Foundation HealthCare Q2 Revenue Grows 44 Percent To $31.9 Million; Adjusted EBITDA Increased 246 Percent To $3.6 Million

Aug 11, 2015, 08:30 ET from Foundation HealthCare Inc.

OKLAHOMA CITY, Aug. 11, 2015 /PRNewswire/ -- Foundation HealthCare, Inc. (OTCQB: FDNH), which is an owner and operator of surgical hospitals, announced today the Company's financial results for the second quarter of 2015.

Highlights include:

  • Net revenues increased 44 percent for the second quarter to $31.9 million and 40 percent year-to-date to $61.4 million.
  • Adjusted EBITDA increased 246 percent to $3.6 million for the second quarter and 426 percent to $5.9 million year-to-date.
  • Patient service revenue grew by 47 percent at majority owned hospitals in the second quarter, 45 percent year-to-date.
  • Foundation sold its 20 percent minority interest in Sherman, Texas hospital for a gain of $6.3 million using the proceeds to reduce debt by $7 million; the minority interest in Sherman, Texas hospital contributed just $0.6 million in revenue and EBITDA to the Company during fiscal 2014.
  • Senior lender signed letter of intent to provide $20.0 million acquisition line of credit to Foundation.

"Patient care is our number one priority at Foundation HealthCare and a key differentiator in our business model," said Stanton Nelson, CEO of Foundation HealthCare. "Our physician partners and our clinical teams continue to perform at a high level which is why we believe our patient satisfaction scores are some of the highest in the country."

Foundation HealthCare continued to build on a strong first quarter performance with a stronger second quarter, reporting 44 percent revenue growth in the second quarter compared to 2014 and year-to-date growth of 40 percent compared to the same period in 2014. Foundation has reported four consecutive quarters with double digit growth over the previous year.

"Our growth is fueled by a 47 percent increase in patient service revenues in the second quarter at our majority owned hospitals and year-to-date growth in patient service revenues at those hospitals of 45 percent," said Nelson.

"The core of Foundation's growth strategy is to expand services at our majority owned hospitals and acquire more of these hospitals. While executing that strategy, we divested our minority interest in the hospital in Sherman, Texas in June and used the proceeds to reduce our term debt by $7 million and negotiated a $20 million acquisition line of credit for operations and acquisitions," he continued.

"Historically, the third and fourth quarters have been Foundation's best earnings periods so we expect these positive trends to continue. Our $20 million acquisition line of credit, which we announced last week, combined with our continued growth positions us well to aggressively pursue opportunities in new geographic markets," said Nelson.

Second Quarter 2015 Financial Results:
Net revenues and equity in earnings of affiliates in the second quarter of 2015 were collectively $31.9 million, up 44% from $22.1 million in the second quarter of 2014.  Our net revenues are composed of patient services, less our provision for doubtful accounts, management fees from affiliates and other revenue.  Patient services revenue (net of the provision for doubtful accounts) increased $8.9 million, or 47%, to $28.0 million during the three months ended June 30, 2015 as compared to $19.0 million in the same period of 2014.  The increase was primarily due to increased revenue at our El Paso hospital generated by more complex cases and increased revenues from ancillary services.

Operating expenses for the second quarter of 2015 were $30.1 million compared to $23.1 million in the second quarter of 2014.  The increase is due primarily to increased purchased services cost directly related to the increased net revenues generated from ancillary services.

Our operations, including the gain on the sale of our minority interest in the Sherman, Texas hospital resulted in a net income attributable to Foundation HealthCare common stock of $4.3 million during the second quarter of 2015, compared to a net loss of $1.5 million during the second quarter of 2014.

Adjusted EBITDA was $3.6 million for the 2015 second quarter compared to $1.0 million in the second quarter of 2014.

