Arcadia Resources, Inc. (NYSE Amex: KAD), a leading provider of innovative consumer health care services under the Arcadia HealthCare? brand, today announced fiscal 2011 third quarter net revenues of $26.2 million and a consolidated net loss of $2.3 million, or $0.01 per share, which compares to net revenue of $25.7 million and a consolidated net loss of $3.2 million, or $0.02 per share, for the same period in fiscal 2010.
?During the third quarter our operating results improved in both our Pharmacy and Services segments,? said Marvin R. Richardson, President and Chief Executive Officer of Arcadia. ?In our Pharmacy segment, we saw substantial growth in active patients, solid growth in our core DailyMed revenue, and progress towards overall segment profitability as we continue to leverage our SG&A compared to the prior quarter. In our Services segment, we saw an increase in revenue and margins compared to the prior quarter and consistent operating contribution. We expect continued improvement during fiscal fourth quarter.?
?We remain in on-going discussions with several large managed care payors who have a strong interest in using DailyMed to improve patient outcomes and manage escalating health care costs. Additionally, we have expanded our market reach for DailyMed into the growing market for transitional care with the addition of pilot programs with highly respected transitional care providers, including Cleveland Clinic. As such, we now have a broader range of opportunities going forward to grow our revenue from both the dispensing of drugs as well as pharmacy services,? Richardson said.
Fiscal 2011 Third Quarter Results
Arcadia reported $26.2 million in revenue from continuing operations during the quarter, up from $25.7 million during the same period a year ago. The Company's gross margin from continuing operations was 27.6% during the third quarter, a decline of 0.8% from the same period a year ago. The reduction in gross margin was driven by a shift in mix towards Pharmacy revenue, which has lower margins than the Company's Services segment. For the second quarter of fiscal 2011, revenues and gross margin from continuing operations were $25.8 million and 27.3%, respectively.
Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations were a negative $1.7 million during the quarter, an improvement of 13.4% over the prior year quarter of negative $1.9 million. EBITDA from continuing operations improved by $0.8 million, or 32.0%, from the second quarter of fiscal 2011.
Arcadia reduced its net loss from continuing operations to $2.5 million, or $0.01 per share, in the third quarter of fiscal 2011, compared to a net loss from continuing operations of $3.0 million, or $0.02 per share, in the same period in fiscal 2010. The consolidated net loss, including discontinued operations, was $2.3 million, or $0.01, in the fiscal third quarter in 2011 compared to a net loss of $3.2 million, or $0.02 in the fiscal third quarter in 2010. In the second quarter of fiscal 2011, the net loss from continuing operations and the consolidated net loss were $3.1 million and $2.9 million, respectively.
Segment highlights:
Pharmacy: Pharmacy segment revenues increased to $5.0 million for the third quarter of fiscal 2011, an increase of 2.0% compared to $4.9 million in the previous quarter. Third quarter revenue increased 7.6% compared with the second quarter in the Company's Indianapolis and California pharmacy locations. Quarter-over-quarter revenues were positively impacted by a 21% growth in active patient count, but were impacted negatively by the loss of certain customers at the Company's Minnesota pharmacy and the conversion of brand name drugs to generics during the quarter. Pharmacy gross margins were 16.2% in the third quarter of fiscal 2011 compared to 15.6% in the prior quarter. While the Pharmacy experienced reimbursement pressure relating to its California patient base, the margin improvement reflects an increase in higher margin non-drug revenue and improved drug and packaging costs. The Pharmacy segment had an EBITDA loss of $1.4 million during the quarter, a 10.7% improvement compared to the EBITDA loss of $1.5 million in the second quarter of fiscal 2011.
Pharmacy segment revenues of $5.0 million for the third quarter of fiscal 2011 increased 22.6% compared to $4.1 million in revenues for the third quarter of fiscal 2010. Pharmacy gross margins were 16.2% in the third quarter of fiscal 2011 compared to 17.3% in the third quarter of fiscal 2010. EBITDA for the Pharmacy segment was a negative $1.4 million compared to a negative $1.2 million in the same quarter a year ago.
