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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
CHECK ONE:
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSACTION PERIOD FROM _________ TO _________.
COMMISSION FILE NO.: 1-12996
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ADVOCAT INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 62-1559667
- --------------------------------- ---------------------------------
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
277 MALLORY STATION ROAD, SUITE 130, FRANKLIN, TN 37067
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ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(615) 771-7575
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(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NONE
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(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR,
IF CHANGED SINCE LAST REPORT.)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
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5,315,822
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(OUTSTANDING SHARES OF THE ISSUER'S COMMON STOCK AS OF AUGUST 12, 1996)
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PART I. FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
ADVOCAT INC.
INTERIM CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, UNAUDITED)
JUNE 30, DECEMBER 31,
1996 1995
-------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 1,479 $ 1,076
Accounts receivable, less
allowance for contractual
adjustments and doubtful
accounts of $1,823 and
$2,082, respectively 22,447 19,566
Income taxes receivable 63 304
Inventories 541 508
Prepaid expenses and other 1,932 1,649
Deferred income taxes 1,169 974
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Total current assets 27,631 24,077
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PROPERTY AND EQUIPMENT, at cost 37,701 29,677
Less accumulated depreciation
and amortization (8,619) (7,659)
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Net property and equipment 29,082 22,018
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OTHER ASSETS:
Deferred tax benefit 7,572 8,224
Deferred financing and other costs, net 1,124 855
Other 2,083 1,922
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Total other assets 10,779 11,001
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$67,492 $57,096
======= =======
(Continued)
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ADVOCAT INC.
INTERIM CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, UNAUDITED)
(CONTINUED)
JUNE 30, DECEMBER 31,
1996 1995
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CURRENT LIABILITIES:
Current portion of long-term debt $ 4,262 $ 3,926
Trade accounts payable 8,203 6,881
Accrued expenses:
Payroll and related benefits 3,904 3,754
Worker's compensation 1,329 1,225
Other 1,514 1,565
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Total current liabilities 19,212 17,351
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NONCURRENT LIABILITIES:
Long-term debt less current portion 18,592 11,063
Deferred gains with respect to leases, net 4,229 4,502
Advances from TDLP 111 859
Other 895 884
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Total noncurrent liabilities 23,827 17,308
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COMMITMENTS, CONTINGENCIES, AND
GUARANTEE
SHAREHOLDERS' EQUITY:
Preferred stock, authorized 1,000,000 shares,
$.10 par value, none issued and outstanding -0- -0-
Common stock, authorized 20,000,000 shares,
$.01 par value 5,295,000, and 5,288,000 shares
issued and outstanding at June 30, 1996 and
December 31, 1995, respectively 53 53
Paid-in capital 14,939 14,875
Retained earnings 9,461 7,509
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Total shareholders' equity 24,453 22,437
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$67,492 $57,096
======= =======
The accompanying notes to interim combined financial statements are an integral
part of these interim consolidated balance sheets.
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ADVOCAT INC.
INTERIM CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS, AND UNAUDITED)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1996 1995 1996 1995
------- ------- ------- -------
REVENUES:
Patient revenues $38,772 $32,565 $77,097 $64,102
Management fees 965 884 2,137 1,777
Interest 39 60 75 121
------- ------- ------- -------
Net revenues 39,776 33,509 79,309 66,000
------- ------- ------- -------
EXPENSES:
Operating 31,670 25,880 63,278 50,907
Lease 3,511 3,349 7,074 6,728
General and administrative 2,088 1,941 4,209 3,861
Depreciation and amortization 523 329 1,033 697
Interest 341 178 667 349
------- ------- ------- -------
Total expenses 38,133 31,677 76,261 62,542
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 1,643 1,832 3,048 3,458
PROVISION FOR INCOME TAXES 592 659 1,097 1,245
------- ------- ------- -------
NET INCOME 1,051 1,173 1,951 2,213
======= ======= ======= =======
AVERAGE NUMBER OF COMMON
AND COMMON EQUIVALENT
SHARES OUTSTANDING (Note 3)
5,338 5,322 5,331 5,317
======= ======= ======= =======
EARNINGS PER SHARE (Note 3)
$ .20 $ .22 $ .37 $ .42
======= ======= ======= =======
The accompanying notes to interim financial statements are an integral part of
these interim consolidated financial statements.
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ADVOCAT INC.
INTERIM STATEMENTS OF CASH FLOWS
(IN THOUSANDS AND UNAUDITED)
Six Months Ended June 30,
1996 1995
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,951 $ 2,213
Adjustments to reconcile net income to net
cash provided from operating activities:
Depreciation and amortization 1,032 464
Provision for doubtful accounts 740 556
Equity earnings in joint ventures (20) (15)
Amortization of deferred credits (533) (378)
Deferred income taxes 457 267
Change in assets and liabilities:
Receivables, net (2,705) (2,258)
Inventories (32) (14)
Prepaid expenses and other (416) (893)
Trade accounts payable and accrued expenses 1,518 468
Current taxes 240 -0-
Other (110) (31)
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Net cash provided from operating activities 2,122 379
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net (847) (1,351)
Issuance of mortgage receivable -0- (792)
Acquisitions, net (5,381) -0-
Pre-opening and other costs (384) (190)
Proceeds from TDLP transaction 47 42
Investment in joint venture -0- (264)
Distributions from joint ventures 8 2
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Net cash used in investing activities (6,557) (2,553)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from debt obligations 4,975 137
Repayment of debt obligations (274) (225)
Advances to TDLP (682) (151)
Financing costs (36) -0-
Net proceeds from bank line of credit 1,575 -0-
Proceeds from sale of common stock 63 143
Advances (to) from lessor (783) 612
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Net cash provided from financing activities $ 4,838 $ 516
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(Continued)
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ADVOCAT INC.
INTERIM STATEMENTS OF CASH FLOWS
(IN THOUSANDS AND UNAUDITED)
(CONTINUED)
Six Months Ended June 30,
1996 1995
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INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS $ 403 $ (1,658)
CASH AND CASH EQUIVALENTS, beginning of period 1,076 3,136
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CASH AND CASH EQUIVALENTS, end of period $ 1,479 $ 1,478
======= ========
SUPPLEMENTAL INFORMATION:
Cash payments of interest $ 587 $ 108
======= ========
Cash payments of income taxes $ 383 $ 1,261
======= ========
Advocat received benefit plan deposits and recorded benefit plan liabilities of
$100,000 and $96,000 in the six month periods ended June 30, 1996 and 1995,
respectively.