Year-To-Date 2015 Financial Results:
Net revenues for the six months ended June 30, 2015 were $61.4 million, up 41 percent from $43.7 million reported in the first six months of 2014.  Patient services revenue (net of the provision for doubtful accounts) increased $17.3 million, or 45 percent, to $55.5 million during the six months ended June 30, 2015 as compared to $38.2 million in the same period of 2014.  The increase was primarily due to increased revenue at our El Paso hospital generated by more complex cases and increased revenues from ancillary services.

Operating expenses for the first six months of 2015 were $59.3 million compared to $46.7 million in the first six months of 2014. The increase is due primarily to increased purchased services cost directly related to the increased net revenues generated from ancillary services.

Our operations, including the gain on the sale of our minority interest in the Sherman, Texas hospital resulted in a net income attributable to Foundation HealthCare common stock of $3.2 million during the first six months of 2015, compared to a net loss of $3.4 million during the first half of 2014.

Year-To-Date Adjusted EBITDA as of June 30, 2015 was $5.9 million compared to $1.1 million for first six months of 2014.

At June 30, 2015, cash and cash equivalents totaled $4.1 million, compared to $2.9 million at December 31, 2014.Foundation's year-to-date performance and the sale of the minority interest in the Sherman, Texas hospital resulted in management removing the "going concern" qualification in the Company's second quarter financial statements.

Conference Call
Foundation's CEO Stanton Nelson, and CFO, Hugh King will host a conference call today, followed by a question and answer period.

Date: Aug. 11, 2015
Time: 4:30 p.m. Eastern time
Dial-In Number: (888) 348-6454

The conference call will be broadcast live at the investor relations section of the Company's website at www.fdnh.com. Please call the conference telephone number 5-10 minutes prior to the start time. An operator will register your name and organization.  In addition, the replay will be available after the call at same website link above or by calling (877) 870-5176 using passcode: 10065059. 

About Foundation HealthCare
Headquartered in Oklahoma City, Foundation HealthCare, Inc. (OTCQB: FDNH) owns and operates surgical hospitals including ancillary hospital based services. These additional services, such as hyperbaric medicine, sleep labs, intra-operative monitoring, imaging and robotic surgery, truly make the Foundation specialty hospital environment unique.

The Company is also an industry leading ASC management and development company focused on partnering with physicians and employees to create an outstanding patient experience, while maximizing partner and shareholder value. The Company is a leader in offering turnkey management and development solutions for physician partners, as well as creating an optimal experience for the patients we serve.  For more information, visit www.fdnh.com.

Reg G disclaimer – reconciling GAAP Net Income with EBITDA and Adjusted EBITDA
Foundation is providing EBITDA information, which is defined as net income plus interest, income taxes, depreciation and amortization expense and earnings or losses from discontinued operations, and Adjusted EBITDA which is defined as EBITDA plus impairment charges minus non-recurring gains.  EBITDA and Adjusted EBITDA are a complement to our GAAP results.  EBITDA and Adjusted EBITDA are commonly used by management and investors as a measure of leverage capacity, debt service ability and liquidity.  EBITDA and Adjusted EBITDA are not considered a measure of financial performance under U.S. generally accepted accounting principles (GAAP), and the items excluded from EBITDA and Adjusted EBITDA are significant components in understanding and assessing our financial performance.  EBITDA and Adjusted EBITDA should not be considered in isolation or as an alternative to, or superior to, such GAAP measures as net income, cash flows provided by or used in operating, investing or financing activities or other financial statement data presented in our consolidated financial statements as an indicator of financial performance or liquidity.  Reconciliations of non-GAAP financial measures are provided in the news release in the accompanying tables.  Since EBITDA and Adjusted EBITDA are not a measure determined in accordance with GAAP and is susceptible to varying calculations, EBITDA, and Adjusted EBITDA as presented, may not be comparable to other similarly titled measures of other companies.

