Advocat Reports Third Quarter Results and Restated First and Second Quarters.Business Editors FRANKLIN, Tenn.--(BUSINESS WIRE)--Jan. 12, 2000 Advocat Inc. (Nasdaq OTC OTC See: Over-the-counter. OTC See over-the-counter market (OTC). :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 ) today reported its results for the third quarter ended September September: see month. 30, 1999, and its restated results for the first and second quarters of 1999. In connection with the November November: see month. 23, 1999, release of its results for the nine months ended September 30, 1999, the Company announced that, subject to completion of an analysis, certain charges recorded in the third quarter might apply to either or both of its previously reported interim results for the first and second quarters of 1999. The reported results for the three quarters today reflect completion of that analysis. For the third quarter of 1999, net revenues were $44.5 million compared with $51.3 million in the third quarter of 1998. The decline in revenue was primarily due to lower patient and ancillary revenues Ancillary Revenue Revenue generated from goods or services that differ from or enhance the main services or product lines of a company. By introducing new products and services or using existing products to branch into new markets, companies create additional opportunities for resulting from changes in Medicare Medicare, national health insurance program in the United States for persons aged 65 and over and the disabled. It was established in 1965 with passage of the Social Security Amendments and is now run by the Centers for Medicare and Medicaid Services. reimbursement Reimbursement Payment made to someone for out-of-pocket expenses has incurred. and a decline in Medicare patient census. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. for the third quarter decreased to $39.7 million compared with $40.2 million in the third quarter of last year. Although Advocat has implemented significant cost reductions in response to the Medicare reimbursement changes, certain operating expenses have risen, including the provision for doubtful accounts, increased reserves for the self-insured self-insured Self fund Health insurance adjective Referring to the practice of carrying an individual health insurance policy for oneself; self insurance is usually more expensive than group insurance portion of liability claims, and higher salaries and wages. The Company also experienced higher lease and general and administrative expenses. Advocat recorded a net loss of $4.2 million, or $0.77 per share, in the third quarter of 1999 compared with net income of $800,000, or $0.15 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, in the third quarter of 1998. As a result of the Company's analysis of charges taken for the nine months ended September 30, 1999, first quarter results were restated and resulted in a reduction in pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta operations of $1.4 million. As restated, Advocat's first quarter net loss was $983,000, or $0.18 per share, compared with a net loss of $118,000, or $0.02 per share, as originally reported for the first quarter of 1999. Restated shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. as of March 31, 1999, was $26.6 million and total assets were $118.3 million compared with $27.5 million and $118.6 million, respectively, as previously reported. Second quarter results for 1999 were also restated and resulted in a reduction in pre-tax operations of $4.2 million. As restated, Advocat's second quarter net loss was $2.6 million, or $0.48 per share, compared with a net loss of $97,000, or $0.02 per share, as originally reported for the second quarter of 1999. Restated shareholders' equity as of June June: see month. 30, 1999, was $24.2 million and total assets were $114.6 million compared with $27.7 million and $116.7 million, respectively, as previously reported. The adjustments to the first and second quarter results primarily included an increase in allowance for bad debts; increase in self-insurance self-insurance, n the setting aside of funds by an individual or organization to meet anticipated dental care expenses or dental care claims, and accumulation of a fund to absorb fluctuations in the amount of expenses and claims. reserves for workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. claims; accrual accrual, n continually recurring short-term liabilities. Examples are accrued wages, taxes, and interest. of fines, penalties and taxes; accrual of severance The act of dividing, or the state of being divided. The term severance has unique meanings in different branches of the law. Courts use the term in both civil and criminal litigation in two ways: first, when dividing a lawsuit into two or more parts, and second, when benefits; certain expenses related to leases; and reversal of revenue previously accrued ac·crue v. ac·crued, ac·cru·ing, ac·crues v.intr. 1. To come to one as a gain, addition, or increment: interest accruing in my savings account. 