In the period ended June 30, 1996, Advocat assumed debt of $1,592,000 in
connection with an acquisition.
The accompanying notes to interim financial statements are an integral part of
these interim consolidated financial statements.
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ADVOCAT INC.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
1. ORGANIZATION AND BACKGROUND:
Advocat Inc. (together with its subsidiaries, "Advocat" or the
"Company") commenced operations with an initial public offering of its
common stock on May 10, 1994. The Company is a provider of long-term
care services operating nursing homes and retirement centers in the
United States and Canada.
Advocat's operational history can be traced to February 1980 through
common senior management involved in different organizational
structures. As of June 30, 1996, the Company operates 86 facilities
comprised of 64 nursing homes containing 7,308 licensed beds and 22
retirement centers containing 2,446 units. The Company owns six
nursing homes, acts as lessee with respect to 38 of the nursing homes
it operates, and acts as manager with respect to the remaining 20
nursing homes. The Company owns one retirement center, acts as lessee
with respect to seven of the retirement centers that it operates, and
acts as manager of the remaining 14 retirement centers.
Geographically, 53 of the Company's nursing homes are located in the
United States and 11 are located in Canada, while 20 of the Company's
22 retirement centers are located in Canada. The foregoing facility
data includes two United States nursing homes acquired June 30, 1996,
totaling 216 licensed beds. The Company's facilities provide a range
of health care services to their residents. In addition to the nursing
and social services usually provided in the long-term care facilities,
the Company offers a variety of rehabilitative, nutritional,
respiratory, and other specialized ancillary services. The Company
operates facilities in Alabama, Arkansas, Florida, Kentucky, Ohio,
Tennessee, Texas, West Virginia, and the Canadian provinces of Ontario
and British Columbia.
2. BASIS OF FINANCIAL STATEMENTS
The interim financial statements for the three and six month periods
ended June 30, 1996 and 1995, included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In the
opinion of management of the Company, the accompanying interim combined
financial statements reflect all adjustments (consisting of only
normally recurring accruals) necessary to present fairly the financial
position at June 30, 1996 and December 31, 1995 and the results of
operations for the three and six month periods ended June 30, 1996 and
1995, and the cash flows for the six month periods ended June 30, 1996
and 1995. Certain items have been reclassified in the 1995 financial
statements to conform to the 1996 presentation.
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The results of operations for the three and six month periods ended
June 30, 1996 and 1995 are not necessarily indicative of the operating
results for the entire respective years. These interim financial
statements should be read in connection with the financial statements
and notes thereto included in the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1995.
3. EARNINGS PER SHARE
Earnings per share is based on the weighted average number of the
Company's common and common equivalent shares outstanding that pertain
to the respective operations included in each period and is calculated
as follows:
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1996 1995 1996 1995
---------- ---------- ---------- ----------
Weighted average shares:
Average shares outstanding 5,294,000 5,256,000 5,292,000 5,253,000
Common stock equivalents --
Employee stock purchase plan 20,000 20,000 18,000 18,000
Options, conversion assumed
under the treasury stock
method 24,000 46,000 21,000 46,000
---------- ---------- --------- ----------
Common and common equivalent
shares outstanding 5,338,000 5,322,000 5,331,000 5,317,000
========== ========== ========== ==========
Net income $1,051,000 $1,173,000 $1,951,000 $2,213,000
========== ========== ========== ==========
Earnings per share $ .20 $ .22 $ .37 $ .42
========== ========== ========== ==========
4. ACQUISITIONS
During the six months ended June 30, 1996, the Company completed the
acquisition of three nursing facilities totaling 276 licensed beds.
The aggregate purchase price of $7.0 million was financed with cash of
approximately $400,000, debt issued in the amount of $5.0 million, and
assumed indebtedness of $1.6 million. Two of the three facilities
totaling 216 licensed beds were acquired effective June 30, 1996.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Advocat Inc. (together with its subsidiaries, "Advocat" or the
"Company") commenced operations with an initial public offering of its common
stock on May 10, 1994. The Company is a provider of long- term care services
operating nursing homes and retirement centers in the United States and Canada.
Advocat's operational history can be traced to February 1980 through
common senior management involved in different organizational structures. As
of June 30, 1996, the Company operates 86 facilities comprised of 64 nursing
homes containing 7,308 licensed beds and 22 retirement centers containing 2,446
units. The Company owns six nursing homes, acts as lessee with respect to 38
of the nursing homes it operates, and acts as manager with respect to the
remaining 20 nursing homes. The Company owns one retirement center, acts as
lessee with respect to seven of the retirement centers that it operates, and
acts as manager of the remaining 14 retirement centers. Geographically, 53 of
the Company's nursing homes are located in the United States and 11 are located
in Canada, while 20 of the Company's 22 retirement centers are located in
Canada. The foregoing facility data includes two United States nursing homes
acquired June 30, 1996, totaling 216 licensed beds. The Company's facilities
provide a range of health care services to their residents. In addition to the
nursing and social services usually provided in the long-term care facilities,
the Company offers a variety of rehabilitative, nutritional, respiratory, and
other specialized ancillary services. The Company operates facilities in
Alabama, Arkansas, Florida, Kentucky, Ohio, Tennessee, Texas, West Virginia,
and the Canadian provinces of Ontario and British Columbia.
Basis of Financial Statements. The Company's patient revenues consist
of the fees charged to the residents of the Company's leased and owned nursing
homes and retirement centers. Management fee revenues consists of the fees
charged to the owners of the facilities managed by the Company. The management
fee revenues are based on the respective contractual terms, which generally
range from 3.5% to 6.0% of the net revenues of the managed facilities. As a
result, the level of management fees is affected positively or negatively by
the increase or decrease in the level of occupancy or rates per patient day of
the managed facilities. Management fees also include consulting and
development fee income. The Company's operating expenses include the costs
incurred in the nursing homes and retirement centers leased and owned by the
Company. The Company's general and administrative expenses consist of the
costs of the corporate office and regional support functions, including the
costs incurred in providing management services to the nursing homes and
retirement centers managed by the Company. The Company's financial statements
reflect the depreciation, amortization and interest expenses of the facilities
owned by the Company, and the depreciation expense associated with equipment
owned by the Company and used in its leased facilities.
