Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549


FORM 8-K

CURRENT REPORT

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

Date of report (Date of earliest event reported)
May 3, 2018 (May 3, 2018)

Diversicare Healthcare Services, Inc.
(Exact Name of Registrant as Specified in Charter)


Delaware

001-12996

62-1559667
(State or Other Jurisdiction of Incorporation)
(Commission File Number)
(IRS Employer Identification No.)


1621 Galleria Boulevard, Brentwood, TN 37027
(Address of Principal Executive Offices) (Zip Code)

(615) 771-7575
(Registrant's telephone number, including area code)


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
 
 
Emerging growth 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.

 
¨







Item 2.02 Results of Operation and Financial Condition.

On May 3, 2018, the Registrant announced its results of operation for the three-month period ended March 31, 2018. A copy of the press release is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference in its entirety. The information furnished pursuant to Item 2.02 herein, including Exhibit 99.1, shall not be deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933.

Item 7.01. Regulation FD Disclosure.

The Registrant is furnishing its Investor presentation update for the period ended March 31, 2018, which is also contained on its website, DVCR.com. See Exhibit 99.2 to this Current Report of Form 8-K.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits

Number    Exhibit

99.1Press release dated March 1, 2018.

99.2Investor presentation


    
    







SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Diversicare Healthcare Services, Inc.


By: /s/ James R. McKnight, Jr.
James R. McKnight, Jr.
Chief Financial Officer


Date:    May 3, 2018




Exhibit


http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=12228183&doc=4
 

   Company Contact:
      Kelly J. Gill
      Chief Executive Officer
      615-771-7575
 
         Investor Relations:
            James R. McKnight, Jr.
            Chief Financial Officer
            615-771-7575
Diversicare Announces 2018 First Quarter Results

BRENTWOOD, TN, (May 3, 2018) – Diversicare Healthcare Services, Inc. (NASDAQ: DVCR), a premier provider of long-term care services, today announced its results for the first quarter ended March 31, 2018.
On April 26, 2018, the Board of Directors declared a quarterly dividend of $0.055 per common share payable to shareholders of record as of June 30, 2018, to be paid on July 16, 2018.
First Quarter 2018 Highlights
Under the new Accounting Standard Codification ("ASC") 606, net revenue was $141.3 million in the first quarter of 2018. In accordance with ASC 606, revenue for the first quarter of 2017 was not restated. The first quarter of 2018 under legacy GAAP was $144.5 million, compared to $141.5 million in the first quarter of 2017, an increase of $3.0 million or 2.1%.
Net loss from continuing operations was $(0.1) million, or $(0.01) per share, in the first quarter of 2018, compared to net income from continuing operations of $1.3 million, or $0.22 per share, in the first quarter of 2017.
The first quarter of 2017 included a non-recurring favorable outcome of $2.2 million related to an appeal of provider taxes. Absent that adjustment, EBITDA improved by $0.5 million and facility-level operating income improved by $0.4 million to $29.0 million, or 20.5% of revenue.
See below for a reconciliation of all GAAP and non-GAAP financial results.
CEO Remarks
Commenting on the results, Kelly Gill, Diversicare’s CEO, stated, “I am pleased with our first quarter 2018 results. Our skilled mix experienced positive tailwinds, increasing considerably to 16.1% from 14.7% in the fourth quarter of 2017. The center we acquired in the latter half of 2017 in Selma, Alabama has been fully integrated onto our platform and I am proud to report that it contributed $2.3 million of revenue during the quarter.

Mr. Gill continued, "We continue to put an emphasis on our focus towards improving the care we provide and achieving industry-leading quality metrics and believe it is the best possible route to long-term success. I am extremely thankful for our dedicated team members leading the focus towards high quality results, which leads to the solid operational and financial results.”







First Quarter 2018 Results
The following table summarizes key revenue and census statistics for continuing operations for each period:
 
Three Months Ended March 31,
 
 
 
2018
 
 
 
2017
 
 
Skilled nursing occupancy
79.9
%
 
 
 
80.1
%
 
 
As a percent of total census:
 
 
 
 
 
 
 
Medicare census
11.6
%
 
 
 
11.7
%
 
 
Medicaid census
67.9
%
 
 
 
68.7
%
 
 
Managed Care census
4.5
%
 
 
 
4.0
%
 
 
As a percent of total revenues:
 
 
 
 
 
 
 
Medicare revenues
26.4
%
 
 
 
26.9
%
 
 
Medicaid revenues
50.7
%
 
 
 
51.5
%
 
 
Managed Care revenues
8.4
%
 
 
 
7.6
%
 
 
Average rate per day:
 
 
 
 
 
 
 
Medicare
$
455.72

 
  
 
$
451.26

 
 
Medicaid
$
176.78

 
  
 
$
173.75

 
 
Managed Care
$
391.96

 
  
 
$
381.54

 
 

Patient Revenues
Patient revenues were $141.3 million and $141.5 million for the three months ended March 31, 2018 and 2017, respectively, a decrease of $(0.2) million. The following summarizes the revenue fluctuations attributable to our portfolio growth (in thousands):
 
Three Months Ended March 31,
 
2018
2017
 
 
 
As reported
 
As adjusted to Legacy GAAP
 
As reported
 
Change
Same-store revenue
$
138,938

 
$
142,145

 
$
141,500

 
$
645

2017 acquisition revenue
2,347

 
2,347

 