Services: The Company's Services segment, which includes Arcadia's home care and medical staffing business, reported net revenue of $21.1 million in the third quarter, an increase of 1.0% compared to net revenues of $20.9 million for the second quarter of fiscal 2011. Home care revenues increased by $180,000, or 1.1%, to $17.0 million from $16.8 in the second quarter. Medical staffing and travel staffing revenue was $4.2 million during the third quarter compared to $4.1 million in the previous quarter. Total Services segment revenue was at its highest level since the third quarter of fiscal 2010. Gross margin within the Services segment was 30.3% in the third quarter of fiscal 2011 compared to 30.0% in the second quarter. The Services segment EBITDA for the third quarter was $1.3 million compared to $1.4 million for the second quarter.
Services segment net revenues of $21.1 million in the third quarter were down slightly compared to net revenues of $21.6 million for the third quarter a year ago. Home care revenues decreased by $124,000, or 0.7%, to $17.0 million from $17.1 million in the same period last year. Medical staffing and travel staffing revenue declined $300,000 to $4.2 million in the third quarter of fiscal 2011 compared to $4.5 million in the same period last year. Gross margin within the Services segment was 30.3% in the third quarter of fiscal 2011 compared to 30.5% in the same period last year. The Services segment EBITDA improved by 18.3%, or $0.2 million, to $1.3 million compared to the prior year quarter.
?These results continue to move us down the path of achieving profitability and becoming cash flow positive. We have seen steady improvement in our Services segment profitability, even though underlying market conditions remain challenging. In our Pharmacy segment, we continue to improve our EBITDA quarter over quarter through higher sales, increased fee for service revenue and operating efficiencies. Our progress is steady and we expect to accelerate the rate of improvement in future quarters,? Richardson commented.
The Company sold its former Catalog segment during the quarter and the Catalog's operating results are included in discontinued operations.
Capital Resources and Liquidity
Cash flow from operations during the third fiscal quarter improved by $1.1 million to negative $2.3 million compared to negative $3.4 million in the second fiscal quarter of 2011, inclusive of changes in operating assets and liabilities in each quarter of negative $0.9 million and negative $1.1 million, respectively.
At December 31, 2010, the Company had total cash plus line-of-credit availability of $4.4 million. On November 2, 2010, the Company finalized a $4.6 million equity financing transaction, net of fees, whereby it sold 15,606,000 shares of common stock at $0.32 per share. The additional cash will be used to fund and grow the DailyMed operations.
The Company previously announced that it had entered into a new credit facility with Comerica Bank covering its Services segment. The amendment changed certain terms of the agreement, including extension of the maturity date until April 2012, and required a $500,000 increase to the restricted cash account used to collateralize the debt balance.
?While we are continuing to manage our short-term cash flows carefully, we are focused on how we deal with the debt that matures in April 2012. We are exploring a variety of alternatives for handling these debt maturities and we intend to have a plan in place over the next several months,? said Matt Middendorf, Chief Financial Officer.
Conference Call Information
Arcadia will conduct a conference call and simultaneous Internet webcast to review these financial results on Wednesday, February 9, 2011, at 11:00 a.m. ET. Marvin R. Richardson, Arcadia HealthCare's President and Chief Executive Officer, will host the call. Also presenting will be Matthew R. Middendorf, Chief Financial Officer.
To access the webcast, visit the Company's website at www.arcadiahealthcare.com, 5-10 minutes prior to the start time and click on the webcast link. The Company's press release, which will contain financial information to be discussed in the presentation, will also be available on the Company's website.
To participate in the live conference call, please dial 1-877-407-8031 (for US-based callers) or 1-201-689-8031(for international callers). The call can also be accessed (listen mode only) via the Company's web site at www.arcadiahealthcare.com through the ?Investors? page.
A replay of the webcast will be available approximately one hour after the completion of the call and will be accessible on www.arcadiahealthcare.com until February 23, 2011. A telephone replay will be available by dialing 1-877-660-6853 (for US-based callers) or 1-201-612-7415 (for international callers). For the replay, callers must use both the Account Number 286 and Conference ID number 366159.
Use of Non-GAAP Financial Information
In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, Arcadia reports non-GAAP financial results. Arcadia's management believes these non-GAAP measures are useful to investors because they provide supplemental information that facilitates comparisons to prior periods. Management uses these non-GAAP measures to evaluate its financial results, develop budgets and manage expenditures. The method Arcadia uses to produce non-GAAP results is likely to differ from the methods used by other companies and should not be regarded as a replacement for corresponding GAAP measures. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP results, which are attached to this release.
