations as other income or loss. In the three months ended March 31, 2020, the Company recognized a gain on the sale of the leasehold rights of 13 facilities of $1020.70 million and ~~a gain on lease termination of nine facilities of~~ $423.57 million. Infor the three months ended ~~March~~June 3130, 2020 and 2019, ~~the~~respectively. ~~Company~~Such ~~amended~~amounts ~~the~~do ~~Welltower~~not ~~Master~~represent ~~Lease~~contracts ~~several~~with ~~times~~customers tounder ~~reflect~~ASC ~~the lease termination of 24 facilities resulting in a gain of $20~~606.~~3 million.~~

(132)~~Asset~~ ~~Impairment~~Primarily ~~Charges~~ consists of revenue from Veteran Affairs and administration of third party facilities.

~~Long-Lived~~(3) ~~Assets~~Includes ~~with~~net arevenues ~~Definite~~from ~~Useful~~all ~~Life~~ payors generated by the other services, excluding third party providers.

In each quarter, the Company’s long-lived assets with a definite useful life are tested for impairment at the lowest levels for which there are identifiable cash flows. The Company estimated the future net undiscounted cash flows expected to be generated from the use of the long-lived assets and then compared the estimated undiscounted cash flows to the carrying amount of the long-lived assets. The cash flow period was based on the remaining useful lives of the primary asset in each long-lived asset group, principally a building or ROU asset in the inpatient segment and customer relationship assets in the rehabilitation therapy services segment. During the three months ended March 31, 2020, the Company recognized impairment charges in the inpatient segment of $9.7 million. No impairment charges were recognized in the three months ended March 31, 2019.

~~(14)Assets Held for Sale~~ 20

InTable ~~the normal course~~ of business, the Company continually evaluates the performance of its operating units, with an emphasis on selling or closing underperforming or non-strategic assets. These assets are evaluated to determine whether they qualify as assets held for sale or discontinued operations. The assets and liabilities of a disposal group classified as held for sale shall be presented separately in the asset and liability sections, respectively, of the statement of financial position in the period in which they are identified only. Assets held for sale that qualify as discontinued operations are removed from the results of continuing operations. The results of operations in the current and prior year periods, along with any cost to exit such businesses in the year of discontinuation, are classified as discontinued operations in the consolidated statements of operations. Contents

29 GENESIS HEALTHCARE, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)

~~Table of Contents~~

GENESIS HEALTHCARE, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)


	Six months ended June 30, 2020
				Rehabilitation
	Inpatient			Therapy			Other
	Services			Services			Services			Total
Medicare	$	363,517		$	41,411		$	—		$	404,928
Medicaid		1,058,861			944			—			1,059,805
Insurance		178,995			10,278			—			189,273
Private		136,194	(1)		147			—			136,341
Third party providers		—			139,662			44,154			183,816
Other		33,711	(2)		9,551	(2)		31,084	(3)		74,346
Total net revenues	$	1,771,278		$	201,993		$	75,238		$	2,048,509

At March 31, 2020, the Company classified six skilled nursing facilities operated by the Company in the states of California, Nevada, Maryland, New Jersey and Rhode Island as held for sale. The facilities did not meet the criteria as discontinued operations. The Company is party to purchase and sale agreements, as amended, to sell the facilities for an aggregate $78.6 million. Three of the six skilled nursing facilities were sold on April 1, 2020. See Note 17 – “Subsequent Events.”

At December 31, 2019, the Company classified one skilled nursing facility operated by the Company in the state of California as held for sale. The facility did not meet the criteria as a discontinued operation. The sale of the facility, which was subject to a HUD insured loan, was completed on February 26, 2020. See Note 3 – “Significant Transactions and Events – Divestiture of Non-Strategic Facilities.”


	Six months ended June 30, 2019
				Rehabilitation
	Inpatient			Therapy			Other
	Services			Services			Services			Total
Medicare	$	408,975		$	45,744		$	—		$	454,719
Medicaid		1,158,045			1,128			—			1,159,173
Insurance		239,699			11,150			—			250,849
Private		156,060	(1)		204			—			156,264
Third party providers		—			177,637			41,094			218,731
Other		34,211	(2)		5,912	(2)		26,833	(3)		66,956
Total net revenues	$	1,996,990		$	241,775		$	67,927		$	2,306,692

~~The~~(1) ~~following~~Includes ~~table~~Assisted/Senior ~~sets~~living ~~forth~~revenue ~~the major classes~~ of ~~assets~~$42.0 million and ~~liabilities~~$47.4 ~~included~~million asfor ~~part of~~ the ~~disposal~~six ~~groups~~months asended ofJune ~~March 31~~30, 2020 and ~~December 31,~~ 2019, ~~(in~~respectively. ~~thousands):~~ Such amounts do not represent contracts with customers under ASC 606.

