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ADVOCAT ANNOUNCES REFINANCING AND
2006 SECOND QUARTER RESULTS
BRENTWOOD, Tenn., (August 9, 2006) – Advocat (OTC BB: AVCA) today announced results for its second quarter and six months ended June 30, 2006. In addition, the Company announced the completion of its
comprehensive refinancing transaction.
Advocat 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.
DEBT REFINANCING
On August 7, 2006, the Company entered into a $30.6 million comprehensive refinancing with Capmark Finance, Inc. which retired existing mortgage and bank
term debt and provided funds for a $1.1 million renovation of a nursing center.
The new debt includes $22.5 million in mortgages with 25 year principal amortization and a five year term, and an $8.1 million
term note with a four year term. In addition, the Company made a payment of approximately $2.5 million to reduce outstanding debt. The refinancing allows Advocat to classify $24.5 million in debt that was
refinanced in the transaction as long-term at June 30, 2006. Advocat is now in compliance with all its debt covenants.
INCOME STATEMENT HIGHLIGHTS FOR THE SECOND QUARTER
Net income from
continuing operations for the quarter was $3.5 million compared to $1.8 million for the same quarter last year. The 2006 results included a net benefit for professional liability expense of $3.9 million
compared to a net expense of $1.5 million in 2005, a decrease in expense of $5.4 million.
The Company recorded a non-cash charge for stock-based compensation of $5.0 million, related to stock options approved by
the Company’s shareholders in June 2006. The options were granted in December 2005 subject to shareholder approval, which occurred at the Company’s annual meeting of shareholders.
For the
three month period, net income per common share from continuing operations on a diluted basis was $0.53 compared to $0.27 for 2005. There were 6.6 million diluted weighted average shares outstanding in the
second quarter of 2006.
REVENUE HIGHLIGHTS AND OCCUPANCY RATES
For the second quarter, revenue increased to $53.9 million from $49.6 million in 2005, an increase of $4.3 million or 8.6%.
The increase was due to increased Medicare utilization, increased Medicaid rates in certain states, Medicare rate increases, and an increase in census in 2006 compared to 2005.
The rate of occupancy at the
Company’s nursing centers increased to 77.7% in 2006 from 75.4% in 2005. As a percentage of total census, Medicare days increased to 14.2% in 2006 from 13.2% in 2005. Medicare was 31.1% of revenue in
2006 and 30.7% in 2005 while Medicaid and similar programs were 55.5% in 2006 compared to 57.7%.
The Company’s average rate per day for Medicare Part A patients increased to $322.79 from $308.31 in
2005, an increase of 4.7%.
FUNDS PROVIDED BY OPERATIONS
Management believes that reviewing funds provided by 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 by operations) is presented at the end of this press release. Funds provided by operations eliminate
the effect of actuarial assumptions, reflects the cash effect of professional liability, and excludes the noncash charge for stock-based compensation. Funds provided by operations for the current quarter were
$4.7 million compared to $3.1 million in the second quarter last year.
REVENUE AND INCOME HIGHLIGHTS FOR 6 MONTHS
Revenue increased to $107.1 million in 2006 from $98.5 million, an increase of
8.7%. Income from continuing operations for the six month period was $9.0 million compared to $10.8 million for 2005.
The Company recorded a non-cash charge for stock-based compensation of $5.0
million. There was no stock-based compensation expense in 2005.
Professional liability expense was a net benefit of $6.0 million versus a net benefit of $5.8 million in the prior year.
For the six month periods, net income from continuing operations per diluted common share was $1.53 compared to $1.64 in 2005.
CEO REMARKS
William R. Council stated, “The Company’s
results for the second quarter, excluding the impact of professional liability actuarial adjustments and the non cash stock-based compensation expense, continue to reflect the positive trends of the last several
quarters. These favorable results are the culmination of many of the Company’s initiatives coming together, including increasing occupancy and Medicare census.
“The completion of the
comprehensive refinancing transactions with Capmark Finance Inc. is a significant, and in some ways, final step in accomplishing the Company’s restructuring following a period of difficult operations. The
refinancing allows the Company to extend maturities of its debt to 4 and 5 years, revises covenants such that the Company is in compliance and provides financing for the $1.1 million renovation of one of the
buildings owned by the Company.
“We have now completed renovations at two nursing centers, and have two projects underway that are scheduled to be completed during the third quarter. For facilities
with three months of operations after completing a renovation, occupancy increased to approximately 75% from 58% last year, and Medicare utilization increased to approximately 21% from 13% last year.”
CONFERENCE CALL INFORMATION
A conference call has been scheduled to discuss the results for the period ended June 30, 2006, on Thursday, August 10 at 9:00 A.M. Central time (10:00 A.M.
Eastern time).
The conference call information is as follows:
Date: Thursday, August 10, 2006
Time: 9:00 A.M. Central, 10:00 A.M. Eastern
Webcast Links: http://phx.corporate-ir.net/playerlink.zhtml?c=77083&s=wm&e=1362527
www.streetevents.com
www.earnings.com
www.irinfo.com/avc
Dial in numbers:
(866) 578-5771 (domestic) or (617) 213-8055 (international)
Passcode: 22517246
A replay of the conference call will be accessible two hours after its completion through
August 17, 2006 by dialing (888) 286-8010 (domestic) or (617) 801-6888 (international) and entering passcode 44014105. Additionally, the
conference call may contain certain additional non−GAAP financial measures. Pursuant to the requirements of Regulation G, the Company will provide a reconciliation of all non−GAAP financial measures not previously reconciled to the most directly comparable GAAP financial measure on its website. Details and links to the reconciliations of any non−GAAP financial measures discussed during the conference call will be posted to the Company's website prior to the conference call at www.irinfo.com/avc.
FORWARD-LOOKING STATEMENTS
Forward-looking statements made in this release involve a number of risks and uncertainties, including but
not limited to, changes in governmental reimbursement, government regulation and health care reforms, the increased cost of borrowing under 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.
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