Advocat Inc : Advocat Announces 2007 Second Quarter Results

Advocat Inc. (NASDAQ: AVCA) today announced its results for the second quarter and six months ended June 30, 2007.

The Company's recently announced acquisition of the leasehold interests and operations of seven skilled nursing facilities in Texas and the related financing is expected to occur on August 10, 2007.

Income Statement Highlights for the Second Quarter 2007

Net income from continuing operations was $4.3 million and $0.68 per diluted common share, compared to $3.7 million and $0.55 per diluted common share for the second quarter in 2006. The major items affecting net income comparability, listed below, contributed a net increase of approximately $0.5 million. These items included:

• Non-cash stock-based compensation expense of $0.2 million in the second quarter of 2007 compared to expense of $5.0 million in 2006 for a total decrease in non-cash expense of $4.8 million.
• An income tax provision of $2.7 million in the second quarter of 2007 compared to a tax benefit of $0.4 million in 2006 for a total increase in income tax expense of $3.1 million.
• A net benefit from professional liability of $3.4 million in the second quarter of 2007 versus a net benefit of $4.0 million in 2006, a decrease in the non-cash benefit of approximately $0.6 million.
• An increase in non-cash rent expense of approximately $0.6 million.

Funds Provided From Operations

Funds provided from operations in the second quarter of 2007 were $3.6 million versus $4.7 million in the second quarter of 2006 and $2.9 million in the first quarter of 2007. Major items affecting funds from operations in 2007 include cash payments for professional liability claims, which were approximately $0.5 million higher than the second quarter of 2006, and the accrual for current income tax expense, which was approximately $0.3 million higher than the second quarter of 2006. Funds from operations is a non-GAAP measurement. A reconciliation of funds from operations to net income is included in the financial tables accompanying this press release.

Other Highlights for the Second Quarter of 2007

• Revenue of $55.4 million, up 3.7% from $53.4 million.
• Average occupancy rate was 78.6% in the second quarter of 2007, compared to 78.7% in the second quarter of 2006.
• Medicare days as a percent of total census decreased to 14.1% from 14.3% in the second quarter of 2006.
• Medicare Part A average revenue per day increased to $344.48 from $323.46, an increase of 6.5%.
• Medicaid average revenue per day increased to $137.75 from $132.48, an increase of 4.0%.
• Working capital increased to $12.4 million at June 30, 2007, compared to $8.2 million at December 31, 2006.
• Debt was reduced by $2.7 million compared to December 31, 2006.
• Shareholders' equity increased to $9.6 million at June 30, 2007, compared to $3.8 million at December 31, 2006.

Major operating expense items affecting 2007 financial results compared to 2006 were:

• Employee wages increased by $1.1 million, or 4.5%.
• Employee health insurance costs increased by $0.2 million, or 16%.
• Bad debt expense decreased by $0.3 million.

As a result of the previously announced termination of operations at a leased facility in Arkansas, the Company has reclassified its 2007 and prior period financial statements to include the results for this facility in discontinued operations.

Facility Renovation Update

Five facilities were renovated before the beginning of the second quarter 2007. Second quarter 2007 results for these facilities compared to the second quarter of 2006 results were:

• Average occupancy increased to 68.4% from 63.0%.
• Medicare census as a percent of total increased to 13.8% from 13.1%.

Two more renovations have been completed since the start of the second quarter of 2007, bringing the total number of completed renovation projects to seven. The Company has begun two additional renovations, which are expected to be completed in the fourth quarter of 2007 and first quarter of 2008, and is currently reviewing plans for an additional renovation, expected to be completed by the second quarter of 2008. The facilities selected for the initial projects were facilities with the most potential for improvement, and these results may not be indicative of results for future projects.

Revenue and Income Highlights for Six Months

Revenue increased to $110.0 million in the first half of 2007 from $106.1 million in 2006, an increase of 3.7%.

Income from continuing operations before income taxes was $9.2 million in the first half of 2007 compared to $9.3 million in 2006. Professional liability expense in 2007 resulted in a benefit of $3.0 million compared to a benefit of $6.3 million in 2006. The provision for income taxes was $3.6 million in 2007 compared to a benefit for income taxes of $1.1 million in 2006. As a result, net income from continuing operations declined to $5.6 million in the first half of 2007 from $10.4 million in 2006. The diluted income per common share from continuing operations was $0.89 in 2007 as compared to $1.58 in 2006.

CEO Remarks

William R. Council, III, President and CEO of Advocat, commented, ?We are gratified with operational performance in the second quarter. Our total occupancy increased to 78.6% from 78.3% in the first quarter. Our Medicare and Medicaid revenues per day increased by 6.5% and 4.0%, respectively, over the prior year, reflecting the Company's ability to provide care to patients with higher acuity levels. Our Medicare revenues as a percent of total revenues increased to 31.4% in 2007 compared to 31.2% in 2006. Costs were contained and on budget.

?Our renovation program at selected facilities and marketing strategies are contributing to occupancy improvements. Five of our six regions are achieving over 85% occupancy rates based on available beds and two regions exceed 90%. Our marketing efforts geared toward attracting the Medicare patient needing additional skilled care and rehabilitation before going home from the hospital are very important. These patients drive our Medicare room and board revenues as well as ancillary services revenue. We are pleased with the overall trend in Medicare utilization and average revenues per day that result from our expertise in caring for these patients.?