	March 31, 2020		December 31, 2019
Current assets:
Prepaid expenses	$	—	$	1,171
Long-term assets:
Property and equipment, net of accumulated depreciation of $9,014 and $2,201 at March 31, 2020 and December 31, 2019, respectively		38,538		16,306
Total assets	$	38,538	$	17,477
Current liabilities:
Current installments of long-term debt	$	728	$	368
Long-term liabilities:
Long-term debt		44,913		19,789
Total liabilities	$	45,641	$	20,157

(2)

Primarily consists of revenue from Veteran Affairs and administration of third party facilities.

(153)~~Commitments~~ ~~and~~Includes ~~Contingencies~~ net revenues from all payors generated by the other services, excluding third party providers.

~~Loss Reserves For Certain Self-Insured Programs~~

~~General and Professional Liability and Workers’ Compensation~~

The Company self-insures for certain insurable risks, including general and professional liabilities and workers’ compensation liabilities through the use of self-insurance or retrospective and self-funded insurance policies and other hybrid policies, which vary among states in which the Company operates, including wholly owned captive insurance subsidiaries, to provide for potential liabilities for general and professional liability claims and workers’ compensation claims. General and professional liability policies are typically written for a duration of 12 months or less and are measured on a “claims made” basis. Regarding workers’ compensation, the Company self-insures to its deductible and purchases statutorily required insurance coverage in excess of its deductible. Excess insurance policies are typically written for a duration of 12 months or less and are measured on an “occurrence” basis. There is a risk that amounts funded by the Company’s self-insurance programs may not be sufficient to respond to all claims asserted under those programs. Insurance reserves represent estimates of future claims payments. This liability includes an estimate of the development of reported losses and losses incurred but not reported. Provisions for changes in insurance reserves are made in the period of the related coverage. The Company also considers amounts that may be recovered from excess insurance carriers in estimating the ultimate net liability for such risks.

~~The~~(5) Earnings ~~Company’s~~(Loss) ~~management~~Per employs its judgment and periodic independent actuarial analysis in determining the adequacy of certain self-insured workers’ compensation and general and professional liability obligations recorded as liabilities in the Company’s financial statements. The Company evaluates the adequacy of its self-insurance reserves on a semi-annual basis or more frequently when it is aware of changes to its incurred loss patterns that could impact the accuracy of those reserves. The methods of making such estimates and establishing the resulting reserves are reviewed periodically and are based on historical paid claims information and nationwide nursing home trends. The foundation for most of these methods is the Company’s actual historical reported and/or Share

~~Table~~The Company has three classes of ~~Contents~~ common stock. Classes A and B are identical in economic and voting interests. Class C has a 1:1 voting ratio with each of the other two classes, representing the voting interests of the legacy FC-GEN Operations Investment, LLC (FC-GEN) owners. Class C common stock is a participating security; however, it shares in a de minimis economic interest and is therefore excluded from the denominator of the basic earnings (loss) per share (EPS) calculation.

~~GENESIS HEALTHCARE, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)~~

~~paid~~The ~~loss~~noncontrolling ~~data.~~owners ~~Any~~of ~~adjustments~~FC-GEN ~~resulting~~have ~~therefrom~~the ~~are~~right ~~reflected~~to exchange their membership units in ~~current~~FC-GEN, ~~earnings.~~along ~~Claims~~with ~~are~~an ~~paid~~equivalent ~~over~~number ~~varying~~of ~~periods~~Class C shares, for shares of Class A common stock of the Company or cash, at the Company’s option. There were exchanges of 0.8 million FC-GEN units and ~~future~~Class ~~payments~~C ~~may~~shares bein ~~different~~the ~~than~~six months ended June 30, 2020 equating to 0.8 million Class A shares. There were exchanges of 3.1 million FC-GEN units and Class C shares in the ~~estimated~~six ~~reserves~~months ended June 30, 2019 equating to 3. 1 million Class A shares.

The Company utilizes a combination of third-party administrators (TPAs), in-house adjusters, and legal counsel, along with systems designed to maintain and process claims to provide it with the data utilized in its assessments of reserve adequacy. Where TPAs are utilized, they operate under the oversight of the Company’s in-house risk management and legal functions. These functions and systems ensure that the claims are properly administered so that the historical data is reliable for estimation purposes. Case reserves, which are approved by the Company’s legal and risk management departments, are determined based on an estimate of the ultimate settlement and/or ultimate loss exposure of individual claims.

