August 6, 2009

Advocat Announces 2009 Second Quarter Results

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.
CONTACT: Advocat Inc. William R. Council, III, President and CEO (615) 771-7575

Cameron Associates Investor Relations: Rodney O'Connor (212) 554-5470


Close window | Back to top

Copyright 2017 Diversicare Healthcare Services Inc.