Arcadia Resources, Inc. (AMEX: KAD), an innovator in consumer health care services, today announced its financial results for the fourth quarter and fiscal year ended March 31, 2007.

Net revenues for fiscal 2007 increased 21% to $158.4 million, compared to $130.9 million for fiscal 2006. The revenue increase partially reflected organic growth of more than 10% year-over year in the Services segment, which now comprises approximately 77% of net revenues, as well as acquisitions made in other categories during fiscal 2007 to position the Company for emerging opportunities in the health care market.

In line with previously reported preliminary results, Arcadia incurred a fiscal 2007 net loss of $43.8 million, or $0.48 per share, of which approximately $37 million consisted of non-cash charges. Non-cash charges included: $22.9 million in goodwill and intangible asset impairment, primarily related to the Durable Medical Equipment business; $4.2 million in charges to increase the reserve for uncollectible accounts receivable; $3.0 million for stock-based compensation expense; and $7.1 million of depreciation and amortization. The fiscal 2007 results also reflected $5.6 million in operating losses incurred by the new clinics business, expenses related to first-year Sarbanes-Oxley Section 404 compliance, and costs associated with restructuring operations. The comparable fiscal 2006 net loss was $4.7 million, or $0.06 per share.

For the fourth quarter of fiscal 2007, net revenues were $38.4 million, compared to $34.2 million for the same period of the prior year. Net loss for the fiscal 2007 fourth quarter, including non-cash charges and other restructuring-related expenses, was $39.2 million, or $0.42 per share. This compared to a net loss of $1.2 million, or $0.01 per share, for the year-ago fourth quarter.

Management Strategies Being Implemented

The Company noted that subsequent to the end of fiscal 2007, its management team had begun to implement a series of previously announced strategic initiatives to improve Arcadia Resources' financial performance, strengthen its capital base, and position its businesses to capture growth opportunities in the healthcare marketplace. Among the key strategic initiatives are the following:

  • Restructuring/Cost Reduction. Management has begun implementing previously announced restructuring initiatives, including closing some unprofitable facilities; consolidating corporate accounting and support functions; centralizing pharmacy operations; and eliminating duplicate functions due to acquisitions. These efforts are expected to reduce costs by approximately $5 million on an annualized basis, beginning in the fiscal 2008 second quarter.
  • Equity Financing. The Company strengthened its capital base in May 2007 through the issuance of approximately $13 million in equity to a group of new and existing Arcadia Resources investors. The proceeds will be used primarily to repay debt borrowings and other corporate expenditures.
  • Debt Restructuring. The Company and Jana Master Fund, Ltd. have restructured a promissory note with a principal balance of $17 million. The terms of the restructuring include extending the maturity date to June 30, 2008 and, effective July 1, 2007, changing the interest rate to the one year LIBOR rate (as published in the Wall Street Journal) plus 8%. Additionally, 50% of the accrued interest is deferred until the maturity date.

In addition to these measures, the Company continues to actively pursue agreements with substantial customers, as well as such initiatives as the possible divestiture of non-strategic assets, further restructuring of debt, financing of Durable Medical Equipment receivables, and restructuring current clinic agreements. Management will also explore additional measures to achieve further cost savings and efficiencies.

10-K Filing

The Company's annual report on Form 10-K was filed today, within the extension period permitted by the SEC under rule 12b-25.

The Form 10-K contains an unqualified opinion on the financial statements from the Company's auditors, BDO Seidman, LLP. The independent auditor's report contains an explanatory paragraph regarding the Company's ability to continue as a going concern as of March 31, 2007. As previously reported, management identified material weaknesses that existed in the Company's internal controls over financial reporting at March 31, 2007, in the assessment of the Company's first year of compliance with Section 404 of the Sarbanes-Oxley Act.

Management Comments

Marvin R. Richardson, President and Chief Executive Officer, said, ?While fiscal 2007 was a challenging year, we have confidence in our plans for improving the Company's financial performance during fiscal 2008. It is important to note that a significant portion of the recent year's loss consisted of non-recurring and/or non-cash items related to our initiatives to position Arcadia Resources for long-term growth.?

?Since fiscal year-end, we have made progress in reshaping our management team, restructuring operations, and strengthening our capital base. Further initiatives are under way to enhance our financial resources, business performance and profitability. We believe that the financial results of fiscal 2007 do not reflect our true potential, and our team is fully committed to ? and sharply focused on ? driving cost-efficiency, achieving profitable growth and enhancing shareholder value,? Mr. Richardson added.

