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ADVOCAT ANNOUNCES 2009 FIRST QUARTER RESULTS BRENTWOOD, Tenn., (May 6, 2009) – Advocat Inc. (NASDAQ: AVCA) today announced its results for the first quarter ended March 31, 2009. Highlights for First Quarter 2009 Key Highlights for the first quarter of 2009 compared to the first quarter of 2008 include the following:
Key highlights comparing the first quarter of 2009 to the fourth quarter of 2008 include the following:
CEO Remarks William R. Council, III, noted, “I am pleased with the first quarter results which were achieved in a difficult economic environment. Funds provided by operations totaled $4.0 million. Also, we saw increased revenue from higher occupancy and increased levels of patient acuity in the first quarter. Operating expenses were up but we held G&A expenses flat. We continue to maintain a wage freeze for management and reduced wage increases for employees. Mr. Council continued, “In the 3 ½ years since we embarked upon a renovation program we have completed improvements on 11 nursing centers. In the first quarter of 2009 10 centers for which renovations were completed over twelve months ago, average occupancy increased from 67.0% to 73.9% and Medicare daily census increased from a total of 110.7 to 123.4. 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 34%. As a result of this success Omega Healthcare Investors, Inc. (“Omega”), the REIT from whom we lease many of our nursing centers, has agreed to fund a third round of $5 million for renovations of selected facilities. In addition, construction of the replacement facility for our Paris, Texas nursing center is on schedule for completion in the third quarter." Other Highlights for the First Quarter 2009 Revenue increased to $73.8 million in 2009 from $71.5 million in 2008, an increase of $2.3 million, or 3.2%. This increase is primarily due to increased Medicaid rates in certain states, Medicare rate increases, and increased managed care rates and census, partially offset by the effects of lower Medicare census. The following table summarizes key revenue and census statistics for the quarterly reporting periods and segregates effects of the New Texas Facilities. Click here for Table Summarizing Key Revenue and Census Statistics The Company’s average rate per day for Medicare Part A patients increased 4.6% in 2009 compared to 2008 as a result of annual inflation adjustments and the acuity levels of Medicare patients in the Company’s 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 3.3% in 2009 compared to 2008 as a result of increasing patient acuity levels and other rate increases in certain states. Operating expense increased to $58.2 million in 2009 from $55.5 million in 2008, an increase of $2.7 million, or 4.9%. This increase is primarily attributable to cost increases related to wages and benefits (including payroll taxes), increases in ancillary and nursing costs, an increase in employee health insurance and higher bad debt expense. Operating expense increased to 78.9% of revenue in 2009, compared to 77.7% of revenue in 2008. The largest component of operating expenses is wages, which increased to $34.3 million in 2009 from $32.9 million in 2008, an increase of $1.4 million, or 4.3%. Wages increased primarily due to increases in wages as a result of competitive labor markets in most of the areas in which we operate, regular merit and inflationary raises for personnel (increase of approximately 3.1% for the period), and labor costs associated with increases in patient acuity levels. Bad debt expense was $0.2 million higher in 2009 compared to 2008. Employee health insurance costs were approximately $0.2 million higher in 2009 compared to 2008. Effective January 1, 2009, the Company is self insured for the first $160,000 in claims per employee each year, up from $150,000 in 2008 and prior periods. Employee health insurance costs can vary significantly from year to year. General and administrative expense was $4.6 million in both 2009 and 2008. As a percentage of revenue, general and administrative expense decreased to 6.2% in 2009 from 6.4% in 2008. Effective January 1, 2009 the Company instituted a wage freeze for its corporate and regional management teams, with reduced wage increases for the balance of the Company’s employees. These policies will be reevaluated as business and economic conditions improve. Professional liability was an expense of $3.2 million in 2009 compared to a benefit of $1.0 million in 2008, an increase in expense of $4.2 million. The Company’s cash expenditures for professional liability costs were $2.1 million and $0.2 million for 2009 and 2008, respectively. Professional liability expense and cash expenditures can fluctuate from quarter to quarter and from year to year. During the twelve months ended March 31, 2009, professional liability expense totaled approximately $5.9 million. Settlement with CMS In May 2009, the Company reached an agreement with the Centers for Medicare and Medicaid Services (CMS) to settle certain pre-acquisition cost report obligations of the homes acquired in Texas in 2007. The Company had accrued $1.0 million as its estimate of the liability for these obligations when it first learned of them in the second quarter of 2008. The settlement payment to CMS totals approximately $0.3 million, with related legal and other costs totaling an additional $0.2 million. The difference between the amount accrued and the ultimate payments, $0.5 million, has been recorded as Other Income in the first quarter of 2009. Facility Renovations During 2005, the Company began a program for strategic renovations on certain nursing centers to improve occupancy, quality of care, and profitability. To date, $15.6 million has been invested in 11 nursing centers, with $10.0 million financed through Omega, $4.5 million financed with internally generated cash and $1.1 million financed with long term debt. In May 2009, Omega committed an additional $5 million for funding renovations to selected nursing centers. Results of centers with renovations completed before the beginning of the first quarter of 2009 are summarized in a table accompanying this press release. Conference Call Information A conference call has been scheduled forThursday, May 7, 2009 at 9:00 A.M. Central time (10:00 A.M. Eastern time) to discuss first quarter 2009 results. The conference call information is as follows: Date: Thursday, May 7, 2009 Time: 9:00 A.M. Central, 10:00 A.M. Eastern Dial in numbers: 888-713-4216 (domestic) or 617-213-4868 (international) 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=PAG8VJHHT A replay of the conference call will be accessible two hours after its completion through May 14, 2009 by dialing 888-286-8010 (domestic) or 617-801-6888 (international) and entering passcode 22950350. 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 successfully construct and operate the Paris, Texas replacement facility or the new facility contemplated in West Virginia, our ability to increase census at our renovated facilities, changes in governmental reimbursement, government regulation and health care reforms, the increased 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 containing 5,773 licensed nursing beds, primarily in the Southeast and Southwest.
Press Release with Financial Tables in PDF Format
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