Company Commences $0.05 Quarterly Dividend
Company Also Announces Completion of New Building in Texas
BRENTWOOD, Tenn., Aug. 6, 2009 (GLOBE NEWSWIRE) -- Advocat Inc. (Nasdaq:AVCA) today announced its results for the second quarter and six months ended June 30, 2009.
Dividend
The Board of Directors has approved the payment of a $0.05 per share dividend commencing with the quarter ended June 30, 2009. The cash dividend is payable on August 30 to stockholders of record on August 17, 2009. The third quarter dividend will be payable in October to stockholders of record on September 30, 2009.
Highlights for Second Quarter 2009
Key Highlights for the second quarter of 2009 compared to the second quarter of 2008 include the following:
* Revenue increased 7.3% to $76.1 million in 2009 compared to $70.8 million in 2008. * Occupancy increased to 76.6% in 2009 compared to 74.7% in the second quarter of 2008 and 75.9% in the first quarter of 2009. * Medicare rates increased 5.6% compared to 2008 as a result of annual inflation adjustments and the acuity levels of Medicare patients in our nursing centers. * Medicaid rates increased 5.2% in 2009 compared to 2008 as a result of rate increases in certain states and increasing patient acuity levels. * Professional liability expense was $3.0 million in 2009, compared to $1.4 million in 2008, an increase in expense of $1.6 million. * Net income from continuing operations was $0.9 million in 2009 up $0.2 million from 2008, or $0.15 per diluted common share compared to $0.11 per diluted common share in 2008. * Funds provided by operations were $4.8 million in 2009 compared to $2.7 million in the second quarter of 2008.
The Company also announced that construction of Brentwood Terrace Healthcare and Rehabilitation Center, a 119 bed skilled nursing facility in Paris, Texas, was completed and the residents expected to move from the old facility to Brentwood Terrace in August 2009, at which time the old facility will be closed. The new facility replaces an existing 102 bed facility.
CEO Remarks
William R. Council, III, noted, "We continue to record excellent comparable and sequential quarterly results in a difficult economy. One of our most important measurements is funds provided from operations which were $4.8 million, a 75% increase over the 2008 comparable quarter. Our net income is a highly variable figure because of adjustments to the professional liability, which can fluctuate from quarter to quarter.
"After careful review of our flow of funds from operations together with our capital expenditures for improving facilities and other funding needs, the Board believes it is appropriate to initiate cash dividends. This action is to reward our patient and loyal stockholders and to enhance the value of their equity."
Mr. Council continued, "In the four years since we embarked upon a renovation program we have completed improvements on 11 nursing centers. In the second quarter of 2009 compared to the last twelve months prior to commencement of the renovation, 11 centers for which renovations were completed prior to the beginning of the quarter, the average occupancy increased from 66.5% to 73.6% and the Medicare daily census increased from a total of 118 to 147. We also measure our renovated facilities performance by looking at the annual return on the capital invested in the projects. The average return on investment for the completed renovations was 39%. We are very pleased with the completion of the Brentwood Terrace replacement facility in Paris, Texas, with completion on time and under budget."
Other Highlights for the Second Quarter 2009
Revenues increased to $76.1 million in 2009 from $70.8 million in 2008, an increase of $5.3 million, or 7.3%. This increase is primarily due to increased Medicaid rates in certain states, increased Medicaid census, and Medicare rate increases, partially offset by the effects of lower Medicare census.
The following table summarizes key revenue and census statistics for continuing operations for each period:
Three Months Ended
June 30,
------------------
2009 2008
------- -------
Skilled nursing occupancy 76.6% 74.7%
Medicare census as percent of total 13.2% 13.9%
Managed care census as percent of total 1.2% 1.3%
Medicare revenues as percent of total 31.5% 32.1%
Medicaid revenues as percent of total 53.7% 52.7%
Managed care revenue as percent of total 2.5% 2.6%
Medicare average rate per day $401.29 $380.01
Medicaid average rate per day $145.22 $138.05
Managed care average rate per day $371.16 $336.18
The Company's average rate per day for Medicare Part A patients increased 5.6% in 2009 compared to 2008 as a result of annual inflation adjustments and the acuity levels of Medicare patients in its nursing centers, as indicated by RUG level scores, which were higher in 2009 than in 2008. The Company's average rate per day for Medicaid patients increased 5.2% in 2009 compared to 2008 as a result of rate increases in certain states and increasing patient acuity levels.