About Arcadia Resources

Arcadia Resources, Inc. is a national provider of alternate site healthcare services and products, including respiratory and durable medical equipment; non-medical and medical staffing, including travel nursing; comprehensive central fill and licensed pharmacy services available for purchase on http://www.prairiestonerx.com; and a catalog of healthcare-oriented products, also available for purchase on http://www.arcadiahomehealth.com and other leading retailer websites. Through industry partnerships, the Company is also establishing walk-in routine (non-emergency) medical clinics inside of retail stores. Arcadia's comprehensive solutions help organizations operate more effectively and with greater flexibility, while enabling individuals to manage illness and injury in the comfort of their own homes or through the convenience of local healthcare sites. For more information on the Company, visit our website: http://www.arcadiaresourcesinc.com. The Company's annual report on Form 10-K for the year ended March 31, 2007 is available on the Company's website and the SEC website (http://www.sec.gov).

Any statements contained in this release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21A of the Securities Exchange Act of 1934, as amended and otherwise within the meaning of court opinions construing such forward-looking statements. The Company claims all safe harbor and other legal protections provided to it by law for all of its forward-looking statements. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, estimates, uncertainties and other factors, which could cause actual financial or operating results, performances or achievements expressed or implied by such forward-looking statements not to occur or be realized, including our estimates of consumer demand for our services and products, required capital investment, competition, and other factors. Actual events and results may differ materially from those expressed, implied or forecasted in forward-looking statements due to a number of factors. Important factors that could cause actual results to differ materially include, but are not limited to (1) our ability to compete with our competitors; (2) our ability to generate sufficient cash flow to meet our obligations on a timely basis, including obtaining additional debt or equity financing and/or restructuring existing indebtedness and financing accounts receivables, which may be difficult due to our history of operating losses and negative cash flows; although management believes that the Company's short-term cash needs can be adequately sourced, we cannot assure that such additional sources of financing will be available on acceptable terms, if at all, and an inability to raise sufficient capital to fund our operations would have a material adverse affect on our business and would raise substantial doubt about our ability to continue as a going concern; (3) the ability of our affiliated agencies to effectively market and sell our services and products; (4) our ability to procure product inventory for resale; (5) our ability to recruit and retain temporary workers for placement with our customers; (6) the timely collection of our accounts receivable; (7) our ability to attract and retain key management employees; (8) our ability to timely develop new services and products and enhance existing services and products; (9) our ability to execute and implement our growth strategy; (10) the impact of governmental regulations; (11) marketing risks; (12) our ability to adapt to economic, political and regulatory conditions affecting the health care industry; (13) other unforeseen events that may impact our business; (14) our ability to successfully integrate acquisitions; and (15) the ability of our new management team to successfully pursue its business plan and the risk that the Company may be required to enact restructuring measures in addition to those announced on March 30, 2007. The forward-looking statements speak only as of the date hereof. Additional information that could materially affect the Company may be found in the Company's filings with the Securities and Exchange Commission. The Company disclaims any obligation to update or alter its forward-looking statements, except as may be required by law.

ARCADIA RESOURCES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 
Year Ended March 31,
2007    2006 
Revenues, net $158,411,484  $130,928,641 
Cost of revenues 106,008,488    87,563,329 
Gross profit 52,402,996  43,365,312 
 
Selling, general and administrative 65,288,339  43,174,514 
Depreciation and amortization 4,256,203  2,326,119 
Goodwill and intangible asset impairment 22,921,045    - 
Total operating expenses 92,465,587    45,500,633 
 
Operating loss (40,062,591) (2,135,321)
 
Other expenses:
Interest expense, net 3,571,548  2,456,799 
Other income -    - 
Total other expenses 3,571,548    2,456,799 
 
Net loss before income taxes (43,634,139) (4,592,120)
 
Current income tax expense 138,134    118,791 
NET LOSS $(43,772,273)   $(4,710,911)
 
Weighted average number of common shares outstanding (in thousands) 91,433  83,834 
Basic and diluted net loss per share $(0.48)   $(0.06)

ARCADIA RESOURCES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

 
Three Month Period Ended March 31,
2007    2006 
Revenues, net $38,411,462  $34,225,752 
Cost of revenues 28,239,736    22,770,870 
Gross profit 10,171,726  11,454,882 
 
Selling, general and administrative 23,072,832  11,750,893 
Depreciation and amortization 2,183,486  544,303 
Goodwill and intangible asset impairment 22,921,045    - 
Total operating expenses 48,177,362    12,295,196 
 
Operating loss (38,005,637) (840,314)
 
Other expenses:
Interest expense, net 1,153,906  325,511 
Other income -    - 
Total other expenses 1,153,906    325,511 
 
Net loss before income taxes (39,159,543) (1,165,825)
 
Current income tax expense 1,397    2,013 
NET LOSS $(39,160,940)   $(1,167,838)
 
Weighted average number of common shares outstanding (in thousands) 102,122  87,083 
Basic and diluted net loss per share $(0.42)   $(0.01)

ARCADIA RESOURCES, INC.

