Foundation HealthCare Reports Fourth Quarter and Annual 2015 Financial Results

FOUNDATION HEALTHCARE ANNUAL REVENUE GROWS 22 PERCENT TO $127.5 MILLION; ADJUSTED EBITDA INCREASED 35 PERCENT TO $14.2 MILLION

Mar 16, 2016, 08:06 ET from Foundation HealthCare, Inc.

OKLAHOMA CITY, March 16, 2016 /PRNewswire/ -- Foundation HealthCare, Inc. (OTCQB: FDNH), which is an owner and operator of surgical hospitals, announced today the Company's final financial results for the fourth quarter and year ended December 31, 2015.

Highlights include:

  • Annual net revenues increased 22 percent to $127.5 million.
  • Annual adjusted EBITDA increased 35 percent to $14.2 million.
  • Annual patient service revenue grew by 26 percent at majority owned hospitals.
  • Houston hospital acquired December 31, 2015.  Expected to be immediately accretive to EBITDA.

"We are very pleased with the results of operations for 2015 and recognize this growth is driven by our unwavering commitment to patient care. We view this commitment as a key differentiator in our business model," said Stanton Nelson, CEO of Foundation HealthCare. "I am pleased to announce that our El Paso hospital was just awarded the Foundation Center of Excellence Award for Nursing Services.  In 2015, our San Antonio hospital was awarded the Center of Excellence for Orthopedics as well as the Blue Cross Distinction award for Bariatric Surgery.  Our physician partners and our clinical teams continue to deliver an unparalleled level of quality which is why our patient satisfaction scores continue to be among the highest in the country."

"Foundation HealthCare reported impressive growth during the 2015.  Total revenues grew 22 percent compared to 2014 and patient service revenues grew 26 percent compared to last year," said Nelson.  "This continued revenue growth validates our business strategy of recruiting top tier physicians, providing our patients with an unparalleled health experience and expanding ancillary services." 

"During the third quarter of 2015, we reached capacity in our San Antonio hospital and announced the construction of another operating room and the addition to two patient rooms for post-surgical care.  This expansion, which will be completed this month, will increase our surgical capacity by 25 percent in San Antonio.  Unfortunately, the construction during November and December did have an inhibiting effect on fourth quarter volumes and revenues," said Nelson. "In addition, our surgical volume in El Paso was modestly lower than expected during 4Q."

"We announced the acquisition of University General Hospital in Houston effective December 31, 2015," said Nelson.  "We have subsequently rebranded the facility "Foundation Surgical Hospital of Houston."  This facility is located in a great market and is an excellent addition to the Foundation family of surgically focused hospitals. In 2016, we expect strong growth due to continued solid performance in El Paso, the expansion in San Antonio and the addition of Foundation Surgical Hospital of Houston. We believe we have built an infrastructure that can support additional hospitals and we are actively seeking to add majority-owned surgical hospitals to our business."

Fourth Quarter 2015 Financial Results:
Net revenues and equity in earnings of affiliates in the fourth quarter of 2015 were collectively $32.1 million, down 1.2 percent from $31.7 million in the fourth 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 $0.7 million, or 2.4 percent, to $29.0 million during the three months ended December 31, 2015 as compared to $28.3 million in the same period of 2014. 

Operating expenses for the fourth quarter of 2015 were $32.3 million compared to $28.9 million in the fourth quarter of 2014.  The increase is due primarily to increased purchased services cost directly related to the increased net revenues generated from ancillary services.

During the fourth quarter of 2015, Foundation reported a $2.8 million gain (net of income taxes) on the sale of its 20% interest in the real estate of the Sherman, Texas hospital.  The operating unit of the Sherman hospital was sold in the second quarter of 2015. 

Our operations resulted in a net income attributable to Foundation HealthCare common stock of $1.6 million during the fourth quarter of 2015, compared to a net income of $1.2 million during the fourth quarter of 2014.

Adjusted EBITDA was $3.0 million for the 2015 fourth quarter compared to $4.7 million in the fourth quarter of 2014. This was primarily related to the lower surgical volume in San Antonio and El Paso.

