Diversicare Healthcare Services, Inc. (NASDAQ: DVCR), a premier
provider of long-term care services, today announced its results
for the third quarter ended September 30, 2018.
Third Quarter 2018
Highlights
- Net loss from continuing operations was $(7.4) million, or
$(1.15) per share, in the third quarter of 2018, compared to net
loss from continuing operations of $(0.6) million, or $(0.09) per
share, in the third quarter of 2017. The loss in the third quarter
of 2018 was mainly attributable to a litigation contingency expense
of $6.4 million related to an ongoing Department of Justice (“DOJ”)
investigation.
- Our adjusted EBITDA for the quarter was $3.4 million, compared
to $3.9 million in the third quarter of 2017.
- Under the new Accounting Standard Codification ("ASC") 606, net
revenue was $141.4 million in the third quarter of 2018. In
accordance with ASC 606, revenue for the third quarter of 2017 was
not restated. Revenue for the third quarter of 2018 under
legacy GAAP was $145.1 million, compared to $146.4 million in the
third quarter of 2017, a decrease of $1.3 million or 1.0%. However,
on a same store basis quarterly Revenue under legacy GAAP increased
by $0.4 million.
- The Company did not declare a quarterly dividend for the
quarter ending December 31, 2018.
See below for a reconciliation of all GAAP and
non-GAAP financial results.
CEO Remarks
“As previously announced, Kerry Massey joined
our team as Chief Financial Officer of Diversicare on September 10,
2018. Kerry has already proven to be a valuable addition to our
team and we look forward to continuing to benefit from his
experience and expertise,” said Jay McKnight, President and Chief
Executive Officer of Diversicare.
Commenting on the quarter’s results, Jay said,
"This was definitely a challenging quarter as we accrued $6.4
million related to an ongoing government investigation, which I
discuss further below. Subsequent to the quarter, we entered into
an Asset Purchase Agreement to sell our three centers held for sale
in Kentucky for a collective sales price of $18.7 million, which is
expected to close in the fourth quarter of 2018. As required by the
Company’s bank agreements, the proceeds from the sale will be used
to retire debt.
Mr. McKnight continued, “As always, our primary focus is caring
for our residents and patients who have been entrusted to us.
I am proud of our dedicated and hardworking team members as we
continue to lead our peer group in quality measures.”
DOJ Investigation Progress
Explaining the $6.4 million reserve taken in the
quarter, Mr. McKnight said, “As we have previously reported, the
Company has been the subject of an ongoing investigation by the DOJ
regarding potential violations of the False Claims Act related to
periods as far back as 2010. The process has developed to the point
that the Company has determined to accrue in this quarter $6.4
million as a contingent liability in connection with this
matter. The Company cannot predict whether a
settlement can be achieved, the outcome of the litigation if there
is no settlement or the length of time necessary to conclude this
matter. Because the outcome of this investigation
remains uncertain, the amount ultimately incurred in connection
with the resolution of this matter could differ materially from the
current accrual, as the Company cannot at this time estimate the
possible range of loss that may result from either a settlement or
litigation of this matter. The Company denies any wrong doings and
will vigorously defend its actions in the event a settlement is not
reached. Please review our disclosures and risk factors in
our SEC filings for more information."
Third Quarter 2018 Results
The following table summarizes key revenue and
census statistics for continuing operations for each period:
| |
Three Months Ended September 30, |
| |
2018 |
|
|
|
2017 |
| Skilled nursing
occupancy |
79.3 |
% |
|
|
|
80.1 |
% |
| As a percent of total
census: |
|
|
|
|
|
| Medicare
census |
10.2 |
% |
|
|
|
10.6 |
% |
| Medicaid
census |
70.0 |
% |
|
|
|
69.1 |
% |
| Managed
Care census |
3.8 |
% |
|
|
|
3.9 |
% |
| As a percent of total
revenues: |
|
|
|
|
|
| Medicare
revenues |
24.1 |
% |
|
|
|
24.9 |
% |
| Medicaid
revenues |
53.9 |
% |
|
|
|
52.6 |
% |
| Managed
Care revenues |
7.5 |
% |
|
|
|
7.5 |
% |
| Average rate per
day: |
|
|
|
|
|
| Medicare |
$ |
452.19 |
|
|
|
|
$ |
455.95 |
|
|
Medicaid |
$ |
180.69 |
|
|
|
|
$ |
176.26 |
|
| Managed
Care |
$ |
388.64 |
|
|
|
|
$ |
379.68 |
|
Patient Revenues
Patient revenues were $141.4 million and
$146.4 million for the three months ended September 30, 2018
and 2017, respectively, a decrease of $5.0 million. The
difference between patient revenues for the third quarter of 2018
is primarily due to the implementation of ASC 606. Refer to Note 4
"Revenue Recognition" to the interim consolidated financial
statements. The following summarizes the revenue fluctuations
attributable to changes in our portfolio (in thousands):
| |
Three Months Ended September 30, |
| |
2018 |
2017 |
|
|
| |
As reported |
|
As adjusted to Legacy GAAP |
|
As reported |
|
Change |
| Same-store revenue |
$ |
139,083 |
|
|
$ |
142,717 |
|
|
$ |
142,321 |
|
|
$ |
396 |
|
| 2017 acquisition
revenue |
2,348 |
|
|
2,348 |
|
|
2,244 |
|
|
104 |
|
| 2017 disposition
revenue |
— |
|
|
— |
|
|
1,812 |
|
|
(1,812 |
) |
| Total
revenue |
$ |
141,431 |
|
|
$ |
145,065 |
|
|
$ |
146,377 |
|
|
$ |
(1,312 |
) |
Our average Medicaid rate per patient day for
the third quarter of 2018 increased compared to
the third quarter of 2017, resulting in increases in
revenue of $1.9 million or 2.5%. Conversely, the average Medicare
rate per patient day for the third quarter of 2018
decreased compared to the third quarter of 2017,
resulting in decreases in revenue of $0.2 million or 0.8%.
