DVCR - Earnings call transcript Q4 2018 | Diversicare Healthcare Services, Inc.

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Operator

Good afternoon and welcome to the Diversicare Healthcare Services 2018 Fourth Quarter Conference Call. Today’s call is being recorded. I would like to remind everyone that, in addition to historical information, certain comments made during this conference will be forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. And these statements involve risks and uncertainties, may cause actual events, results and/or performance to differ materially from those indicated by such statements.

You are encouraged to review the risk factors and forward-looking statements disclosures the company has provided in its annual report on Form 10-K for the fiscal year ended December 31, 2018, as well as its other public filings with the Securities and Exchange Commission.

may on references financial call, today’s be non-GAAP made measures. During in non-GAAP encouraged to and results furnished to are financial Form the press X-K. under review GAAP measures Investors those those measures release of the comparable our reconciliation turn now to Mr. call would I the over to like Jay McKnight, Executive Officer. President and Chief

Jay McKnight

Thank for Diversicare’s afternoon XXXX fourth you Good you, thank quarter Chris. and joining earnings call.

our our and begin this quarter, to in encourage activities risk discussion disclosures I our our investors filings. of a review Before we to SEC factors want

As subject by we required program. and forms to before the Medicare therapy as is in our relating the others required evaluation have noted governmental by our case TennCare industry, to into practices preadmission with we investigations and our are the practices, the forms unresolved PASRR

agreements. a million, contract against in sale challenges held net as as to that we December consideration price taken closed industry cost the that per for into were We applied debt, sale. continue have jurisdictions the strategic which direction. announced of X highest These the presence under third country. facing in our loan in gain other realizing $XX.X required the The sales In a quarter, developing substantial at a the factors professional we certain had $X.X assets were previously the on also sale. X of centers and our to we by from bed sale liability sell classified on Kentucky operating some and have been million We have in our proceeds

year-ago to new $XX.X million a million recognized accounting. will compares the net we $X.X of quarter to lease quarter. Adjusted of the net million the the the $XX.X in We around to million for $XX quarter million $XX.X lease we provide continue the compared to EBITDAR of effective XXXX. loss was January for that year-ago XXXX. for the X, mentioned EBITDAR fourth compared $XXX,XXX quarter for changes adopted I the fourth last quarter, accounting quarter standard quarter. For clarity from income of

As on XXXX, the recognizing the recognize our leases This lease accounting right-of-use guidance, more a quarter as over assets balance result, the Under straight-line lease. first basis cost of paid than liability. operating on corresponding and will we in in requires we of leases lease of lease begin, the a portion cash all to term. early the rent expense recognize us a sheet

Investors nursing quarter, As executed a Healthcare centers. XX-year to lease we Omega new last XX lease announced REIT we with master

under XX We centers XX lease our Golden also commenced large centers nursing early their nursing from terms. are of portion XXXX. in the Living of leased lease leased operating X these leases, that a November XX XX-year Under master

more rent $X.X GAAP to million result, during As recognize payments expense expect cash than a XXXX. we rent

Massey, of accounting CFO, in was details into than common less was Our guidance quarter GAAP under Kerry our million, results, which last provide $XXX.X will his the $XXX,XXX quarter lease more for about primarily by revenue XX.X%. related skilled year’s the the with Diving to impact quarter’s of Kentucky was also was increase. which to centers, same-store from mix revenue the $XXX.X of XX.X% down offset XX.X% XX.X%, the occupancy decrease total million. The from comments. down Year-over-year, to sale was revenue X

rates call. year-over-year We earnings the slightly quality measures customarily Medicare increased Medicaid respectively. $XX.XX, our $X.XX $X.XX, decreased discuss by Care rates quarterly Our while and by and Managed on

financial in to portfolio to continues continue our for current impressive, improving X.XX While – also some all highlight The that, I’ll our statements. score QM over With we quarter our our X.X turn call the group to peer for quality to the our measures lead quarter Kerry for on continue overall the for-profit measured quarter. at the desire year-ago outcomes. to be to of of want compared of specific remarks our