~~The~~Basic ~~provision~~EPS ~~for~~was ~~general~~computed ~~and~~by ~~professional~~dividing ~~liability~~net ~~risks~~(loss) ~~totaled~~income ~~$27.7~~attributable ~~million~~to ~~and~~Genesis ~~$21~~Healthcare, Inc.4 ~~million~~by the weighted-average number of outstanding common shares for the ~~three~~period. ~~months~~Diluted ~~ended~~EPS ~~March 31, 2020~~is ~~and~~computed ~~2019,~~by ~~respectively. The~~dividing ~~reserves~~net ~~for~~(loss) ~~general~~income ~~and~~attributable ~~professional~~to ~~liability~~Genesis Healthcare, ~~which~~Inc. ~~are~~plus ~~recorded~~the oneffect anof ~~undiscounted~~any ~~basis,~~assumed ~~were~~conversions ~~$399.7~~of ~~million~~noncontrolling ~~and~~interests ~~$392.8~~by ~~million~~the asweighted-average number of ~~March 31, 2020~~outstanding ~~and~~common ~~December 31, 2019,~~shares ~~respectively~~after giving effect to all potential dilutive common stock.

The provision for workers’ compensation risks totaled $12.5 million and $15.2 million for the three months ended March 31, 2020 and 2019, respectively. The reserves for loss for workers’ compensation risks were $162.1 million and $160.5 million as of March 31, 2020 and December 31, 2019, respectively. These reserves are discounted based on actuarial estimates of claim payment patterns using a discount rate for the current policy year of 1.6%. The discount rates are based upon the risk-free rate for the appropriate duration for the respective policy year. The removal of discounting would have resulted in an increased reserve for workers’ compensation risks of $9.4 million and $12.0 million as of March 31, 2020 and December 31, 2019, respectively.

~~Health Insurance~~ 21

~~The~~Table Company offers employees an option to participate in self-insured health plans. Health insurance claims are paid as they are submitted to the plans’ administrators. The Company maintains an accrual for claims that have been incurred but not yet reported to the plans’ administrators and therefore have not yet been paid. This accrual for incurred but not yet reported claims was $14.5 million and $15.1 million as of March 31, 2020 and December 31, 2019, respectively. The liability for the self-insured health plan is recorded in accrued compensation in the consolidated balance sheets. Although management believes that the amounts provided in the Company’s consolidated financial statements are adequate and reasonable, there can be no assurances that the ultimate liability for such self-insured risks will not exceed management’s estimates. Contents

~~Legal~~GENESIS ~~Proceedings~~ HEALTHCARE, INC. AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS(UNAUDITED)

~~The~~A ~~Company~~reconciliation ~~and certain~~ of ~~its~~the ~~subsidiaries~~numerator ~~are involved in various litigation~~ and ~~regulatory~~denominator ~~investigations~~used ~~arising~~ in the ~~ordinary~~calculation ~~course~~ of ~~business.~~basic ~~While~~net there can be no assurance, based on the Company’s evaluation of information currently available, management does not believe the results of such litigation and regulatory investigations would have a material adverse effect on the results of operations, financial position or cash flows of the Company. However, the Company’s assessment of materiality may be affected by limited information (~~particularly in the early stages of government investigations~~loss). ~~Accordingly,~~income ~~the~~per ~~Company’s~~common ~~assessment~~share offollows ~~materiality may change~~ (in ~~the future based upon availability of discovery and further developments in the proceedings at issue. The results of legal proceedings are inherently uncertain~~thousands, ~~and~~except ~~material~~per ~~adverse~~share ~~outcomes are possible.~~ data):

From time to time the Company may enter into confidential discussions regarding the potential settlement of pending investigations or litigation. There are a variety of factors that influence the Company’s decisions to settle and the amount it may choose to pay, including the strength of the Company’s case, developments in the investigation or litigation, the behavior of other interested parties, the demand on management time and the possible distraction of the Company’s employees associated with the case and/or the possibility that the Company may be subject to an injunction or other equitable remedy. The settlement of any pending investigation, litigation or other proceedings could require the Company to make substantial settlement payments and result in its incurring substantial costs.