CONSOLIDATED BALANCE SHEETS

 
March 31
2007    2006 
ASSETS
Current assets:
Cash and cash equivalents $ 2,994,322  $ 530,344 
Accounts receivable, net of allowance of $8,310,000 and $1,891,000, respectively 33,427,284  27,109,601 
Inventories, net 2,732,533  1,502,276 
Prepaid expenses and other current assets 2,768,231    3,180,002 
Total current assets 41,922,370  32,322,223 
Property and equipment, net 12,606,480  6,225,043 
Goodwill 33,335,921  28,263,208 
Acquired intangible assets, net 28,982,628  18,325,732 
Other assets 380,374    14,940 
$ 117,227,773    $ 85,151,146 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Lines of credit, current portion $ 2,612,996  $ 2,000,000 
Accounts payable 6,861,262  1,912,860 
Accrued expenses:
Compensation and related taxes 4,462,726  2,417,832 
Commissions 359,401  279,262 
Accrued interest 818,655  141,463 
Other 1,049,065  1,266,598 
Payable to affiliated agencies, current portion 1,548,827  2,163,954 
Long-term obligations, current portion 21,320,198  2,056,311 
Capital lease obligations, current portion 1,020,421  349,555 
Deferred revenue 659,258    - 
Total current liabilities 40,712,809  12,587,835 
Other liabilities 457,161  - 
Line of credit, less current portion 20,342,796  14,487,967 
Payable to affiliated agencies, less current portion 37,848  152,750 
Long-term obligations, less current portion 896,870  266,447 
Capital lease obligations, less current portion 696,787    612,054 
Total liabilities 63,144,271  28,107,053 
 
Commitments and contingencies
 
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value, 5,000,000 shares authorized, none outstanding -  ? 
Common stock, $.001 par value, 200,000,000 and 150,000,000 shares authorized, respectively; 121,059,177 shares and 97,262,333 shares issued and outstanding, respectively 121,059  97,263 
Treasury stock, 0 and 859,297 shares, respectively -  (2,660,840)
Additional paid-in capital 110,342,704  72,215,658 
Accumulated deficit (56,380,261)   (12,607,988)
Total stockholders' equity 54,083,502    57,044,093 
$ 117,227,773    $ 85,151,146 
 

See notes to consolidated financial statements.

SUPPLEMENTAL INFORMATION:

 

Fourth Quarter and Full-Year EBITDA Comparisons

 

The Company's EBITDA for the fiscal 2007 and 2006 periods is presented below.

 
Reconciliation of EBITDA to Net Loss: (in thousands)

Quarter Ended
March 31, 2007

Quarter Ended
March 31, 2006

Net Loss (39,161) (1,168)
Income tax expense 1  2 
Interest expense 1,154  326 
Depreciation and amortization (including depreciation expense in cost of revenues) 3,097  1,234 
Impairment expense 22,921  0 
EBITDA (11,988) 394 
 
 
 
Reconciliation of EBITDA to Net Loss: (in thousands)

Fiscal Year Ended
March 31, 2007

Fiscal Year Ended
March 31, 2006

Net Loss (43,772) (4,711)
Income tax expense 138  119 
Interest expense 3,571  2,457 
Depreciation and amortization (including depreciation expense in cost of revenues) 7,114  3,426 
Impairment expense 22,921  0 
EBITDA (10,028) 1,291 

The presentation above bridges from Net Loss to EBITDA and is presented as a supplemental performance measure and is not intended as an alternative to net income or any other measure calculated in accordance with generally accepted accounting principles. Further, EBITDA may not be comparable to similarly titled measures used by other companies. Management has chosen to present the tables above to enable the reader to more readily understand the Company's EBITDA measurement due to the requirement to classify the depreciation and amortization related to certain revenue-producing fixed assets as a component of cost of goods sold, while presenting the remainder of depreciation and amortization on the corresponding line of the income statement.

Kreab/Strategy XXI
Dan Fleshler, 212-935-0210
or
Davis Hodge, 212-935-0210