Kerry Massey

you, Jay. Thank

accounting accounting for methodology method, revenue is shared the calls, new a the of we became used standard modified method, adopting previous service effective year we change The impact new current-year bad Consistent common to component standard, debt this to common standard on GAAP previous us which presented with expense used of revenue provide by a expenses. on at primarily accounting you that from providers. Please retrospective results with conformed a our the As of operating recognition presented recorded our of than healthcare being presentation on XXXX. the accounting In revenue comparison this beginning that rather is bottom a the as prior reduction remember is our minimal. revenue basis. same line in being as that this as

have in XX-K. in our previous those detail and have in this change We disclosures our filings updated discussed XXXX

Our reported the million, of $XXX.X $XXX.X prior have been unfavorably million. which the Under revenue for would GAAP, million. revenue year quarter quarter was common the to $XXX.X compares

the for fourth a of of common $X.X or occupancy million increase centers, the million, Medicaid sale of Managed quarter Care Kentucky representing for helped consistent was of operating was million The a last for driver primary a which basis the of per QX resulted year. million $X.X $X.X with the mix. expenses X the the lower in quarter revenue which $XXX.X same-store increases and the for revenue. XXXX. Year-over-year Total was were figure rates less mentioned, was reimbursement by Jay decrease offset The skilled to decrease in quarter. the accounting equivalent and of from X.X% mitigate impact As decrease million, day revenue QX $X on in

increased revenue, the by $X.X of expenses G&A fourth decreased expenses year for quarter. from the million percentage compared quarter of to XXXX. XX% operating a prior As slightly XX.X% QX to

revenue, remained G&A expenses quarter-over-quarter at a percentage of As X.X%. consistent

from of $X.X QX or of prior X.X% Our professional or expense year quarter slightly for liability of the of million X.X% revenue million revenue. increased $X.X

Living. previously in our master early As and with lease we’re mentioned, Omega Jay the of years agreements Golden

that expense operating for outpace actual these rent leases we has our cash significantly to result, As GAAP pay. begun a rent the

the X.X% increase This expense XX.X% or quarter-over-quarter of non-cash straight-line us $X.X was Our $XX.X significant more in by year driven impact increased of expense. quarter for primarily from revenue. million for million even prior million become of the in rent straight-line of increase $XX.X million a non-cash rent XXXX. expense lease $X.X quarter of will revenue The or

We expect XXXX. to recognize of $X.X million payments amounts quarter. $X.X approximately during rent That million each more GAAP than rent cash to unfavorable impact expense

EBITDAR rent EBITDAR $X.X million gain for QX results for quarter Kentucky the million sale benchmark compared the expense. our QX the of impact on our QX operating as adjusted a of EBITDAR excluding million the results, will of centers $XX.X as compared was the of was straight-line we to performance. of rent measurement use million EBITDAR Given fourth million operating illustrates on impact non-cash $XX.X the $XX.X for for ‘XX. to ‘XX. of $XX period-to-period

That of For remarks. call $X.X turn the I results. QX our some over the quarter, back the discussion shareholders net financial will to income million. concludes was closing attributed to now for Jay

Jay McKnight

Kerry. Thanks,

I’d summarize Before from moving results XXXX. to to year-over-year questions, XXXX the to like

residents rates annual from approximately GAAP increased decreased our on common $XXX all year-over-year of patients XX and length to combined revenue our a average for our million Our annual of by almost stay days. basis while by up, $XXX million, were $X.X million

is this initiatives we platform to focus evaluation the industry last for that but us our looking structure. mentioned and as evaluating primary a are we under pressure, at cost have call, I operating on offset As means

for the which $XX.X $XX.X EBITDAR in XXXX adjusted of million. was XXXX, noise, normalizes million Our periods, versus decrease these some $X.X million for a of

recorded to severance year-over-year, XXXX. in Our from dropped excluding the G&A executive X% as a X.X% percentage of revenue

XX%. As a of similar tax expense a revaluation tax related of measure, recorded in late tax result XX.X% we significant year. our as approval to operating a the late percentage plan a annual to In the required from assets that increased non-cash XXXX, our deferred as revenue of expense

