Addus HomeCare Announces Fourth Quarter 2015 Results

Mar 07, 2016, 16:05 ET from Addus HomeCare Corporation

DOWNERS GROVE, Ill., March 7, 2016 /PRNewswire/ -- Addus HomeCare Corporation (NASDAQ:  ADUS), a comprehensive provider of home and community-based personal care services provided in the home and focused on the dual eligible population, today announced its financial results for the fourth quarter and year ended December 31, 2015. 

For the fourth quarter, net service revenues were $84.8 million, a 2.6% increase from $82.6 million for the fourth quarter of 2014. Net income from continuing operations was $3.1 million, or $0.27 per diluted share, for the fourth quarter of 2015 compared with $3.6 million, or $0.33 per diluted share, for the prior-year fourth quarter. Adjusted diluted net income per share from continuing operations for the fourth quarter of 2015 was $0.29 compared with $0.36 for the fourth quarter for 2014.  Adjusted diluted net income per share from continuing operations per share excludes (i) for 2015 a net $0.02 expense impact comprised of a $0.09 benefit from Worker Opportunity Tax Credits that relate to the first three quarters of 2015; a $0.05 expense caused by a higher reserve estimate for workers compensation to adjust for a lowering of reserves in the third quarter of 2015; a $0.03 expense due to transaction expenses related to the South Shore Home Health Services acquisition; and a $0.03 expense from an accrual related to an IRS audit of prior years; and (ii) for 2014 a $0.03 expense related to M&A transaction expenses. Adjusted EBITDA was $5.4 million for the fourth quarter of 2015 compared with $7.1 million for the same prior-year quarter.  (See page 7 for a reconciliation of all non-GAAP and GAAP financial measures.)

For 2015, net service revenues increased 7.6% to $336.8 million from $312.9 million for 2014. Net income from continuing operations was $11.4 million, or $1.02 per diluted share, for 2015 compared with $12.0 million, or $1.08 per diluted share, for 2014. Adjusted diluted net income per share was $1.12 for 2015 and $1.14 for 2014. Adjusted EBITDA was $23.6 million for 2015 compared with $23.8 million for 2014.

Adjusting 2015 and 2014 revenues to exclude revenue from previously announced closed locations, total net service revenues and same store revenues rose 6.1% and 2.9%, respectively, for the fourth quarter of 2015 compared with the fourth quarter of 2014.  For the full year, adjusted net service revenues grew 10.0% for 2015 compared with 2014 and 6.8% on a same store basis.

Commenting on the results, Dirk Allison, who was appointed President and Chief Executive Officer of Addus on January 18, 2016, said, "The Company's heightened focus on organic growth is reflected in the sequential-quarter improvement in key operating metrics.  For the fourth quarter, billable hours per day increased sequentially at an annualized rate of 12.1%. Revenues per day for the fourth quarter of 2015 increased sequentially at an annualized rate of 13.2%.

"While Addus remains fundamentally committed to providing high quality services, we are also focused on our cost structure, which has continued to be higher than we would like. In the fourth quarter, our costs were higher due in part to an increase in general liability claims and an increased A/R reserve. We also believe that certain of our operating costs are higher than they need to be.

"We have already begun to institute additional measures and processes to ensure that the investments we make generate appropriate returns.  Expense reduction initiatives are ongoing in many areas, including in payroll following our 2015 system conversion, telecommunications and IT spending, and our centralized care center infrastructure.  We expect to see meaningful reductions in these and other costs by the end of 2016, while improving our operational efficiency and support for high quality care.  As we implement these initiatives, there may be some one-time charges, which we would expect to discuss further at the end of the first quarter."

Mr. Allison concluded, "The completion of the South Shore acquisition, which we expect will be accretive to our 2016 financial results, provides Addus a strong start to achieving our goals for 2016. Addus is well positioned as the leading pure-play home care company.  We have the opportunity to leverage attractive industry growth dynamics through the ongoing execution of our organic growth and acquisition strategies." 

