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 )
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