Mr. Council went on to note, ?I am also happy that we were able to deliver an acquisition that meets the targets we set out in our strategic goals. The acquisition of the seven facilities in Texas fits squarely in the parameters we have previously announced for acquisition candidates: an accretive transaction at an attractive price and a cluster of facilities located within our geographic footprint. I look forward to successfully integrating these operations and continuing the search for further opportunities.?

Guidance

The Company's previously issued guidance does not include results of the recently announced acquisition of seven facilities in Texas. Because of this transaction, Advocat is withdrawing this guidance.

Conference Call Information

A conference call has been scheduled for Thursday, August 9, 2007 at 9:00 A.M. Central time (10:00 A.M. Eastern time) to discuss 2007 second quarter results.

The conference call information is as follows:

      Date:               Thursday, August 9, 2007
      Time:               9:00 A.M. Central, 10:00 A.M. Eastern
      Webcast Links:      www.streetevents.com
                          www.earnings.com
                          www.irinfo.com/avc
      Dial in numbers:    (866) 314-9013 (domestic) or
                          (617) 213-8053 (international)
      Passcode:           39686209

A replay of the conference call will be accessible two hours after its completion through August 16, 2007 by dialing (888) 286-8010 (domestic) or (617) 801-6888 (international) and entering passcode 60791545.

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 our current views with respect to future events and present our estimates and assumptions only as of the date of this report. Actual results could differ materially from those contemplated by the forward-looking statements made in this release. In addition to any assumptions and other factors referred to specifically in connection with such statements, other factors 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 complete the acquisition of the seven skilled nursing facilities from Senior Management Services of America North Texas, Inc. and to obtain the financing from LaSalle Bank NA on the terms anticipated, our ability to integrate the acquired nursing homes into our business and achieve the anticipated cost savings, 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, our ability to control costs, changes to our valuation allowance for deferred tax assets, changes in occupancy rates in our facilities, 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, the effects of changing economic and competitive conditions, changes in anticipated revenue and cost growth, changes in the anticipated results of operations of the Company, 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, 2006, 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 42 skilled nursing centers containing 4,405 licensed nursing beds, primarily in the Southeast. For additional information about the Company, visit Advocat's web site: http://www.irinfo.com/avc

ADVOCAT INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands)
		June 30, 2007			December 31, 2006
		(unaudited)
ASSETS:
Current Assets
Cash and cash equivalents		$	13,046		$	12,344
Receivables, net			17,379			16,902
Deferred income taxes			2,719			1,785
Other current assets			6,120			6,759
Total current assets			39,264			37,790
Property and equipment, net			29,652			28,773
Deferred income taxes			18,224			21,849
Note receivable, net			4,536			4,758
Other assets, net			3,104			3,731
TOTAL ASSETS		$	94,780		$	96,901
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities
Short-term debt and current portion of long-term debt and settlement promissory notes		$	6,314		$	7,249
Trade accounts payable			4,144			4,566
Accrued expenses:
Payroll and employee benefits			8,301			9,363
Current portion of self-insurance reserves			4,102			4,838
Other current liabilities			4,013			3,600
Total current liabilities			26,874			29,616
Noncurrent Liabilities
Long-term debt and settlement promissory notes, less current portion			22,544			24,267
Self-insurance reserves, less current portion			17,789			22,159
Other noncurrent liabilities			7,544			5,733
Total noncurrent liabilities			47,877			52,159
PREFERRED STOCK			10,439			11,289
SHAREHOLDERS' EQUITY			9,590			3,837
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	94,780		$	96,901

ADVOCAT INC. CONSOLIDATED INCOME STATEMENTS (Unaudited) (In thousands, except per share data)
		For the Three Months								For the Six Months
		Ended June 30,								Ended June 30,
		2007				2006				2007				2006
PATIENT REVENUES, NET		$	55,381			$	53,423			$	109,973			$	106,070
EXPENSES:
Operating			41,896				40,188				83,636				80,278
Lease			4,611				3,828				9,207				7,653
Professional liability			(3,378	)			(3,982	)			(2,955	)			(6,258	)
General and administrative			4,017				3,716				8,095				7,197
Stock-based compensation			190				5,012				259				5,012
Depreciation			932				917				1,841				1,852
			48,268				49,679				100,083				95,734
OPERATING INCOME			7,113				3,744				9,890				10,336
OTHER INCOME (EXPENSE):
Foreign currency transaction gain			366				249				413				240
Other income			-				-				-				207
Interest income			256				165				507				348
Interest expense			(776	)			(877	)			(1,592	)			(1,876	)
			(154	)			(463	)			(672	)			(1,081	)
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES			6,959				3,281				9,218				9,255
PROVISION (BENEFIT) FOR INCOME TAXES			2,698				(387	)			3,577				(1,116	)
NET INCOME FROM CONTINUING OPERATIONS			4,261				3,668				5,641				© Business Wire 2007 Recommend : 0 Partner Area React to this article Latest news on DIVERSICARE HEALTHCARE SER 03/26   DIVERSICARE HEALTHCARE SERVICES INC: ex-dividend day 03/26   DIVERSICARE HEALTHCARE SERVICES INC: ex-dividend day 2012   ADVOCAT INC.: ex-dividend day 2012   ADVOCAT INC.: ex-dividend day 2012   ADVOCAT INC.: ex-dividend day 2012   ADVOCAT INC.: Robbins Umeda LLP Announces an Investigation of Advocat Inc. 2012   ADVOCAT INC.: ex-dividend day 2011   ADVOCAT INC.: ex-dividend day 2011   ADVOCAT INC.: ex-dividend day 2009   ADVOCAT: Bristol Thanks Investors for Sending Advocat a Message That Change Is ..		Advertisement