Our Hospice average daily census for the third quarter
of 2018 increased $1.3 million or 20.6%. Conversely, our
Medicare, Managed Care, Medicaid and Private average daily census
for the third quarter of 2018 decreased $1.6
million, $0.6 million, $0.7 million and $2.2 million, respectively,
or 5.3%, 6.2%, 0.9% and 17.9%, respectively. Our ancillary revenue
for the third quarter of 2018 increased $0.6
million.
Operating Expense
Operating expense decreased in the third quarter
of 2018 to $113.8 million as compared to $118.1 million in the
third quarter of 2017. Operating expense decreased as a
percentage of revenue at 80.5% for the third quarter of 2018 as
compared to 80.7% for the third quarter of 2017. The
following table summarizes the expense fluctuations attributable to
changes in our portfolio (in thousands):
| |
Three Months Ended September 30, |
| |
2018 |
2017 |
|
|
|
|
|
| |
As reported |
|
As adjusted to Legacy GAAP |
|
As reported |
|
Change |
| Same-store operating
expense |
$ |
112,066 |
|
|
$ |
115,969 |
|
|
$ |
114,868 |
|
|
$ |
1,101 |
|
| 2017 acquisition
expense |
1,733 |
|
|
1,733 |
|
|
1,863 |
|
|
(130 |
) |
| 2017 disposition
expense |
— |
|
|
— |
|
|
1,373 |
|
|
(1,373 |
) |
| Total
expense |
$ |
113,799 |
|
|
$ |
117,702 |
|
|
$ |
118,104 |
|
|
$ |
(402 |
) |
Our operating expenses decreased by $0.4
million, which is attributable to favorable variances in nursing
and ancillary costs and dietary expenses of $0.4 million and $0.6
million, respectively, in third quarter of 2018 compared to the
third quarter of 2017. This was partially offset by unfavorable
variances in salaries and related taxes and health insurance costs
of $0.3 million and $0.2 million, respectively, in third quarter of
2018 compared to the third quarter of 2017.
One of the largest components of operating
expenses is wages, which increased to $69.9 million during the
third quarter of 2018 as compared to $69.4 million in the third
quarter of 2017.
Lease expense in the third quarter of 2018
remained consistent with the third quarter of 2017 at $13.8
million.
Professional liability expense was $2.9 million
and $2.6 million in the third quarters of 2018 and 2017,
respectively. Our cash expenditures for professional liability
costs of continuing operations stayed consistent at $1.7 million
for the third quarters of 2018 and 2017, respectively. Professional
liability expense fluctuates based on the results of our
third-party professional liability actuarial studies and cash
expenditures are incurred to defend and settle existing claims. See
“Liquidity and Capital Resources” in our 2018 third quarter 10-Q
for further discussion of the accrual for professional
liability.
The Company recorded a contingent liability
related to the DOJ investigation for $6.4 million in the third
quarter of 2018. The Company denies any wrong doing and is prepared
to vigorously defend its actions. The Company’s ultimate ability to
settle this investigation will depend on several factors, including
whether the amount and terms of an acceptable settlement can be
reached with the DOJ. Refer to Note 6 to the interim consolidated
financial statements for further discussion.
General and administrative expense was $7.5
million in the third quarter of 2018 as compared to $8.1 million in
the third quarter of 2017. General and administrative expense
decreased as a percentage of revenue to 5.3% in the third quarter
of 2018 from 5.5% in the third quarter of 2017. The change in
general and administrative expense is attributable to a decrease in
salaries and related taxes of $0.5 million in the
third quarter of 2018 as compared to
the third quarter of 2017.
Depreciation and amortization expense in the
third quarter of 2018 remained consistent with the third quarter of
2017 at $3.0 million.
Interest expense in the third quarter of 2018
remained consistent with the third quarter of 2017 at $1.7
million.
