Full Press Release Details
Phone: (847) 303-5300
Email: DMeulemans@addus.com
Addus HomeCare Reports Fourth Quarter 2013 Results
Fourth Quarter Financial Highlights
March 12, 2014 Addus HomeCare Corporation (Nasdaq: ADUS), a comprehensive provider of home and community based services, which are primarily social in nature and provided in the home, and focused on the dual eligible population,
announced today its financial results for the fourth quarter and year ended December 31, 2013.
Mark Heaney, President and Chief Executive Officer of
Addus HomeCare, stated: We are pleased to see continued steady improvement in our organic growth rate. The completion of our new acquisitions in New Mexico in December and Tennessee and Ohio in January adds to our footprint in key managed care
states. We are also moving forward to compete the implementation of technology investments to leverage the results of our growth
Total net service revenues for the fourth quarter of 2013 were $69.9 million, a 9.6% increase compared to $63.8 million in the prior year
quarter. Revenues from same stores increased to $68.2 million, a 6.9% increase over the prior year with new acquisitions making up the difference. The growth in revenues is attributable to an 7.9% increase in average census in the quarter for our
same stores, and a 5.3% increase (1,359 new clients) from acquisitions, offset by a slight decline in average billable hours per client per month. (See comment about State of Illinois billing changes below.)
Gross profit for 2013 increased to $18.1 million representing a 3.2% year-over-year growth rate. Gross profit margin declined by 1.6% of revenue to 25.9%.
Modified billing procedures by the State of Illinois reduced operating profit by $600,000 in the fourth quarter of 2013 as compared to fourth quarter of 2012. Without this change in billing processes the decline in our gross profit margin was 0.7%
year-over-year. The impact of the loss of this billing process in Q4 of 2013 was to depress earnings by $0.04 per share in the quarter and for the year.
Operating income from continuing operations for the fourth quarter of 2013 declined 33.9% to $3.5 million, or
5.0% of revenue, compared to $5.3 million, or 8.2% of revenue, in the prior year quarter. In addition to investments in telephony, IT and other infrastructure, this decline was also caused by:
Income tax expense was $192,000, or 5.8% of income from continuing operations before taxes. This favorable tax rate is the result of our ability to capture
higher than expected Work Opportunity Tax Credits and other tax credits affecting both our 2012 and 2013 tax years. The impact of this favorable tax rate was to increase earnings in the quarter by $0.06 per diluted share.
Net income from continuing operations for the fourth quarter was $3.1 million, a 10.8% decline when compared to the prior year, primarily the result of
$662,000 in one-time costs related to acquisitions and $281,000 related to expenses required for our Sarbanes-Oxley Act Section 404 ( SOX 404 ) compliance activities.
After considering the one-time costs associated with our M&A efforts, the change to the billing process, the cost for SOX 404 compliance and the impact of
the reduced tax expense discussed above, our adjusted EPS for the quarter from continuing operations would have been $0.32 per diluted share, equal to 2012 reported results.
As a result of our Discontinued Operations, we recorded a $2.2 million, net of tax, reduction to the gain on the sale of the Home Health business in the 4th quarter of 2013. The reduction in the gain is the result of recording a $3.2 million pretax reserve for the potential recovery of Medicare billings for the six-year period prior to the date of the
closing of the sale of the business. This reserve is intended to be used to settle amounts recovered by the programs under their audit procedures and is reflective of our estimated reserve needs. Net income, including a loss from discontinued
operations, was $0.9 million, or $0.08 per diluted share.
Cash flow for the quarter was a negative $13.9 million, primarily due to the $11.8 million
expenditure for acquisitions closed during the quarter, and lower collections from the State of Illinois, offset by positive cash generated from operations.
Total net service revenues for the
twelve months ended December 31, 2013 were $265.9 million, a 8.9% increase compared to $244.3 million for the prior year. Revenues from same store sales increased to $264.2 million, an 8.2% increase over the prior year with new acquisitions
making up the difference. Net income from continuing operations for the
twelve months ended December 31, 2013 increased 20.2% to $11.2 million, or $1.01 per diluted share, compared to $9.3 million, or $0.86 per diluted share, in the prior year. Net income,
including the loss from discontinued operations and the gain from the sale of the home health business was $19.1 million, or $1.73 per diluted share.
Operating income from continuing operations increased 2.0% to $15.5 million, or 5.8% of revenue, for the twelve months ended December 31, 2013. This
compares to $15.2 million or 6.2% of revenue in 2012, after adjusting operating income for the benefit of a $0.5 million gain on a sale of an agency realized in 2012.