The Company remains focused on controlling expenses. Key expense items for second quarter include:
* The Company continues to maintain a wage freeze for senior
management and reduced wage increases for other employees.
* Operating expense increased to $59.4 million in 2009 from $56.0
million in 2008, an increase of $3.4 million, or 6.1%. Operating
expense decreased to 78.1% of revenue in 2009, compared to 79.0%
of revenue in 2008.
* The largest component of operating expenses is wages, which
increased to $35.2 million in 2009 from $33.3 million in 2008, an
increase of $1.9 million, or 5.7%.
* Cash expenditures for professional liability costs were $0.7
million in 2009 compared to $1.9 million for 2008. Payments in
2009 were lower than originally scheduled as certain payments
totaling $0.4 million that were originally scheduled to be made
in June were inadvertently delayed until early July.
* Employee health insurance costs were approximately $0.4 million
higher in 2009 compared to 2008.
* Bad debt expense was $0.2 million higher in 2009 compared to
2008.
* Workers compensation insurance expense decreased approximately
$0.8 million in 2009.
* General and administrative expense increased to $4.8 million in
2009 from $4.6 million in 2008, an increase of $0.2 million or
3.3%. As a percentage of revenue, general and administrative
expense decreased to 6.3% in 2009 from 6.6% in 2008.
Note Receivable
On June 30, 2009, the Company collected the balance due on a note receivable denominated in Canadian dollars issued in the sale of its Canadian subsidiary in 2004, receiving cash payments totaling approximately $4.2 million during the second quarter. In accordance with the Company's bank term loan agreement, $1.8 million of these proceeds were paid on the principal balance of long term debt obligations.
Revenue and Income Highlights for Six Months
Revenue increased to $149.8 million in 2009 from $142.3 million in 2008, an increase of $7.5 million, or 5.3%. This increase is primarily due to increased Medicaid rates in certain states, Medicare rate increases, and increased Medicaid census, partially offset by the effects of lower Medicare census.
Income from continuing operations before income taxes was $2.1 million for six months ended June 30, 2009 compared to $5.8 million for the same period in 2008. The provision for income taxes was $0.8 million in 2009 compared to $2.0 million in 2008. The diluted income per common share from continuing operations was $0.20 and $0.61 for 2009 and 2008, respectively.
Facility Renovation Update
During 2005, Advocat began an initiative to complete strategic renovations of certain facilities to improve occupancy, quality of care and profitability. Management developed a plan to begin with those facilities with the greatest potential for benefit, and began the renovation program during the third quarter of 2005. As of June 30, 2009, renovation projects have been completed at eleven facilities, and work has commenced on projects at two additional nursing centers, including a 15 bed expansion at one nursing center. Plans for additional renovation projects are in development.
A total of $15.9 million has been spent on these renovation programs to date, with $10.0 million financed through Omega, $4.8 million financed with internally generated cash, and $1.1 million financed with long-term debt. The amounts financed by Omega have resulted in increased rent and are not reflected as capital expenditures. In May 2009, Omega agreed to provide an additional $5.0 million to fund renovations to several nursing centers we lease from them under the same terms as prior funding commitments totaling $10.0 million. Renovation spending financed under these commitments result in increased rent and are not reflected as capital expenditures.
A table is included with this press release summarizing operating results at renovated nursing centers.
Conference Call Information
A conference call has been scheduled for Friday, August 7, 2009 at 9:00 A.M. Central time (10:00 A.M. Eastern time) to discuss second quarter 2009 results.
The conference call information is as follows:
Date: Friday, August 7, 2009 Time: 9:00 A.M. Central, 10:00 A.M. Eastern Webcast Links: www.streetevents.com www.earnings.com www.irinfo.com/avc Dial in numbers: 888-679-8040 (domestic) or 617-213-4851 (International) Passcode: 76835620
The call will consist of remarks from management as well as a question and answer session. In addition to the questions posed during the live call, management will also be addressing questions submitted by email. If you would like to submit a question please email it to InvestorRelations@advocat-inc.com before the start of the call.
