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Advocat Inc. Announces 2005 Year End Results
BRENTWOOD, Tennessee - (March 29, 2006) - Advocat Inc. (NASDAQ OTC: AVCA) today announced its results for the fourth quarter and year ended December 31, 2005.
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.
2005 Results
Income Statement Highlights
Net income from continuing operations for 2005 was $30.6 million compared to $12.5 million in 2004 which amounted
to $4.69 per diluted share versus the previous year’s $1.93 per diluted share. The Company’s results included a $4.0 million net benefit for professional liability costs compared to a $1.8 million net
benefit in 2004. Furthermore, in 2005 a benefit for income taxes of $13.8 million was recorded versus a provision of $266,000 in 2004. Net income, after deducting a loss from discontinued operations of $5.3
million in 2005, was $25.0 million. In 2004, net income was $2.5 million after a loss from discontinued operations of $9.7 million. For 2005 there were 6.5 million weighted average shares outstanding on a
fully diluted basis.
Revenue Highlights
For 2005, revenue grew to $203.7 million compared to $191.2 million in 2004. This increase of $12.5 million resulted mostly
from Medicare rate increases, higher Medicaid rates in certain states, and increased Medicare utilization.
Balance Sheet Highlights
Shareholders’ deficit decreased to $16.9 million at December 31, 2005, from $41.9 million at last year end,
primarily as a result of 2005 net income of $25.0 million. Self-insured professional liability reserves were $34.5 million at December 31, 2005, compared to $42.9 million at December 31, 2004. The Company
also reduced the valuation allowance on its deferred tax assets. The Company previously had a full valuation allowance on its net deferred tax assets, including tax loss carryforwards. Based on its
improved performance, the Company was able to reduce this valuation allowance.
More complete financials are available in the 2005 Form 10-K, which was filed today with the SEC. Included in this press release are comparisons of 2005
versus 2004 years and fourth quarters, and there is a table presenting condensed cash flows from operating activities of continuing operations as well as a condensed balance sheet.
Mr. William Council, CEO of Advocat, stated, “Last year was a very good one for Advocat and the progress so far in 2006 is positive. In this
regard, we recently reported new loan agreements with our primary bank lender. Revenue improvements, excellent income gains, occupancy rate increases, improved Medicare utilization rates, and the proposed sale
of assisted living facilities are main measurements of our success. Creating these results is a dedicated Advocat staff that is committed to a program of quality care for our patients. As a result of these
efforts, several of our nursing centers were awarded public recognition for excellence. Our goal is to become the leading nursing center within each community we serve. Building reputation, strengthening our
marketing effort, and aesthetically upgrading the centers are ongoing processes for our Company.”
Occupancy and Medicare Utilization
The average rate of occupancy at the Company’s nursing centers for 2005 was 76.2%, a total increase of
30 basis points over 2004. The average rate of occupancy during the fourth quarter 2005 was 77.6%. This is 120 basis points better than the same quarter last year. The quality mix of occupancy is also
very important. Medicare revenues were 30% of the totals for 2005 which was 70 basis points better than a year ago. For the fourth quarter, Medicare revenues were 29.7% in 2005, which was 20 basis points better
than 2004.
For 2005, Medicare patient days accounted for
approximately 13.0% of total patient days, compared to 12.7% for 2004. For the fourth quarter of 2005, Medicare patient days were 13.0% of total patient days, compared to 12.3% for the same quarter last year.
Liquidity and Capital Resources
As of December 31, 2005, the Company had $31.5 million of scheduled debt maturities that must be repaid
or refinanced during the next twelve months. The Company is actively working with its lenders to address these issues. On March 17, 2006, the Company entered into a two year renewal of its term notes and
working capital line of credit agreement with its primary bank lender.
The Company expects to close during the second quarter of this year the sale of 11 assisted living facilities in North Carolina for approximately $11.0
million, although no assurances can be given that this sale will be completed. The Company has also entered into an agreement to sell its remaining assisted living facility in North Carolina, which sale is
subject to certain contingencies. These facilities and three nursing centers are collateral for mortgage debt with a commercial finance company totaling approximately $27.7 million as of December 31,
2005. These mortgages were scheduled to mature on April 1, 2006, and the Company has entered into a 60 day extension for $17.7 million of this debt that is secured by the assisted living facilities and has
entered into a 90 day extension for $10.0 million of this debt that is secured by the three nursing centers. The Company is actively working with this lender in an effort to obtain a longer term extension of these
debt maturities, but no agreement has been reached, and no assurances can be made that these efforts will be successful.
Facility Improvements
As announced last summer, Omega, a real estate investment trust and our largest financial partner, is providing
additional financing of up to $5 million for the renovation of facilities leased by the Company. The first project was completed in early January and three additional projects are in progress. Two other
projects are in the design phase.
Conference Call
A conference call has been scheduled to discuss the fourth quarter and year end results for the period ended December 31, 2005,
on Thursday, March 30, 2006 at 1:00 P.M. central time (2:00 P.M. eastern time).
The conference call information is as follows:
Date: Thursday, March 30, 2006
Time: 1:00 P.M. Central Time, 2:00 P.M. Eastern
Webcast Links: http://phx.corporate-ir.net/playerlink.zhtml?c=77083&s=wm&e=1235156
www.streetevents.com
www.earnings.com
www.irinfo.com/avc
Dial in numbers: (866) 277-1184 (domestic) or (617) 597-5360 (international)
Passcode: 77584680
A replay of the conference call will be accessible two hours after its completion through April 13, 2006 by dialing (617) 801-6888
and entering passcode 75328937.
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.
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