Important Cautions Regarding Forward-Looking Statements
This press release contains forward-looking statements that are based on the Company's current expectations, forecasts and assumptions. Forward-looking statements involve risks and uncertainties that could cause actual outcomes and results to differ materially from the Company's expectations, forecasts and assumptions. These risks and uncertainties include risks and uncertainties not in the control of the Company, including, without limitation, the risk that Company will maintain enough liquidity to execute its business plan, continue as a going concern and other risks including those enumerated and described in the Company's filings with the Securities and Exchange Commission, which filings are available on the SEC's website at www.sec.gov. Unless otherwise required by law, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

CONTACT: Company Contact:
Foundation HealthCare, Inc.
Stanton Nelson, CEO
Tel 405-608-1715

 

FOUNDATION HEALTHCARE, INC.

Reconciliation of Income (Loss) from Continuing Operations to EBITDA from Continuing Operations

(Unaudited)



For the Three Months Ended


For the Six Months Ended


June 30,


June 30,


2015


2014


2015


2014

Income (loss) from continuing operations, net of taxes

$ 1,933,901


$  (880,492)


$ 2,304,225


$ (1,920,959)

EBITDA adjustments:








Plus: Interest expense, net

279,257


503,759


605,323


1,005,232

Plus: Provision (benefit) for income taxes

(114,038)



(114,038)


(852,005)

Plus: Depreciation and amortization

1,345,948


1,423,384


2,727,455


2,884,301

Total EBITDA adjustments

1,511,167


1,927,143


3,218,740


3,037,528

EBITDA from continuing operations

$ 3,445,068


$ 1,046,651


$ 5,522,965


$  1,116,569









EBITDA from continuing operations

$ 3,445,068


$ 1,046,651


$ 5,522,965


$  1,116,569

Adjusted EBITDA adjustment








Plus: Stock compensation expense

174,305



348,606


Total Adjusted EBITDA adjustments

174,305



348,606


Adjusted EBITDA

$ 3,619,373


$ 1,046,651


$ 5,871,571


$  1,116,569

 

 

FOUNDATION HEALTHCARE, INC.

Condensed Consolidated Balance Sheets

(Unaudited)



June 30,


December 31,


2015


2014

ASSETS




Cash and cash equivalents 

$   4,136,618


$     2,860,025

Accounts receivable, net of allowances for doubtful accounts of $866,000 and $1,742,000, respectively

20,773,694


18,971,435

Receivables from affiliates 

913,260


1,157,184

Supplies inventories 

1,870,868


1,863,175

Prepaid and other current assets 

3,766,100


4,487,873

Current assets from discontinued operations 

249,884


342,441

Total current assets 

31,710,424


29,682,133

Property and equipment, net 

12,388,341


13,465,190

Equity method investments in affiliates 

3,043,094


3,558,020

Intangible assets, net 

8,051,282


9,080,395

Goodwill 

973,927


973,927

Other assets 

543,030


437,809

Other assets from discontinued operations 

792,184


2,329,395

Total assets 

$ 57,502,282


$   59,526,869

LIABILITIES, PREFERRED NONCONTROLLING INTEREST AND SHAREHOLDERS' DEFICIT




Liabilities:




Accounts payable 

$   8,669,909


$   10,364,160

Accrued liabilities 

11,706,595


10,223,388

Preferred noncontrolling interests dividends payable 

177,692


195,212

Short-term debt 

557,684


456,784

Current portion of long-term debt 

4,795,796


5,023,048

Other current liabilities 

1,280,059


1,052,543

Current liabilities from discontinued operations 

3,225,125


839,791

Total current liabilities 

30,412,860


28,154,926

Long-term debt, net of current portion 

16,902,652


24,737,719

Deferred lease incentive

8,139,033


8,608,716

Other liabilities 

6,091,971


5,424,313

Total liabilities 

61,546,516


66,925,674

Preferred noncontrolling interest 

7,830,000


8,700,000

Commitments and contingencies (Note 9)




Foundation Healthcare shareholders' deficit:




Preferred stock $0.0001 par value, 10,000,000 authorized; no shares issued and outstanding 