	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
Numerator:
Net (loss) income	$	(29,316)	$	(8,983)	$	9,365	$	(34,065)
Less: Net loss attributable to noncontrolling interests		7,311		4,164		2,138		13,983
Net (loss) income attributable to Genesis Healthcare, Inc.	$	(22,005)	$	(4,819)	$	11,503	$	(20,082)
Denominator:
Weighted-average shares outstanding for basic net income (loss) per share		111,232		106,846		110,477		105,289

Basic net (loss) income per common share attributable to Genesis Healthcare, Inc.	$	(0.20)	$	(0.05)	$	0.10	$	(0.19)

~~Table of Contents~~

~~GENESIS~~A ~~HEALTHCARE,~~reconciliation ~~INC.~~of ~~AND~~the ~~SUBSIDIARIESNOTES~~numerator TOand ~~CONSOLIDATED~~denominator ~~FINANCIAL~~used ~~STATEMENTS~~in the calculation of diluted net (~~UNAUDITED~~loss) income per common share follows (in thousands, except per share data):

~~Lease Guarantees~~

The Company transferred the operations to 13 skilled nursing, behavioral health and assisted living facilities to the NewGen Partnership on February 1, 2020. In conjunction with the transfer, the Company executed lease guaranty agreements on two of the facilities now leased by the NewGen Partnership. Under the guaranty agreements, the Company guarantees all payments and performance obligations of the tenants. As of March 31, 2020, the two leases have undiscounted cash rent obligations remaining of $29.4 million.


	Three months ended June 30,				Six months ended June 30,
	2020		2019		2020		2019
Numerator:
Net (loss) income	$	(29,316)	$	(8,983)	$	9,365	$	(34,065)
Less: Net loss attributable to noncontrolling interests		7,311		4,164		2,138		13,983
Net (loss) income attributable to Genesis Healthcare, Inc.	$	(22,005)	$	(4,819)	$	11,503	$	(20,082)
Plus: Assumed conversion of noncontrolling interests		—		—		(15)		—
Net (loss) income available to common stockholders after assumed conversions	$	(22,005)	$	(4,819)	$	11,488	$	(20,082)
Denominator:
Weighted-average common shares outstanding		111,232		106,846		110,477		105,289
Plus: Assumed conversion of noncontrolling interests		—		—		55,811		—
Plus: Unvested restricted stock units and stock warrants		—		—		578		—
Adjusted weighted-average common shares outstanding, diluted		111,232		106,846		166,866		105,289

Diluted net (loss) income per common share attributable to Genesis Healthcare, Inc.	$	(0.20)	$	(0.05)	$	0.07	$	(0.19)

~~(16)Fair Value of Financial Instruments~~

The ~~Company’s~~computation ~~financial~~of ~~instruments~~diluted ~~consist~~net ~~primarily~~(loss) income per common share attributable to Genesis Healthcare, Inc. excludes the effects of ~~cash~~anti-dilutive ~~and~~shares ~~cash~~attributable ~~equivalents~~to the assumed conversion of noncontrolling interests, unvested restricted ~~cash~~stock units, and ~~equivalents~~stock warrants, ~~restricted~~which ~~investments~~were in56.0 ~~marketable~~million ~~securities,~~for ~~accounts~~the ~~receivable~~three months ended June 30, ~~accounts~~2020 ~~payable~~and 57.5 million and ~~current~~58.4 million for the three and ~~long-term~~six ~~debt~~months ended June 30, 2019, respectively. There were 55.4 million and 56.6 million units attributable to the noncontrolling interests outstanding as of June 30, 2020 and 2019, respectively.

The Company’s financial instruments, other than its accounts receivable and accounts payable, are spread across a number of large financial institutions whose credit ratings the Company monitors and believes do not currently carry a material risk of non-performance.

~~Recurring~~Omnibus ~~Fair~~Equity ~~Value~~Incentive ~~Measures~~ Plans

Fair value is defined as an exit price (i.e., the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date). The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels as shown below. An instrument’s classification within the fair value hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

	Level 1 —		Quoted prices (unadjusted) in active markets for identical assets or liabilities.
	Level 2 —		Inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the asset or liability.
	Level 3 —		Inputs that are unobservable for the asset or liability based on the Company’s own assumptions (about the assumptions market participants would use in pricing the asset or liability).

During the second quarter of 2020, the Company’s shareholders approved the 2020 Omnibus Equity Incentive Plan (the 2020 Plan). As of the effective date of the 2020 Plan, no further grants may be made under the Genesis Healthcare, Inc. Amended and Restated 2015 Omnibus Equity Incentive Plan (the “Prior Plan”). Any shares that were available for issuance under the Prior Plan and that were not subject to outstanding awards under the Prior Plan became available for issuance (in addition to the newly authorized shares) under the 2020 Plan. Accordingly, upon stockholder approval of the 2020 Plan at the Annual Meeting of Stockholders on June 3, 2020, a total of 6,462,605 shares became available for delivery under the 2020 Plan, including (i) 3,500,000 newly authorized shares and (ii) 2,962,605 shares previously registered on Forms S-8 filed with the SEC that were available for issuance under the Prior Plan.

Filing Compare · Genesis Healthcare, Inc.