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RESULTS OF OPERATIONS
The following tables present the unaudited interim statements of income
data for the three and six month periods ended June 30, 1996 and 1995, and set
forth this data as a percentage of revenues for the same periods.
(IN THOUSANDS) THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1996 1995 1996 1995
-------- ------- ------- --------
REVENUES:
Patient revenues $38,772 $32,565 $77,097 $64,102
Management fees 965 884 2,137 1,777
Interest 39 60 75 121
------- ------- ------- -------
Net revenues 39,776 33,509 79,309 66,000
------- ------- ------- -------
EXPENSES:
Operating 31,670 25,880 63,278 50,907
Lease 3,511 3,349 7,074 6,728
General and administrative 2,088 1,941 4,209 3,861
Depreciation and amortization 523 329 1,033 697
Interest 341 178 667 349
------- ------- ------- -------
Total expenses 38,133 31,677 76,261 62,542
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 1,643 1,832 3,048 3,458
PROVISION FOR INCOME TAXES 592 659 1,097 1,245
------- ------- ------- -------
NET INCOME $ 1,051 $ 1,173 $ 1,951 $ 2,213
======= ======== ======= =======
PERCENTAGE OF NET REVENUES
(IN THOUSANDS) THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1996 1995 1996 1995
-------- --------- --------- --------
REVENUES:
Patient revenues 97.5% 97.2% 97.2% 97.1%
Management fees 2.4 2.6 2.7 2.7
Interest 0.1 0.2 0.1 0.2
----- ----- ----- -----
Net revenues 100.0% 100.0% 100.0% 100.0%
----- ----- ----- -----
EXPENSES:
Operating 79.7 77.2 79.8 77.1
Lease 8.8 10.0 8.9 10.2
General and administrative 5.2 5.8 5.3 5.9
Depreciation and amortization 1.3 1.0 1.3 1.1
Interest 0.9 0.5 0.8 0.5
----- ----- ----- -----
Total expenses 95.9 94.5 96.1 94.8
----- ----- ----- -----
INCOME BEFORE INCOME TAXES 4.1 5.5 3.9 5.2
PROVISION FOR INCOME TAXES 1.5 2.0 1.4 1.9
----- ----- ----- -----
NET INCOME 2.6% 3.5% 2.5% 3.3%
===== ===== ===== =====
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As of June 30, 1996, the Company operates 86 facilities comprised of
64 nursing homes containing 7,308 licensed beds and 22 retirement centers
containing 2,446 units. In comparison, as of June 30, 1995, the Company
operated 66 nursing homes containing 7,425 licensed beds and 20 retirement
centers containing 2,335 units. Since January 1, 1995, the Company has begun
operating for its own account seven homes, three of which it previously
managed, totaling 556 nursing home beds and 109 retirement center units. The
operations of these facilities have a significant impact on the comparability
of the 1996 and 1995 periods. In the following discussion, these homes are
collectively referred to as the "New Homes." All but 169 of the New Home
beds/units were counted in the portfolio at June 30, 1995.
THREE MONTHS ENDED JUNE 30 - 1996 COMPARED WITH 1995
Revenues. Net revenues increased to $39.8 million in 1996 from $33.5
million in 1995, an increase of $6.3 million, or 19%. Patient revenues
increased to $38.8 million in 1996 from $32.6 million in 1995, an increase of
$6.2 million, or 19%. Of this increase, $2.8 million is attributable to the
New Homes. Ancillary service revenues, prior to contractual allowances,
increased to $14.5 million in 1996 from $8.3 million in 1995, an increase of
$6.2 million or 75%. The increase in patient revenues is also impacted by
normal inflationary increases and a small decrease in patient days of 0.5%
among the homes operating for at least one year. Management fee revenues
increased by $80,000, or 9%. The increase is primarily due to $100,000 in
consulting fees earned with respect to the development of one of the New Homes.
The Company anticipates an additional $100,000 in such revenues in the third
quarter after which time no further such revenues are anticipated. The
increase in ancillary revenues and the completion in 1995 of the certification
of all of the Company's beds for participation under the Medicare program have
resulted in continued improvement in the quality mix of the Company's revenues.
As a percent of net patient revenues, Medicare improved to 26.9% in 1996 from
19.2% in 1995 while Medicaid decreased to 55.4% in 1996 from 60.3% in 1995.
While Medicare utilization has increased, the Company has experienced rate
increases below historical norms in the Medicaid programs in the states of
Alabama and Florida. The Company anticipates that it is likely states will
continue to seek ways to depress the rate of growth in Medicaid program costs.
Operating Expense. Operating expense increased to $31.7 million in
1996 from $25.9 million in 1995, an increase of $5.8 million, or 22%. As a
percent of net revenues, operating expense increased to 79.7% in 1996 from
77.2% in 1995. Of this increase, $2.3 million is attributable to the New
Homes. The remaining increase is primarily attributable to an increase in the
provision of ancillary services to Medicare patients. As ancillary services
have increased, the supply costs related to the provision of such services have
increased correspondingly. In addition, the Company's operating margin has
declined due to reduced average census, cost containment measures in Medicaid
programs, difficulty in achieving expense reductions in certain homes, and
growth in the Company's medical supply distribution business, which generates a
lower operating margin. Wages increased to $14.2 million in 1996 from $12.4
million in 1995, an increase of $1.8 million, or 15%. Of this increase, $1.2
million is attributable to the New Homes. A portion of the remaining increase
in wages is offset by reduced costs associated with
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less utilization of temporary nursing services and reduced contracted
housekeeping and laundry services. The Company's wage increases are generally
in line with inflation. Among homes in operation for at least one year, the
Company has experienced increased general and other insurance costs of
$444,000. While the Company's operating margin has declined year to year, the
margin has improved from that of the fourth quarter of 1995. This is
reflective of benefits realized from expense control programs implemented in
the Company's various operating regions. Additionally, the Company has noted
an improvement in occupancy in the latter part of the second quarter and
continuing into the third quarter. The improvements are encouraging, but
neither their continuance nor their positive impact to the Company's operations
can be assured.
Lease Expense. Lease expense increased to $3.5 million in 1996 from
$3.3 million in 1995, an increase of $163,000, or 5%. Of this increase,
$122,000 is attributable to the New Homes, and the remainder is primarily
attributable to inflationary increases included in the terms of a majority of
the Company's operating leases.