Addus completed the fourth quarter with $4.1 million in cash, no bank debt and $58.3 million of availability under its revolving credit facility.  Net cash used in operating activities was $4.7 million for the fourth quarter of 2015 while cash provided by operating activities was $4.1 million for the full year.  In conjunction with the completion of the South Shore acquisition in February 2016, the Company borrowed $22 million on its term loan facility.

The Company believes a material weakness in internal controls over financial reporting existed as of December 31, 2015, principally related to controls over its payroll system and related processes.  During 2015, the Company converted to a new payroll system, which contributed to operational issues resulting in a failure of controls.  Over the past few weeks, the Company has started the process of making changes to address this control deficiency.  The Company will report such material weakness in Item 9A of its Annual Report on Form 10-K for the 2015 fiscal year. 

Non-GAAP Financial Measures

The information provided in this release includes adjusted diluted net income per share, Adjusted EBITDA and adjusted net service revenue, which are non-GAAP financial measures. The Company defines adjusted diluted net income per share as diluted net income per share, adjusted for M&A expenses, costs incurred to exit certain exited sites, tax benefit from prior-period worker opportunity tax credits, increased prior-period general liability claims and incremental costs for Sarbanes-Oxley Section 404 compliance.  The Company defines Adjusted EBITDA as earnings before interest expense, taxes, depreciation, amortization, M&A expenses and stock-based compensation expense. The Company defines adjusted net service revenue as revenue adjusted for the closure of certain sites.  The Company has provided, in the financial statement tables included in this press release, a reconciliation of adjusted diluted net income per share to diluted net income per share, a reconciliation of Adjusted EBITDA to net income and a reconciliation of adjusted net service revenue to net service revenue, in each case, the most directly comparable GAAP measure. Management believes that adjusted diluted net income per share, adjusted EBITDA and adjusted net service revenue are 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.

Conference Call

Addus will host a conference call on Tuesday, March 8, 2016, beginning at 9:00 a.m. Eastern time. The toll-free dial-in number is (877) 930-8289 (international dial-in number is (253) 336-8714), pass code 17828912. A telephonic replay of the conference call will be available through midnight on March 22, 2016, by dialing (855) 859-2056 (international dial-in number is (404) 537-3406) and entering pass code 17828912.

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 live broadcast.

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.  These forward-looking statements are based on our current expectations and beliefs concerning future developments and their potential effect on us. 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 consummation and integration of acquisitions, anticipated transition to managed care providers, our ability to successfully execute our growth strategy, unexpected increases in SG&A and other expenses, expected benefits and unexpected costs of acquisitions and dispositions, 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, higher than anticipated costs, estimation inaccuracies in future revenues, margins, earnings and growth, 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 16, 2015 and its Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 6, 2015, 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.  In addition, these forward-looking statements necessarily depend upon assumptions, estimates and dates that may be incorrect or imprecise and involve known and unknown risks, uncertainties and other factors. Accordingly, any forward-looking statements included in this press release do not purport to be predictions of future events or circumstances and may not be realized. (Unaudited tables and notes follow).

About Addus

Addus is a comprehensive provider of home and community-based services that primarily are personal in nature, provided in the home and focused on the dual eligibility 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, managed care organizations, commercial insurers and private individuals. For more information, please visit www.addus.com.

 

 

ADDUS HOMECARE CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Income

(Amounts and shares in thousands, except per share data)

(Unaudited)









Income Statement Information:

For the Three Months

Ended December 31,


For the Year Ended
December 31,


2015


2014


2015


2014

Net service revenues

$     84,760


$     82,636


$   336,815


$   312,942

Cost of service revenues

62,567


59,989


245,492


229,207

Gross profit

22,193


22,647


91,323


83,735


26.2%


27.4%


27.1%


26.8%

General and administrative expenses

17,966


16,259


70,582


61,834

Depreciation and amortization

1,212


1,146


4,717


3,830

Total operating expenses

19,178


17,405


75,299


65,664

Operating income from continuing operations

3,015


5,242


16,024


18,071

Total interest expense, net

235


196


739


680

Income from continuing operations before income taxes

2,780


5,046


15,285


17,391

Income tax (benefit) expense from continuing operations

(271)


