EX-99.1 2 g02918exv99w1.htm EX-99.1 PRESS RELEASE 08/09/06 ex-99.1
 

Exhibit 99.1
     
Company Contact:
  Investor Relations:
William R. Council, III
  Rodney O’Connor
President and CEO
  Cameron Associates
(615) 771-7575
  (212) 554-5470
ADVOCAT ANNOUNCES REFINANCING AND
2006 SECOND QUARTER RESULTS
BRENTWOOD, Tenn., (August 9, 2006) — Advocat (OTC BB: AVCA) today announced results for its second quarter and six months ended June 30, 2006. In addition, the Company announced the completion of its comprehensive refinancing transaction.
Advocat provides long-term care services to nursing home patients in eight states, primarily in the southeast. The Company has 43 centers containing 4,505 licensed nursing beds.
DEBT REFINANCING
On August 7, 2006, the Company entered into a $30.6 million comprehensive refinancing with Capmark Finance, Inc. which retired existing mortgage and bank term debt and provided funds for a $1.1 million renovation of a nursing center.
The new debt includes $22.5 million in mortgages with 25 year principal amortization and a five year term, and an $8.1 million term note with a four year term. In addition, the Company made a payment of approximately $2.5 million to reduce outstanding debt. The refinancing allows Advocat to classify $24.5 million in debt that was refinanced in the transaction as long-term at June 30, 2006. Advocat is now in compliance with all its debt covenants.
INCOME STATEMENT HIGHLIGHTS FOR THE SECOND QUARTER
Net income from continuing operations for the quarter was $3.5 million compared to $1.8 million for the same quarter last year. The 2006 results included a net benefit for professional liability expense of $3.9 million compared to a net expense of $1.5 million in 2005, a decrease in expense of $5.4 million.
The Company recorded a non-cash charge for stock-based compensation of $5.0 million, related to stock options approved by the Company’s shareholders in June 2006. The options were granted in December 2005 subject to shareholder approval, which occurred at the Company’s annual meeting of shareholders.
For the three month period, net income per common share from continuing operations on a diluted basis was $0.53 compared to $0.27 for 2005. There were 6.6 million diluted weighted average shares outstanding in the second quarter of 2006.
REVENUE HIGHLIGHTS AND OCCUPANCY RATES
For the second quarter, revenue increased to $53.9 million from $49.6 million in 2005, an increase of $4.3 million or 8.6%. The increase was due to increased Medicare utilization, increased Medicaid rates in certain states, Medicare rate increases, and an increase in census in 2006 compared to 2005.

 

 

The rate of occupancy at the Company’s nursing centers increased to 77.7% in 2006 from 75.4% in 2005. As a percentage of total census, Medicare days increased to 14.2% in 2006 from 13.2% in 2005. Medicare was 31.1% of revenue in 2006 and 30.7% in 2005 while Medicaid and similar programs were 55.5% in 2006 compared to 57.7%.
The Company’s average rate per day for Medicare Part A patients increased to $322.79 from $308.31 in 2005, an increase of 4.7%.
FUNDS PROVIDED BY OPERATIONS
Management believes that reviewing funds provided by operations is an important measurement of the Company’s performance. The net cash provided by operating activities before changes in other assets and liabilities (or funds provided by operations) is presented at the end of this press release. Funds provided by operations eliminate the effect of actuarial assumptions, reflects the cash effect of professional liability, and excludes the non-cash charge for stock-based compensation. Funds provided by operations for the current quarter were $4.7 million compared to $3.1 million in the second quarter last year.
REVENUE AND INCOME HIGHLIGHTS FOR 6 MONTHS
Revenue increased to $107.1 million in 2006 from $98.5 million, an increase of 8.7%. Income from continuing operations for the six month period was $9.0 million compared to $10.8 million for 2005.
The Company recorded a non-cash charge for stock-based compensation of $5.0 million. There was no stock-based compensation expense in 2005.
Professional liability expense was a net benefit of $6.0 million versus a net benefit of $5.8 million in the prior year.
For the six month periods, net income from continuing operations per diluted common share was $1.53 compared to $1.64 in 2005.
CEO REMARKS
William R. Council stated, “The Company’s results for the second quarter, excluding the impact of professional liability actuarial adjustments and the non cash stock-based compensation expense, continue to reflect the positive trends of the last several quarters. These favorable results are the culmination of many of the Company’s initiatives coming together, including increasing occupancy and Medicare census.
“The completion of the comprehensive refinancing transactions with Capmark Finance Inc. is a significant, and in some ways, final step in accomplishing the Company’s restructuring following a period of difficult operations. The refinancing allows the Company to extend maturities of its debt to 4 and 5 years, revises covenants such that the Company is in compliance and provides financing for the $1.1 million renovation of one of the buildings owned by the Company.
“We have now completed renovations at two nursing centers, and have two projects underway that are scheduled to be completed during the third quarter. For facilities with three months of operations after completing a renovation, occupancy increased to approximately 75% from 58% last year, and Medicare utilization increased to approximately 21% from 13% last year.”

