Advocat Announces Restructuring of Convertible Preferred Stock and Amendment and Renewal of Master Lease Agreement.Lessor One who rents real property or Personal Property to another. A lessor of land is a landlord. Cross-references Landlord and Tenant. lessor n. the owner of real property who rents it to a lessee pursuant to a written lease. to Provide $5 million in Additional Capital to Fund Renovations BRENTWOOD, Tenn. -- Advocat (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on : AVCA AVCA American Volleyball Coaches Association AVCA American Veterinary Chiropractic Association AVCA African Venture Capital Association AVCA Almaden Valley Community Association AVCA Automobil Veteranen Club Austria AVCA Apoyo Vital Cardiopulmonar Avanzado ), which provides long term care services to nursing home patients, today announced that it has entered into an agreement to restructure its Series B Redeemable Convertible Preferred Stock Convertible Preferred Stock Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares". held by Omega Healthcare Investors (together with its subsidiaries, "Omega"), a publicly owned Publicly owned can refer to:
See: Real Estate Investment Trust REIT See real estate investment trust (REIT). , eliminating the option of Omega to convert the Preferred Stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. into shares of Advocat common stock. Advocat and Omega also agreed to extend the term of its lease covering 29 nursing centers it currently leases from Sterling Acquisition Corp., a wholly-owned subsidiary of Omega. In addition, Omega agreed to provide up to $5 million to fund capital improvements made to certain nursing centers by June 30, 2008. The annual base rent related to these nursing centers will be increased to reflect the amount of capital improvements made to the facilities. The Company is currently reviewing its portfolio of nursing centers to select the centers for renovation. Preferred Stock Restructuring The Convertible Series B Preferred Stock held by Omega will be exchanged for a new Series C Preferred Stock that is not convertible. The new Series C Preferred Stock has a stated value Stated Value A value that, instead of being par value, is assigned to a corporation's stock for accounting purposes. Stated value has no relation to market price. Notes: of approximately $4.9 million and an annual dividend rate of 7% of its stated value (similar to the terms of the Series B Preferred Stock). The Series C Preferred Stock will pay dividends in cash quarterly. The Series C Preferred Stock is redeemable at stated value at Omega's option after September 30, 2010, and is redeemable at stated value at Advocat's option, subject to certain limitations. On October 20, 2006, Advocat declared and paid the quarterly dividend on the Series B Preferred Stock for the quarter ended September 30, 2006. The Series B Preferred Stock was convertible, under certain circumstances, into approximately 800,000 common shares of Advocat (or approximately 14% of the common shares outstanding prior to conversion). Advocat and Omega agreed to value this conversion feature at a discount of approximately 22.3% to the underlying market value (approximately $15 million) of the common stock. As consideration for eliminating this conversion feature, the Company will increase its rental payments to Omega by approximately $687,000 per year, beginning January 2007. Avondale Partners LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control advised Advocat in relation to the Preferred Stock Restructuring. Master Lease Amendment Advocat and Omega also agreed to amend and renew the master lease covering 29 nursing centers. The initial term of the lease was set to expire in September 2010, with a ten year renewal option. The amended master lease commences on October 1, 2006, and extends to September 30, 2018. The amendment also provides for a renewal option of an additional twelve years. Consistent with prior terms, the lease provides for annual increases in lease payments equal to the lesser of two times the increase in the consumer price index or 3.0%. Under generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting , the Company is required to record these scheduled rent increases on a straight line basis over the 12 year term of the renewal period. As a result of recording these increases, the Company's annual rent expense will increase by approximately $2.7 million, although this increase has no effect on cash rent payments other than the payments associated with the restructuring of the preferred stock described above. CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Remarks "We are pleased to reach these agreements with Omega," commented William R. Council, CEO of Advocat. "The elimination of the conversion feature removes a significant dilution to our current shareholders, and provides a greater degree of stability in our capital structure. We are pleased that Omega agreed to discount the value of the underlying shares, capturing that value for Advocat's current shareholders. "The early renewal of the lease provides more stability and long term certainty for our nursing center operations, particularly in light of the contemplated facility renovations. We are pleased that Omega is showing its continued support for this important strategic initiative by agreeing to provide up to $5 million in financing for these facility renovations. The renovation funding is in addition to the previous $5 million funding for renovations which we are completing in 2006. We appreciate the support we receive from Omega. "The deal is accretive on a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis for 2005, and flat on a pro forma basis for the six months ended June 30, 2006. We have illustrated the effects of these transactions in pro forma financial statements Pro forma financial statements A firm's financial statements as adjusted to reflect a projected or planned transaction. "What-if" analysis. included below, and will hold a conference call Wednesday, October 25, at 7:30 A.M. Central, 8:30 A.M. Eastern, to discuss this transaction." CONFERENCE CALL INFORMATION
The conference call information is as follows:
Date: Wednesday, October 25, 2006
Time: 7:30 A.M. Central, 8:30 A.M. Eastern
Webcast Links:
http://phx.corporate-ir.net/playerlink.zhtml?c=77083&s=wm&e=1406596
www.irinfo.com/avc
www.streetevents.com
Dial in numbers: (866) 383-8008 (domestic) or
(617) 597-5341 (international)
Passcode: 74178378
A replay of the conference call will be accessible two hours after its completion through November 1, 2006 by dialing (888) 286-8010 (domestic) or (617) 801-6888 (international) and entering passcode 60673267. About Advocat Advocat provides long-term care long-term care (LTC), n the provision of medical, social, and personal care services on a recurring or continuing basis to persons with chronic physical or mental disorders. services to nursing home patients in eight states, primarily in the southeast. The Company has 43 centers containing 4,505 licensed nursing beds. For additional information about the Company, visit Advocat's web site: http://www.irinfo.com/avc. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. Forward-looking statements made in this release involve a number of risks and uncertainties, including but not limited to, changes in governmental reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. , 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 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. UNAUDITED PRO FORMA CONDENSED con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. CONSOLIDATED FINANCIAL INFORMATION The following unaudited pro forma condensed consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge have been prepared to give effect to a material transaction described herein and are based upon the assumptions and adjustments described in the notes to the unaudited pro forma condensed consolidated financial statements included herein. The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and are not necessarily indicative of the financial position or results of operations that would have actually been reported had the material transaction occurred on the dates indicated, nor are they necessarily indicative of the future financial position or results of operations of Advocat. The unaudited pro forma condensed consolidated financial statements include adjustments, which are based upon preliminary estimates, to reflect the transactions described in this press release. Due to these varying assumptions, actual results may differ from the pro forma adjustments presented herein. These unaudited pro forma condensed consolidated financial statements are based upon, and should be read in conjunction with the historical consolidated financial statements of Advocat and related notes contained in the reports and other information Advocat has filed with the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Securities and Exchange Commission. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] |
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