Specifically, the Company presents EBITDA as a non-GAAP measure. EBITDA represents income (loss) from operations. The Company presents EBITDA because it is a measure management believes is frequently used by securities analysts, investors and interested parties in the evaluation of financial performance. EBITDA has limitations as an analytical tool, and securities analysts, investors and interested parties should not consider any of these non-GAAP measures in isolation or as a substitute for analysis of the Company's results as reported under GAAP.
About Arcadia HealthCare
Arcadia HealthCare is a service mark of Arcadia Resources, Inc. (NYSE Amex: KAD), and is a leading provider of home care, medical staffing and pharmacy services under its proprietary DailyMed program. The Company, headquartered in Indianapolis, Indiana, has 65 locations in 18 states. Arcadia HealthCare's comprehensive solutions and business strategies support the Company's vision of "Keeping People at Home and Healthier Longer."
DailyMed? Pharmacy dispenses a monthly cycle of a patient's prescriptions, over-the-counter medications and vitamins, and organizes them into pre-sorted packets clearly marked with the date and time the medications should be taken. In the dispensing process, a DailyMed pharmacist reviews each patient's medication profile and utilizes state-of-the-art medication therapy management tools in order to improve the safety and efficacy of the medications being dispensed. A DailyMed pharmacist provides routine communication with the patient, the primary care physician, caregivers and payers in order to maximize the pharmaceutical care administered. The DailyMed program improves patient care and drug utilization while reducing drug and hospitalization costs for private and government payers.
Forward Looking Statements
Any statements contained in this release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21A of the Securities Exchange Act of 1934, as amended and otherwise within the meaning of court opinions construing such forward-looking statements. The Company claims all safe harbor and other legal protections provided to it by law for all of its forward-looking statements. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, estimates, uncertainties and other factors, which could cause actual financial or operating results, performances or achievements expressed or implied by such forward-looking statements not to occur or be realized, including our estimates of consumer demand for our services and products, required capital investment, competition, and other factors. Actual events and results may differ materially from those expressed, implied or forecasted in forward-looking statements due to a number of factors. Important factors that could cause actual results, developments and business decisions to differ materially from forward-looking statements are described in the Company's filings with the Securities and Exchange Commission from time to time, including the section entitled "Risk Factors" and elsewhere in the Company's most recent Annual Report on Form 10-K and subsequent periodic reports. Among the factors that could cause future results to differ materially from those provided in our press release are: (i) we cannot be certain or our ability to generate sufficient cash flow to meet our obligations on a timely basis; (ii) we may be required to make significant business investments that do not produce offsetting increases in revenue; (iii) we may be unable to execute and implement our growth strategy; (iv) we may be unable to achieve our targeted performance goals for our business segments; and (v) other unforeseen events may impact our business. The forward-looking statements speak only as of the date hereof. The Company disclaims any obligation to update or alter its forward-looking statements, except as may be required by law.
FINANCIAL TABLES FOLLOW
ARCADIA RESOURCES, INC. | ||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||||||
(in thousands, except per share amounts) | ||||||||||||
December 31, | March 31, | |||||||||||
2010 | 2010 | |||||||||||
