Exhibit 99.1
Advocat Announces Results for Third Quarter
BRENTWOOD, Tenn.--(BUSINESS WIRE)--Nov. 9, 2005--Advocat Inc.
(NASDAQ OTC: AVCA) today announced its results for the third quarter
ended September 30, 2005.
Advocat reported net income from continuing operations of $1.8
million, or $0.27 per diluted common share, for the third quarter of
2005 compared with a net income from continuing operations of
$182,000, or $0.02 per diluted common share, in 2004. Net income for
common stock for the third quarter was $1.7 million, or $0.27 per
diluted share, compared with a net loss for common stock of $289,000,
or $0.05 per diluted share, in the third quarter of 2004.
"Advocat reported higher revenues, operating income and net income
in the third quarter, and continued to generate strong cash flows from
operations," stated William R. Council, III, president and CEO of
Advocat. "We continue to focus on strengthening our operations and are
pleased with our improved results."
"During the third quarter, we acquired the Briarcliff Health Care
Center, a 120-bed skilled nursing facility in Oak Ridge, Tennessee. We
have operated the Briarcliff facility under a lease agreement since
1990. We purchased the nursing home for approximately $6.7 million and
financed the transaction with a commercial finance company. We believe
our ability to secure this credit underscores the solid progress we
have made in improving our financial condition."
Third Quarter Results
Advocat's net revenues from continuing operations increased 5.3%
to $54.5 million compared with $51.7 million in the third quarter of
2004. The increase in third quarter net revenues was primarily due to
patient revenues that increased 5.4% to $51.3 million compared with
$48.6 million in the third quarter of 2004. Patient revenues benefited
from Medicare rate increases that were effective October 1, 2004,
increased Medicare utilization, increased Medicaid rates in certain
states and a 0.7% increase in census in 2005 compared with 2004.
Medicare revenues increased to 29.5% of patient revenues in 2005, up
from 28.5% in 2004. Resident revenues increased to $3.2 million in
2005 from $3.1 million in the third quarter of 2004. Ancillary service
revenues, prior to contractual allowances, increased 22.3% to $10.9
million in 2005 from $8.9 million in the third quarter of 2004.
Operating expenses increased to $42.8 million and represented
78.5% of patient and resident revenues for the third quarter of 2005
compared with $40.3 million, or 77.9% of such revenues, in the third
quarter of 2004. The increase in operating expenses was primarily due
to higher wage and benefit costs.
The Company's results of continuing operations for the third
quarter of 2005 included professional liability costs that declined to
$1.0 million compared with $2.5 million in 2004. The provision for
current liability claims recorded during the three months ended
September 30, 2005, was partially offset by downward adjustments in
the liability primarily resulting from the quarterly actuarial
valuations, resulting in a net expense of $1.0 million in the period.
These reductions from the quarterly actuarial valuation were primarily
the result of the effects of settlements of certain claims for amounts
less than had been reserved in prior periods and the resulting effect
of these settlements on the assumptions inherent to the actuarial
estimate. The self-insurance reserves are assessed on a quarterly
basis, with changes in estimated losses being recorded in the
consolidated statements of operations in the period identified.
Professional liability costs include cash and non-cash charges
recorded based on current actuarial reviews. The actuarial reviews
include estimates of known claims and an estimate of claims that may
have occurred, but have not yet been reported to the Company.
As of September 30, 2005, the Company has recorded total
liabilities for reported professional liability claims and estimates
for incurred but unreported claims of $34.4 million, and has current
debt obligations of $48.3 million. The Company does not have cash or
available resources to pay in full this current debt, the accrued
professional liability claims or any significant portion of either and
has limited resources available to meet its anticipated operating,
capital expenditure and debt service requirements during 2005.
Nine Months Results
Net revenues increased to $159.0 million in the first nine months
of 2005 compared with $149.2 million in 2004. Patient revenues
increased to $149.4 million in 2005 compared with $140.1 million in
the first nine months of 2004. Resident revenues were $9.5 million
compared with $9.2 million. Ancillary service revenues, prior to
contractual allowances, increased to $31.1 million in 2005 from $27.4
million in 2004.
Operating expenses were $123.6 million in 2005 and represented
77.8% of patient and resident revenues compared with $116.9 million,
or 78.4% of such revenues, in 2004. The increase in operating expenses
was primarily due to higher wage and benefit costs.
Professional liability expense for the first nine months of 2005
resulted in a net benefit of $4.8 million compared with a net benefit
of $2.2 million in the same period of 2004. During the nine months
ended September 30, 2005, the Company reduced its total recorded
liabilities for self-insured professional liability risks to $34.4
million, down from $42.9 million at December 31, 2004. Downward
adjustments in the liability primarily resulting from the quarterly
actuarial valuations were partially offset by the provision for
current liability claims recorded during the nine months ended
September 30, 2005, resulting in a net benefit of $4.8 million in the
period.
Net income from continuing operations for the first nine months of
2005 was $12.2 million, or $1.87 per diluted common share, compared
with $8.3 million, or $1.29 per share, in the first nine months of
2004. Net income for common stock for the first nine months of 2005
was $12.1 million, or $1.90 per diluted share, compared with $6.7
million, or $1.08 per diluted share, in the same period of 2004. The
2005 results include income of $141,000 from discontinued operations
compared with a loss of $1.4 million in the same period of 2004.
Third Quarter Conference Call
Advocat will conduct a conference call to discuss its third
quarter 2005 earnings release on November 10, 2005, at 10:00 a.m.
Central Time (11:00 a.m. Eastern Time). To participate in the
Company's call, dial 866-800-8651 or 617-614-2704 and enter passcode
25570245. A live broadcast of the conference call will also be
available on the Internet at the Company's web site,
www.irinfo.com/avc, as well as www.earnings.com and
www.streetevents.com. A replay of the broadcast will be available
until November 24, 2005, at the same web sites.