Year-To-Date 2015 Financial Results:
Net revenues for the year ended December 31, 2015 were $127.5 million, up 22 percent from $104.8 million reported for the year ended December 31, 2014.  Patient services revenue (net of the provision for doubtful accounts) increased $23.7 million, or 26 percent, to $114.8 million during the year ended December 31, 2015 as compared to $91.1 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 year ended December 31, 2015 were $121.3 million compared to $101.6 million for 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 and real estate resulted in a net income attributable to Foundation HealthCare common stock of $5.2 million during the year ended December 31, 2015, compared to a net loss of $2.1 million during 2014. Net income per Foundation common share for the year ended December 31, 2015 was $0.30 compared to a net loss of $0.12 per share in the prior year.

Annual Adjusted EBITDA as of December 31, 2015 was $14.2 million compared to $10.6 million for 2014.

At December 31, 2015, cash and cash equivalents totaled $5.1 million, compared to $2.9 million at December 31, 2014.

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: March 16, 2016
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, a replay will be available after the call at the Foundation website or by calling (877) 870-5176 using passcode: 10082263. 

About Foundation HealthCare Headquartered in Oklahoma City, Okla., Foundation HealthCare owns and/or operates four surgical hospitals and ten surgery centers in seven states. Physicians who operate in our facilities currently provide general surgeries and surgeries in such specialties as orthopedics, neurosurgery, pain management, podiatry, gynecology, optometry, gastroenterology and pediatric ENT (tubes/adenoids).

Foundation HealthCare's management seeks to operate each facility efficiently and effectively such that patients receive high quality, cost effective care. The Foundation team seeks to improve the performance of each hospital by recruiting physicians to operate in its facilities and incorporating additional ancillary services in their markets. These additional service lines, such as toxicology, wound care, sleep management, radiology and imaging, 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.

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

Primary contact: Brooks O'Neil, 952-239-7677  (brooks@whiteoaksir.com)

FOUNDATION HEALTHCARE, INC.

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

(Unaudited)



For the Three Months Ended


For the Year Ended


December 31,


December 31,


2015


2014


2015


2014

Income (loss) from continuing operations, net of taxes

$    504,632


$ 2,859,137


$   5,949,374


$   2,872,015

EBITDA adjustments:








Plus: Interest expense, net

232,652


280,859


1,059,855


1,610,791

Plus: Provision (benefit) for income taxes

(604,574)


217


(718,612)


(851,788)

Plus: Depreciation and amortization

1,625,167


1,345,334


5,697,962


5,550,162

Total EBITDA adjustments

1,253,245


1,626,410


6,039,205


6,309,165

EBITDA from continuing operations

$ 1,757,877


$ 4,485,547


$ 11,988,579


$   9,181,180









EBITDA from continuing operations

$ 1,757,877


$ 4,485,547


$ 11,988,579


$   9,181,180

Adjusted EBITDA adjustment








Plus: Stock compensation expense

1,002,548


195,801


1,637,413


1,387,087

Plus: S-1 filing expenses

-


-


318,863


-

Plus: Acquisition expenses

272,729


-


272,729


-

Total Adjusted EBITDA adjustments

1,275,277


195,801


2,229,005


1,387,087

Adjusted EBITDA

$ 3,033,154


$ 4,681,348


$ 14,217,584


$ 10,568,267

 



FOUNDATION HEALTHCARE, INC.

Condensed Consolidated Balance Sheets

(Unaudited)







December 31,


December 31,


2015


2014

ASSETS




Cash and cash equivalents 

$     5,062,492


$     2,860,025

Accounts receivable, net of allowance for doubtful
   accounts of $1,206,000 and $1,742,000, respectively

30,383,942


18,971,435

Receivables from affiliates 

509,886


1,157,184

Supplies inventories 

3,566,940


1,863,175

Prepaid and other current assets 

4,161,620


4,487,873

Current assets from discontinued operations 

197,307


342,441

Total current assets 

43,882,187


29,682,133

Property and equipment, net 

53,515,123


13,465,190

Equity method investments in affiliates 

3,012,631


3,558,020

Intangible assets, net 

7,022,170


9,080,395

Goodwill 

10,594,819


973,927

Other assets 

1,259,029


437,809

Other assets from discontinued operations 

8,713


2,329,395

Total assets 

$ 119,294,672


$   59,526,869

LIABILITIES, PREFERRED NONCONTROLLING INTEREST
AND SHAREHOLDERS' DEFICIT




Liabilities:




Accounts payable 

$     9,060,060


$   10,364,160

Accrued liabilities 

12,877,711


10,223,388

Preferred noncontrolling interests dividends payable 

157,887


195,212

Short-term debt 

308,769


456,784

Current portion of long-term debt 

10,429,750


5,023,048

Other current liabilities 

590,827


1,052,543

Current liabilities from discontinued operations 

1,735,615


839,791

Total current liabilities 

35,160,619


28,154,926

Long-term debt, net of current portion 

69,954,911


24,737,719

Deferred lease incentive

7,672,745


8,608,716

Other liabilities 

6,479,181


5,424,313

Total liabilities 

119,267,456


66,925,674

Preferred noncontrolling interest 

6,960,000


8,700,000

Commitments and contingencies (Note 10)




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;
    17,267,301 and 17,263,842 issued and outstanding, respectively 

1,730


1,726

Paid-in capital 

20,885,915


19,321,267

Accumulated deficit 

(32,130,178)


(37,265,044)

Total Foundation Healthcare shareholders' deficit 

(11,242,533)


(17,942,051)

Noncontrolling interests 

4,309,749


1,843,246

Total deficit 

(6,932,784)


(16,098,805)

Total liabilities, preferred noncontrolling interest and shareholders' deficit 

$ 119,294,672


$   59,526,869

 

FOUNDATION HEALTHCARE, INC.

Condensed Consolidated Statements of Operations

For the Three Months Ended December 31, 2015 and 2014

(Unaudited)






2015


2014

Net Revenues:




Patient services 

$ 31,341,845


$ 30,612,740

Provision for doubtful accounts 

(2,358,193)


(2,318,957)

Net patient services revenue

28,983,652


28,293,783

Management fees from affiliates 

1,009,170


1,337,685

Other revenue 

1,744,151


1,090,737

Revenues 

31,736,973


30,722,205

Equity in earnings of affiliates 

391,193


939,482

Operating Expenses:




Salaries and benefits 

9,516,422


6,955,774

Supplies 

7,184,251


6,617,114

Other operating expenses 

14,000,847


13,957,445

Depreciation and amortization 

1,625,167


1,345,334

Total operating expenses 

32,326,687


28,875,667

Other Income (Expense):




Interest expense, net 

(232,652)


(280,859)

Other income

331,231


354,193

Net other (expense) 

98,579


73,334

Income from continuing operations, before taxes 

(99,942)


2,859,354

Benefit (provision) for income taxes 

604,574


(217)

Income from continuing operations, net of taxes 

504,632


2,859,137

Income from discontinued operations, net of tax 

2,830,002


263,631

Net income

3,334,634


3,122,768

Less:  Net income attributable to noncontrolling interests 

1,532,473


1,772,567

Net income attributable to Foundation Healthcare 

1,802,160


1,350,201

Preferred noncontrolling interests dividends 

(157,887)


(195,213)

Net income attributable to Foundation Healthcare common stock 

$   1,644,273


$   1,154,988

Earnings per common share (basic and diluted):




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

$          (0.07)


$            0.05

Income from discontinued operations, net of tax 

0.16


0.02

Net income per share, attributable to
    Foundation Healthcare common stock 

$            0.09


$            0.07

Weighted average number of common and diluted shares outstanding 

17,271,513


17,080,451

 



FOUNDATION HEALTHCARE, INC.

Condensed Consolidated Statements of Operations

For the Years Ended December 31, 2015 and 2014

(Unaudited)



2015


2014

Net Revenues:




Patient services 

$ 121,197,748


$ 96,219,746

Provision for doubtful accounts 

(6,359,423)


(5,118,194)

Net patient services revenue

114,838,325


91,101,552

Management fees from affiliates 

5,449,354


5,394,666

Other revenue 

5,852,145


5,361,931

Revenues 

126,139,824


101,858,149

Equity in earnings of affiliates 

1,369,488


2,979,293

Operating Expenses:




Salaries and benefits 

33,870,730


29,273,542

Supplies 

27,759,861


24,000,276

Other operating expenses 

53,928,367


42,767,477

Depreciation and amortization 

5,697,962


5,550,162

Total operating expenses 

121,256,920


101,591,457

Other Income (Expense):




Interest expense, net 

(1,059,855)


(1,610,791)

Other income

38,226


385,033

Net other (expense) 

(1,021,629)


(1,225,758)

Income from continuing operations, before taxes 

5,230,762


2,020,227

Benefit for income taxes 

718,612


851,788

Income from continuing operations, net of taxes 

5,949,374


2,872,015

Income (loss) from discontinued operations, net of tax 

6,593,188


(357,452)

Net income

12,542,562


2,514,563

Less:  Net income attributable to noncontrolling interests 

6,645,210


3,827,439

Net income (loss) attributable to Foundation Healthcare 

5,897,352


(1,312,876)

Preferred noncontrolling interests dividends 

(706,395)


(780,853)

Net income (loss) attributable to Foundation Healthcare common stock 

$     5,190,957


$ (2,093,729)

Earnings per common share (basic and diluted):




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

$            (0.08)


$          (0.10)

Income (loss) from discontinued operations, net of tax 

0.38


(0.02)

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

$              0.30


$          (0.12)

Weighted average number of common and diluted shares outstanding 

17,267,301


17,080,451

  



FOUNDATION HEALTHCARE, INC.

Condensed Consolidated Statements of Cash Flows

For the Years Ended December 31, 2015 and 2014

(Unaudited)






2015


2014

Operating activities:




Net income 

$ 12,542,562


$  2,514,563

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

6,593,188


(357,452)

Income from continuing operations, net of tax

5,949,374


2,872,015

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




Depreciation and amortization

5,697,962


5,550,162

Deferred tax benefit

-


(1,154,252)

Stock-based compensation, net of cashless vesting

1,564,652


1,064,854

Provision for doubtful accounts

6,359,423


5,118,194

Equity in earnings of affiliates

(1,369,488)


(2,979,293)

Changes in assets and liabilities:




Accounts receivable, net of provision for doubtful accounts

(17,771,930)


(11,333,987)

Receivables from affiliates

647,298


(309,182)

Supplies inventories

(1,703,765)


67,967

Prepaid and other current assets

326,253


(1,528,377)

Other assets

(10,821,220)


(193,211)

Accounts payable

(1,304,100)


(1,284,827)

Accrued liabilities

2,784,061


6,383,015

Other current liabilities

(461,716)


(3,613,586)

Other liabilities

118,897


4,274,861

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

(9,984,299)


2,934,353

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

1,566,595


(488,300)

Net cash provided by (used in) operating activities

(8,417,704)


2,446,053

Investing activities:




Purchase of property and equipment

(43,599,313)


(4,884,948)

Disposal of property and equipment

165,000


1,807

Proceeds from sale of equity investment


178,000

Distributions from affiliates

1,914,877


2,778,257

Net cash used in investing activities from continuing operations

(41,519,436)


(1,926,884)

Net cash provided by investing activities from discontinued operations

8,388,233


Net cash used in investing activities

(33,131,203)


(1,926,884)

Financing activities:




Debt proceeds

81,745,831


32,885,948

Debt payments

(31,269,952)


(26,284,135)

Preferred noncontrolling interest dividends

(743,720)


(781,052)

Preferred noncontrolling interest redemptions

(1,740,000)


Distributions to noncontrolling interests

(4,234,784)


(3,731,252)

Proceeds from noncontrolling interests


112,167

Net cash provided by financing activities from continuing operations

43,757,375


2,201,676

Net cash used in financing activities from discontinued operations


(4,072,896)

Net cash provided by (used in) financing activities

43,757,375


(1,871,220)

Net change in cash and cash equivalents

2,208,467


(1,352,051)

Cash and cash equivalents at beginning of period

2,860,025


4,212,076

Cash and cash equivalents at end of period

$   5,068,492


$  2,860,025

Cash Paid for Interest and Income Taxes:




Interest expense

$   1,059,855


$  2,052,213

Interest expense, discontinued operations

$               —


$     168,733

Income taxes, continuing operations

$   1,600,000


$  3,255,623

 

SOURCE Foundation HealthCare, Inc.



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