 
2,347

Total revenue
$
141,285

 
$
144,492

 
$
141,500

 
$
2,992

The difference between patient revenues for the first quarter of 2018 is due to the implementation of ASC 606. Refer to Note 4 "Revenue Recognition" to the interim consolidated financial statements.
The overall increase in revenues as adjusted to legacy GAAP of $3.0 million is primarily attributable to revenue contributions from the acquisition of the Park Place operations during the first quarter of 2018 of $2.3 million.
On a same-store center basis, the average Medicare and Medicaid rate per patient day for the first quarter of 2018 increased compared to the first quarter of 2017, resulting in increases in revenue of $0.3 million and $1.1 million, respectively, or 0.9% and 1.5%, respectively. Our same-store Medicare, Medicaid and Private average daily census for the first quarter of 2018 decreased $0.5 million, $0.8 million and $0.4 million, or 1.7%, 1.1% and 3.4%, respectively. Conversely our Managed Care average daily census for the first quarter of 2018 increased $0.9 million or 9.9%.





Operating Expense
Operating expense increased in the first quarter of 2018 to $112.3 million as compared to $110.7 million in the first quarter of 2017. Operating expense increased as a percentage of revenue at 79.5% for the first quarter of 2018 as compared to 78.2% for the first quarter of 2017. The following table summarizes the expense increases attributable to our portfolio growth (in thousands):
 
Three Months Ended March 31,
 
2018
2017
 

 
As reported
 
As adjusted to Legacy GAAP
 
As reported
 
Change
Same-store operating expense
$
110,709

 
$
114,172

 
$
110,667

 
$
3,505

2017 acquisition expense
1,569

 
1,569

 

 
1,569

Total expense
$
112,278

 
$
115,741

 
$
110,667

 
$
5,074

The overall increase in operating expense of $5.1 million is partially attributable to the acquisition of the Park Place operations during the first quarter of 2018 of $1.6 million.
On a same-store center basis, operating expenses slightly increased by $3.5 million, which is attributable to unfavorable variances in provider taxes and salaries and related taxes of $2.3 million and $2.1 million, respectively, in first quarter of 2018 compared to the first quarter of 2017. The change in provider taxes is due to the $2.2 million refund from the state of Kentucky during the first quarter of 2017. Conversely our same-store health insurance costs decreased by $0.9 million in first quarter of 2018 compared to the first quarter of 2017.
One of the largest components of operating expenses is wages, which increased to $67.1 million during the first quarter of 2018 as compared to $65.0 million in the first quarter of 2017, which, consistent with above, is due primarily to acquisition activity.
Lease expense in the first quarter of 2018 remained consisted with the first quarter of 2017 at $13.7 million.
Professional liability expense was $2.8 million and $2.7 million in the first quarters of 2018 and 2017, respectively. Our cash expenditures for professional liability costs of continuing operations were $1.1 million and $2.1 million for the first quarters of 2018 and 2017, respectively. Professional liability expense and cash expenditures fluctuate from year to year based respectively on the results of our third-party professional liability actuarial studies and on the costs incurred in defending and settling existing claims. See “Liquidity and Capital Resources” for further discussion of the accrual for professional liability.
General and administrative expense was $8.1 million in the first quarter of 2018 as compared to $9.0 million in the first quarter of 2017. General and administrative expense decreased as a percentage of revenue from 6.3% in 2017 to 5.8% in 2018. The decrease in general and administrative expense is attributable to a decrease in corporate wages and payroll taxes by $0.9 million. The acquisition of 22 centers in the fourth quarter of 2016 resulted in an increase in salary expenses during the first quarter of 2017.
Depreciation and amortization expense was approximately $2.9 million in the first quarter of 2018 as compared to $2.5 million in 2017. The increase in depreciation expense relates to the fixed asset acquisition of a center located in Selma, Alabama during the third quarter of 2017.
Interest expense was $1.7 million in the first quarter of 2018 and $1.5 million in the first quarter of 2017, an increase of $0.2 million. The increase was primarily attributable to the amendment of the term loan facility that occurred in June 2017.
As a result of the above, continuing operations reported a loss of $0.1 million before income taxes for the first quarter of 2018 as compared to income of $2.2 million for the first quarter of 2017. The benefit for income taxes was $0.1 million for the first quarter of 2018, and the provision for income taxes was $0.9 million for the first quarter of 2017. Both basic and diluted loss per common share from continuing operations were $0.01 for the first quarter of 2018 as compared to basic and diluted income per common share from continuing operations of $0.22 and $0.21, respectively, in the first quarter of 2017.
Receivables
Our net receivables balance decreased $2.7 million to $62.2 million as of March 31, 2018, from $64.9 million as of December 31, 2017.






