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ADVOCAT INC. ANNOUNCES 2006 FIRST QUARTER RESULTS
BRENTWOOD, Tennessee - (May 11, 2006) - Advocat Inc. (NASDAQ OTC: AVCA) today announced its results for the first quarter ended March 31, 2006.
Advocat Inc. provides long-term care services to nursing
home patients in eight states, primarily in the Southeast. The Company has 43 centers containing 4,505 licensed nursing beds.
Income Statement Highlights
Net income from continuing operations
for the quarter was $6.6 million compared to $8.9 million for the same quarter last year. The Company’s results included a net benefit for professional liability expense of $2.1 million compared to a net
benefit of $7.2 million in the 2005 quarter, a decrease in net benefit of $5.1 million. In 2006 a benefit for income taxes of $0.7 million was recorded compared to a provision of $11,000 in 2005. For the three
month periods ended March 31, 2006 and 2005, net income from continuing operations per common share fully diluted for the quarters was $1.00 and $1.37, respectively. There were 6.5 million weighted average shares
outstanding on a fully diluted basis during the first quarter of 2006.
Revenue Highlights and Occupancy Rates
For the 2006 first quarter, revenue grew to $53.2 million compared to $48.9 million in
2005, an increase of 8.8%. The increase in patient revenue was due to increased Medicare utilization, increased Medicaid rates in certain states, increased Medicare rates and an increase in patient census, partially
offset by a decrease in net ancillary service revenues.
The average rate of occupancy at the Company’s nursing centers increased to 77.6% in 2006 from 75.4% in 2005. Medicare revenues were 31.3% of
total patient revenue in 2006 compared to 30.1% in 2005.
Liquidity and Capital Resources
As of March 31, 2006, $45.6 million of debt was classified as a current liability and certain financial
covenants were in non-compliance. Management is actively working with the lenders to extend maturities and to adjust covenants.
On March 17, 2006, the Company entered into a two-year renewal of the term
notes and working capital line of credit agreements with the primary bank lender. Advocat is now in compliance with those covenants and anticipates it will repay the term notes within the two-year term of this
agreement.
The Company entered into an agreement to sell eleven of its assisted living facilities in North Carolina for approximately $11 million as well as the sale of the twelfth facility to another buyer
for approximately $4 million. The Company is scheduled to close the sale of the eleven facilities on May 15, 2006, and expects to close the remaining transaction in the second quarter of 2006, although no assurances
can be given. Mortgages of $16.6 million secured by these twelve facilities were due April 1, 2006, and the Company has entered into a 60-day extension for these mortgage loans. The Company has also entered
into a 90-day extension of $10.0 million in mortgage loans that are secured by three nursing centers with this lender. The Company anticipates that, when the sale of the facilities is closed, it will be able to
refinance the remaining debt with the current lender. No agreements have been reached, and no assurances can be made that its efforts will be successful.
Funds Provided From Operations
Management
believes that reviewing cash provided from operations is an important measurement of the Company’s performance. The net cash provided by operating activities before changes in other assets and liabilities (or
Funds Provided From Operations) is presented in the first section of the cash flow statement of the press release. Funds provided from operations eliminate the effect of actuarial assumptions and reflects the cash
effect of professional liability. Funds provided from operations for the current quarter were $4.0 million versus $2.0 million generated in the first quarter last year.
CEO Remarks
Mr. William
Council, CEO of Advocat, stated, “The steady progress of the Company is very evident by the performance in the first quarter, as the Company is continuing to record positive growth. Management is focused on
increasing occupancy rates and revenue per patient, while we are strengthening our financials with diligent cost controls and cash flow management. We are also focused on completing our previously announced
divestitures and securing long term financing for our maturing debt.”
Conference Call
A conference call has been scheduled to discuss the first quarter 2006 results for the period ended
March 31, 2006, on Monday, May 15 at 10:00 A.M. central time (11:00 A.M. eastern time).
The conference call information is as follows:
Date: Monday, May 15, 2006
Time: 10:00 A.M. Central, 11:00 A.M. Eastern
Webcast Links: http://phx.corporate-ir.net/playerlink.zhtml?c=77083&s=wm&e=1308775
www.streetevents.com
www.earnings.com
www.irinfo.com/avc
Dial in numbers: (866) 356-4123 (domestic) or (617) 597-5393 (international)
Passcode: 87804276
A replay of the conference call will be
accessible two hours after its completion through May 22, 2006 by dialing (888) 286-8010 (domestic) or (617) 801-6888 (international) and entering passcode 48208703.
Forward-Looking Statements
Forward-looking statements made in this release involve a number of risks and uncertainties, including but not limited to, uncertainty regarding our ability to complete all of
the described transactions and restructure the remaining debt, changes in governmental reimbursement, government regulation and health care reforms, the increased cost of borrowing under our credit agreements,
covenant waivers from our lenders, possible amendments to our credit agreements, ability to control ultimate professional liability costs, the accuracy of our estimate of our anticipated professional liability
expense, the impact of future licensing surveys, the outcome of regulatory proceedings alleging violations of laws and regulations governing quality of care or violations of other laws and regulations applicable to
our business, changing economic conditions as well as other risk factors detailed in the Company's Securities and Exchange Commission filings. The Company has provided additional information in its Annual Report
on Form 10-K for the fiscal year ended December 31, 2005, as well as in other filings with the Securities and Exchange Commission, which readers are encouraged to review for further disclosure of other factors
that could cause actual results to differ materially from those indicated in the forward-looking statements. Advocat Inc. is not responsible for updating the information contained in this press release beyond the
published date, or for changes made to this document by wire services or Internet services.
More complete financials are available in the Form 10-Q, which was filed today with the SEC.
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