Common stock $0.0001 par value, 500,000,000 shares authorized; 17,248,154 and 17,263,842 issued and outstanding, respectively 

1,725


1,726

Paid-in capital 

19,614,523


19,321,267

Accumulated deficit 

(34,057,564)


(37,265,044)

Total Foundation Healthcare shareholders' deficit 

(14,441,316)


(17,942,051)

Noncontrolling interests 

2,567,082


1,843,246

Total deficit 

(11,874,234)


(16,098,805)

Total liabilities, preferred noncontrolling interest and shareholders' deficit 

$ 57,502,282


$   59,526,869

 

 

FOUNDATION HEALTHCARE, INC.

Condensed Consolidated Statements of Operations

For the Three Months Ended June 30, 2015 and 2014

(Unaudited)



2015


2014

Net Revenues:




Patient services 

$ 30,152,597


$ 19,909,721

Provision for doubtful accounts 

(2,177,522)


(875,574)

Net patient services revenue

27,975,075


19,034,147

Management fees from affiliates 

1,973,754


1,434,769

Other revenue 

1,914,125


1,610,651

Revenues 

31,862,954


22,079,567

Equity in earnings of affiliates 

319,673


679,302

Operating Expenses:




Salaries and benefits 

7,915,961


7,094,381

Supplies 

7,390,390


5,693,006

Other operating expenses 

13,398,977


8,925,671

Depreciation and amortization 

1,345,948


1,423,384

Total operating expenses 

30,051,276


23,136,442

Other Income (Expense):




Interest expense, net 

(279,257)


(503,759)

Other income

(32,231)


840

Net other (expense) 

(311,488)


(502,919)

Income (loss) from continuing operations, before taxes 

1,819,863


(880,492)

Benefit for income taxes 

114,038


Income (loss) from continuing operations, net of taxes 

1,933,901


(880,492)

Income from discontinued operations, net of tax 

3,857,135


27,749

Net income (loss) 

5,791,036


(852,743)

Less:  Net income attributable to noncontrolling interests 

1,074,022


461,301

Net income (loss) attributable to Foundation Healthcare 

4,717,014


(1,314,044)

Preferred noncontrolling interests dividends 

(372,885)


(193,069)

Net income (loss) attributable to Foundation Healthcare common stock 

$   4,344,129


$ (1,507,113)

Earnings per common share (basic and diluted):




Net income (loss) attributable to continuing operations attributable to Foundation Healthcare common stock 

$            0.03


$          (0.09)

Income from discontinued operations, net of tax 

0.22


0.00

Net income (loss) per share, attributable to Foundation Healthcare common stock 

$            0.25


$          (0.09)

Weighted average number of common and diluted shares outstanding 

17,248,154


17,128,590

 

 

FOUNDATION HEALTHCARE, INC.

Condensed Consolidated Statements of Operations

For the Six Months Ended June 30, 2015 and 2014

(Unaudited)



2015


2014

Net Revenues:




Patient services 

$ 58,090,495


$ 39,423,203

Provision for doubtful accounts 

(2,598,546)


(1,237,090)

Net patient services revenue

55,491,949


38,186,113

Management fees from affiliates 

3,223,076


2,704,072

Other revenue 

2,690,079


2,821,173

Revenues 

61,405,104


43,711,358

Equity in earnings of affiliates 

731,072


1,171,113

Operating Expenses:




Salaries and benefits 

15,655,824


14,978,240

Supplies 

13,460,051


10,634,377

Other operating expenses 

27,482,454


18,154,125

Depreciation and amortization 

2,727,455


2,884,301

Total operating expenses 

59,325,784


46,651,043

Other Income (Expense):




Interest expense, net 

(605,323)


(1,005,232)

Other income

(14,882)


840

Net other (expense) 

(620,205)


(1,004,392)

Income (loss) from continuing operations, before taxes 

2,190,187


(2,772,964)