DOJ million shareholders’ During the contingency the our of negative accounting, a recent quarter events, us matter. equity our have expense in to with and $X.X combined position of a on operating balance recorded Those put performance XXXX, two sheet. litigation changes lease into related third ongoing we

be XXXX, up straight equity balance to a and that in the line years. right-of-use will of excess With position In in grossing $XXX accounting shared, of include we the several the lease-related shareholders’ assets our expected negative for it’s million. quarter sheet liabilities expectation have around we next the we that be first will lease

accounting we results, operating believe communicate the that we’ll focusing to and be use to all metric EBITDAR that Given changes, transparent measure will on the be most forward. moving

questions move transition. As as always, technical will major any statements accounting financial we we can answer through about our this we

to you to remarks and be recognized by relentless also expectations. the recognize conclude care like reminding team prepared improve like by to our members concludes exceptional all and mission for call of our goal Healthcare Diversicare we achievement custom, touch every leader. of our mission industry We’d is of exceeding pursuit their our and passion life our health a statement: today. of As providing to our we’d This

now open call today’s will remember what’s discuss be we’ll XX-K questions. related unable We the more investigation. to Please filing in open shared than been to government the for

Operator

our Instructions] Retzer Management. the first Patrick from comes question And Capital Thank of you. with [Operator line Retzer

line Your is now open.

Patrick Retzer

afternoon. Good

Jay McKnight

Patrick. Hey,

Patrick Retzer

anything, the the several of facilities, industry company favorable and reasons versus services for cost So has especially that well nursing years skilled advantages hospitals those as rehab those as challenges to offer the and other about the the talked has demographics, for your you do industry do yet wind see, back here. if the at of improving those think conditions? faced the is certainly reconcile industry you what people How

Jay McKnight

There are opinions out a there. lot of different

who national Some and publicly giving out come their and come their companies from have from thoughts Others traded opinions. results putting organization. our been

in the we’ll It’s across increase trough. saying you time looks a to but wave. trough, care going of little that, come SNFs normal be an been census and pressure, to – expectation the whenever the like. an country that bigger is have that’s in that to baby see of a We we’ve a wisdom, provider, this there couple are see In a of what will that begin is skilled well become new the in to well it’s has documented Conventional been We lot past but norm years that would trough. payer that just a not seen the to skilled looking are a into across space seen boomers a be since really lift There in we question over been of age we’ve an to nursing, particularly in XXXX. markets, managed – pressured. trough. bit going And increase no known, to the the It’s increase. our one a go stabilization, bigger start patients going as expect has has really, around folks we a bottom forwards, think over the

Patrick Retzer

company? shareholders’ about that next legal years for equity talked lender negative for you any the several Does have And the or Okay. ramifications perhaps.

Jay McKnight

from come accounting I lawyer. a not the world. obviously am I

any make So I would sure to we about. something counsel and are that some questions staying definitely we there. can’t our speak It’s legal smart ask to matter close

have REITs covenant perspective, tend far – understanding flow works. the as syndicate to bank a about opposed look charge effectively And to are As how an who lenders both our and on understand lenders, from have coverage as the to you They at the us book cash this this. they to our fixed rent.

understand And this. so they thoroughly

close the and balance lease change very to how and sheet. it’s changes liabilities in been accounting have We and asset the going what about talking to and the them our

have anything not aware not side. a I of am anything. expecting on they am so the good Legally, think I I understanding, lender So major

Patrick Retzer

you. thank Okay,

Operator

like further back and remarks. now Thank question-and-answer would call Mr. President that the Officer, McKnight, I turn for Executive conclude you. And any to does to Chief today’s Jay session.

Jay McKnight

you thank forward Thank future. look and you, the call joining for in to in sharing your We you today. Healthcare Diversicare Chris. our And interest with our results Services all appreciate

Operator

thank for gentlemen, conference. does and conclude program. today’s in Ladies you participating This today’s

day. You may have great a Everyone all disconnect.

Diversicare Healthcare Services (DVCR) 3 Mar 192018 Q4 Earnings call transcript