[AVC ADVOCAT LOGO]
Exhibit 99.1
Company Contact: Investor Relations:
William R. Council, III Rodney O'Connor
President and CEO Cameron Associates
(615) 771-7575 (212) 554-5470
ADVOCAT INC. ANNOUNCES 2006 FIRST QUARTER RESULTS
BRENTWOOD, TENNESSEE - (MAY 11, 2006) - Advocat Inc. (NASDAQ OTC: AVCA) today
announced its results for the first quarter ended March 31, 2006.
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.
INCOME STATEMENT HIGHLIGHTS
Net income from continuing operations for the quarter was $6.6 million compared
to $8.9 million for the same quarter last year. The Company's results included a
net benefit for professional liability expense of $2.1 million compared to a net
benefit of $7.2 million in the 2005 quarter, a decrease in net benefit of $5.1
million. In 2006 a benefit for income taxes of $0.7 million was recorded
compared to a provision of $11,000 in 2005. For the three month periods ended
March 31, 2006 and 2005, net income from continuing operations per common share
fully diluted for the quarters was $1.00 and $1.37, respectively. There were 6.5
million weighted average shares outstanding on a fully diluted basis during the
first quarter of 2006.
REVENUE HIGHLIGHTS AND OCCUPANCY RATES
For the 2006 first quarter, revenue grew to $53.2 million compared to $48.9
million in 2005, an increase of 8.8%. The increase in patient revenue was due to
increased Medicare utilization, increased Medicaid rates in certain states,
increased Medicare rates and an increase in patient census, partially offset by
a decrease in net ancillary service revenues.
The average rate of occupancy at the Company's nursing centers increased to
77.6% in 2006 from 75.4% in 2005. Medicare revenues were 31.3% of total patient
revenue in 2006 compared to 30.1% in 2005.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2006, $45.6 million of debt was classified as a current
liability and certain financial covenants were in non-compliance. Management is
actively working with the lenders to extend maturities and to adjust covenants.
On March 17, 2006, the Company entered into a two-year renewal of the term notes
and working capital line of credit agreements with the primary bank lender.
Advocat is now in compliance with those covenants and anticipates it will repay
the term notes within the two-year term of this agreement.
The Company entered into an agreement to sell eleven of its assisted living
facilities in North
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Carolina for approximately $11 million as well as the sale of the twelfth
facility to another buyer for approximately $4 million. The Company is scheduled
to close the sale of the eleven facilities on May 15, 2006, and expects to close
the remaining transaction in the second quarter of 2006, although no assurances
can be given. Mortgages of $16.6 million secured by these twelve facilities were
due April 1, 2006, and the Company has entered into a 60-day extension for these
mortgage loans. The Company has also entered into a 90-day extension of $10.0
million in mortgage loans that are secured by three nursing centers with this
lender. The Company anticipates that, when the sale of the facilities is closed,
it will be able to refinance the remaining debt with the current lender. No
agreements have been reached, and no assurances can be made that its efforts
will be successful.
FUNDS PROVIDED FROM OPERATIONS
Management believes that reviewing cash provided from operations is an important
measurement of the Company's performance. The net cash provided by operating
activities before changes in other assets and liabilities (or Funds Provided
From Operations) is presented in the first section of the cash flow statement of
the press release. Funds provided from operations eliminate the effect of
actuarial assumptions and reflects the cash effect of professional liability.
Funds provided from operations for the current quarter were $4.0 million versus
$2.0 million generated in the first quarter last year.
CEO REMARKS
Mr. William Council, CEO of Advocat, stated, "The steady progress of the Company
is very evident by the performance in the first quarter, as the Company is
continuing to record positive growth. Management is focused on increasing
occupancy rates and revenue per patient, while we are strengthening our
financials with diligent cost controls and cash flow management. We are also
focused on completing our previously announced divestitures and securing long
term financing for our maturing debt."
CONFERENCE CALL
A conference call has been scheduled to discuss the first quarter 2006 results
for the period ended March 31, 2006, on Monday, May 15 at 10:00 A.M. central
time (11:00 A.M. eastern time).
The conference call information is as follows:
Date: Monday, May 15, 2006
Time: 10:00 A.M. Central, 11:00 A.M. Eastern
Webcast Links: http://phx.corporate-ir.net/playerlink.zhtml?c=77083&s=wm&e=
1308775
www.streetevents.com
www.earnings.com
www.irinfo.com/avc
Dial in numbers: (866) 356-4123 (domestic) or (617) 597-5393 (international)
Passcode: 87804276
A replay of the conference call will be accessible two hours after its
completion through May 22, 2006 by dialing (888) 286-8010 (domestic) or (617)
801-6888 (international) and entering passcode 48208703.