Conference Call Information
A conference call has been scheduled for Thursday, May 3, 2018 at 4:00 P.M. Central time (5:00 P.M. Eastern time) to discuss first quarter 2018 results. The conference call information is as follows:
 
 
 
Date:
 
Thursday, May 3, 2018
Time:
 
4:00 P.M. Central, 5:00 P.M. Eastern
Webcast Links:
 
www.DVCR.com
Dial in numbers:
 
877.340.2552 (domestic) or 253.237.1159 (International)
Conference ID: 8729479
The Operator will connect you to Diversicare’s Conference Call

A replay of the conference call will be accessible two hours after its completion through May 10, 2018, by dialing 855-859-2056 (domestic) or 404-537-3406 (international) and entering Conference ID 8729479.
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 our current views with respect to future events and present our 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 in this release. 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 successfully integrate the operations of our new nursing centers in Alabama and Mississippi, as well as successfully operate all of our centers, our ability to increase census at our renovated centers, changes in governmental reimbursement, government regulation, the impact of the recently adopted federal health care reform or any future health care reform, any increases in the cost of borrowing under our credit agreements, our ability to comply with covenants contained in those credit agreements, our ability to renew or extend our leases at or prior to the end of the existing lease terms, 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 proceedings alleging violations of state or Federal False Claims Acts, laws and regulations governing quality of care or other laws and regulations applicable to our business including HIPAA and laws governing reimbursement from government payors, the costs of investing in our business initiatives and development, our ability to control costs, changes to our valuation of deferred tax assets, changes in occupancy rates in our centers, 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 others. The Company has provided additional information in its Annual Report on Form 10-K for the fiscal year ended December 31, 2017, as well as in its 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. Diversicare Healthcare Services, 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.
Diversicare provides long-term care services to patients in 76 nursing centers and 8,456 skilled nursings beds. For additional information about the Company, visit Diversicare's web site: www.DVCR.com.
-Financial Tables to Follow-







DIVERSICARE HEALTHCARE SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
 
 
 
March 31,
2018
 
December 31,
2017
 
 
(Unaudited)
 
 
ASSETS:
 
 
 
 
Current Assets
 
 
 
 
Cash and cash equivalents
 
$
6,418

 
$
3,524

Receivables, net
 
62,212

 
64,929

Current assets of discontinued operations
 
20

 
45

Other current assets
 
5,368

 
4,160

Total current assets
 
74,018

 
72,658

 
 
 
 
 
Property and equipment, net
 
55,206

 
69,204

Deferred income taxes
 
15,020

 
15,154

Acquired leasehold interest, net
 
6,595

 
6,691

Assets held for sale, net
 
13,228

 

Other assets, net
 
3,781

 
3,862

TOTAL ASSETS
 
$
167,848

 
$
167,569

 
 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY:
 
 
 
 
Current Liabilities
 
 
 
 
Current portion of long-term debt and capitalized lease obligations
 
$
12,913

 
$
13,065

Trade accounts payable
 
13,775

 
14,080

Current liabilities of discontinued operations
 
462

 
461

Accrued expenses:
 
 
 
 
Payroll and employee benefits
 
18,890

 
20,013

Current portion of self-insurance reserves
 
9,134

 
8,792

Other current liabilities
 
8,859

 
7,856

Total current liabilities
 
64,033

 
64,267

Noncurrent Liabilities
 
 
 
 
Long-term debt and capitalized lease obligations, less current portion and deferred financing costs, net
 
75,669

 
74,603

Self-insurance reserves, less current portion
 
13,891

 
13,458

Other noncurrent liabilities
 
7,880

 
8,779

Total noncurrent liabilities
 
97,440

 
96,840

 
 
 
 
 
SHAREHOLDERS’ EQUITY
 
6,375

 
6,462

 
 
 
 
 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
 
$
167,848

 
$
167,569

 
 
 
 
 







DIVERSICARE HEALTHCARE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data, unaudited)
 
Three Months Ended March 31,
 
2018
 
2017
PATIENT REVENUES, net
$
141,285

 
$
141,500

Operating expense
112,278

 
110,667

Facility-level operating income
29,007

 
30,833

 
 
 
 
EXPENSES:
 
 
 
Lease and rent expense
13,713

 
13,743

Professional liability
2,775

 
2,670

General and administrative
8,139

 
8,973

Depreciation and amortization
2,881

 
2,487

Total expenses less operating
27,508

 
27,873

OPERATING INCOME
1,499

 
2,960

OTHER INCOME (EXPENSE):
 
 
 
Gain on sale of investment in unconsolidated affiliate

 
733

Interest expense, net
(1,669
)
 
(1,483
)
Other income
51

 

Total other expense
(1,618
)
 
(750
)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
(119
)
 
2,210

BENEFIT (PROVISION) FOR INCOME TAXES
38

 
(862
)
INCOME (LOSS) FROM CONTINUING OPERATIONS
(81
)
 
1,348

INCOME (LOSS) FROM DISCONTINUED OPERATIONS:
 
 
 
OPERATING LOSS
(22
)
 
(15
)
NET INCOME (LOSS)
$
(103
)
 
$
1,333

 
 
 
 
NET INCOME (LOSS) PER COMMON SHARE:
 
 
 
Per common share – basic
 
 
 
Continuing operations
$
(0.01
)
 
$
0.22

Discontinued operations

 

 
$
(0.01
)
 
$
0.22

 
 
 
 
Per common share – diluted
$
(0.01
)
 
$
0.21

Continuing operations

 

Discontinued operations
$
(0.01
)
 
$
0.21

 
 
 
 
DIVIDENDS DECLARED PER SHARE OF COMMON STOCK
$
0.055

 
$
0.055

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
 
 
 
Basic
6,314

 
6,233

Diluted
6,314

 
6,440







DIVERSICARE HEALTHCARE SERVICES, INC.
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
(In thousands)
 
 
 
For Three Months Ended
 
 
March 31, 2018
 
December 31, 2017
 
September 30, 2017
 
June 30, 2017
 
March 31, 2017
 
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
Net income (loss)
 
$
(103
)
 
$
(5,933
)
 