General and Administrative Expense. General and administrative expense
increased to $2.1 million in 1996 from $1.9 million in 1995, an increase of
$138,000, or 7%. The increase is primarily attributable to the expense of new
positions added to service the Company's expanded operations. As a percent of
total net revenues, general and administrative expenses declined from 5.8% in
1995 to 5.2% in 1996, reflective of spreading the Company's overhead costs over
a wider base of operations.
Depreciation and Amortization. Depreciation and amortization expenses
increased to $523,000 in 1996 from $329,000 in 1995, an increase of $194,000,
or 59%. Approximately $105,000 of the increase is associated with the New
Homes.
Interest Expense. Interest expense increased to $341,000 in 1996 from
$178,000 in 1995, an increase of $163,000, or 92%. Approximately $126,000 of
the increase is attributable to indebtedness related to the New Homes with the
remainder of the increase primarily attributable to increased borrowings under
the Company's working capital line of credit.
Income Before Income Taxes; Net Income; Earnings Per Share. As a
result of the above, income before income taxes was $1.6 million in 1996 as
compared with $1.8 million in 1995, a decrease of $190,000, or 10%. The
effective combined federal, state and provincial income tax rate was 36% in
both 1996 and 1995. Net income was $1.1 million in 1996 as compared with $1.2
million in 1995, a decrease of $121,000, and earnings per share was $.20 was
compared with $.22.
SIX MONTHS ENDED JUNE 30 - 1996 COMPARED WITH 1995
Revenues. Net revenues increased to $79.3 million in 1996 from $66.0
million in 1995, an increase of $13.3 million, or 20%. Patient revenues
increased to $77.1 million in 1996 from $64.1 million in 1995, an increase of
$13.0 million, or 20%. Of this increase, $5.5 million is attributable to the
New Homes. Ancillary service revenues, prior to contractual allowances,
increased to $29.2 million in 1996
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from $15.8 million in 1995, an increase of $13.4 million or 85%. The increase
in patient revenues is also impacted by normal inflationary increases and a
small decrease in patient days of 0.6% among the homes operating for at least
one year. Management fee revenues increased by $361,000, or 20%. The
increase is primarily due to $400,000 in consulting fees earned with respect to
the development of three of the New Homes. The Company anticipates an
additional $100,000 in such revenues in the third quarter after which time no
further such revenues are anticipated. The increase in ancillary revenues and
the completion in 1995 of the certification of all of the Company's beds for
participation under the Medicare program have resulted in continued improvement
in the quality mix of the Company's revenues. As a percent of net patient
revenues, Medicare improved to 26.4% in 1996 from 18.4% in 1995 while Medicaid
decreased to 55.4% in 1996 from 60.5% in 1995. While Medicare utilization has
increased, the Company has experienced rate increases below historical norms in
the Medicaid programs in the states of Alabama and Florida. The Company
anticipates that it is likely states will continue to seek ways to depress the
rate of growth in Medicaid program costs.
Operating Expense. Operating expense increased to $63.3 million in
1996 from $50.9 million in 1995, an increase of $12.4 million, or 24%. As a
percent of net revenues, operating expense increased to 79.8% in 1996 from
77.1% in 1995. Of this increase, $4.6 million is attributable to the New
Homes. The remaining increase is primarily attributable to an increase in the
provision of ancillary services to Medicare patients. As ancillary services
have increased, the supply costs related to the provision of such services have
increased correspondingly. In addition, the Company's operating margin has
declined due to reduced average census, cost containment measures in Medicaid
programs, difficulty in achieving expense reductions in certain homes, and
growth in the Company's medical supply distribution business, which generates a
lower operating margin. Wages increased to $28.1 million in 1996 from $24.3
million in 1995, an increase of $3.8 million, or 16%. Of this increase, $2.1
million is attributable to the New Homes. A portion of the remaining increase
in wages is offset by reduced costs associated with less utilization of
temporary nursing services and reduced contracted housekeeping and laundry
services. The Company's wage increases are generally in line with inflation.
Among homes in operation for at least one year, the Company has experienced
increased general and employee health insurance costs of $643,000. This is
partially offset by a decrease in worker's compensation expense of $65,000.
Lease Expense. Lease expense increased to $7.1 million in 1996 from
$6.7 million in 1995, an increase of $346,000, or 5%. Of this increase,
$268,000 is attributable to the New Homes, and the remainder is primarily
attributable to inflationary increases included in the terms of a majority of
the Company's operating leases.
General and Administrative Expense. General and administrative expense
increased to $4.2 million in 1996 from $3.9 million in 1995, an increase of
$348,000, or 9%. The increase is primarily attributable to the expense of new
positions added to service the Company's expanded operations. As a percent of
total net revenues, general and administrative expenses declined from 5.9% in
1995 to 5.3% in 1996, reflective of spreading the Company's overhead costs over
a wider base of operations.
Depreciation and Amortization. Depreciation and amortization expenses
increased to $1,032,000 in 1996 from $697,000 in 1995, an increase of $335,000,
or 48%. Approximately $208,000 of the increase is associated with the New
Homes.
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Interest Expense. Interest expense increased to $667,000 in 1996 from
$349,000 in 1995, an increase of $318,000, or 91%. Approximately $251,000 of
the increase is attributable to indebtedness related to the New Homes with the
remainder of the increase primarily attributable to increased borrowings under
the Company's working capital line of credit.
Income Before Income Taxes; Net Income; Earnings Per Share. As a
result of the above, income before income taxes was $3.1 million in 1996 as
compared with $3.5 million in 1995, a decrease of $410,000, or 12%. The
effective combined federal, state and provincial income tax rate was 36% in
both 1996 and 1995. Net income was $2.0 million in 1996 as compared with $2.2
million in 1995, a decrease of $262,000, and earnings per share was $.36 was
compared with $.42.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company's working capital was $8.4 million as
compared with $6.7 million at December 31, 1995. The current ratio was 1.4 at
both dates.
Net cash provided from operating activities totaled $2.1 million and
$379,000 in 1996 and 1995, respectively. These amounts primarily represent the
cash flows from income plus depreciation and amortization along with the
changes in working capital components.
Net cash used in investing activities totaled $6.6 million and $2.6
million in 1996 and 1995, respectively. These amounts primarily represent
capital expenditures for equipment for and improvements to the Company's
existing facilities, acquisitions in 1996, and, in 1995, an investment in a
Canadian joint venture managed by the Company. The Company and its predecessor
business have used between $1.7 million and $3.0 million for capital
expenditures for facility improvements and equipment in each of the last three
calendar years. Such expenditures were financed through working capital. The
Company anticipates that such expenditures for its existing facility operations
will be approximately $2.0 million for the year ended December 31, 1996.