As a result of the above, continuing operations
reported a loss of $7.6 million before income taxes for the third
quarter of 2018 as compared to a loss of $0.9 million for the third
quarter of 2017. The benefit for income taxes was $0.2
million for the third quarter of 2018, and the benefit
for income taxes was $0.3 million for the third quarter of
2017. Both basic and diluted loss per common share from continuing
operations were $1.15 for the third quarter of 2018 as compared to
both basic and diluted loss per common share from continuing
operations of $0.09 in the third quarter of 2017.
Receivables
Our net receivables balance increased $1.0
million to $65.9 million as of September 30, 2018, from $64.9
million as of December 31, 2017.
Conference Call Information
A conference call has been scheduled for
Thursday, November 1, 2018 at 4:00 P.M. Central time (5:00 P.M.
Eastern time) to discuss third quarter 2018 results. The
conference call information is as follows:
| |
|
|
| Date: |
|
Thursday, November 1, 2018 |
| Time: |
|
4:00 P.M. Central, 5:00 P.M. Eastern |
| Webcast Links: |
|
www.DVCR.com |
| Dial in numbers: |
|
877.340.2552 (domestic) or
253.237.1159 (International)Conference ID:
5065409The Operator will connect you to Diversicare’s Conference
Call |
A replay of the conference call will be
accessible two hours after its completion through November 8,
2018, by dialing 855-859-2056 (domestic) or 404-537-3406
(international) and entering Conference ID 3335717.
FORWARD-LOOKING STATEMENTS
The “forward-looking statements” contained in
this release are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking
statements are predictive in nature and are frequently identified
by the use of terms such as “may,” “will,” “should,” “expect,”
“believe,” “estimate,” “intend,” and similar words indicating
possible future expectations, events or actions. These
forward-looking statements reflect our current views with respect
to future events and present our estimates and assumptions only as
of the date of this release. Actual results could differ materially
from those contemplated by the forward-looking statements made in
this release. In addition to any assumptions and other factors
referred to specifically in connection with such statements, other
factors, many of which are beyond our ability to control or
predict, could cause our actual results to differ materially from
the results expressed or implied in any forward-looking statements
including, but not limited to, our ability to successfully
integrate the operations of our new nursing center in Alabama, as
well as successfully operate all of our centers, our ability to
increase census at our renovated centers, changes in governmental
reimbursement, government regulation, the impact of the recently
adopted federal health care reform or any future health care
reform, any increases in the cost of borrowing under our credit
agreements, our ability to comply with covenants contained in those
credit agreements, our ability to renew or extend our leases at or
prior to the end of the existing lease terms, the outcome of
professional liability lawsuits and claims, our 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 proceedings alleging
violations of state or Federal False Claims Acts, laws and
regulations governing quality of care or other laws and regulations
applicable to our business including HIPAA and laws governing
reimbursement from government payors, the costs of investing in our
business initiatives and development, our ability to control costs,
changes to our valuation of deferred tax assets, changes in
occupancy rates in our centers, changing economic and competitive
conditions, changes in anticipated revenue and cost growth, changes
in the anticipated results of operations, the effect of changes in
accounting policies as well as others. The Company has provided
additional information in its Annual Report on Form 10-K for the
fiscal year ended December 31, 2017, as well as in its other
filings with the Securities and Exchange Commission, which readers
are encouraged to review for further disclosure of other factors.
These assumptions may not materialize to the extent assumed, and
risks and uncertainties may cause actual results to be different
from anticipated results. These risks and uncertainties also may
result in changes to the Company’s business plans and prospects.
Diversicare Healthcare Services, 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.
Diversicare provides long-term care services to
patients in 76 nursing centers and 8,456 skilled nursings beds. For
additional information about the Company, visit Diversicare's web
site: www.DVCR.com.