$
(580
)
 
$
353

 
$
1,333

Loss from discontinued operations, net of tax
 
22

 
(14
)
 
(1
)
 
28

 
15

Income tax provision (benefit)
 
(38
)
 
6,092

 
(345
)
 
134

 
862

Interest expense
 
1,669

 
1,677

 
1,668

 
1,541

 
1,483

Depreciation and amortization
 
2,881

 
2,807

 
2,988

 
2,620

 
2,487

EBITDA
 
4,431

 
4,629

 
3,730

 
4,676

 
6,180

 
 
 
 
 
 
 
 
 
 
 
EBITDA adjustments:
 
 
 
 
 
 
 
 
 
 
Acquisition & disposition related costs (a)
 
46

 
2

 
72

 
133

 
85

Hurricane costs (b)
 

 

 
232

 

 

Lease termination receipts (c)
 

 

 
(180
)
 

 

Gain on sale of unconsolidated
    affiliate (d)
 

 

 

 

 
(733
)
Gain on bargain purchase (e)
 
$

 
(925
)
 
$

 
$

 
$

Adjusted EBITDA
 
$
4,477

 
$
3,706

 
$
3,854

 
$
4,809

 
$
5,532

 

(a)
Represents non-recurring costs associated with acquisition and disposition-related transactions.
(b)
Represents non-recurring hurricane costs related to Hurricanes Harvey and Irma during the third quarter 2017.
(c)
Represents non-recurring lease termination receipts, net of expenses, related to the termination of the Carthage, Mississippi operating lease in September 2017.
(d)
Represents non-recurring gain on the sale of an unconsolidated affiliate in November 2016.

(e)
Represents non-recurring gain on bargain purchase related to the Selma acquisition in July 2017.
 




 





DIVERSICARE HEALTHCARE SERVICES, INC.
RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED NET INCOME (LOSS)
(In thousands, except per share data)
 
 
 
For Three Months Ended
 
 
March 31, 2018
 
December 31, 2017
 
September 30, 2017
 
June 30, 2017
 
March 31, 2017
 
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
 
(Unaudited)
Net income (loss)
 
$
(103
)
 
$
(5,933
)
 
$
(580
)
 
$
353

 
$
1,333

Adjustments:
 
 
 
 
 
 
 
 
 
 
Acquisition and disposition related costs (a)
 
46

 
2

 
72

 
133

 
85

Hurricane costs (b)
 

 

 
232

 

 

Gain on sale of unconsolidated affiliate (c)
 

 

 

 

 
(733
)
Gain on bargain purchase (d)
 

 
(925
)
 

 

 

Lease termination receipts (e)
 

 

 
(180
)
 

 

Tax impact of above adjustments (f)
 
(15
)
 
600

 
(43
)
 
(53
)
 
(283
)
Discontinued operations, net of tax
 
22

 
(14
)
 
(1
)
 
28

 
15

Adjusted net income (loss)
 
$
(50
)
 
$
(6,270
)
 
$
(500
)
 
$
461

 
$
417

 
 
 
 
 
 
 
 
 
 
 
Adjusted net income (loss) per common share
 
 
 
 
 
 
 
 
 
 
Basic
 
$
(0.01
)
 
$
(1.00
)
 
$
(0.08
)
 
$
0.07

 
$
0.07

Diluted
 
$
(0.01
)
 
$
(1.00
)
 
$
(0.08
)
 
$
0.07

 
$
0.06

 
 
 
 
 
 
 
 
 
 
 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
 
 
 
 
 
 
 
 
 
 
Basic
 
6,314

 
6,295

 
6,294

 
6,294

 
6,233

Diluted
 
6,314

 
6,295

 
6,294

 
6,472

 
6,440

 
 
 
 
 
 
 
 
 
 
 


(a)
Represents non-recurring costs associated with acquisition and disposition-related transactions.
(b)
Represents non-recurring hurricane costs related to Hurricanes Harvey and Irma during the third quarter 2017.
(c)
Represents non-recurring gain on the sale of an unconsolidated affiliate in November 2016.
(d)
Represents non-recurring gain on bargain purchase related to the Selma acquisition in July 2017.
(e)
Represents non-recurring lease termination receipts, net of expenses, related to the termination of the Carthage, Mississippi operating lease in September 2017.
(f)
Represents tax provision for the cumulative adjustments for each period.
 





DIVERSICARE HEALTHCARE SERVICES, INC.
FUNDS PROVIDED BY OPERATIONS
(In thousands, except per share data, unaudited)
 
Three Months Ended March 31,
 
2018
 
2017
NET INCOME (LOSS)
$
(103
)
 
$
1,333

Discontinued operations
(22
)
 
(15
)
Net income (loss) from continuing operations
(81
)
 
1,348

Adjustments to reconcile net income (loss) from continuing operations to funds provided by operations:
 
 
 
Depreciation and amortization
2,881

 
2,487

Provision for doubtful accounts

 
1,970

Deferred income tax benefit

 
354

Provision for self-insured professional liability, net of cash payments
956

 
(83
)
Stock based compensation
284

 
241

 Gain on sale of unconsolidated affiliate

 
(733
)
 Provision for leases in excess of cash payments
(453
)
 
(91
)
Deferred bonus

 
500

Other
140

 
123

FUNDS PROVIDED BY OPERATIONS
$
3,727

 
$
6,116

 
 
 
 