Please use the following link to pre-register and view important information about this conference call. Pre-registering is not mandatory, but is recommended as it will provide you immediate entry into the call and will facilitate the timely start of the call. Pre-registration takes only a few minutes and you may pre-register at any time, including up to and after the call start time. To pre-register, please go to:
https://www.theconferencingservice.com/prereg/key.process?key=PFMCWRM7U
A replay of the conference call will be accessible two hours after its completion through August 13, 2009 by dialing 888-286-8010 (domestic) or 617-801-6888 (international) and entering passcode 91342045.
FORWARD-LOOKING STATEMENTS
The "forward-looking statements" contained in this release are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are predictive in nature and are frequently identified by the use of terms such as "may," "will," "should," "expect," "believe," "estimate," "intend," and similar words indicating possible future expectations, events or actions. These forward-looking statements reflect the Company's current views with respect to future events and present its estimates and assumptions only as of the date of this release. Actual results could differ materially from those contemplated by the forward-looking statements made herein. In addition to any assumptions and other factors referred to specifically in connection with such statements, other factors, many of which are beyond our ability to control or predict, could cause our actual results to differ materially from the results expressed or implied in any forward-looking statements including, but not limited to, our ability to arrange appropriate financing and successfully construct and operate the replacement facility for the recently acquired facility in West Virginia, our ability to increase census at our renovated facilities, changes in governmental reimbursement, government regulation and health care reforms, any increases in the cost of borrowing under our credit agreements, our ability to comply with covenants contained in those credit agreements, the outcome of professional liability lawsuits and claims, our 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, our ability to control costs, changes to our valuation of deferred tax assets, changes in occupancy rates in our facilities, changing economic and competitive conditions, changes in anticipated revenue and cost growth, changes in the anticipated results of operations, the effect of changes in accounting policies 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, 2008, as well as in its Quarterly Reports on Form 10-Q and other filings with the Securities and Exchange Commission, which readers are encouraged to review for further disclosure of other factors. These assumptions may not materialize to the extent assumed, and risks and uncertainties may cause actual results to be different from anticipated results. These risks and uncertainties also may result in changes to the Company's business plans and prospects. 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.
Advocat provides long term care services to patients in 50 skilled nursing centers, primarily in the Southeast and Southwest. For additional information about the Company, visit Advocat's web site: http://www.irinfo.com/avc.
ADVOCAT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30, Dec. 31,
2009 2008
-------- --------
(Unaudited)
ASSETS:
Current Assets
Cash and cash equivalents $ 12,101 $ 7,598
Receivables, net 25,018 23,503
Current portion of note receivable -- 466
Deferred income taxes 4,095 3,967
Other current assets 4,431 3,345
-------- --------
Total current assets 45,645 38,879
Property and equipment, net 42,284 37,456
Deferred income taxes 14,259 13,899
Note receivable, net -- 3,486
Acquired leasehold interest, net 9,957 10,149
Other assets, net 2,862 3,040
-------- --------
TOTAL ASSETS $115,007 $106,909
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities
Current portion of long-term debt $ 3,325 $ 2,238
Trade accounts payable 5,351 4,600
Accrued expenses:
Payroll and employee benefits 11,309 9,545
Current portion of self-insurance reserves 7,751 6,469
Other current liabilities 4,662 5,142
-------- --------
Total current liabilities 32,398 27,994
Noncurrent Liabilities
Long-term debt, less current portion 26,134 30,172
Self-insurance reserves, less current portion 11,861 10,212
Other noncurrent liabilities 18,462 13,089
-------- --------
Total noncurrent liabilities 56,457 53,473
PREFERRED STOCK 7,042 7,891
SHAREHOLDERS' EQUITY 19,110 17,551
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $115,007 $106,909
======== ========
ADVOCAT INC.