Net cash provided from financing activities totaled $4.8 million and
$516,000 in 1996 and 1995, respectively. The net cash used in financing
activities primarily represents proceeds from and repayment of long-term debt,
advances to TDLP, advances to and from a lessor, and, in 1996, net proceeds
under the Company's bank line of credit.
At June 30, 1996, the Company had total debt outstanding of $22.9
million of which $13.2 million was principally mortgage debt bearing interest
at rates currently ranging from 8.0% to 11.0%. The Company's remaining debt
was drawn under its $17.5 million credit line. The credit line had an
initial term through May 1, 1996 and has been extended through September 1,
1996. The credit line includes $10.0 million designated for use in making
acquisitions of long-term care facilities and $7.5 million for working capital
purposes. Through June 30, 1996, the Company had drawn $6.1 million under its
acquisition credit line. Amounts drawn under the acquisition credit line may
be converted to a three-year term loan effective with the end of the initial
term. At June 30, 1996, the Company had drawn $2.3 million and had $5.2
million in letters of credit outstanding under this working capital credit
line. Amounts drawn under the credit line bear interest, at the Company's
option, at either the lead bank's prime rate or 2% above the London Interbank
Offered Rate ("LIBOR"). Amounts drawn under the credit line are secured
generally by certain accounts
14
15
receivable and substantially all other assets of the Company as well as by any
assets acquired with funds drawn under the acquisition credit line. The
Company has agreed to comply with certain covenants, including financial
covenants with respect to maintaining current ratio, net working capital,
coverage of fixed charges, tangible net worth, and earnings levels as defined
in the line of credit agreement. Additionally, the Company may not declare
dividends during the term of the agreement.
In December 1995, the Company received a temporary increase (the
"Overline") in the maximum amount available to be drawn under the line of
credit facility. The Company has the ability to draw additional working
capital up to $2.6 million through September 1, 1996. As of June 30, 1996, the
Company had drawn $1.3 million under the Overline; through August 12, 1996, the
amount drawn had increased to $2.0 million.
The Company has secured a commitment for a new credit facility and
plans to exercise its privileges thereunder to restructure and consolidate its
indebtedness during the third quarter. The new credit facility, which has a
term of three years, is for a total of $50 million and is divided into two
components: a $10 million revolving credit facility and a $40 million
acquisition line of credit. Funds drawn under the revolving credit facility
will be subject to a defined borrowing base and will bear interest (at the
Company's option) of either prime or LIBOR plus 2.5%. Funds drawn under the
acquisition line will have defined limits in relation to the appraised values
(generally 85%) and debt service ratios of the facilities financed thereunder.
These components will also determine the applicable interest rate, which will
vary (at the Company's option) in relation to either the prime rate or LIBOR.
Amounts drawn under the $50 million credit facility will be secured generally
by certain accounts receivable and substantially all other assets of the
Company as well as by any assets acquired with funds drawn under the
acquisition credit line. The Company has agreed to comply with certain
covenants, including financial covenants with respect to maintaining current
ratio, net working capital, coverage of fixed charges, tangible net worth, and
earnings levels as defined in the credit facility agreements.
The Company has received a commitment for permanent financing with
respect to a Canadian facility purchased in December 1995. The Company expects
to replace the $1.1 million short-term promissory note with the proceeds under
the anticipated mortgage during the latter part of 1996. The outstanding
balance has been classified as long-term as of June 30, 1996.
Based upon the operations of the Company, management believes that
available cash and funds generated from operations, as well as amounts
available through its banking relationships, will be sufficient for the Company
to satisfy its capital expenditures, working capital, and debt requirements for
the next 12 months. The Company intends to satisfy the capital requirements
for its acquisition activities from among various means, including borrowings
from commercial lenders, seller-financed debt, issuance of additional debt,
financing obtained from sale and leaseback transaction with real estate
investment trusts and, to the extent available, internally generated cash from
operations. On a longer-term basis, management believes the Company will be
able to satisfy the principal repayment requirements on its indebtedness with a
combination of funds generated from operations and from refinancings with
existing or new commercial lenders.
Receivables
The Company's operations could be adversely affected if it experiences
significant delays in reimbursement of its labor and other costs from Medicare
and other third-party revenue sources. The Company's future liquidity will
continue to be dependent upon the relative amounts of current assets
15
16
(principally cash, accounts receivable and inventories) and current liabilities
(principally accounts payable and accrued expense). In that regard, accounts
receivable can have a significant impact on the Company's liquidity. Continued
efforts by governmental and third-party payors to contain or reduce the
acceleration of costs by monitoring reimbursement rates, increasing medical
review of bills for services or negotiating reduced contract rates, as well as
any significant increase in the Company's proportion of Medicare and Medicaid
patients, could adversely affect the Company's liquidity and results of
operations.
Accounts receivable attributable to the provision of patient and
resident services at June 30, 1996 and December 31, 1995, totaled $22.3 million
and $20.2 million, respectively, representing approximately 52 and 51 days,
respectively, in accounts receivable. Accounts receivable from the provision
of management services at June 30, 1996 and December 31, 1995, totaled $1.0
million and $0.7 million, respectively, representing approximately 74 and 69
days, respectively, in accounts receivable.
Accounts receivable at June 30, 1996, includes approximately $800,000
expended in 1996 towards expansions of certain of the Company's leased
facilities. The Company funded the improvements as agent for the lessor who
reimbursed the advances in July 1996.
The Company continually evaluates the adequacy of its bad debt reserves
based on patient mix trends, agings of older balances, payment terms and delays
with regard to third-party payors, collateral and deposit resources, as well as
other factors. The Company has implemented additional procedures to strengthen
its collection efforts and reduce the incidence of uncollectible accounts.
Foreign Currency Translation
The Company has obtained its financing primarily in U.S. dollars;
however, it will incur revenues and expenses in Canadian dollars with respect
to Canadian management activities and operations of the Company's Canadian
facilities. Therefore, if the currency exchange rate fluctuates, the Company
may experience currency translation gains and losses with respect to the
operations of these activities and the capital resources dedicated to their
support. While such currency exchange rate fluctuations have not been material
to the Company in the past, there can be no assurance that the Company will not
be adversely affected by shifts in the currency exchange rates in the future.