ASSETS | (unaudited) | |||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 3,796 | $ | 5,444 | ||||||||
Accounts receivable, net of allowance of $1,952 and $2,623, respectively | 12,544 | 12,290 | ||||||||||
Inventories, net | 1,234 | 917 | ||||||||||
Prepaid expenses and other current assets | 1,695 | 1,551 | ||||||||||
Current assets of discontinued operations | - | 174 | ||||||||||
Total current assets | 19,269 | 20,376 | ||||||||||
Property and equipment, net | 1,671 | 1,738 | ||||||||||
Goodwill | 2,500 | 2,500 | ||||||||||
Acquired intangible assets, net | 7,241 | 7,670 | ||||||||||
Other assets | 394 | 412 | ||||||||||
Restricted cash | 1,000 | 500 | ||||||||||
Total assets | $ | 32,075 | $ | 33,196 | ||||||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable | $ | 1,531 | $ | 2,859 | ||||||||
Accrued expenses: | ||||||||||||
Compensation and related taxes | 2,091 | 3,184 | ||||||||||
Interest | 39 | 82 | ||||||||||
Health insurance | 588 | 463 | ||||||||||
Other | 1,650 | 1,507 | ||||||||||
Fair value of warrant liability | 1,094 | 1,499 | ||||||||||
Payable to affiliated agencies | 485 | 1,076 | ||||||||||
Long-term obligations, current portion | 189 | 939 | ||||||||||
Capital lease obligations, current portion | 31 | 69 | ||||||||||
Current liabilities of discontinued operations | - | 308 | ||||||||||
Total current liabilities | 7,698 | 11,986 | ||||||||||
Lines of credit | 12,466 | 7,774 | ||||||||||
Long-term obligations, less current portion | 27,138 | 25,192 | ||||||||||
Capital lease obligations, less current portion | 10 | 19 | ||||||||||
Total liabilities | 47,312 | 44,971 | ||||||||||
Commitments and contingencies | ||||||||||||
STOCKHOLDERS' DEFICIT | ||||||||||||
Preferred stock, $.001 par value, 5,000,000 shares authorized, none outstanding | - | - | ||||||||||
Common stock, $.001 par value, 300,000,000 shares authorized; 193,094,419 shares and 177,918,044 shares issued, respectively | 193 | 178 | ||||||||||
Additional paid-in capital | 151,160 | 145,381 | ||||||||||
Accumulated deficit | (166,590 | ) | (157,334 | ) | ||||||||
Total stockholders' deficit | (15,237 | ) | (11,775 | ) | ||||||||
Total liabilities and stockholders' deficit | $ | 32,075 | $ | 33,196 | ||||||||
ARCADIA RESOURCES, INC. | ||||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||||||
Three Month Period Ended | Nine Month Period Ended | |||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||||||
| ||||||||||||||||||||
Services | $ | 21,139 | $ | 21,564 | $ | 62,434 | $ | 65,953 | ||||||||||||
Pharmacy | 5,033 | 4,105 | 14,998 | 10,731 | ||||||||||||||||
Revenues, net | 26,172 | 25,669 | 77,432 | 76,684 | ||||||||||||||||
Cost of revenues | 18,952 | 18,374 | 56,405 | 54,923 | ||||||||||||||||
Gross profit | 7,220 | 7,295 | 21,027 | 21,761 | ||||||||||||||||
Selling, general and administrative | 8,904 | 9,239 | 28,218 | 28,569 | ||||||||||||||||
Depreciation and amortization | 334 | 484 | 969 | 1,425 | ||||||||||||||||
Total operating expenses | 9,238 | 9,723 | 29,187 | 29,994 | ||||||||||||||||
Operating loss | (2,018 | ) | (2,428 | ) | (8,160 | ) | (8,233 | ) | ||||||||||||
Other expenses: | ||||||||||||||||||||
Interest expense, net | 1,003 | 934 | 2,827 | 2,618 | ||||||||||||||||
Change in fair value of warrant liability | (541 | ) | (367 | ) | (678 | ) | (368 | ) | ||||||||||||
Other | - | - | - | 30 | ||||||||||||||||
Total other expenses | 462 | 567 | 2,149 | 2,280 | ||||||||||||||||
Loss from continuing operations before income taxes | (2,480 | ) | (2,995 | ) | (10,309 | ) | (10,513 | ) | ||||||||||||
Income tax expense | 30 | 16 | 102 | 116 | ||||||||||||||||
Loss from continuing operations | (2,510 | ) | (3,011 | ) | (10,411 | ) | (10,629 | ) | ||||||||||||
Discontinued operations: | ||||||||||||||||||||
Loss from discontinued operations | (36 | ) | (157 | ) | (118 | ) | (1,637 | ) | ||||||||||||
Net gain on disposal | 228 | 15 | 1,274 | 394 | ||||||||||||||||
192 | (142 | ) | 1,156 | (1,243 | ) | |||||||||||||||
NET LOSS | $ | (2,318 | ) | $ | (3,153 | ) | $ | (9,255 | ) | $ | (11,872 | ) | ||||||||
Weighted average number of common shares outstanding | 187,309 | 168,788 | 180,627 | 163,412 | ||||||||||||||||