FUNDS PROVIDED BY OPERATIONS PER COMMON SHARE:
 
 
 
Basic
$
0.59

 
$
0.98

Diluted
$
0.59

 
$
0.95

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING :
 
 
 
Basic
6,314

 
6,233

Diluted
6,314

 
6,440

We have included certain financial measures in this press release, including EBITDA, Adjusted EBITDA, Adjusted Net income (loss) and Funds Provided by Operations which are “non-GAAP 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. We define EBITDA as net income (loss) adjusted for loss (income) from discontinued operations, interest expense, income tax and depreciation and amortization. We define Adjusted EBITDA as EBITDA adjusted for acquisition and disposition related costs, hurricane costs, lease termination receipts, gain on sale of unconsolidated center, and gain on bargain purchase. We define Adjusted Net income (loss) as Net income (loss) adjusted for acquisition and disposition related costs, hurricane costs, lease termination receipts, gain on sale of unconsolidated center, gain on bargain purchase, tax impact related to those adjustments, and discontinued operations, net of tax. Funds Provided by Operations is defined as net income from operating activities adjusted for the cash effect of professional liability and other non-cash charges. Management believes that Funds Provided by Operations is an important performance measurement 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.
Our measurements of EBITDA, Adjusted EBITDA, Adjusted Net income (loss) and Funds Provided by Operations may not be comparable to similarly titled measures of other companies. We have included information concerning EBITDA, Adjusted EBITDA, Adjusted Net income (loss) and Funds Provided by Operations in this press release because we believe that such information is used by certain investors as measures of a company’s historical performance. Management believes that Adjusted EBITDA and Adjusted Net income (loss) are important performance measurements because they eliminate certain nonrecurring start-up losses and separation costs. Management believes that Funds Provided by Operations is an important performance measurement 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 taxes and other non-cash items. Our presentation of EBITDA, Adjusted EBITDA, Adjusted Net income (loss) and Funds Provided by Operations should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items.





DIVERSICARE HEALTHCARE SERVICES, INC.
SELECTED OPERATING STATISTICS
(Unaudited)
Three Months Ended March 31, 2018
 
 
 




As of March 31, 2018
 
 




Occupancy (Note 2)
 
 
 
 
 
 
 
 
Region
(Note 1)
 
Licensed Nursing Beds
Note (4)
 
Available Nursing Beds
Note (4)
 
Skilled Nursing Weighted Average Daily Census
 
Licensed Nursing Beds
 
Available
 Nursing
 Beds
 
Medicare
 Utilization
2018 Q1
 Revenue
($ in millions)
 
Medicare Room and Board Revenue PPD
 (Note 3)
 
Medicaid Room and Board Revenue PPD
 (Note 3)
 
Alabama
 
2,464

 
2,367

 
2,105

 
85.4
%
 
88.9
%
 
11.2
%
 
$
44.5

 
$
438.26

 
$
186.15

 
Kansas
 
464

 
462

 
400

 
86.3
%
 
86.6
%
 
12.3
%
 
7.8

 
445.41

 
169.62

 
Kentucky
 
1,285

 
1,291

 
1,125

 
87.6
%
 
87.1
%
 
13.3
%
 
26.3

 
476.02

 
186.70

 
Mississippi
 
1,039

 
978

 
890

 
85.7
%
 
91.0
%
 
14.1
%
 
19.1

 
429.13

 
188.04

 
Missouri
 
339

 
335

 
231

 
68.1
%
 
68.9
%
 
11.5
%
 
4.1

 
463.04

 
135.25

 
Ohio
 
403

 
392

 
349

 
86.7
%
 
89.1
%
 
13.1
%
 
8.9

 
494.80

 
185.82

 
Tennessee
 
617

 
546

 
441

 
71.4
%
 
80.7
%
 
13.3
%
 
9.2

 
444.31

 
183.12

 
Texas
 
1,845

 
1,613

 
1,215

 
65.8
%
 
75.3
%
 
7.6
%
 
21.4

 
494.64

 
148.58

 
Total
 
8,456

 
7,984

 
6,756

 
79.9
%
 
84.6
%
 
11.6
%
 
$
141.3

 
$
455.72

 
$
176.78

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Note 1:
The Alabama region includes nursing centers in Alabama and Florida. The Kentucky region includes one nursing center in Indiana.
 
Note 2:
The number of Licensed Nursing Beds is based on the licensed capacity of the facility. The Company has historically reported its occupancy based on licensed nursing beds, and excludes a limited number of assisted living, independent living, and personal care beds. The number of Available Nursing Beds represents licensed nursing beds less beds removed from service. Available nursing beds is subject to change based upon the needs of the facilities, including configuration of patient rooms, common usage areas and offices, status of beds (private, semi-private, ward, etc.) and renovations. Occupancy is measured on a weighted average basis.
 
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 Licensed and Available Nursing Bed counts above include only licensed and available SNF beds.