1,403


3,932


5,428

Net income from continuing operations

3,051


3,643


11,353


11,963

Discontinued operations:








Income from Home Health Business, net of tax

270


280


270


280

Earnings from discontinued operations

270


280


270


280

Net income

$       3,321


$       3,923


$     11,623


$     12,243









Net income per share:








    Continuing Operations

$         0.27


$         0.33


$         1.02


$         1.08

    Discontinued Operations

$         0.02


$         0.02


$         0.02


$         0.02









Weighted average number of common shares outstanding:








     Diluted

11,220


11,143


11,189


11,114









Cash Flow Information:

For the Three Months
Ended December 31,


For the Year
Ended December 31,


2015


2014


2015


2014









Net cash (used in) provided by operating activities

$      (4,680)


$         (562)


$       4,106


$       7,028

Net cash (used in) investing activities

(5,012)


(484)


(10,724)


(12,496)

Net cash (used in) provided by financing activities

(1,081)


285


(2,641)


3,266

Net change in cash

(10,773)


(761)


(9,259)


(2,202)

Cash at the beginning of the period

14,877


14,124


13,363


15,565

Cash at the end of the period

$       4,104


$     13,363


$       4,104


$     13,363

 

 

ADDUS HOMECARE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets

(Amounts in thousands)

(Unaudited)






December 31,


2015


2014

Assets








Current assets




Cash

$       4,104


$     13,363

Accounts receivable, net

84,959


68,333

Prepaid expenses and other current assets

4,858


7,168

Deferred tax assets

8,640


8,508

Total current assets

102,561


97,372





Property and equipment, net

8,619


7,695





Other assets




Goodwill

68,844


64,220

Intangible assets, net

10,351


10,347

Investment in joint venture

900


900

Other assets

1,337


269

Total other assets

81,432


75,736





Total assets

$   192,612


$   180,803





Liabilities and stockholders' equity








Current liabilities




Accounts payable

$       4,748


$       3,951

Accrued expenses

35,082


37,268

Current portion of capital lease obligations

1,109


986

Current portion of contingent earn-out obligation

1,250


1,000

Total current liabilities

42,189


43,205





Capital lease obligations, less current portion

1,882


2,677

Contingent earn-out obligation, less current portion

-


1,120

Deferred tax liability

6,815


5,845

Total long-term  liabilities

8,697


9,642

Total liabilities

50,886


52,847





Total stockholders' equity

141,726


127,956





Total liabilities and stockholders' equity

$   192,612


$   180,803

 

 

ADDUS HOMECARE CORPORATION AND SUBSIDIARIES

Key Statistical and Financial Data

(Unaudited)










For the Three Months
Ended December 31,


For the Year
Ended December 31,


2015


2014


2015


2014

General:








Adjusted EBITDA (in thousands) (1)

$       5,394


$       7,076


$     23,627


$     23,759

States served at period end

-


-


22


22

Locations at period end

-


-


119


129

Employees at period end

-


-


21,395


18,054









Home & Community:








Average billable census - same store (2)

31,917


32,080


32,038


31,019

Average billable census - acquisitions (3)

680


-


718


-

Average billable census total

32,597


32,080


32,756


31,019

Billable hours (in thousands)

4,930


4,825


19,556


18,335

Average billable hours per census per month

50.4


50.1


49.8


49.3

Billable hours per business day

77,032


75,385


76,390


71,903

Revenues per billable hour

$       17.19


$       17.13


$       17.22


$       17.07









Percentage of Revenues by Payor:








State, local and other governmental programs

77.3%


80.3%


77.7%


86.4%

Managed care organizations

18.8


15.4


18.3


9.1

Private duty

2.9


3.2


3.0


3.4

Commercial

1.0%


1.1%


1.0%


1.1%









(1)  We define Adjusted EBITDA as earnings before discontinued operations, interest expense, taxes, depreciation, amortization, M&A expenses, stock-based compensation expense and IRS accrual adjustment. Adjusted EBITDA is a performance measure used by management that is not calculated in accordance with generally accepted accounting principles in the United States (GAAP). It should not be considered in isolation or as a substitute for net income, operating income or any other measure of financial performance calculated in accordance with GAAP.  