CONSOLIDATED INCOME STATEMENTS
(Unaudited)
(In thousands, except per share data)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2009 2008 2009 2008
-------- -------- -------- --------
PATIENT REVENUES, NET $ 76,051 $ 70,845 $149,809 $142,311
-------- -------- -------- --------
EXPENSES:
Operating 59,398 55,999 117,628 111,535
Lease 5,785 5,746 11,561 11,450
Professional liability 2,955 1,401 6,197 358
General and administrative 4,801 4,647 9,374 9,206
Depreciation and
amortization 1,475 1,317 2,884 2,559
-------- -------- -------- --------
74,414 69,110 147,644 135,108
-------- -------- -------- --------
OPERATING INCOME 1,637 1,735 2,165 7,203
-------- -------- -------- --------
OTHER INCOME (EXPENSE):
Foreign currency
transaction gain 276 62 191 (167)
Other income -- -- 549 --
Interest income 79 120 154 280
Interest expense (485) (703) (967) (1,534)
-------- -------- -------- --------
(130) (521) (73) (1,421)
-------- -------- -------- --------
INCOME FROM CONTINUING
OPERATIONS BEFORE
INCOME TAXES 1,507 1,214 2,092 5,782
PROVISION (BENEFIT) FOR
INCOME TAXES (570) (505) (792) (1,972)
-------- -------- -------- --------
NET INCOME FROM CONTINUING
OPERATIONS 937 709 1,300 3,810
DISCONTINUED OPERATIONS:
Operating loss, net of tax
benefit of $3, $12, $3
and $19, respectively (7) (19) (7) (31)
-------- -------- -------- --------
NET INCOME 930 690 1,293 3,779
PREFERRED STOCK DIVIDENDS 86 86 172 172
-------- -------- -------- --------
NET INCOME FOR COMMON STOCK $ 844 $ 604 $ 1,121 $ 3,607
======== ======== ======== ========
NET INCOME PER COMMON SHARE:
Per common share - basic
Income from continuing
operations $ 0.15 $ 0.11 $ 0.20 $ 0.64
Loss from discontinued
operations -- -- -- (0.01)
-------- -------- -------- --------
$ 0.15 $ 0.11 $ 0.20 $ 0.63
======== ======== ======== ========
Per common share - diluted
Income from continuing
operations $ 0.15 $ 0.11 $ 0.20 $ 0.61
Loss from discontinued
operations -- (0.01) -- --
-------- -------- -------- --------
$ 0.15 $ 0.10 $ 0.20 $ 0.61
======== ======== ======== ========
WEIGHTED AVERAGE COMMON
SHARES:
Basic 5,676 5,676 5,674 5,715
======== ======== ======== ========
Diluted 5,746 5,906 5,738 5,947
======== ======== ======== ========
ADVOCAT INC.
FUNDS PROVIDED BY OPERATIONS
(Unaudited)
(In thousands)
Three Months Ended Six Months Ended
------------------------- ----------------
June 30, March 31, June 30,
---------------- ------- ----------------
2009 2008 2009 2009 2008
------- ------- ------- ------- -------
NET INCOME $ 930 $ 690 $ 363 $ 1,293 $ 3,779
Discontinued
operations (7) (19) -- (7) (31)
------- ------- ------- ------- -------
Net income from
continuing
operations 937 709 363 1,300 3,810
Adjustments to
reconcile net
income from
continuing
operations to
funds provided by
operations:
Depreciation and
amortization 1,475 1,317 1,409 2,884 2,559
Provision for
doubtful accounts 637 467 804 1,441 1,023
Deferred income
tax provision
(benefit) (694) 151 206 (488) (47)
Provision
(benefit) for
self-insured
professional
liability, net
of cash payments 2,098 (618) 1,017 3,115 (2,031)
Stock-based
compensation 170 233 224 394 411
Amortization of
deferred balances 95 101 95 190 230
Provision for
leases in excess
of cash payments 326 451 328 654 917
Noncash gain on
settlement of
contingent
liability -- -- (549) (549) --
Other (293) (98) 61 (232) 98
------- ------- ------- ------- -------
FUNDS PROVIDED BY
OPERATIONS $ 4,751 $ 2,713 $ 3,958 $ 8,709 $ 6,970
======= ======= ======= ======= =======
Reconciliation of
funds provided by
operations to cash
flow from operating
activities:
Funds provided by
operations $ 4,751 $ 2,713 3,958 8,709 $ 6,970
Changes in other
assets and
liabilities
affecting operating
activities:
Receivables, net (1,053) 1,746 (1,903) (2,956) 1,423
Prepaid expenses and
other assets 949 (1,019) (864) 85 (691)
Trade accounts
payable and accrued
expenses (801) (1,454) 1,996 1,195 (3,219)
------- ------- ------- ------- -------
Net cash provided by
operating
activities of
continuing
operations $ 3,846 $ 1,986 $ 3,187 $ 7,033 $ 4,483
======= ======= ======= ======= =======
Advocat provides financial measures using accounting principles
generally accepted in the United States (GAAP) and using adjustments
to GAAP (non-GAAP). These non-GAAP measures are not measurements under
GAAP. These measurements should be considered in addition to, but not
as a substitute for, the information contained in our financial
statements prepared in accordance with GAAP. Funds Provided by
Operations is defined as cash flow from operating activities before
changes in other assets and liabilities affecting operating
activities. Management believes that Funds Provided by Operations is
an important measurement of the Company's performance because it
eliminates the effect of actuarial assumptions on our professional
liability reserves, includes the cash effect of professional liability
payments, and does not include the effects of deferred tax benefit and
other non-cash charges. Since the definition of Funds Provided by
Operations may vary among companies and industries, it should not be
used as a measure of performance among companies.
