|
ADVOCAT ANNOUNCES RESULTS
FOR FOURTH QUARTER AND YEAR END
FRANKLIN, Tenn. - (March 28, 2005) - Advocat Inc. (NASDAQ OTC: AVCA) today announced its results for the fourth quarter and year ended December 31, 2004.
For the fourth quarter of 2004, Advocat reported a net loss from continuing operations of $3.9 million, or $0.69 per diluted common share, compared with a net income from continuing operations
of $2.1 million, or $0.33 per diluted common share, in 2003. The results for 2004 include $7.7 million in impairment charges compared with $1.7 million in the fourth quarter of 2003.
Reclassification for Discontinued Operations
As previously announced, the Company has made several divestitures and lease terminations in 2004, including its Canadian subsidiary, its medical supply business,
three leased and two owned nursing homes in Texas, and, in 2003, two assisted living facilities in North Carolina. Each of these facilities and businesses constitute components under the provisions of Statement
of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” and, accordingly, the Company has reclassified each of these components
to discontinued operations.
Fourth Quarter Results
Advocat’s net revenues from continuing operations increased 8.2% to $53.6 million compared with $49.5 million in the fourth quarter of
2003. The increase in fourth quarter net revenues was primarily due to patient revenues that increased 8.5% to $50.5 million compared with $46.6 million in the fourth quarter of 2003. Higher patient
revenues benefited from Medicare rate increases that were effective October 1, 2004, and increased Medicaid rates in certain states, partially offset by a 1.3% decline in census in 2004 compared with 2003. Resident
revenues increased to $3.1 million in 2004 from $2.9 million in the fourth quarter of 2003.
Total expenses from continuing operations increased to $57.0 million compared with $46.7 million in the
fourth quarter of 2003. The increase in total expenses was primarily due to higher impairment charges in 2004. As a result of projected cash flows related primarily to six Company-owned assisted living
facilities, the Company recorded $7.7 million in impairment charges in accordance with the provisions of SFAS No. 144. In the fourth quarter of 2003, the company had similar charges of $1.7 million. The impairment
charges primarily relate to the Company’s assisted living subsidiary and are primarily attributable to low occupancy in an over-bedded market, low reimbursement rates and increasing expense
levels. Operating expenses increased to $40.8 million and represented 76.1% of patient and resident revenues for the fourth quarter of 2004 compared with $37.4 million, or 75.5%, of such revenues in the fourth
quarter of 2003. Expenses for professional liability were $280,000 in the fourth quarter of 2004 compared to a net benefit of $248,000 in the fourth quarter of 2003.
2004 Results
Net income
from continuing operations for 2004 was $4.4 million, or $0.68 per diluted common share, compared with a net loss from continuing operations of $12.1 million, or $2.25 per share, in 2003. Net loss from
discontinued operations in 2004 was $1.7 million, or $0.26 per diluted share, compared with net income of $851,000 in 2003, or $0.16 per diluted share. Net income for common stock in 2004 was $2.5 million, or
$0.42 per diluted share, compared with a net loss for common stock of $11.5 million, or $2.09 per share, in 2003. Advocat’s profit for 2004 resulted primarily from non-cash expense reductions caused by
downward adjustments in the Company’s accrual for self-insured risks associated with professional liability claims.
The Company’s results of continuing operations for 2004 included a $1.9 million
net benefit for professional liability costs, compared with an expense of $15.1 million in 2003. The reduction related to adjustments in the Company’s self-insured risks associated with professional
liability claims. During 2004, the Company reduced its total recorded liabilities for self-insured professional liability risks associated with the settlement of certain professional liability claims to $42.9
million, down from $47.2 million at December 31, 2003. Downward adjustments in the liability primarily resulting from the quarterly actuarial valuations were partially offset by the provision for current
liability claims recorded during 2004, resulting in a net benefit of $1.9 million in 2004. These reductions were primarily the result of the effects of settlements of certain claims for amounts less than
previously estimated. These self-insurance reserves are assessed on a quarterly basis, with changes in estimated losses being recorded in the consolidated statements of operations in the period
identified. Professional liability costs include cash and non-cash charges recorded based on current actuarial reviews. The actuarial reviews include estimates of known claims and an estimate of claims that may
have occurred, but have not yet been reported to the Company.
As of December 31, 2004, the Company reported a liability of $42.9 million, including reported professional liability claims and estimates for
incurred but unreported claims. The Company does not have cash or available resources to pay these accrued professional liability claims or any significant portion thereof.
Net revenues increased 10.5%
to $202.8 million for 2004 compared with $183.5 million in 2003. Patient revenues were up 11.1% to $190.6 million in 2004 compared with $171.5 million in 2003. Resident revenues were $12.2 million in
2004 compared with $12.0 million in 2003.
Total expenses of continuing operations were $196.1 million in 2004 compared with $192.6 million in 2003. Operating expenses represented 77.8% of patient and
resident revenues for 2004 compared with 78.9% of such revenues in 2003.
Reimbursement Updates
President Bush’s proposed federal budget for the fiscal year beginning October 1, 2005, includes
several reductions that will adversely affect Advocat’s revenues if implemented. The budget eliminates the reimbursement of add-ons for high acuity patients under the Resource Utilization Group (RUG) that
if implemented, will reduce revenue and cash flow before taxes by approximately $3.6 million per year. In addition, the proposed reduction of reimbursement for cross-over bad debt expense may reduce the
Company’s revenue and cash flow before taxes by approximately $150,000 per year when fully phased in.
Forward-looking statements made in this release involve a number of risks and uncertainties,
including but not limited to, uncertainty regarding the Company’s ability to restructure or refinance its debt, the impact of under-insured professional liability claims, factors affecting the long-term care
industry in general, governmental reimbursement, government regulation, health care reforms, the impact of future licensing surveys, changing economic and market conditions and other risk factors detailed in the
Company’s Securities and Exchange Commission filings. The Company will provide additional information in its Annual Report on Form 10-K for the fiscal year ended December 31, 2004, and has provided
additional information in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2004 (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.
Advocat Inc. provides long-term care services to nursing
home patients and residents of assisted living facilities in nine states, primarily in the Southeast.
|