Benefit for income taxes 

114,038


852,005

Income (loss) from continuing operations, net of taxes 

2,304,225


(1,920,959)

Income (loss) from discontinued operations, net of tax 

3,771,057


(249,299)

Net income (loss) 

6,075,282


(2,170,258)

Less:  Net income attributable to noncontrolling interests 

2,494,916


846,223

Net income (loss) attributable to Foundation Healthcare 

3,580,365


(3,016,481)

Preferred noncontrolling interests dividends 

(372,885)


(386,138)

Net income (loss) attributable to Foundation Healthcare common stock 

$   3,207,480


$ (3,402,619)

Earnings per common share (basic and diluted):




Net loss attributable to continuing operations attributable to Foundation Healthcare common stock 

$          (0.03)


$          (0.19)

Income (loss) from discontinued operations, net of tax 

0.22


(0.01)

Net income (loss) per share, attributable to Foundation Healthcare common stock 

$            0.19


$          (0.20)

Weighted average number of common and diluted shares outstanding 

17,252,228


16,931,864

 

 

FOUNDATION HEALTHCARE, INC.

Condensed Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2015 and 2014

(Unaudited)



2015


2014

Operating activities:




Net income (loss)

$  6,075,282


$ (2,170,258)

Less:  Income (loss) from discontinued operations, net of tax

3,771,057


(249,299)

Income (loss) from continuing operations

2,304,225


(1,920,959)

Adjustments to reconcile net income (loss) from continuing operations to net cash provided by operating activities:




Depreciation and amortization

2,727,455


2,884,301

Stock-based compensation, net of cashless vesting

293,255


698,337

Provision for doubtful accounts

2,598,546


1,237,090

Equity in earnings of affiliates

(731,072)


(1,171,113)

Changes in assets and liabilities:




Accounts receivable, net of provision for doubtful accounts

(4,400,806)


(1,526,452)

Receivables from affiliates

243,924


(90,536)

Supplies inventories

(7,693)


24,179

Prepaid and other current assets

721,773


(4,735,515)

Other assets

(105,221)


(201,676)

Accounts payable

(1,694,267)


(1,360,178)

Accrued liabilities

1,483,207


1,714,559

Other current liabilities

227,516


(837,886)

Other liabilities

197,975


2,959,735

Net cash provided by (used in) operating activities from continuing operations

3,858,817


(2,326,114)

Net cash used in operating activities from discontinued operations

(602,074)


(330,293)

Net cash provided by (used in) operating activities

3,256,743


(2,656,407)

Investing activities:




Purchase of property and equipment

(720,760)


(563,436)

Disposal of property and equipment

99,267


Proceeds from sale of equity investment


Distributions from affiliates

1,245,998


1,317,026

Net cash provided by investing activities from continuing operations

624,505


753,590

Net cash provided by investing activities from discontinued operations

8,388,233


Net cash provided by investing activities

9,012,738


753,590

Financing activities:




Debt proceeds

1,920,112


28,468,812

Debt payments

(9,881,531)


(22,796,246)

Preferred noncontrolling interest dividends

(390,405)


(388,481)

Preferred noncontrolling interest redemptions

(870,000)


Distributions to noncontrolling interests

(1,771,064)


(1,644,779)

Net cash (used in) provided by financing activities from continuing operations

(10,992,888)


3,639,306

Net cash used in financing activities from discontinued operations


(4,072,896)

Net cash used in financing activities

(10,992,888)


(433,590)

Net change in cash and cash equivalents

1,276,593


(2,336,407)

Cash and cash equivalents at beginning of period

2,860,025


4,212,076

Cash and cash equivalents at end of period

$  4,136,618


$  1,875,669

Cash Paid for Interest and Income Taxes:




Interest expense

$     929,000


$  1,162,072

Interest expense, discontinued operations

$            —


$     168,733

Income taxes, continuing operations

$            —


$  1,950,000

 

SOURCE Foundation HealthCare Inc.