Inflation
Management does not believe that the operations of the Company have
been materially affected by inflation. The Company expects salary and wage
increases for its skilled staff to continue to be higher than average salary
and wage increases, as is common in the health care industry. To date, these
increases as well as normal inflationary increases in other operating expenses
have been adequately covered by revenue increases. However, it is likely that
states will continue to seek ways to control the growth in Medicaid program
rates.
16
17
Recent Accounting Pronouncements
In 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of." The Company adopted SFAS No. 121 in the first quarter of 1996 and the
adoption did not have a material effect on the Company's financial position.
Two facilities noted as receiving special attention in the Company's Annual
Report on Form 10-K showed improvement in operations in the six months ended
June 30, 1996 as compared to the three months ended December 31, 1995.
The FASB also issued SFAS No. 123, "Accounting for Stock-Based
Compensation" in 1995. This statement requires new disclosures in the notes to
the financial statements about stock-based compensation plans based on the fair
value of equity instruments granted. Companies may also base the recognition
of compensation cost for instruments issued under stock-based compensation
plans on these fair values. The Company will adopt the disclosure requirements
of SFAS No. 123 in 1996.
Risk Factors
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company hereby makes reference to
items set forth under the heading "Risk Factors" in the Company's Registration
Statement on Form S-1, as amended (Registration No. 33-76150). Such cautionary
statements identify important facts that could cause the Company's actual
results to differ materially from those projected in forward looking statements
made by or on behalf of the Company.
PART II -- OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of shareholders was held on May 30, 1996.
(c) Matters voted upon at the meeting:
- Election of Directors:
Mary Margaret Hamlett William H. Lomicka Allan C. Silber
--------------------- ------------------ ---------------
For 4,074,582 4,075,582 4,074,518
Against -0- -0- -0-
Withheld 225,344 224,344 225,408
Abstentions -0- -0- -0-
Non-Voting(1) 993,824 993,824 993,824
--------- --------- ---------
Eligible Shares 5,293,750 5,293,750 5,293,750
========= ========= =========
---------
(1) Including broker non-votes.
- Proposals (a) to amend the Company's 1994 Nonqualified Stock Option
Plan for Directors to increase the number of shares of Common
Stock reserved for issuance from 140,000 shares to 190,000 shares
("Proposal A") and (b) to amend the Company's 1994 Incentive and
Nonqualified Stock Option Plan for Key Personnel to increase the
number of shares of Common Stock reserved for issuance from 460,000
shares to 610,000 shares ("Proposal B").
Proposal A Proposal B
---------- ----------
For 3,730,356 3,561,739
Against 562,687 728,754
Withheld -0- -0-
Abstentions 6,883 9,433
Non-Voting(1) 993,824 993,824
--------- ---------
Eligible Shares 5,293,750 5,293,750
========= =========
---------
(1) Including broker non-votes.
Item 6. Exhibits and Reports on Form 8-K.
The Registrant has not filed any reports on Form 8-K during the
quarter for which this report is filed.
The exhibits filed as part of the report on Form 10-Q are listed in
the Exhibit Index immediately following the signature page.
17
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ADVOCAT INC.
August 12, 1996 By: /s/ Mary Margaret Hamlett
----------------------------------------------
Mary Margaret Hamlett
Principal Financial Officer and Chief Accounting
Officer and An Officer Duly Authorized to Sign
on Behalf of the Registrant
18
19
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
2.1 -- Asset Purchase Agreement dated November 30, 1995, among Williams
Nursing Homes Inc., d/b/a Afton Oaks Nursing Center, Lynn Mayers,
Thomas E. Mayers, and Diversicare Leasing Corp. (incorporated
by reference to Exhibit 2.1 to the Company's Current Report on
Form 8-K dated November 30, 1995).*
2.2 -- Purchase Agreement between Diversicare Leasing Corporation and
Americare Corporation dated February 20, 1996 (incorporated by
reference to Exhibit 2.2 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995).*
2.3 -- Asset Purchase Agreement among Pinedale Associates, Inc.,
Jean May, Carolyn S. Thompson and Diversicare Leasing
Corp. dated May 31, 1996.*
2.4 -- Asset Purchase Agreement between Hartford Health Care,
Inc. and Diversicare Leasing Corp. dated May 23, 1996.*
3.1 -- Certificate of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 to the Company's Registration Statement
No. 33-76150 on Form S-1).
3.2 -- Bylaws of the Company (incorporated by reference to Exhibit 3.2
to the Company's Registration Statement No. 33-76150 on Form S-
1).
3.2 -- Amendment to Articles of Incorporate dated March 23, 1995
(incorporated by reference to Exhibit A of Exhibit 1 to Form 8-A
filed March 30, 1995).
4.1 -- Form of Common Stock Certificate (incorporated by reference to
Exhibit 4 to the Company's Registration Statement No. 33-76150 on
Form S-1).
4.2 -- Rights Agreement dated March 13, 1995, between the Company and
Third National Bank in Nashville (incorporated by reference to
Exhibit 1 to the Company's Current Report on Form 8-K dated March
13, 1995).
4.3 -- Summary of Shareholder Rights Plan adopted March 13, 1995
(incorporated by reference to Exhibit B of Exhibit 1 to Form 8-A
filed March 30, 1995).
4.4 -- Rights Agreement of Advocat Inc. dated March 23, 1995
(incorporated by reference to Exhibit 1 to Form 8-A filed March
30, 1995).
20
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
10.1 -- Asset Contribution Agreement among Counsel Corporation and
Certain of its Direct and Indirect Subsidiaries dated May 10,
1994 (incorporated by reference to Exhibit 10.1 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1994).
10.2 -- Asset Contribution Agreement among Diversicare Inc. and Certain
of its Direct and Indirect Subsidiaries dated May 10, 1994
(incorporated by reference to Exhibit 10.2 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1994).
10.3 -- 1994 Incentive and Non-Qualified Stock Plan for Key Personnel
(incorporated by reference to Exhibit 10.3 to the Company's
Registration Statement No. 33-76150 on Form S-1).
10.4 -- 1994 Non-Qualified Stock Option Plan for Directors (incorporated
by reference to Exhibit 10.4 to the Company's Registration
Statement No. 33-76150 on Form S-1).
10.5 -- Master Agreement and Supplemental Executive Retirement Plan
(incorporated by reference to Exhibit 10.6 to the Company's
Registration Statement No. 33-76150 on Form S-1).