###
 



investorslidesfy18q1
Nasdaq: DVCR Investor Update As of March 31, 2018


 
Nasdaq: DVCR Forward-looking statements made in this presentation involve a number of risks and uncertainties, but not limited to: 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, 2017, 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. Forward-Looking Statements 2  the outcome of proceedings alleging violations of state or Federal False Claims Acts  our ability to increase patients served at our renovated centers  our ability to successfully integrate the operations of our new nursing centers in Alabama and Mississippi, as well as successfully operate all of our centers  laws and regulations governing quality of care or other laws and regulations applicable to our business including laws governing reimbursement from government payers  changes in governmental reimbursement  changes in occupancy rates in our centers  the impact of the recently adopted federal health care reform or any future healthcare reform  changes in anticipated revenue and cost growth and the anticipated results of operations  any increases in the cost of borrowing under our credit agreements  our ability to comply with covenants contained in those credit agreements  our ability to renew real estate investment trust leases under reasonable terms  the accuracy of our estimate of our anticipated professional liability expense  the outcome of professional liability lawsuits and claims  our ability to control ultimate professional liability costs  the costs of investing in our business initiatives and development  Our ability to control costs  the impact of future licensing surveys  the effect of changes in accounting policies  changing economic and competitive conditions  changes to our valuation of deferred tax assets


 
Nasdaq: DVCR Non-GAAP Information This presentation contains certain non-GAAP financial measures, including, EBITDA, Adjusted EBITDA and Adjusted EBITDAR. EBITDA is a non-GAAP financial measure which consists of net (loss) income before interest, income taxes, and depreciation and amortization. Adjusted EBITDA, also a non-GAAP financial measure, is EBITDA adjusted to add back non-recurring items such as (i) acquisition related costs, (ii) lease termination costs, (iii) gain on the sale of an unconsolidated affiliate, (iv) gain on bargain purchase, and (v) hurricane costs. Adjusted EBITDAR is Adjusted EBITDA adjusted to add back lease expense. Our presentation of EBITDA, Adjusted EBITDA and Adjusted EBITDAR should not be construed as an implication that our future results will be unaffected by unusual or non-recurring items. The presentation of the non-GAAP financial information is not intended to be considered in isolation or as a substitute for any measure prepared in accordance with GAAP. Because non-GAAP financial measures presented in this presentation are not measurements determined in accordance with GAAP and are susceptible to varying calculations, these non-GAAP financial measures, as presented, may not be comparable to other similarly titled measures presented by other companies. Diversicare believes that these non-GAAP financial measures facilitate making period-to-period comparisons and are meaningful indications of its operating performance. We have also presented Adjusted EBITDA in this presentation because we believe it is useful to provide investors and other users of our financial statements this performance measure to align with how management assesses our results of operations. A reconciliation of these non-GAAP measures to the most directly comparable GAAP measure is included in the attached Appendix A to this presentation. 3


 
Nasdaq: DVCR Leading Skilled Nursing Provider Compelling Demographic Trends Management’s Strategic Vision Yielding Results Improving Patient Quality Measures, Census And Skilled Mix Demonstrated Ability To Grow And Enhance Portfolio Positively Trending Financial Results Investment Highlights 4


 
Nasdaq: DVCR • Joined Diversicare in 2012 • 20+ years of experience in the LTC industry • Previous senior leadership positions at: ‒ Golden Living • Licensed Physical Therapist • Licensed Nursing Home Administrator Executive Leadership • Joined Diversicare in 2012 • 10+ Years of senior finance positions in the healthcare industry • Previous senior leadership positions at: ‒ NuscriptRX ‒ Take Care Health Systems ‒ I-TRAX, Inc. (CHD Meridian) • Joined Diversicare in 2010 • 25 Years+ of experience in the LTC industry • Previous senior leadership positions at: ‒ Beverly ‒ Living Centers of America ‒ Skilled Healthcare • SNF – Rehab - Hospice Jay McKnight Chief Financial Officer Kelly Gill CEO, President & Director Leslie Campbell Chief Operating Officer 5


 
Nasdaq: DVCR NE CO OK LA FL (1) IA IL KS (6) OH (5)IN (1) MO (3) AR KY (13) TN (5) PA MS (9) AL (20) SC NC GA VA WV TX (13) 6 Diversicare at a Glance 2017 Q1 Revenue $141.5M – 2018 Q1 Reported Revenue $141.3M – 2018 Q1 old GAAP Revenue $144.5M; 2.1% Growth Currently – 75 SNFs, 1 ALF – 8,456 Licensed Skilled Nursing Beds – 10 States Headquartered in Brentwood, TN


 
Nasdaq: DVCR 7 Company Profile  Public Company since 1994  NASDAQ Listed Company Symbol: DVCR  Added to Russell Microcap Index in 2014  52 week range $7.16 – $12.25  Historically paid $0.22 annual dividend  Headquartered in Brentwood, TN


 
Nasdaq: DVCR 8 Long Term Care Industry Overview • Compelling Demographic Trends • High Quality Clinical Outcomes • Relative Low Cost of Care • Risks to the Industry and the Company


 
Nasdaq: DVCR 9 Compelling Industry Demographics Risi n g Deman d St able Su p pl y Sources: AHCA, CMS OSCAR Data and US Census Bureau, US Administration on Aging 15,000 15,500 16,000 16,500 17,000 2000 2002 2004 2006 2008 2010 2012 2014 2016 Number of Skilled Nursing Facilities 0 20 40 60 80 100 1990 2000 2010 2020E 2030E 2040E 2050E 2060E Age 65+ Population (in millions)


 
Nasdaq: DVCR 10 • Long term care spending continues to increase ‒ Medicare and Medicaid expenditures for SNFs expected to grow 57% from 2015 to 2025 ‒ Annual spending on older adults is expected to increase 250% by 2040 Sources: Medpac and US HHS Department Compelling Industry Demographics $20.0 $30.0 $40.0 $50.0 $60.0 $70.0 $80.0 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E 2023E 2024E 2025E Medicare and Medicaid SNF Spending (in billions) Medicare Medicaid