-Financial Tables to Follow-
DIVERSICARE HEALTHCARE SERVICES,
INC.CONDENSED CONSOLIDATED BALANCE
SHEETS(In thousands)
| |
|
September 30, 2018 |
|
December 31, 2017 |
| |
| |
(Unaudited) |
|
|
|
ASSETS: |
|
|
|
|
| Current
Assets |
|
|
|
|
| Cash and cash
equivalents |
|
$ |
3,293 |
|
|
$ |
3,524 |
|
|
Receivables, net |
|
65,927 |
|
|
64,929 |
|
| Current
assets of discontinued operations |
|
20 |
|
|
45 |
|
| Other
current assets |
|
6,242 |
|
|
4,160 |
|
| Total
current assets |
|
75,482 |
|
|
72,658 |
|
| |
|
|
|
|
| Property
and equipment, net |
|
53,474 |
|
|
69,204 |
|
| Deferred
income taxes |
|
15,891 |
|
|
15,154 |
|
| Acquired
leasehold interest, net |
|
6,403 |
|
|
6,691 |
|
| Assets
held for sale, net |
|
13,299 |
|
|
— |
|
| Other
assets, net |
|
7,782 |
|
|
3,862 |
|
| TOTAL
ASSETS |
|
$ |
172,331 |
|
|
$ |
167,569 |
|
| |
|
|
|
|
| LIABILITIES AND
EQUITY (DEFICIT): |
|
|
|
|
| Current
Liabilities |
|
|
|
|
| Current
portion of long-term debt and capitalized lease obligations |
|
$ |
12,576 |
|
|
$ |
13,065 |
|
| Trade
accounts payable |
|
14,146 |
|
|
14,080 |
|
| Current
liabilities of discontinued operations |
|
461 |
|
|
461 |
|
| Accrued
expenses: |
|
|
|
|
| Payroll
and employee benefits |
|
20,131 |
|
|
20,013 |
|
| Current
portion of self-insurance reserves |
|
13,051 |
|
|
8,792 |
|
| Other
current liabilities |
|
8,361 |
|
|
7,856 |
|
| Total
current liabilities |
|
68,726 |
|
|
64,267 |
|
| Noncurrent
Liabilities |
|
|
|
|
| Long-term
debt and capitalized lease obligations, less current portion and
deferred financing costs, net |
|
77,308 |
|
|
74,603 |
|
|
Self-insurance reserves, less current portion |
|
16,301 |
|
|
13,458 |
|
| Accrued
litigation contingency |
|
6,400 |
|
|
— |
|
| Other
noncurrent liabilities |
|
5,134 |
|
|
8,779 |
|
| Total
noncurrent liabilities |
|
105,143 |
|
|
96,840 |
|
| |
|
|
|
|
| SHAREHOLDERS’
EQUITY (DEFICIT) |
|
(1,538 |
) |
|
6,462 |
|
| |
|
|
|
|
| TOTAL
LIABILITIES AND EQUITY (DEFICIT) |
|
$ |
172,331 |
|
|
$ |
167,569 |
|
| |
|
|
|
|
DIVERSICARE HEALTHCARE SERVICES,
INC. CONSOLIDATED STATEMENTS OF
OPERATIONS(In thousands, except per share data,
unaudited)
| |
Three Months Ended September 30, |
|
|
2018 |
|
2017 |
| PATIENT REVENUES,
net |
$ |
|
|
|
|
|
141,431 |
|
$ |
146,377 |
| Operating expense |
113,799 |
|
|
118,104 |
|
|
Facility-level operating income |
27,632 |
|
|
28,273 |
|
| |
|
|
|
| EXPENSES: |
|
|
|
| Lease and
rent expense |
13,764 |
|
|
13,791 |
|
|
Professional liability |
2,933 |
|
|
2,617 |
|
|
Litigation contingency expense |
6,400 |
|
|
— |
|
| General
and administrative |
7,537 |
|
|
8,083 |
|
|
Depreciation and amortization |
2,964 |
|
|
2,988 |
|
| Lease
termination receipts |
— |
|
|
(180 |
) |
| Total
expenses less operating |
33,598 |
|
|
27,299 |
|
| OPERATING (LOSS)
INCOME |
(5,966 |
) |
|
974 |
|
| OTHER INCOME
(EXPENSE): |
|
|
|
| Interest
expense, net |
(1,666 |
) |
|
(1,668 |
) |
| Hurricane
costs |
— |
|
|
(232 |
) |
| Other
income |
36 |
|
|
— |
|
| Total
other expense |
(1,630 |
) |
|
(1,900 |
) |
| LOSS FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES |
(7,596 |
) |
|
(926 |
) |
| BENEFIT FOR INCOME
TAXES |
207 |
|
|
345 |
|
| LOSS FROM CONTINUING
OPERATIONS |
(7,389 |
) |
|
(581 |
) |
| INCOME (LOSS) FROM
DISCONTINUED OPERATIONS: |
|
|
|
| OPERATING
INCOME (LOSS) |
(8 |
) |
|
1 |
|
| NET LOSS |
$ |
(7,397 |
) |
|
$ |
(580 |
) |
| |
|
|
|
| NET LOSS PER COMMON
SHARE: |
|
|
|
| Per
common share – basic |
|
|
|
|
Continuing operations |
$ |
(1.15 |
) |
|
$ |
(0.09 |
) |
|
Discontinued operations |
— |
|
|
— |
|
| |
$ |
(1.15 |
) |
|
$ |
(0.09 |
) |
| |
|
|
|
| Per
common share – diluted |
$ |
(1.15 |
) |
|
$ |
(0.09 |
) |
|
Continuing operations |
— |
|
|
— |
|
|
Discontinued operations |