10.6 -- 1994 Employee Stock Purchase Plan (incorporated by reference to
Exhibit 10.7 to the Company's Registration Statement No. 33-76150
on Form S-1).
10.7 -- Form of Employment Agreements dated May 10, 1994, between the
Registrant and Dr. Birkett, Mr. Richardson and Ms. Hamlett
(incorporated by reference to Exhibit 10.8 to the Company's
Registration Statement No. 33-76150 on Form S-1).
10.8 -- Form of Director Indemnification Agreement (incorporated by
reference to Exhibit 10.8 to the Company's Registration Statement
No. 33-76150 on Form S-1).
10.9 -- Master Lease Agreement dated August 14, 1992, between Diversicare
Corporation of America and Omega Healthcare Investors, Inc.
(incorporated by reference to Exhibit 10.12 to the Company's
Registration Statement No. 33-76150 on Form S-1).
21
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
10.10 -- Consent, Assignment and Amendment Agreement between Diversicare
Corporation of America, Counsel Nursing Properties, Inc., Advocat
Inc., Diversicare Leasing Corporation and Omega Healthcare
Investors, Inc. dated May 10, 1994 (incorporated by reference to
Exhibit 10.10 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994).
10.11 -- Advocat Inc. Guaranty in favor of Omega Healthcare Investors,
Inc. dated May 10, 1994 (incorporated by reference to Exhibit
10.11 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994).
10.12 -- Consolidation, Modification and Renewal Note dated August 30,
1991, by Diversicare Nursing Centers, Inc. to the order of Sovran
Bank/Tennessee (incorporated by reference to Exhibit 10.19 to the
Company's Registration Statement No. 33-76150 on Form S-1).
10.13 -- Wraparound Promissory Note dated August 30, 1991, by Texas
Diversicare Limited Partnership and Diversicare Nursing Centers,
Inc. (incorporated by reference to Exhibit 10.20 to the Company's
Registration Statement No. 33-76150 on Form S-1).
10.14 -- Management Agreement dated August 30, 1991, between Texas
Diversicare Limited Partnership and Diversicare Corporation of
America, as assigned effective October 1, 1991, to Diversicare
Management, with consent of Texas Diversicare Limited
Partnership, as amended (incorporated by reference to Exhibit
10.21 to the Company's Registration Statement No. 33-76150 on
Form S-1).
10.15 -- Amended and Restated Limited Partnership Agreement dated August
30, 1991, among Diversicare General Partner, Inc., J. Scott
Jackson and each Limited Partner (incorporated by reference to
Exhibit 10.22 to the Company's Registration Statement No. 33-
76150 on Form S-1).
10.16 -- Participation Agreement dated August 30, 1991, between Texas
Diversicare Limited Partnership and Diversicare Corporation of
America (incorporated by reference to Exhibit 10.23 to the
Company's Registration Statement No. 33-76150 on Form S-1).
22
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
10.17 -- Agreement of Purchase and Sale entered into August 30, 1991,
among Diversicare Corporation of America, Texas Diversicare
Limited Partnership' and Diversicare Corporation of America
(incorporated by reference to Exhibit 10.25 to the Company's
Registration Statement No. 33-76150 on Form S-1).
10.18 -- Partnership Services Agreement entered into August 30, 1991,
among Texas Diversicare Limited Partnership, Diversicare Incorporated
and Counsel Property Corporation (incorporated by reference to
Exhibit 10.26 to the Company's Registration Statement No. 33-76150
on Form S-1).
10.19 -- Guaranteed Return Loan Security Agreement entered into August 30,
1991, between Texas Diversicare Limited Partnership and
Diversicare Incorporated (incorporated by reference to Exhibit
10.27 to the Company's Registration Statement No. 33-76150 on
Form S-1).
10.20 -- Credit and Security Agreement dated October 12, 1994, between
NationsBank of Tennessee, N.A., the Company and the Company's
subsidiaries (incorporated by reference to Exhibit 10.20 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1994).
10.21 -- Promissory Note by Advocat Inc. to the order of Diversicare Inc.
dated May 10, 1994 (incorporated by reference to Exhibit 10.21 to
the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994).
10.22 -- Promissory Note by Advocat Inc. to the order of Counsel Nursing
Properties, Inc. dated May 10, 1994 (incorporated by reference to
Exhibit 10.22 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994).
10.23 -- Demand Master Promissory Note by Advocat Inc. to the order of
Diversicare Corporation of America dated May 10, 1994
(incorporated by reference to Exhibit 10.23 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1994).
10.24 -- Lease Agreement between Counsel Healthcare Assets Inc. and
Counsel Nursing Properties, Inc. dated May 10, 1994 (incorporated
by reference to Exhibit 10.24 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994).
23
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
10.25 -- Lease Agreement between Counsel Healthcare Assets Inc. and
Counsel Nursing Properties, Inc. dated May 10, 1994 (incorporated
by reference to Exhibit 10.25 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994).
10.26 -- Management and Guaranteed Return Loan Agreement dated as of
November 30, 1985, between Diversicare VI Limited Partnership and
Diversicare Incorporated, an Ontario corporation, as amended, as
assigned effective October 1, 1991, to Diversicare Management
Services Co., with consent of Diversicare VI Limited Partnership
(incorporated by reference to Exhibit 10.34 to the Company's
Registration Statement No. 33-76150 on Form S-1).
10.27 -- Management Agreement dated August 24, 1981, between Americare
Corporation and Diversicare Corporation of America, as assigned
to Diversicare Management Services Co., with consent of Americare
Corporation (incorporated by reference to Exhibit 10.36 to the
Company's Registration Statement No. 33-76150 on Form S-1).
10.28 -- Management Agreement between Counsel Healthcare Assets, Inc., an
Ontario corporation and Counsel Nursing Properties, Inc. dated
April 30, 1994, as assigned effective May 10, 1994, to
Diversicare Canada Management Services Co., Inc (incorporated by
reference to Exhibit 10.28 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994).
10.29 -- Lease Agreement between Spring Hill Medical, Inc. and First
American HealthCare, Inc. dated February 1, 1994 (incorporated by
reference to Exhibit 10.38 to the Company's Registration
Statement No. 33-76150 on Form S-1).
10.30 -- Lease Agreement, as amended, between Bryson Hill Associates of
Alabama, Inc. and Estates Nursing Homes, Inc. dated June 15,
1984, as assigned effective May 10, 1994, to Diversicare Leasing
Corp. (incorporated by reference to Exhibit 10.39 to the
Company's Registration Statement No. 33-76150 on Form S-1).