Forward-Looking Statements
Forward-looking statements made in this release involve a number
of risks and uncertainties, including but not limited to, uncertainty
regarding the Company's ability to restructure or refinance its debt,
the impact of under-insured professional liability claims, the
accuracy of the Company's estimate of its anticipated professional
liability expense, factors affecting the long-term care 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. The Company has
provided additional information in its Annual Report on Form 10-K for
the fiscal year ended December 31, 2004, 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.
Advocat Inc. provides long-term care services to nursing home
patients and residents of assisted living facilities in nine states,
primarily in the Southeast.
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 For the Nine
Months Months
Ended September 30, Ended September 30,
2005 2004 2005 2004
--------- --------- --------- ---------
REVENUES:
Patient revenues, net $51,261 $48,620 $149,426 $140,058
Resident revenues 3,229 3,115 9,543 9,162
--------- --------- --------- ---------
Net revenues 54,490 51,735 158,969 149,220
--------- --------- --------- ---------
EXPENSES:
Operating 42,799 40,283 123,602 116,940
Lease 3,972 3,827 11,950 11,494
Professional liability 984 2,500 (4,837) (2,185)
General and administrative 3,391 3,396 10,577 9,316
Depreciation and
amortization 1,273 1,171 3,719 3,540
--------- --------- --------- ---------
Total expenses 52,419 51,177 145,011 139,105
--------- --------- --------- ---------
OPERATING INCOME 2,071 558 13,958 10,115
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Foreign currency
transaction gain 258 303 136 496
Interest income 132 111 401 155
Interest expense (868) (758) (2,417) (2,280)
--------- --------- --------- ---------
(478) (344) (1,880) (1,629)
--------- --------- --------- ---------
INCOME FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES 1,593 214 12,078 8,486
PROVISION (BENEFIT) FOR
INCOME TAXES (170) 32 (150) 186
--------- --------- --------- ---------
NET INCOME FROM CONTINUING
OPERATIONS 1,763 182 12,228 8,300
--------- --------- --------- ---------
INCOME (LOSS) FROM
DISCONTINUED OPERATIONS:
Operating loss, net of tax
provision of $0, $0, $0
and $150, respectively - (473) (250) (1,513)
Gain on sale, net of tax
provision of $0, $30, $0
and $424, respectively 8 77 391 159
--------- --------- --------- ---------
Net income (loss) from
discontinued operations 8 (396) 141 (1,354)
--------- --------- --------- ---------
NET INCOME (LOSS) 1,771 (214) 12,369 6,946
PREFERRED STOCK DIVIDENDS,
ACCRUED BUT NOT PAID 81 75 237 221
--------- --------- --------- ---------
NET INCOME (LOSS) FOR COMMON
STOCK $1,690 $(289) $12,132 $6,725
========= ========= ========= =========
NET INCOME (LOSS) PER COMMON
SHARE:
Per common share - basic
Income from continuing
operations $0.29 $0.02 $2.09 $1.43
Income (loss) from
discontinued operations 0.00 (0.07) 0.03 (0.24)
--------- --------- --------- ---------
$0.29 $(0.05) $2.12 $1.19
========= ========= ========= =========
Per common share - diluted
Income from continuing
operations $0.27 $0.02 $1.87 $1.29
Income (loss) from
discontinued operations 0.00 (0.07) 0.03 (0.21)
--------- --------- --------- ---------
$0.27 $(0.05) $1.90 $1.08
========= ========= ========= =========
WEIGHTED AVERAGE SHARES:
Basic 5,725 5,695 5,725 5,647
========= ========= ========= =========
Diluted 6,498 5,695 6,498 6,407
========= ========= ========= =========
ADVOCAT INC.
CASH FLOWS FROM OPERATING ACTIVITIES
(Unaudited)
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2005 2004 2005 2004
--------- --------- --------- ---------
NET INCOME $1,771 $(214) $12,369 $6,946
Income (loss) from
discontinued operations 8 (396) 141 (1,354)
--------- --------- --------- ---------
Net income from continuing
operations 1,763 182 12,228 8,300
Adjustments to reconcile net
income from continuing
operations to net cash
provided by operating
activities:
Depreciation and
amortization 1,273 1,171 3,719 3,540
Provision for doubtful
accounts 492 465 1,212 1,170
Provision for (benefit
from) accrual for
self-insured
professional
liability, net 830 2,341 (5,291) (2,760)
Payment of
professional
liability costs (967) (778) (3,198) (2,145)
Amortization of
deferred balances 65 90 265 272
Provision for leases
in excess of cash
payments 59 139 168 417
Foreign currency
transaction gain (258) (303) (136) (496)
Non-cash interest
expense 41 39 122 114
Non-cash interest
income (101) (95) (323) (125)
--------- --------- --------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES BEFORE
CHANGES IN OTHER ASSETS AND
LIABILITIES 3,197 3,251 8,766 8,287
CHANGES IN OTHER ASSETS AND
LIABILITIES AFFECTING
OPERATING ACTIVITIES:
Receivables, net (246) (1,241) (1,848) (167)
Prepaid expenses and
other assets (713) (1,402) (1,928) (1,056)
Trade accounts payable
and occurred expenses 501 126 1,137 (2,539)
--------- --------- --------- ---------
Net cash
provided by
continuing
operations 2,739 734 6,127 4,525
Net cash
provided
(used) by
discontinued
operations -- (57) (59) 738
--------- --------- --------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES $2,739 $677 $6,068 $5,263
========= ========= ========= =========
CONTACT: Advocat Inc.
William R. Council, 615-771-7575