(2)  Exited sites would have reduced same store census for the three months ended December 31, 2014 by 1,101 and twelve months ended December 31, 2014 by 1,346.









(3)  The average billable census in acquisitions of 2,914 and 2,294 for the three months and twelve months ended December 31, 2014, respectively, was reclassified to average billable census - same stores for comparability purposes.

 

 

ADDUS HOMECARE CORPORATION AND SUBSIDIARIES

(Unaudited)










For the Three Months
Ended December 31,


For the Year Ended
December 31,


2015


2014


2015


2014

Reconciliation of Adjusted EBITDA

   to Net Income: (1)








Net income

$       3,321


$       3,923


$     11,623


$     12,243

Less: (Earnings) from discontinued operations, net of tax

(270)


(280)


(270)


(280)

Net income from continuing operations

3,051


3,643


11,353


11,963

Interest expense, net

234


196


739


680

Income tax (benefit) expense from continuing operations

(270)


1,403


3,932


5,428

Depreciation and amortization

1,213


1,146


4,717


3,830

M&A expenses

455


423


1,013


1,031

Stock-based compensation expense

411


265


1,573


827

IRS Accrual

300


-


300


-

Adjusted EBITDA

$       5,394


$       7,076


$     23,627


$     23,759









Reconciliation of Diluted Earnings per Share to Adjusted Diluted Earnings per Share: (2)








Diluted earnings per share

$         0.27


$         0.33


$         1.02


$         1.08

Acquisition-related transaction expense per share

0.03


0.03


0.07


0.06

Worker Opportunity Tax Credits per share

(0.09)


-




-

Cost associated with IRS accrual per share

0.03


-


0.03


-

Reserve adjustment for Workers Compensation per share

0.05


-





Adjusted diluted earnings per share

$         0.29


$         0.36


$         1.12


$         1.14









Reconciliation of Net Service Revenues to Adjusted Net Service Revenues: (3)








Net service revenues

$     84,760


$     82,636


$   336,815


$   312,942

Revenue associated with the closure

   of certain sites

(141)


(2,875)


(5,549)


(11,768)

Adjusted net service revenues

$     84,619


$     79,761


$   331,266


$   301,174









(1)    We define Adjusted EBITDA as earnings before interest expense, taxes, depreciation, amortization, M&A expenses, stock-based compensation expense and IRS accrual adjustment. Adjusted EBITDA is a performance measure used by management that is not calculated in accordance with generally accepted accounting principles in the United States (GAAP). It should not be considered in isolation or as a substitute for net income, operating income or any other measure of financial performance calculated in accordance with GAAP. 









(2)    We define Adjusted diluted earnings per share as earnings per share, adjusted for M&A expenses, cost associated with IRS accrual, tax benefit from worker opportunity tax credits and reserve adjustment for workers compensation. Adjusted diluted earnings per share is a performance measure used by management that is not calculated in accordance with generally accepted accounting principles in the United States (GAAP). It should not be considered in isolation or as a substitute for net income, operating income or any other measure of financial performance calculated in accordance with GAAP. 









(3)    We define Adjusted net service revenues as revenue adjusted for the closure of certain sites.  Adjusted net service revenues is a performance measure used by management that is not calculated in accordance with generally accepted accounting principles in the United States (GAAP).  It should not be considered in isolation or as a substitute for net income, operating income or any other measure of financial performance calculated in accordance with GAAP.

 

 

                        

SOURCE Addus HomeCare Corporation



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