$ |
(1.15 |
) |
|
$ |
(0.09 |
) |
| |
|
|
|
| DIVIDENDS DECLARED PER
SHARE OF COMMON STOCK |
$ |
0.055 |
|
|
$ |
0.055 |
|
| WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING: |
|
|
|
|
Basic |
6,400 |
|
|
6,294 |
|
|
Diluted |
6,400 |
|
|
6,294 |
|
DIVERSICARE HEALTHCARE SERVICES,
INC. CONSOLIDATED STATEMENTS OF
OPERATIONS(In thousands, except per share data,
unaudited)
| |
Nine Months Ended September 30, |
|
|
2018 |
|
2017 |
| PATIENT REVENUES,
net |
$ |
|
|
|
|
|
423,798 |
|
|
$ |
|
430,427 |
| Operating expense |
337,517 |
|
|
341,937 |
|
|
Facility-level operating income |
86,281 |
|
|
88,490 |
|
| |
|
|
|
| EXPENSES: |
|
|
|
| Lease and
rent expense |
41,202 |
|
|
41,297 |
|
|
Professional liability |
8,890 |
|
|
8,011 |
|
|
Litigation contingency expense |
6,400 |
|
|
— |
|
| General
and administrative |
24,971 |
|
|
25,277 |
|
|
Depreciation and amortization |
8,692 |
|
|
8,095 |
|
| Lease
termination receipts |
— |
|
|
(180 |
) |
| Total
expenses less operating |
90,155 |
|
|
82,500 |
|
| OPERATING (LOSS)
INCOME |
(3,874 |
) |
|
5,990 |
|
| OTHER INCOME
(EXPENSE): |
|
|
|
| Gain on
sale of investment in unconsolidated affiliate |
308 |
|
|
733 |
|
| Interest
expense, net |
(4,996 |
) |
|
(4,692 |
) |
| Hurricane
costs |
— |
|
|
(232 |
) |
| Other
income |
115 |
|
|
— |
|
| Total
other expense |
(4,573 |
) |
|
(4,191 |
) |
| INCOME (LOSS) FROM
CONTINUING OPERATIONS BEFORE INCOME TAXES |
(8,447 |
) |
|
1,799 |
|
| BENEFIT (PROVISION) FOR
INCOME TAXES |
670 |
|
|
(651 |
) |
| INCOME (LOSS) FROM
CONTINUING OPERATIONS |
(7,777 |
) |
|
1,148 |
|
| LOSS FROM DISCONTINUED
OPERATIONS: |
|
|
|
| OPERATING
LOSS |
(34 |
) |
|
(42 |
) |
| NET INCOME (LOSS) |
$ |
(7,811 |
) |
|
$ |
1,106 |
|
| |
|
|
|
| NET INCOME (LOSS) PER
COMMON SHARE: |
|
|
|
| Per
common share – basic |
|
|
|
|
Continuing operations |
$ |
(1.22 |
) |
|
$ |
0.18 |
|
|
Discontinued operations |
(0.01 |
) |
|
(0.01 |
) |
| |
$ |
(1.23 |
) |
|
$ |
0.17 |
|
| |
|
|
|
| Per
common share – diluted |
$ |
(1.22 |
) |
|
$ |
0.18 |
|
|
Continuing operations |
(0.01 |
) |
|
(0.01 |
) |
|
Discontinued operations |
$ |
(1.23 |
) |
|
$ |
0.17 |
|
| |
|
|
|
| DIVIDENDS DECLARED PER
SHARE OF COMMON STOCK |
$ |
0.165 |
|
|
$ |
0.165 |
|
| WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING: |
|
|
|
|
Basic |
6,362 |
|
|
6,274 |
|
|
Diluted |
6,362 |
|
|
6,465 |
|
DIVERSICARE HEALTHCARE SERVICES,
INC.RECONCILIATION OF NET INCOME (LOSS) TO
ADJUSTED EBITDA(In thousands)
| |
|
For Three Months Ended |
| |
September 30, 2018 |
|
June 30, 2018 |
|
March 31, 2018 |
|
December 31, 2017 |
|
September 30, 2017 |
| |
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
| Net income
(loss) |
$ |
(7,397) |
|
$ |
(311) |
|
$ |
(103) |
|
$ |
(5,933) |
|
$ |
(580) |
| Loss (income) from
discontinued operations, net of tax |
|
8 |
|
|
4 |
|
|
22 |
|
|
(14 |
) |
|
(1 |
) |
| Income tax provision
(benefit) |
|
(207 |
) |
|
(425 |
) |
|
(38 |
) |
|
6,092 |
|
|
(345 |
) |
| Interest expense |
|
1,666 |
|
|
1,661 |
|
|
1,669 |
|
|
1,677 |
|
|
1,668 |
|
| Depreciation and
amortization |
|
2,964 |
|
|
2,847 |
|
|
2,881 |
|
|
2,807 |
|
|
2,988 |
|
|
EBITDA |
|
(2,966 |
) |
|
3,776 |
|
|
4,431 |
|
|
4,629 |
|
|
3,730 |
|
| |
|
|
|
|
|
|
|
|
|
|
| EBITDA
adjustments: |
|
|
|
|
|
|
|
|
|
|
| Litigation contingency
expense (a) |
|
6,400 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Executive severance
(b) |
|
— |
|
|
1,172 |
|
|
— |
|
|
— |
|
|
— |
|
| Gain on bargain
purchase (c) |
|
— |
|
|
— |
|
|
— |
|
|
(925 |
) |
|
— |
|
| Lease termination
receipts (d) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(180 |
) |
| Hurricane costs
(e) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
232 |
|
| Gain on sale of