Income taxes for the year were $3.8 million and include approximately $2.2 million in Work Opportunity Tax Credits and Empowerment Zone credits with $600,000
related to 2012 as the tax law change enacted in early 2013 included a retroactive effective date of January 1, 2012. Had the tax law been in effect for the two years without interruption, our effective tax rate for 2013 would have been 29.5%.
As a result of the Company s increased stock price and overall market value as of the end of the second quarter of 2013, the Company became subject
to the requirements of SOX 404. Accordingly, the Company is now required to have an audit of its internal controls over financial reporting. The Company believes material weaknesses in internal controls over financial reporting existed as of
December 31, 2013, principally related to general controls over its information technology, including user access and change management activities and to overall controls related to its payroll system and related processes. The Company will
engage an expert consultant to assist in enhancing the controls over its information technology; in addition, the Company has selected the vendor for a new payroll system that will address the control issues in that area and will engage an expert
consultant to assist in the implementation. The Company will report such material weakness in Item 9A of its Annual Report on Form 10K for the 2013 fiscal year. The Company does not believe that the material weakness will impact the accuracy of
the Company s financial statements to be reported in its 2013 Form 10-K.
In January 2014, the Company completed the acquisition contemplated by the previously announced agreement to acquire all of the personal care operations of the
Medi Home Private Care Division of Medical Services of America, Inc. The acquisition includes two agencies located in South Carolina, four agencies located in Tennessee, and two agencies located in Ohio.
The asset purchase agreement provided for separate closings with respect to the operations in each state. The closing related to the agencies in South
Carolina took place effective November 1, 2013, with the operations being integrated into existing agencies in South Carolina. Accordingly, the results are included in the reported results for same store sales. The operations in Ohio and
Tennessee closed in January 2014 and will be reported as part of new acquisitions beginning in the first quarter of 2014.
Revenues in the first quarter
will be negatively impacted by severe winter weather experienced during January and February affecting 65 to 70% of our offices. Census for the period reflects modest growth with a decline in hours served per client per month attributable to the
Non-GAAP Financial Measures
The information provided in this release includes Adjusted EBITDA, a non-GAAP financial measure, which the Company defines as earnings before discontinued
operations, interest expense, taxes, depreciation, amortization, and stock-based compensation expense. The Company has provided, in the financial statement tables included in this press release, a reconciliation of Adjusted EBITDA to net income, the
most directly comparable GAAP measure. Management believes that Adjusted EBITDA is useful to investors, management and others in evaluating the Company s operating performance, to provide investors with insight and consistency in the
Company s financial reporting and to present a basis for comparison of the Company s business operations among periods, and to facilitate comparison with the results of the Company s peers.
Addus will report its 2013 fourth
quarter and year-end financial results after the market close on Wednesday, March 12, 2014. Management will conduct a conference call to discuss its results at 5 p.m. Eastern time on March 12, 2014. The toll-free dial-in number is
(877) 474-9504 (international dial-in number is 857-244-7557), with the passcode: 59823687. A telephonic replay of the conference call will be available through midnight on March 19, 2014, by dialing (888) 286-8010 (international
dial-in number is 617-801-6888) and entering the passcode 14285457.
A live broadcast of Addus HomeCare s conference call will be available under the
Investor Relations section of the Company s website: www.addus.com. An online replay of the conference call will also be available on the Company s website for one month, beginning approximately three hours following the conclusion of the
comprehensive provider of home and community based services, primarily social in nature and provided in the home, and focused on the dual eligible population. Addus services include personal care and assistance with activities of daily living,
and adult day care. Addus consumers are individuals who are at risk of hospitalization or institutionalization, such as the elderly, chronically ill and disabled. Addus payor clients include federal, state and local governmental
agencies, commercial insurers and private individuals. For more information, please visit www.addus.com.
Forward-Looking Statements
Certain matters discussed in this press release constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995. Such forward-looking statements may be identified by words such as continue, expect, and similar expressions. Forward-looking statements involve a number of risks and uncertainties that may cause actual results to
differ materially from those expressed or implied by such forward-looking statements, including the expected benefits and costs
of acquisitions, the anticipated financial impact of possible transactions, management plans related to dispositions, the possibility that expected benefits may not materialize as expected, the
failure of the business to perform as expected, changes in reimbursement, changes in government regulations, changes in Addus HomeCare s relationships with referral sources, increased competition for Addus HomeCare s services, changes in
the interpretation of government regulations, the uncertainty regarding the outcome of discussions with managed care organizations, changes in tax rates, the impact of adverse weather events and other risks set forth in the Risk Factors section in
Addus HomeCare s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 28, 2013 and in Addus HomeCare s Quarterly Reports on Form 10-Q, filed with the Securities and Exchange Commission on May 2,
2013, August 1, 2013 and November 8, 2013, each of which is available at http://www.sec.gov. Addus HomeCare undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events
or otherwise. (Unaudited tables and notes follow).