Basic and diluted net income (loss) per share: | ||||||||||||||||||||
Loss from continuing operations | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.05 | ) | $ | (0.07 | ) | ||||||||
Income (loss) from discontinued operations | - | - | - | - | ||||||||||||||||
Net loss per share | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.05 | ) | $ | (0.07 | ) | ||||||||
ARCADIA RESOURCES, INC. | ||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW | ||||||||||||
(in thousands) | ||||||||||||
Nine-Month Period Ended | ||||||||||||
December 31, | ||||||||||||
(Unaudited) | ||||||||||||
2010 | 2009 | |||||||||||
Operating activities | ||||||||||||
Net loss for the period | $ | (9,255 | ) | $ | (11,872 | ) | ||||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
Provision for doubtful accounts | 534 | 1,432 | ||||||||||
Depreciation of property and equipment | 540 | 1,241 | ||||||||||
Amortization of intangible assets | 429 | 564 | ||||||||||
Gain on business disposals | (1,274 | ) | (394 | ) | ||||||||
Non-cash interest expense | 2,141 | 1,789 | ||||||||||
Amortization of deferred financing costs and debt discounts | 291 | 280 | ||||||||||
Stock-based compensation expense | 1,056 | 923 | ||||||||||
Change in fair value of warrant liability | (678 | ) | (368 | ) | ||||||||
Changes in operating assets and liabilities, net of acquisitions: | ||||||||||||
Accounts receivable | (711 | ) | 3,088 | |||||||||
Inventories | (315 | ) | 648 | |||||||||
Other assets | (116 | ) | 266 | |||||||||
Accounts payable | (1,677 | ) | (1,251 | ) | ||||||||
Accrued expenses | (896 | ) | (1,477 | ) | ||||||||
Due to affiliated agencies | (569 | ) | (373 | ) | ||||||||
Net cash used in operating activities | (10,500 | ) | (5,504 | ) | ||||||||
Investing activities | ||||||||||||
Business acquisitions, net of cash acquired | (139 | ) | (253 | ) | ||||||||
Proceeds from business disposal | 1,342 | 9,335 | ||||||||||
Increase in restricted cash | (500 | ) | (500 | ) | ||||||||
Purchases of property and equipment | (473 | ) | (329 | ) | ||||||||
Net cash provided by investing activities | 229 | 8,253 | ||||||||||
Financing activities | ||||||||||||
Lines of credit, net activity | 4,947 | (113 | ) | |||||||||
Proceeds from equity financing, net of fees paid in cash of $536 and $839, respectively | 4,476 | 10,260 | ||||||||||
Proceeds from note payable, net of fees | - | 2,141 | ||||||||||
Payments on notes payable and capital lease obligations | (802 | ) | (9,252 | ) | ||||||||
Proceeds from exercise of stock options | 2 | - | ||||||||||
Net cash provided by (used in) financing activities | 8,623 | 3,037 | ||||||||||
Net change in cash and cash equivalents | (1,648 | ) | 5,786 | |||||||||
Cash and cash equivalents, beginning of period | 5,444 | 1,522 | ||||||||||
Cash and cash equivalents, end of period | $ | 3,796 | $ | 7,308 | ||||||||
ARCADIA RESOURCES, INC. | |||||||||||
EBITDA RECONCILIATION | |||||||||||
(in thousands) | |||||||||||
Three-Month Period Ended December 31, | |||||||||||
Reconciliation of EBITDA from Continuing Operations to Net Loss from Continuing Operations: | 2010 | 2009 | |||||||||
Net Loss from Continuing Operations | $ | (2,510 | ) | $ | (3,011 | ) | |||||
Income tax expense | 30 | 16 | |||||||||
Interest expense/other | 1,003 | 934 | |||||||||
Change in fair value of warrant liability | (541 | ) | (367 | ) | |||||||
Depreciation and amortization | 334 | 484 | |||||||||
EBITDA from Continuing Operations | $ | (1,684 | ) | $ | (1,944 | ) | |||||
Nine-Month Period Ended December 31, | |||||||||||
Reconciliation of EBITDA from Continuing Operations to Net Loss from Continuing Operations: | 2010 | 2009 | |||||||||
Net Loss from Continuing Operations | $ | (10,411 | ) | $ | (10,629 | ) | |||||
Income tax expense | 102 | 116 | |||||||||
Interest expense/other | 2,827 | 2,648 | |||||||||
Change in fair value of warrant liability | (678 | ) | (368 | ) | |||||||
Depreciation and amortization | 969 | 1,425 | |||||||||
EBITDA from Continuing Operations | $ | (7,191 | ) | $ | (6,808 | ) | |||||
Arcadia HealthCare
Matthew Middendorf, Chief Financial Officer,
317-569-8234
mmiddendorf@arcadiahealthcare.com