investment in unconsolidated affiliate (f) |
|
— |
|
|
(308 |
) |
|
— |
|
|
— |
|
|
— |
|
| Acquisition &
disposition related costs (g) |
|
— |
|
|
— |
|
|
46 |
|
|
2 |
|
|
72 |
|
| Adjusted
EBITDA |
|
$ |
3,434 |
|
|
$ |
4,640 |
|
|
$ |
4,477 |
|
|
$ |
3,706 |
|
|
$ |
3,854 |
|
| Add: Lease
expense |
|
$ |
13,764 |
|
|
$ |
13,725 |
|
|
$ |
13,713 |
|
|
$ |
13,691 |
|
|
$ |
13,791 |
|
| Adjusted
EBITDAR |
|
$ |
17,198 |
|
|
$ |
18,365 |
|
|
$ |
18,190 |
|
|
$ |
17,397 |
|
|
$ |
17,645 |
|
|
(a) |
Represents non-recurring expected costs
associated with the DOJ investigation. |
|
(b) |
Represents non-recurring costs associated with
severance expenses for the former Chief Executive Officer. |
|
(c) |
Represents non-recurring gain on bargain
purchase related to the Selma acquisition in July 2017. |
|
(d) |
Represents non-recurring lease termination
receipts, net of expenses, related to the termination of the
Carthage, Mississippi operating lease in September 2017. |
|
(e) |
Represents non-recurring hurricane costs
related to Hurricanes Harvey and Irma during the third quarter
2017. |
|
(f) |
Represents non-recurring gain on the sale of
an unconsolidated affiliate in November 2016. |
|
(g) |
Represents non-recurring costs associated with
acquisition and disposition-related transactions. |
DIVERSICARE HEALTHCARE SERVICES,
INC.RECONCILIATION OF NET INCOME (LOSS) TO
ADJUSTED NET INCOME (LOSS)(In thousands, except per share
data)
| |
|
For Three Months Ended |
| |
September 30, 2018 |
|
June 30, 2018 |
|
March 31, 2018 |
|
December 31, 2017 |
|
September 30, 2017 |
| |
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
|
(Unaudited) |
| Net income
(loss) |
$ |
(7,397) |
|
$ |
(311) |
|
$ |
(103) |
|
$ |
(5,933) |
|
$ |
(580) |
| Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Litigation contingency expense (a) |
|
6,400 |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
| Executive
severance (b) |
|
— |
|
|
1,172 |
|
|
— |
|
|
— |
|
|
— |
|
| Gain on
bargain purchase (c) |
|
— |
|
|
— |
|
|
— |
|
|
(925 |
) |
|
— |
|
| Lease
termination receipts (d) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
(180 |
) |
| Hurricane
costs (e) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
232 |
|
| Gain on
sale of unconsolidated affiliate (f) |
|
— |
|
|
(308 |
) |
|
— |
|
|
— |
|
|
— |
|
|
Acquisition and disposition related costs (g) |
|
— |
|
|
— |
|
|
46 |
|
|
2 |
|
|
72 |
|
| Tax
impact of above adjustments (h) |
|
— |
|
|
(474 |
) |
|
(15 |
) |
|
600 |
|
|
(43 |
) |
|
Discontinued operations, net of tax |
|
8 |
|
|
4 |
|
|
22 |
|
|
(14 |
) |
|
(1 |
) |
| Adjusted net
income (loss) |
|
$ |
(989 |
) |
|
$ |
83 |
|
|
$ |
(50 |
) |
|
$ |
(6,270 |
) |
|
$ |
(500 |
) |
| |
|
|
|
|
|
|
|
|
|
|
| Adjusted net
income (loss) per common share |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
$ |
(0.15 |
) |
|
$ |
0.01 |
|
|
$ |
(0.01 |
) |
|
$ |
(1.00 |
) |
|
$ |
(0.08 |
) |
|
Diluted |
|
$ |
(0.15 |
) |
|
$ |
0.01 |
|
|
$ |
(0.01 |
) |
|
$ |
(1.00 |
) |
|
$ |
(0.08 |
) |
| |
|
|
|
|
|
|
|
|
|
|
| WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING: |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
6,400 |
|
|
6,370 |
|
|
6,314 |
|
|
6,295 |
|
|
6,294 |
|
|
Diluted |
|
6,400 |
|
|
6,470 |
|
|
6,314 |
|
|
6,295 |
|
|
6,294 |
|
| |
|
|
|
|
|
|
|
|
|
|
| (a) |
Represents non-recurring expected costs
associated with the DOJ investigation. |
| (b) |
Represents non-recurring costs associated with
severance expenses for the former Chief Executive Officer. |
|
(c) |
Represents non-recurring gain on bargain
purchase related to the Selma acquisition in July 2017. |
|
(d) |
Represents non-recurring lease termination
receipts, net of expenses, related to the termination of the