ADDUS HOMECARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Income and Cash Flow Information
(amounts and shares in thousands, except per share data)
| For the Three Months Ended December 31, | For the Year Ended December 31, | |||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Income Statement Information: | ||||||||||||||||
| Net service revenues | $ | 69,882 | $ | 63,775 | $ | 265,941 | $ | 244,315 | ||||||||
| Cost of service revenues | 51,780 | 46,238 | 198,202 | 180,264 | ||||||||||||
| Gross profit | 18,102 | 17,537 | 67,739 | 64,051 | ||||||||||||
| 25.9 | % | 27.5 | % | 25.5 | % | 26.2 | % | |||||||||
| General and administrative expenses | 14,092 | 11,652 | 50,118 | 46,362 | ||||||||||||
| Gain on sale of agency | (495 | ) | ||||||||||||||
| Depreciation and amortization | 534 | 624 | 2,160 | 2,521 | ||||||||||||
| Total operating expenses | 14,626 | 12,276 | 52,278 | 48,388 | ||||||||||||
| Operating income from continuing operations | 3,476 | 5,261 | 15,461 | 15,663 | ||||||||||||
| Total interest expense, net | 160 | 331 | 486 | 1,568 | ||||||||||||
| Income from continuing operations before taxes | 3,316 | 4,930 | 14,975 | 14,095 | ||||||||||||
| Income tax expense | 192 | 1,427 | 3,812 | 4,807 | ||||||||||||
| Net income from continuing operations | 3,124 | 3,503 | 11,163 | 9,288 | ||||||||||||
| Discontinued operations: | ||||||||||||||||
| Gain (loss) from home health business, net of tax | (90 | ) | 242 | (980 | ) | (1,653 | ) | |||||||||
| Gain (loss) on sale of home health business, net of tax | (2,149 | ) | 8,962 | |||||||||||||
| Earnings (losses) from discontinued operations | (2,239 | ) | 242 | 7,982 | (1,653 | ) | ||||||||||
| Net income | $ | 885 | $ | 3,745 | $ | 19,145 | $ | 7,635 | ||||||||
| Net income (loss) per share: | ||||||||||||||||
| Basic | ||||||||||||||||
| Continuing operations | $ | 0.29 | $ | 0.33 | $ | 1.03 | $ | 0.86 | ||||||||
| Discontinued operations | (0.21 | ) | 0.02 | 0.74 | (0.15 | ) | ||||||||||
| Basic income per share | $ | 0.08 | $ | 0.35 | $ | 1.77 | $ | 0.71 | ||||||||
| Diluted | ||||||||||||||||
| Continuing operations | $ | 0.28 | $ | 0.32 | $ | 1.01 | $ | 0.86 | ||||||||
| Discontinued operations | (0.20 | ) | 0.02 | 0.72 | (0.15 | ) | ||||||||||
| Diluted income per share | $ | 0.08 | $ | 0.34 | $ | 1.73 | $ | 0.71 | ||||||||
| Weighted average number of common shares outstanding: | ||||||||||||||||
| Basic | 10,838 | 10,772 | 10,826 | 10,764 | ||||||||||||
| Diluted | 11,154 | 10,807 | 11,075 | 10,784 | ||||||||||||
| For the Three Months Ended December 31, | For the Year Ended December 31, | |||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| Cash Flow Information: | ||||||||||||||||
| Net cash provided by operating activities | $ | 2,311 | $ | 6,069 | $ | 27,414 | $ | 15,405 | ||||||||
| Net cash provided by (used in) investing activities | (16,210 | ) | (101 | ) | 2,872 | (619 | ) | |||||||||
| Net cash used in financing activities | (5,944 | ) | (16,458 | ) | (15,069 | ) | ||||||||||
| Net change in cash | (13,899 | ) | 24 | 13,828 | (283 | ) | ||||||||||
| Cash at the beginning of the period | 29,464 | 1,713 | 1,737 | 2,020 | ||||||||||||
| Cash at the end of the period | $ | 15,565 | $ | 1,737 | $ | 15,565 | $ | 1,737 |
Condensed Consolidated Balance Sheets
(Amounts in thousands)
| December 31, 2013 | December 31, 2012 | |||||||
| Assets | ||||||||
| Current assets | ||||||||
| Cash | $ | 15,565 | $ | 1,737 | ||||