 
Nasdaq: DVCR 11 Relative Cost Per Case of Treatment Across Post-Acute Care Providers Sources: Medpac and US HHS Department $0 $20 $40 $60 $80 $100 $120 Stroke Hip Fracture Joint Replacement Respiratory w/ Vent Tracheotomy w/ Vent $8 $9 $11 $6 $10 $26 $34 $18 $17 $26 $75 $31 $45 $67 $115 SNF IRF LTAC SNFs are recognized as high quality, low cost provider of institutional post-acute care


 
Nasdaq: DVCR Risks to the Industry and the Company A number of risks may impact the Industry in general and the Company in particular, including litigation risks and Government reimbursement/regulation risks. Litigation Risks include: • The provision of health care services results in numerous professional liability claims. As of March 31, 2018, the Company had 73 professional liability lawsuits pending against it, many of which are substantially self-insured; thus, the Company has significant potential professional liability exposure. • The Industry is subject to extensive regulatory scrutiny and lawsuits alleging violations of the False Claims Act. The Company is currently defending an investigation relating to its therapy services arising from a false claims lawsuit and an investigation related to the completion of preadmission evaluation forms required by the Tennessee Medicaid Program. • The Company is the subject of a purported class action lawsuit against one of its former Arkansas facilities seeking damages for alleged chronic understaffing. 12


 
Nasdaq: DVCR Risks to the Industry and the Company Government Reimbursement Risks include: • In recent years, there have been initiatives on the federal and state levels for comprehensive reforms affecting the availability, payment and reimbursement of healthcare services in the United States. The Industry is subject to ongoing health care reform which is likely to continue to affect the provision of healthcare services and may require changes in the way the Company conducts its business. • The Industry, as well as the Company, is primarily dependent upon reimbursement from third-party payors, including the Medicare and Medicaid programs. Significant reductions in the reimbursements provided by these programs and other changes have been proposed that would, if implemented, negatively impact the Company’s net revenues, net income and cash flows. • The health care industry is subject to numerous laws and regulations of federal, state and local governments. These laws and regulations include, but are not necessarily limited to, matters such as licensure, accreditation, government health care program participation requirements, protection of patient health information, reimbursement for patient services, quality of patient care and Medicare and Medicaid fraud and abuse. The Company must comply with these increased regulations in order to qualify for reimbursement under Medicare and Medicaid Programs. 13


 
Nasdaq: DVCR 14 Company Overview • Mature Company • Provides a full spectrum of post-acute healthcare services • Robust operating platform capable of significant growth expansion


 
Nasdaq: DVCR Investments made in internal improvements and scalability position Diversicare for external growth Launched Q3 2010 Today Expanded Focus Now On Portfolio Growth Retooling: Areas of Focus Platform Development Operational Improvement Facility Renovations Key Strategic Accomplishments 15


 
Nasdaq: DVCR Implement an Electronic Medical Record (EMR) Solution Centralization of Key Processes People – Processes – Resources Completed – Company repositioned for rapid growth Platform Development and Operational Improvements 16


 
Nasdaq: DVCR 17 Key Results and Outcomes • Improved Quality Measures • Improved patient mix and reimbursement rates • Improved operating and G&A leverage • Demonstrated growth through acquisitions


 
Nasdaq: DVCR Adoption of ASC 606 - Effective January 1, 2018, the Company adopted the new revenue recognition standard in accordance with Accounting Standards Codification (“ASC”) 606. - The Company used the modified retrospective adoption approach. Therefore, prior year revenue was not restated and the comparison of the current year revenue is conformed to the legacy GAAP presentation and then compared to prior year revenue. - The impact on the bottom line of the methodology is minimal and mostly relates to the classification of bad debt expense, which is now being recorded as a reduction of revenue instead of a component of operating expense. 18


 
Nasdaq: DVCR Results for All Centers: 5 Star Quality Measures Relative to For-Profit Peer Group 19 4.07 3.0 3.2 3.4 3.6 3.8 4.0 4.2 Overall QM Rating DVCR Industry For-Profit Not-For-Profit Diversicare is an industry leader in 5 Star Quality Measures outcomes.


 
Nasdaq: DVCR A – Resulting from a 2% decrease in rates as a result of sequestration beginning April 1, 2013. Results: Rate Increases Driven By Higher Acuity • Medicare rate growth driven by acuity • 17.4% Increase from FY10 Q3 to FY18 Q1 • 4.1% CAGR 20 $380 $430 $480 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 $388 $456 Medicare Rate Per Day Medicare Rate Per Day RUGS IV Final Rule Impact A


 
Nasdaq: DVCR • Medicaid rates driven by acuity • 19.4% Increase from FY10 Q3 to FY18 Q1 • 4.5% CAGR Results: Rate Increases Driven By Higher Acuity 21 $145 $150 $155 $160 $165 $170 $175 $180 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 $148 $177 Medicaid Rate Per Day Medicaid Rate Per Day


 
Nasdaq: DVCR Results: Growth in Operated Facilities • Our ability to integrate facilities onto our platform is proven by our growth and early accretion of new facilities. • We acquired 22 facilities in the fourth quarter of 2016. • On July 1, 2017, we acquired a facility located in Selma, Alabama. 22 30 35 40 45 50 55 60 65 70 75 80 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 2017 Q3 2017 Q4 2018 Q1 76 45