Carthage, Mississippi operating lease in September 2017. |
|
(e) |
Represents non-recurring hurricane costs
related to Hurricanes Harvey and Irma during the third quarter
2017. |
|
(f) |
Represents non-recurring gain on the sale of
an unconsolidated affiliate in November 2016. |
|
(g) |
Represents non-recurring costs associated with
acquisition and disposition-related transactions. |
|
(h) |
Represents tax provision for the cumulative
adjustments for each period. |
DIVERSICARE HEALTHCARE SERVICES,
INC.FUNDS PROVIDED BY OPERATIONS(In
thousands, except per share data, unaudited)
| |
Nine Months Ended September 30, |
| |
|
|
2018 |
|
2017 |
| NET INCOME
(LOSS) |
$ |
(7,811) |
|
|
$ |
|
1,106 |
| Discontinued
operations |
(34 |
) |
|
(42 |
) |
| Net income (loss) from
continuing operations |
(7,777 |
) |
|
1,148 |
|
|
Adjustments to reconcile net income (loss) from continuing
operations to funds provided by operations: |
|
|
|
|
Depreciation and amortization |
8,692 |
|
|
8,095 |
|
| Provision
for doubtful accounts |
— |
|
|
6,407 |
|
|
Litigation contingency expense |
6,400 |
|
|
— |
|
| Deferred
income tax provision (benefit) |
(829 |
) |
|
52 |
|
| Provision
for self-insured professional liability, net of cash payments |
2,224 |
|
|
(168 |
) |
| Stock
based compensation |
947 |
|
|
766 |
|
|
Gain on sale of investment in unconsolidated affiliate |
(308 |
) |
|
(733 |
) |
|
Provision for leases in excess of cash payments |
(1,363 |
) |
|
(517 |
) |
| Deferred
bonus |
— |
|
|
700 |
|
|
Other |
250 |
|
|
388 |
|
| FUNDS PROVIDED
BY OPERATIONS |
$ |
8,236 |
|
|
$ |
16,138 |
|
| |
|
|
|
| FUNDS PROVIDED
BY OPERATIONS PER COMMON SHARE: |
|
|
|
|
Basic |
$ |
1.29 |
|
|
$ |
2.57 |
|
|
Diluted |
$ |
1.27 |
|
|
$ |
2.50 |
|
| WEIGHTED
AVERAGE COMMON SHARES OUTSTANDING : |
|
|
|
|
Basic |
6,362 |
|
|
6,274 |
|
|
Diluted |
6,491 |
|
|
6,465 |
|
We have included certain financial measures in
this press release, including EBITDA, Adjusted EBITDA, Adjusted
EBITDAR, Adjusted Net income (loss) and Funds Provided by
Operations which are “non-GAAP financial measures” using accounting
principles generally accepted in the United States (GAAP) and using
adjustments to GAAP (non-GAAP). These non-GAAP measures are not
measurements under GAAP. These measurements should be considered in
addition to, but not as a substitute for, the information contained
in our financial statements prepared in accordance with GAAP. We
define EBITDA as net income (loss) adjusted for loss (income) from
discontinued operations, interest expense, income tax and
depreciation and amortization. We define Adjusted EBITDA as EBITDA
adjusted for acquisition and disposition related costs, hurricane
costs, lease termination receipts, gain on sale of unconsolidated
center, gain on bargain purchase, executive severance and
litigation contingency expense. We define Adjusted EBITDAR as
Adjusted EBITDA adjusted for rent expense. We define Adjusted Net
income (loss) as Net income (loss) adjusted for acquisition and
disposition related costs, hurricane costs, lease termination
receipts, gain on sale of unconsolidated center, gain on bargain
purchase, executive severance, litigation contingency expense, tax
impact related to those adjustments, and discontinued operations,
net of tax. Funds Provided by Operations is defined as net income
from operating activities adjusted for the cash effect of
professional liability and other non-cash charges. Management
believes that Funds Provided by Operations is an important
performance measurement because it eliminates the effect of
actuarial assumptions on our professional liability reserves,
includes the cash effect of professional liability payments, and
does not include the effects of deferred tax benefit and other
non-cash charges.