10.31 -- Lease Agreement between HealthCare Ventures and Wessex Care
Corporation dated October 23, 1989, as assigned effective May 10,
1994, to Diversicare Leasing Corp. (incorporated by reference to
Exhibit 10.40 to the Company's Registration Statement No. 33-
76150 on Form S-1).
24
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
10.32 -- Lease Agreement between Osborne & Wilson Development Corp., Inc.
and Diversicare Corporation of America dated July 7, 1989, as
assigned effective May 10, 1994, to Diversicare Leasing Corp.
(incorporated by reference to Exhibit 10.41 to the Company's
Registration Statement No. 33-76150 on Form S-1).
10.33 -- Florida Lease Agreement between Counsel Nursing Properties, Inc.
and Diversicare Leasing Corp. dated May 10, 1994 (incorporated by
reference to Exhibit 10.33 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994).
10.34 -- Lease Agreement between Counsel Nursing Properties, Inc. and
Diversicare Leasing Corp. dated May 10, 1994 (incorporated by
reference to Exhibit 10.34 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1994).
10.35 -- Underwriting Agreement dated May 10, 1994, by and among NatWest
Securities Limited, J.C. Bradford & Co., Raymond James &
Associates, Inc., Advocat Inc., Counsel Nursing Properties, Inc.,
Diversicare Inc. and Counsel Healthcare Assets Inc. regarding
4,750,000 shares of Common Stock of Advocat Inc. (incorporated
by reference to Exhibit 1 to the Company's Registration Statement
No. 33-76150 on Form S-1).
10.36 -- Letter Agreement dated November 23, 1994, among Advocat Inc.,
Omega Healthcare Investors, Inc., Sterling Health Care Centers,
Inc. and E.B. Lowman, II (incorporated by reference to Exhibit
10.36 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1994).
10.37 -- Assignment and Assumption Agreement of Master Lease dated
September 1, 1995, between Sterling Health Care Management, Inc.,
Diversicare Leasing Corp. and Sterling Acquisition Corp
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1995).
10.38 -- Master Lease dated December 1, 1994, between Sterling Health Care
Management, Inc. and Sterling Acquisition Corp (incorporated by
reference to Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1995).
25
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
10.39 -- Assignment and Assumption Agreement of Master Sublease dated
September 1, 1995, between Sterling Health Care Management, Inc.,
Diversicare Leasing Corp. and O S Leasing Company (incorporated
by reference to Exhibit 10.3 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1995).
10.40 -- Master Sublease dated December 1, 1994, between Sterling Health
Care Management, Inc. and O S Leasing Company (incorporated by
reference to Exhibit 10.4 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1995).
10.41 -- Letter of Credit Agreement dated September 1, 1995, between Omega
Health Care Investors, Inc., Sterling Acquisition Corp., Sterling
Acquisition Corp II, O S Leasing Company and Diversicare Leasing
Corp (incorporated by reference to Exhibit 10.5 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1995).
10.42 -- Advocat Inc. Guaranty dated September 1, 1995, in favor of Omega
Health Care Investors, Inc., Sterling Acquisition Corp., Sterling
Acquisition Corp. II and O S Leasing Company (incorporated by
reference to Exhibit 10.6 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1995).
10.43 -- Management Agreement between Diversicare Management Services Co.
and Emerald-Cedar Hill, Inc. dated February 20, 1996
(incorporated by reference to Exhibit 10.43 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1995).
10.44 -- Management Agreement between Diversicare Management Services Co.
and Emerald-Golfcrest, Inc. dated February 20, 1996
(incorporated by reference to Exhibit 10.44 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1995).
10.45 -- Management Agreement between Diversicare Management Services Co.
and Emerald-Golfview, Inc. dated February 20, 1996 (incorporated
by reference to Exhibit 10.45 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1995).
26
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
10.46 -- Management Agreement between Diversicare Management Services Co.
and Emerald-Southern Pines, Inc. dated February 20, 1996
(incorporated by reference to Exhibit 10.46 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1995).
10.47 -- Loan Agreement between Omega Healthcare Investors, Inc. and
Diversicare Leasing Corp., d/b/a Good Samaritan Nursing Home,
dated February 20, 1996 (incorporated by reference to Exhibit
10.47 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1995).
10.48 -- Short Term Note by Diversicare Leasing Corp. to Omega Healthcare
Investors, Inc. dated February 20, 1996 (incorporated by
reference to Exhibit 10.48 to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995).
10.49 -- Advocat Inc. Guaranty in favor of Omega Healthcare Investors,
Inc. dated February 20, 1996 (incorporated by reference to
Exhibit 10.49 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995).
10.50 -- First Amendment to Credit and Security Agreement dated November
28, 1995, between NationsBank of Tennessee, N.A., Advocat Inc.
and the Subsidiaries (as defined) (incorporated by reference to
Exhibit 10.50 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995).
10.51 -- Second Amendment to Credit and Security Agreement dated December
1, 1995, between NationsBank of Tennessee, N.A., Advocat Inc. and
the Subsidiaries (as defined) (incorporated by reference to
Exhibit 10.51 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995).
10.52 -- Third Amendment to Credit and Security Agreement dated December
1, 1995, between NationsBank of Tennessee, N.A., Advocat Inc. and
the Subsidiaries (as defined) (incorporated by reference to
Exhibit 10.52 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995).
10.53 -- Fourth Amendment to Credit and Security Agreement dated April 1,
1996, between NationsBank of Tennessee, N.A., Advocat Inc. and
the Subsidiaries (as defined) (incorporated by reference
to Exhibit 10.53 to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1996).
27
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
10.54 -- Fifth Amendment to Credit and Security Agreement dated May 1,
1996, between NationsBank of Tennessee, N.A., Advocat Inc. and
the Subsidiaries (as defined) (incorporated by reference
to Exhibit 10.54 to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended March 31, 1996).
10.55 -- Sixth Amendment to Credit and Security Agreement dated
June 28, 1996, between NationsBank of Tennessee, N.A.,
Advocat Inc. and the Subsidiaries (as defined).
21 -- Subsidiaries of the Registrant (incorporated by reference to
Exhibit 21 to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994).
27 -- Financial Data Schedule (for SEC use only).
* This exhibit contains a list of the schedules thereto, which have been
omitted. The Company agrees to furnish supplementally a copy of any such
omitted schedule to the Commission upon request.