 
Nasdaq: DVCR Acquisitions are Accretive to earnings within a quarter of acquisitions date – the exceptions being development opportunities like new construction, major renovations, etc. Demonstrated Platform Scalability by successful integration of new facilities New Facility Integration, including EMR, implemented during the first quarter of operations at new facilities Results: Impact Of New Centers 23


 
Nasdaq: DVCR Results: Revenue Impact of Acquisitions 24 * For the purposes of this chart, the “same-store group” represents all centers operated by the Company prior to January 1, 2015. $- $20 $40 $60 $80 $100 $120 $140 $160 Q1 ’14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Quarterly Revenue Same-store group* 2015 Acquisitions (3) 2016 Acquisitions (22) 2017 Acquisitions (1)


 
Nasdaq: DVCR *Same-Store group represents all nursing centers acquired by the Company prior to January 1, 2017. Results: New Centers and Same-Store 25


 
Nasdaq: DVCR Results: Revenue Growth and Operating Leverage • Continued Company-wide cost reduction efforts in place o Diligent vendor management and product selection criteria o Centralized purchasing functions drive consistency through all facilities o Revenue and operating expenses increased in the fourth quarter due to the acquisition of 22 new centers 26 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% $30 $50 $70 $90 $110 $130 $150 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 Revenue and Facility-Level Operating Profit Revenue Operating Profit (%)


 
Nasdaq: DVCR • Continued G&A reduction efforts in place o Right-sized overhead structure for new portfolio o Centralized core functions to leverage skilled teams • Savings from G&A reductions funded strategic investments Results: G&A Leverage 27 A –G&A expenses increased in the third quarter of 2016 due to preparation for our acquisition activity of 22 centers in the fourth quarter. 5.0% 6.0% 7.0% 8.0% Q1 '15 Q2 '15 Q3 '15 Q4 '15 Q1 '16 Q2 '16 Q3 '16 Q4 '16 Q1 '17 Q2 '17 Q3 '17 Q4 '17 Q1 '18 G&A Expense as a % of Revenue A


 
Nasdaq: DVCR 28 Current Areas of Focus • Continuous quality improvement • Enhancing existing portfolio • Growth through accretive acquisitions


 
Nasdaq: DVCR Continuous improvement of Quality Measures Continue to drive volume of patients served Improve skilled mix / provide high-acuity services Ongoing renovations of existing facilities Continue to Enhance Existing Portfolio 29


 
Nasdaq: DVCR Achieved goal of doubling the size of the Company in 3 years Target: 5-10 new facilities per year Active acquisition pipeline Expanded operating infrastructure = Scalability Structure flexibility = Several sources of financial capacity Portfolio Growth 30


 
Nasdaq: DVCR • Full Ownership Of Assets • Participate In Value Appreciation • Enhance Facility Ownership Fee-Simple Acquisitions • Minimal Capital Required • Leverage Turnaround Capabilities • Leverage Strong REIT Relationships Assumption of Long-Term Operating Leases 2010 Today 20% 24% 80% 76% Flexible Structure Broadens Pipeline 31 Acquisition Types


 
Nasdaq: DVCR 32 Summary • Improved operational and financial results • Attractive investment dynamics • Repositioned for the future


 
Nasdaq: DVCR Key Financial and Operating Statistics 33 Q1 2018 Q4 2017 Q3 2017 Q2 2017 Q1 2017 Average Daily Census 6,756 6,740 6,854 6,749 6,770 Total Average Daily Census – Medicare & Managed Care 1,086 988 994 1,053 1,065 Skilled Mix % 16.1% 14.7% 14.5% 15.6% 15.7% Occupancy (Available Beds) 84.5% 83.3% 84.7% 83.5% 85.5% Medicare Rate Per Day $455.72 $457.02 $455.95 $453.02 $451.26 Medicaid Rate Per Day $176.78 $178.29 $176.26 $173.92 $173.75 Revenue (Millions) $141.3 $144.4 $146.4 $142.6 $141.5 Facility Level Operating Profit $29.0 $28.2 $28.3 $29.4 $30.8 G&A % of Revenue 5.8% 5.6% 5.5% 5.8% 6.3% Net Income (Loss) $(0.1) $(5.9) $(0.6) $0.4 $1.3 Adjusted EBITDAR $18.2 $17.4 $17.6 $18.6 $19.3 Adjusted EBITDA $4.5 $3.7 $3.9 $4.8 $5.5


 
Nasdaq: DVCR Leading Skilled Nursing Provider Compelling Demographic Trends Management’s Strategic Vision Yielding Results Improving Patient Quality Measures, Census And Skilled Mix Demonstrated Ability To Grow And Enhance Portfolio Positively Trending Financial Results Investment Highlights 34


 
Nasdaq: DVCR Appendix A: Reconciliation of Net Income to Adjusted EBITDA and Adjusted EBITDAR 35 (a) Represents non-recurring costs associated with acquisition-related transactions. (b) Represents non-recurring lease termination receipts, net of expenses, related to the termination of the Carthage, Mississippi operating lease in September 2017. (c) Represents non-recurring hurricane costs related to Hurricanes Harvey and Irma during the third quarter 2017. (d) Represents non-recurring gain on bargain purchase related to the Selma acquisition in July 2017. (e) Represents non-recurring gain on the sale of an unconsolidated affiliate sold in November 2016.