Our measurements of EBITDA, Adjusted EBITDA,
Adjusted EBITDAR, Adjusted Net income (loss) and Funds Provided by
Operations may not be comparable to similarly titled measures of
other companies. We have included information concerning EBITDA,
Adjusted EBITDA, Adjusted EBITDAR, Adjusted Net income (loss) and
Funds Provided by Operations in this press release because we
believe that such information is used by certain investors as
measures of a company’s historical performance. Management believes
that Adjusted EBITDA, Adjusted EBITDAR and Adjusted Net income
(loss) are important performance measurements because they
eliminate certain nonrecurring start-up losses, separation costs
and other items. Management believes that Funds Provided by
Operations is an important performance measurement because it
eliminates the effect of actuarial assumptions on our professional
liability reserves, includes the cash effect of professional
liability payments, and does not include the effects of deferred
taxes and other non-cash items. Our presentation of EBITDA,
Adjusted EBITDA, Adjusted EBITDAR, Adjusted Net income (loss) and
Funds Provided by Operations should not be construed as an
inference that our future results will be unaffected by unusual or
nonrecurring items.
| DIVERSICARE HEALTHCARE SERVICES, INC. SELECTED
OPERATING STATISTICS(Unaudited)Three
Months Ended September 30, 2018 |
| |
|
As of September 30, 2018 |
|
|
|
Occupancy (Note 2) |
|
|
|
|
|
|
|
|
|
Region(Note 1) |
|
Licensed Nursing BedsNote (4) |
|
Available Nursing BedsNote (4) |
|
Skilled Nursing Weighted Average Daily Census |
|
Licensed Nursing Beds |
|
Available Nursing Beds |
|
Medicare Utilization |
2018
Q3 Revenue($ in millions) |
|
Medicare Room and Board Revenue
PPD (Note 3) |
|
Medicaid Room and Board Revenue
PPD (Note 3) |
|
| Alabama |
|
2,464 |
|
|
2,367 |
|
|
2,095 |
|
|
85.0 |
% |
|
88.5 |
% |
|
9.7 |
% |
|
$ |
44.5 |
|
|
$ |
433.66 |
|
|
$ |
190.59 |
|
|
| Kansas |
|
464 |
|
|
462 |
|
|
402 |
|
|
86.6 |
% |
|
87.0 |
% |
|
10.4 |
% |
|
8.1 |
|
|
432.47 |
|
|
179.38 |
|
|
|
Kentucky |
|
1,285 |
|
|
1,291 |
|
|
1,113 |
|
|
86.6 |
% |
|
86.2 |
% |
|
12.6 |
% |
|
26.6 |
|
|
392.23 |
|
|
176.77 |
|
|
|
Mississippi |
|
1,039 |
|
|
978 |
|
|
871 |
|
|
83.8 |
% |
|
89.1 |
% |
|
12.8 |
% |
|
18.6 |
|
|
429.24 |
|
|
188.10 |
|
|
|
Missouri |
|
339 |
|
|
335 |
|
|
230 |
|
|
68.0 |
% |
|
68.8 |
% |
|
6.0 |
% |
|
4.0 |
|
|
461.88 |
|
|
143.57 |
|
|
| Ohio |
|
403 |
|
|
392 |
|
|
327 |
|
|
81.1 |
% |
|
83.4 |
% |
|
13.3 |
% |
|
8.6 |
|
|
734.23 |
|
|
246.10 |
|
|
|
Tennessee |
|
617 |
|
|
546 |
|
|
432 |
|
|
70.1 |
% |
|
79.2 |
% |
|
11.1 |
% |
|
9.0 |
|
|
431.28 |
|
|
191.29 |
|
|
| Texas |
|
1,845 |
|
|
1,613 |
|
|
1,233 |
|
|
66.8 |
% |
|
76.4 |
% |
|
6.7 |
% |
|
22.0 |
|
|
502.24 |
|
|
150.61 |
|
|
| Total |
|
8,456 |
|
|
7,984 |
|
|
6,703 |
|
|
79.3 |
% |
|
84.0 |
% |
|
10.2 |
% |
|
$ |
141.4 |
|
|
$ |
452.19 |
|
|
$ |
180.69 |
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 1: |
The Alabama region includes nursing
centers in Alabama and Florida. The Kentucky region includes one
nursing center in Indiana. |
|
|
Note 2: |
The number of Licensed Nursing Beds is
based on the licensed capacity of the facility. The Company has
historically reported its occupancy based on licensed nursing beds,
and excludes a limited number of assisted living, independent
living, and personal care beds. The number of Available Nursing
Beds represents licensed nursing beds less beds removed from
service. Available nursing beds is subject to change based upon the
needs of the facilities, including configuration of patient rooms,
common usage areas and offices, status of beds (private,
semi-private, ward, etc.) and renovations. Occupancy is measured on
a weighted average basis. |
|
|
Note 3: |
These Medicare and Medicaid revenue rates
include room and board revenues, but do not include any ancillary
revenues related to these patients. |
|
|
Note 4: |
The Licensed and Available Nursing Bed
counts above include only licensed and available SNF beds. |
|
Company Contact:James R. McKnight, Jr.Chief Executive
Officer615-771-7575 |
|
Investor Relations: Kerry D.
Massey Chief Financial Officer 615-771-7575 |
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