ADVOCAT INC.
SELECTED OPERATING STATISTICS
JUNE 30, 2009
(Unaudited)
For the Three Months Ended
June 30, 2009
-----------------------------
Skilled
As of Nursing Occupancy
June 30, 2009 Weighted (Note 1)
------------------- Average -------------------
Licensed Available Daily Licensed Available
Region Beds Beds Census Beds Beds
--------------------------------------------------------------------
Alabama 711 704 615 86.5% 87.3%
Arkansas 1,311 1,183 943 72.0% 79.7%
Florida 502 462 399 79.5% 86.4%
Kentucky (Note 4) 775 742 660 85.2% 89.0%
Tennessee 617 586 488 79.1% 83.3%
Texas 1,857 1,655 1,314 70.8% 79.4%
Total 5,773 5,332 4,419 76.6% 82.9%
===== ===== ===== ===== =====
For the Three Months Ended June 30, 2009
-----------------------------------------------
Medicare Medicaid
2009 Room and Room and
Q2 Board Board
Revenue Revenue Revenue
($ in PPD PPD
Medicare millions) 2009 2009
Region Utilization (Note 2) (Note 3) (Note 3)
----------------------------------------------------------------
Alabama 14.3% $11.7 $408.11 $163.27
Arkansas 15.2% 15.2 374.41 137.34
Florida 9.6% 7.8 416.52 177.44
Kentucky (Note 4) 12.7% 12.7 413.01 168.39
Tennessee 16.0% 8.5 382.27 138.32
Texas 11.7% 19.8 422.04 120.17
------- ------- ------- -------
Total 13.2% $75.7 $401.29 $145.22
======= ======= ======= =======
Note 1: The number of "Licensed beds" is based on the licensed
capacity of the facility. The Company has historically
reported its occupancy based on licensed beds. The number of
"Available Beds" represents "licensed beds" less beds removed
from service. "Available beds" is subject to change based
upon the needs of the facilities, including configuration of
patient rooms and offices, status of beds (private, semi-
private, ward, etc.) and renovations.
Note 2: Total revenue for regions excludes approximately $0.4 million
of ancillary services and other revenue for the three month
period ended June 30, 2009.
Note 3: These Medicare and Medicaid revenue rates include room and
board revenues but do not include any ancillary revenues
related to these patients.
Note 4: The Kentucky region includes nursing centers in Kentucky,
West Virginia and Ohio.
ADVOCAT INC.
SELECTED OPERATING STATISTICS OF RENOVATED FACILITIES
JUNE 30, 2009
(Unaudited)
Occupancy(1) Medicare Average
Daily Census
Q2 LTM(2) Q2 LTM(2)
Renovation - Completion Date 2009 Prior 2009 Prior
-----------------------------------------------------------------
1st renovation - January 2006 86.8% 64.9% 14.4 8.1
2nd renovation - July 2006 71.8% 71.2% 14.0 12.3
3rd renovation - August 2006 63.3% 45.1% 9.1 5.3
4th renovation - October 2006 82.8% 71.9% 11.7 8.6
5th renovation - February 2007 65.1% 56.2% 10.8 8.0
6th renovation - April 2007 50.8% 47.5% 10.9 12.7
7th renovation - July 2007 86.8% 85.0% 16.3 17.4
8th renovation - January 2008 67.5% 50.9% 14.8 8.9
9th renovation - October 2008 87.3% 83.0% 18.4 17.2
10th renovation - November 2008 88.3% 80.8% 14.5 12.2
11th renovation - March 2009 59.0% 62.5% 12.6 7.0
----- ----- ----- -----
Total 73.6% 66.5% 147.5 117.7
----- ----- ----- -----
(1) Occupancy based on licensed beds.
(2) Last Twelve Months prior to commencement of construction.