 

 

CONFERENCE CALL INFORMATION
A conference call has been scheduled to discuss the results for the period ended June 30, 2006, on Thursday, August 10 at 9:00 A.M. Central time (10:00 A.M. Eastern time).
The conference call information is as follows:
     
Date:
  Thursday, August 10, 2006
Time:
  9:00 A.M. Central, 10:00 A.M. Eastern
Webcast Links:
  http://phx.corporate-ir.net/playerlink.zhtml?c=77083&s=wm&e=1362527
 
  www.streetevents.com
 
  www.earnings.com
 
  www.irinfo.com/avc
 
Dial in numbers:
  (866) 578-5771 (domestic) or (617) 213-8055 (international)
Passcode:
  22517246
A replay of the conference call will be accessible two hours after its completion through August 17, 2006 by dialing (888) 286-8010 (domestic) or (617) 801-6888 (international) and entering passcode 44014105. Additionally, the conference call may contain certain additional non-GAAP financial measures. Pursuant to the requirements of Regulation G, the Company will provide a reconciliation of all non-GAAP financial measures not previously reconciled to the most directly comparable GAAP financial measure on its website. Details and links to the reconciliations of any non-GAAP financial measures discussed during the conference call will be posted to the Company’s website prior to the conference call at www.irinfo.com/avc.
FORWARD-LOOKING STATEMENTS
Forward-looking statements made in this release involve a number of risks and uncertainties, including but not limited to, changes in governmental reimbursement, government regulation and health care reforms, the increased cost of borrowing under our credit agreements, ability to control ultimate professional liability costs, the accuracy of our estimate of our anticipated professional liability expense, the impact of future licensing surveys, the outcome of regulatory proceedings alleging violations of laws and regulations governing quality of care or violations of other laws and regulations applicable to our business, changing economic conditions as well as other risk factors detailed in the Company’s Securities and Exchange Commission filings. The Company has provided additional information in its Annual Report on Form 10-K for the fiscal year ended December 31, 2005, as well as in other filings with the Securities and Exchange Commission, which readers are encouraged to review for further disclosure of other factors that could cause actual results to differ materially from those indicated in the forward-looking statements. Advocat Inc. is not responsible for updating the information contained in this press release beyond the published date, or for changes made to this document by wire services or Internet services.
For additional information about the Company, visit Advocat’s web site: http://www.irinfo.com/avc
-Financial Tables to Follow-

 

 

ADVOCAT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
                 
    June 30,     December 31,  
    2006     2005  
    (Unaudited)          
ASSETS:
                
Current Assets
                
Cash and cash equivalents
   $ 10,503     $ 7,070  
Restricted cash
     350       625  
Receivables, net
     17,436       18,147  
Deferred income taxes
     798       1,004  
Other current assets
     5,647       5,180  
 
            
Total current assets
     34,734       32,026  
Property and equipment, net
     27,842       39,421  
Deferred income taxes
     14,285       12,856  
Note receivable, net
     4,923       5,198  
Other assets, net
     3,902       4,261  
 
            
TOTAL ASSETS
   $ 85,686     $ 93,762  
 
            
LIABILITIES AND SHAREHOLDERS’ DEFICIT:
                
Current Liabilities
                
Short-term debt and current portion of long-term debt and settlement promissory notes
   $ 9,316     $ 47,419  
Trade accounts payable
     3,882       4,415  
Accrued expenses:
                
Payroll and employee benefits
     7,499       8,495  
Current portion of self-insurance reserves
     5,229       5,952  
Other current liabilities
     4,417       5,715  
 
            
Total current liabilities
     30,343       71,996  
Noncurrent Liabilities
                
Long-term debt and settlement promissory notes, less current portion
     24,455       128  
Self-insurance reserves, less current portion
     22,961       29,041  
Other noncurrent liabilities
     4,728       4,717  
 
            
Total noncurrent liabilities
     52,144       33,886  
REDEEMABLE CONVERTIBLE PREFERRED STOCK
     4,918       4,750  
SHAREHOLDERS’ DEFICIT
     (1,719 )     (16,870 )
 
            
TOTAL LIABILITIES AND SHAREHOLDERS’ DEFICIT
   $ 85,686     $ 93,762  
 
            

 

 