| Accounts receivable, net | 61,354 | 71,303 | ||||||
| Prepaid expenses and other current assets | 6,235 | 7,293 | ||||||
| Assets held for sale | 245 | |||||||
| Deferred tax assets | 8,326 | 7,258 | ||||||
| Total current assets | 91,480 | 87,836 | ||||||
| Property and equipment, net | 2,634 | 2,489 | ||||||
| Other assets | ||||||||
| Goodwill | 60,026 | 50,536 | ||||||
| Intangible assets, net | 8,762 | 6,370 | ||||||
| Deferred tax assets | 2,328 | |||||||
| Investment in joint venture | 900 | |||||||
| Other assets | 132 | 298 | ||||||
| Total other assets | 69,820 | 59,532 | ||||||
| Total assets | $ | 163,934 | $ | 149,857 | ||||
| Liabilities and stockholders equity | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 4,633 | $ | 4,117 | ||||
| Accrued expenses | 41,945 | 32,717 | ||||||
| Current maturities of long-term debt | 208 | |||||||
| Deferred revenue | 59 | 2,148 | ||||||
| Total current liabilities | 46,637 | 39,190 | ||||||
| Long-term debt, less current maturities | 16,250 | |||||||
| Deferred tax liability | 3,441 | |||||||
| Total stockholders equity | 113,856 | 94,417 | ||||||
| Total liabilities and stockholders equity | $ | 163,934 | $ | 149,857 |
Key Statistical and Financial Data (Unaudited)
| For the Three Months Ended December 31, | For the Year Ended December 31, | |||||||||||||||
| 2013 | 2012 | 2013 | 2012 | |||||||||||||
| General: | ||||||||||||||||
| Adjusted EBITDA (in thousands) (1) | $ | 4,161 | $ | 5,947 | $ | 18,136 | $ | 18,525 | ||||||||
| States served at period end | 21 | 19 | ||||||||||||||
| Locations at period end | 121 | 103 | ||||||||||||||
| Employees at period end | 15,228 | 13,836 | ||||||||||||||
| Home & Community | ||||||||||||||||
| Average billable census - same store | 27,522 | 25,508 | 26,689 | 25,104 | ||||||||||||
| Average billable census - acquisitions | 453 | 113 | ||||||||||||||
| Average billable census total | 27,975 | 25,508 | 26,802 | 25,104 | ||||||||||||
| Billable hours (in thousands) | 4,104 | 3,754 | 15,621 | 14,388 | ||||||||||||
| Average billable hours per census per month | 48.9 | 49.1 | 48.6 | 47.8 | ||||||||||||
| Billable hours per business day | 62,175 | 56,879 | 59,850 | 55,126 | ||||||||||||
| Revenues per billable hour | $ | 17.03 | $ | 16.99 | $ | 17.02 | $ | 16.98 | ||||||||
| Percentage of Revenues by Payor: | ||||||||||||||||
| State, local and other govermental programs | 94 | % | 95 | % | 94 | % | 95 | % | ||||||||
| Commercial | 2 | 1 | 2 | 1 | ||||||||||||
| Private duty | 4 | % | 4 | % | 4 | % | 4 | % |
| For the Three Months Ended December 31, | For the Year Ended December 31, | |||||||||||||||
| Adjusted EBITDA (1) (Unaudited) | 2013 | 2012 | 2013 | 2012 | ||||||||||||
| Reconciliation of Adjusted EBITDA to Net Income: | ||||||||||||||||
| Net income | $ | 885 | $ | 3,745 | $ | 19,145 | $ | 7,635 | ||||||||
| Less: (Earnings) loss from discontinued operations, net of tax | 2,239 | (242 | ) | (7,982 | ) | 1,653 | ||||||||||
| Net income from continuing operations | 3,124 | 3,503 | 11,163 | 9,288 | ||||||||||||
| Interest expense, net | 160 | 331 | 486 | 1,568 | ||||||||||||
| Income tax expense from continuing operations | 192 | 1,427 | 3,812 | 4,807 | ||||||||||||
| Depreciation and amortization | 534 | 624 | 2,160 | 2,521 | ||||||||||||
| Stock-based compensation expense | 151 | 62 | 515 | 341 | ||||||||||||
| Adjusted EBITDA | $ | 4,161 | $ | 5,947 | $ | 18,136 | $ | 18,525 |