2. . The Company also reported that it is currently not in compliance with various financial covenants contained in its loan agreements with its primary bank and other lenders. Cross-default Cross-default A provision under which default on one debt obligation triggers default on another debt obligation. and other provisions contained in other loan agreements will under certain circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or permit the holders of a majority of the Company's debt to demand immediate repayment. The Company has total bank and other debt of $61.8 million as of September 30, 1999, of which approximately $27 million must be repaid or refinanced in 2000. However, because of the non-compliance the Company has classified $55.6 million as current liabilities Current Liabilities Usually appearing on a company's balance sheet, it represents the amount owed for interest, accounts payable, short-term loans, expenses incurred but unpaid, and other debts due within one year. . Management is currently in various stages of negotiations with the Company's bank and other lenders for the restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). of this approximately $27 million in debt that has maturity dates in February February: see month. or April 2000. No assurance can be given that the Company will successfully negotiate a restructuring, including appropriate waivers, of its indebtedness INDEBTEDNESS. The state, of being in debt, without regard to the ability or inability of the party to pay the same. See 1 Story, Eq. 343; 2 Hill. Ab. 421. 2. . If any of the Company's lenders forced immediate repayment, the Company would not be able to repay the amounts outstanding. 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. made in this release involve a number of risks and uncertainties, including but not limited to, factors affecting the 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. 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. Advocat Inc. operates 122 facilities including 57 assisted living as·sist·ed living n. A living arrangement in which people with special needs, especially older people with disabilities, reside in a facility that provides help with everyday tasks such as bathing, dressing, and taking medication. facilities with 5,320 units and 65 skilled nursing facilities skilled nursing facility n. Abbr. SNF An establishment that houses chronically ill, usually elderly patients, and provides long-term nursing care, rehabilitation, and other services. containing 7,307 licensed beds. The Company operates facilities in 12 states, primarily in the Southeast, and three provinces in Canada. For additional information about the Company, visit Advocat's web site: http://www.irinfo.com/avc
ADVOCAT INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share data)
For the Three Months
Ended September 30,
1999 1998
------------- --------------
REVENUES:
Patient revenues $ 33,865 $ 41,716
Resident revenues 9,735 8,649
Management fee revenues 860 896
Interest income 40 44
----------- -----------
Net revenues 44,500 51,305
----------- -----------
EXPENSES:
Operating 39,710 40,163
Lease 5,251 4,816
General and administrative 3,482 2,703
Interest 1,494 1,349
Depreciation and amortization 1,152 1,024
Non-recurring charges 0 0
----------- -----------
Total expenses 51,089 50,055
----------- -----------
Income (loss) before income taxes (6,589) 1,250
Provision (benefit) for income taxes (2,372) 450
----------- -----------
Income (loss) before cumulative effect of
change in accounting principle (4,217) 800
Cumulative effect of change in
accounting principle 0 0
----------- -----------
NET INCOME (LOSS) $ (4,217) $ 800
=========== ===========
Basic and diluted earnings (loss) per share:
Income (loss) before
accounting change $ (0.77) $ 0.15
Accounting change, net of tax 0.00 0.00
----------- -----------
Net income (loss) $ (0.77) $ 0.15
=========== ===========
Average Shares:
Basic 5,942,000 5,399,000
=========== ===========
Diluted 5,492,000 5,403,000
=========== ===========
For the Nine Months
Ended September 30,
1999 1998
------------ ------------
REVENUES:
Patient revenues $ 105,071 $ 126,662
Resident revenues 27,962 25,983
Management fee revenues 2,656 2,708
Interest income 113 143
----------- -----------
Net revenues 135,802 155,496
----------- -----------
EXPENSES:
Operating 115,466 123,546
Lease 15,155 14,379
General and administrative 9,372 8,159
Interest 4,126 3,848
Depreciation and amortization 3,447 2,818
Non-recurring charges 0 1,468
----------- -----------
Total expenses 147,566 154,218
----------- -----------
Income (loss) before income taxes (11,764) 1,278
Provision (benefit) for income taxes (4,235) 460
----------- -----------
Income (loss) before cumulative effect of
change in accounting principle (7,529) 818
Cumulative effect of change in
accounting principle (277) 0
----------- -----------
NET INCOME (LOSS) $ (7,806) $ 818
=========== ===========
Basic and diluted earnings (loss) per share:
Income (loss) before accounting change $ (1.39) $ 0.15
Accounting change, net of tax (0.05) 0.00
----------- -----------
Net income (loss) $ (1.44) $ 0.15
=========== ===========
Average Shares:
Basic 5,430,000 5,384,000
=========== ===========
Diluted 5,430,000 5,395,000
=========== ===========
ADVOCAT INC.
CONSOLIDATED BALANCE SHEETS.
(Unaudited)
(In thousands, except per share data)
Sept. 30, Dec. 31,
1999 1998
------------- -------------
Assets:
Cash and cash equivalents $ 1,341 $ 2,347
Accounts receivable, net 12,147 26,289
Other current assets 4,480 5,149
---------- ----------
Total current assets 17,968 33,785
Property and equipment, net 67,060 66,592
Investments in joint ventures 8,026 7,194
Deferred tax benefit 10,251 6,338
Other assets 6,403 7,385
---------- ----------
Total assets $ 109,708 $ 121,294
========== ==========
Liabilities:
Current maturities of long-term debt $ 55,604 $ 30,126
Other current liabilities 17,065 19,892
---------- ----------
Total current liabilities 72,669 50,018
Long-term debt, less current portion 6,238 33,514
Other non-current liabilities 10,743 10,201
---------- ----------
Total liabilities 89,650 93,733
Shareholders' equity 20,058 27,561
---------- ----------
Total liabilities and shareholders' equity $ 109,708 $ 121,294
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