ADVOCAT INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
                                 
    For the Three Months     For the Six Months  
    Ended June 30,     Ended June 30,  
    2006     2005     2006     2005  
PATIENT REVENUES, NET
   $ 53,895     $ 49,607     $ 107,082     $ 98,491  
 
                        
EXPENSES:
                                
Operating
     40,668       37,420       81,298       75,752  
Lease
     3,828       4,079       7,653       7,961  
Professional liability
     (3,853 )     1,461       (6,000 )     (5,781 )
General and administrative
     3,716       3,316       7,197       6,708  
Stock-based compensation
     5,012       —       5,012       —  
Depreciation
     926       825       1,870       1,685  
 
                        
 
     50,297       47,101       97,030       86,325  
 
                        
OPERATING INCOME
     3,598       2,506       10,052       12,166  
 
                        
OTHER INCOME (EXPENSE):
                                
Foreign currency transaction gain (loss)
     249       (66 )     240       (122 )
Other income
     —       —       207       —  
Interest income
     165       152       348       269  
Interest expense
     (877 )     (780 )     (1,876 )     (1,549 )
 
                        
 
     (463 )     (694 )     (1,081 )     (1,402 )
 
                        
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
     3,135       1,812       8,971       10,764  
PROVISION (BENEFIT) FOR INCOME TAXES
     (387 )     51       (1,116 )     62  
 
                        
NET INCOME FROM CONTINUING OPERATIONS
     3,522       1,761       10,087       10,702  
INCOME (LOSS ) FROM DISCONTINUED OPERATIONS:
                                
Operating income (loss), net of tax provision (benefit) of $0, $(31), $0 and $(42), respectively
     52       (134 )     170       (487 )
Gain (loss) on sale, net of tax provision of $0, $0, $0 and $0, respectively
     (128 )     7       (120 )     383  
 
                        
INCOME (LOSS) FROM DISCONTINUED OPERATIONS
     (76 )     (127 )     50       (104 )
 
                        
NET INCOME
     3,446       1,634       10,137       10,598  
PREFERRED STOCK DIVIDENDS, ACCRUED BUT NOT PAID
     85       78       168       156  
 
                        
NET INCOME FOR COMMON STOCK
   $ 3,361     $ 1,556     $ 9,969     $ 10,442  
 
                        
NET INCOME PER COMMON SHARE:
                                
Per common share — basic
                                
Income from continuing operations
   $ .60     $ .29     $ 1.73     $ 1.84  
Income (loss) from discontinued operations
     (.02 )     (.02 )     .01       (.02 )
 
                        
 
   $ .58     $ .27     $ 1.74     $ 1.82  
 
                        
Per common share — diluted
                                
Income from continuing operations
   $ .53     $ .27     $ 1.53     $ 1.64  
Income (loss) from discontinued operations
     (.01 )     (.02 )     .01       (.02 )
 
                        
 
   $ .52     $ .25     $ 1.54     $ 1.62  
 
                        
WEIGHTED AVERAGE COMMON SHARES:
                                
Basic
     5,746       5,725       5,743       5,725  
 
                        
Diluted
     6,596       6,498       6,544       6,498  
 
                        

 

 

ADVOCAT INC.
FUNDS PROVIDED BY OPERATIONS
(Unaudited)
(In thousands)
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2006     2005     2006     2005  
NET INCOME
   $ 3,446     $ 1,634     $ 10,137     $ 10,598  
Income (loss) from discontinued operations
     (76 )     (127 )     50       (104 )
 
                        
Net income from continuing operations
     3,522       1,761       10,087       10,702  
Adjustments to reconcile net income from continuing operations to funds provided by operations:
                                
Depreciation
     926       825       1,870       1,685  
Provision for doubtful accounts
     595       258       936       743  
Deferred income taxes, net
     (445 )     —       (1,223 )     —  
Provision for (benefit from) accrual for self-insured professional liability, net
     (4,004 )     1,308       (6,304 )     (6,080 )
Payment of professional liability costs
     (637 )     (1,196 )     (1,183 )     (2,231 )
Stock-based compensation
     5,012       —       5,012       —  
Amortization of deferred balances
     36       59       87       198  
Provision for leases in excess of cash payments
     3       92       11       109  
Gain on sale of bed license
     —       —       (207 )     —  
Foreign currency transaction (gain) loss
     (249 )     66       (240 )     122  
Non-cash interest expense
     43       41       86       81  
Non-cash interest income
     (98 )     (117 )     (206 )     (222 )
 
                        
FUNDS PROVIDED BY OPERATIONS
   $ 4,704     $ 3,097     $ 8,726     $ 5,107  
 
                        
###