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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.
More complete financials are available in the Form 10-Q, which was filed today
with the SEC.
For additional information about the Company, visit Advocat's web site:
http://www.irinfo.com/avc
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ADVOCAT INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
MARCH 31, DECEMBER 31,
2006 2005
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(UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents $ 7,895 $ 7,070
Restricted cash 350 625
Receivables, net 17,472 18,147
Deferred income taxes 776 1,004
Other current assets 5,930 5,180
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Total current assets 32,423 32,026
Property and equipment, net 39,021 39,421
Deferred income taxes 13,862 12,856
Note receivable, net of current portion 5,289 5,198
Other assets, net 3,674 4,261
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TOTAL ASSETS: $ 94,269 $ 93,762
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CURRENT LIABILITIES:
Short-term debt and current portion of long-term debt
and settlement promissory notes $ 45,648 $ 47,419
Trade accounts payable 4,262 4,415
Accrued expenses:
Payroll and employee benefits 7,570 8,495
Current portion of self-insurance reserves 6,045 5,952
Other current liabilities 5,062 5,715
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Total current liabilities 68,587 71,996
NONCURRENT LIABILITIES:
Settlement promissory notes, less current portion - 128
Self-insurance reserves, less current portion 26,382 29,041
Other noncurrent liabilities 4,725 4,717
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Total noncurrent liabilities 31,107 33,886
REDEEMABLE CONVERTIBLE PREFERRED STOCK 4,834 4,750
SHAREHOLDERS' DEFICIT (10,259) (16,870)
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TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT $ 94,269 $ 93,762
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ADVOCAT INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts, unaudited)
THREE MONTHS ENDED
MARCH 31,
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2006 2005
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PATIENT REVENUES, NET $ 53,187 $ 48,884
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EXPENSES:
Operating 40,630 38,332
Lease 3,825 3,882
Professional liability (2,147) (7,242)
General and administrative 3,481 3,392
Depreciation 944 860
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Total expenses 46,733 39,224
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OPERATING INCOME 6,454 9,660
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OTHER INCOME (EXPENSE):
Foreign currency transaction loss (9) (56)
Other income 207 -
Interest income 183 117
Interest expense (999) (769)
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(618) (708)
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INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 5,836 8,952
PROVISION (BENEFIT) FOR INCOME TAXES (729) 11
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NET INCOME FROM CONTINUING OPERATIONS 6,565 8,941
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INCOME (LOSS) FROM DISCONTINUED OPERATIONS:
Operating income (loss), net of taxes of $0 and $11, respectively 118 (353)
Gain on sale, net of taxes of $0 and $0, respectively 8 376
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Net income from discontinued operations 126 23
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NET INCOME 6,691 8,964
PREFERRED STOCK DIVIDENDS, ACCRUED BUT NOT PAID 83 78
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NET INCOME FOR COMMON STOCK $ 6,608 $ 8,886
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NET INCOME PER COMMON SHARE:
Per common share - basic
Income from continuing operations $ 1.13 $ 1.55
Income from discontinued operations 0.02 0.00
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$ 1.15 $ 1.55
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Per common share - diluted
Income from continuing operations $ 1.00 $ 1.37
Income from discontinued operations 0.02 0.01
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$ 1.02 $ 1.38
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WEIGHTED AVERAGE SHARES:
Basic 5,740 5,725
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Diluted 6,503 6,499
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ADVOCAT INC.
FUNDS PROVIDED BY OPERATIONS
(in thousands and unaudited)
THREE MONTHS ENDED
MARCH 31,
2006 2005
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NET INCOME $ 6,691 $ 8,964
Income from discontinued operations 126 23
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Net income from continuing operations 6,565 8,941
Adjustments to reconcile net income from continuing operations to net
cash provided by operating activities:
Depreciation 944 860
Provision for doubtful accounts 341 485
Deferred income tax benefit (778) -
Benefit from reduction in accrual for self-insured
professional liability, net of provision (2,300) (7,388)
Payment of professional liability costs (546) (1,035)
Amortization of deferred balances 51 106
Provision for leases in excess of cash payments 8 50
Gain on sale of property (207) -
Foreign currency transaction loss 9 56
Non-cash interest expense 43 40
Non-cash interest income (108) (105)
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FUNDS PROVIDED BY OPERATIONS $ 4,022 $ 2,010
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