Foundation HealthCare Year To Date Revenue Grows 32% To $94 Million; Adjusted EBITDA Increased 93% To $10.8 Million

News provided by

Foundation HealthCare

Nov 02, 2015, 08:00 ET

OKLAHOMA CITY, Nov. 2, 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 third quarter of 2015.

Highlights include:

  • Net revenues increased 19% for the third quarter to $32.6 million and 32% year-to-date to $94.0 million.
  • Adjusted EBITDA increased 43% to $5.0 million for the third quarter and 93% to $10.8 million year-to-date.
  • Patient service revenue grew by 24% at majority owned hospitals in the third quarter, 37%year-to-date.
  • Fifth consecutive quarter that the company reported double digit growth compared to 2014.

"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 reported impressive growth during the first half of 2015 and continued that in the third quarter, reporting 19% revenue growth in the third quarter compared to 2014 and year-to-date growth of 32% compared to the same period in 2014. Foundation has reported five consecutive quarters with double digit growth.

"Patient service revenues grew 23% in the third quarter of 2015 compared to the same period last year. Year-to-date growth in patient service revenues has been 37%," 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." 

"The fourth quarter has historically been one of Foundation's best earnings periods so we expect these positive trends to continue," said Nelson.

Third Quarter 2015 Financial Results:

Net revenues and equity in earnings of affiliates in the third quarter of 2015 were collectively $32.8 million, up 17% from $28.0 million in the third 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 $5.8 million, or 23%, to $30.4 million during the three months ended September 30, 2015 as compared to $24.6 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 third quarter of 2015 were $29.6 million compared to $26.1 million in the third 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 resulted in a net income attributable to Foundation HealthCare common stock of $0.3 million during the third quarter of 2015, compared to a net income of $0.2 million during the third quarter of 2014. Earnings per share from continuing operations for the three months ended September 30, 2015 was $0.02 compared to an earnings per share of $0.01 per share in the prior year.

Adjusted EBITDA was $5.0 million for the 2015 third quarter compared to $3.5 million in the third quarter of 2014.

Year-To-Date 2015 Financial Results:

Net revenues for the nine months ended September 30, 2015 were $94.0 million, up 32% from $71.1 million reported in the first nine months of 2014.  Patient services revenue (net of the provision for doubtful accounts) increased $23.1 million, or 37 percent, to $85.9 million during the nine months ended September 30, 2015 as compared to $62.8 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 nine months of 2015 were $88.9 million compared to $72.7 million in the first nine 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 $3.5 million during the first nine months of 2015, compared to a net loss of $3.2 million during the first nine months of 2014. Net loss per share from continuing operations for the nine months ended September 30, 2015 was $0.02 compared to a net loss per share of $0.17 per share in the prior year.

Year-To-Date Adjusted EBITDA as of September 30, 2015 was $10.8 million compared to $5.6 million for first nine months of 2014.

At September 30, 2015, cash and cash equivalents totaled $4.8 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: Nov. 2, 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: 10075178. 

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 Nine Months Ended

September 30,

September 30,

2015

2014

2015

2014

Income (loss) from continuing operations, net of taxes

$

3,097,905

$

1,646,310

$

5,402,130

$

(274,649)

EBITDA adjustments:














Plus: Interest expense, net

221,881


324,700


827,204


1,329,932

Plus: Provision (benefit) for income taxes

—


—


(114,038)


(852,005)

Plus: Depreciation and amortization

1,345,340


1,320,527


4,072,795


4,204,828

      Total EBITDA adjustments

1,567,221


1,645,227


4,785,961


4,682,755

EBITDA from continuing operations

$

4,665,126

$

3,291,537

$

10,188,091

$

4,408,106
















EBITDA from continuing operations

$

4,665,126

$

3,291,537

$

10,188,091

$

4,408,106

Adjusted EBITDA adjustment














Plus: Stock compensation expense

286,259


185,171


634,865


1,191,286

      Total Adjusted EBITDA adjustments

286,259


185,171


634,865


1,191,286

Adjusted EBITDA

$

4,951,385

$

3,476,708

$

10,822,956

$

5,599,392

FOUNDATION HEALTHCARE, INC.

 

Condensed Consolidated Balance Sheets
(Unaudited)








September 30,

December 31,

2015

2014

ASSETS






Cash and cash equivalents

$

4,751,278

$

2,860,025

Accounts receivable, net of allowance for doubtful accounts of $1,184,000 and $1,742,000, respectively

21,321,016


18,971,435

Receivables from affiliates

524,479


1,157,184

Supplies inventories

1,912,887


1,863,175

Prepaid and other current assets

3,187,300


4,487,873

Current assets from discontinued operations

246,011


342,441

   Total current assets

31,942,971


29,682,133

Property and equipment, net

11,962,955


13,465,190

Equity method investments in affiliates

2,909,701


3,558,020

Intangible assets, net

7,536,727


9,080,395

Goodwill

973,927


973,927

Other assets

535,704


437,809

Other assets from discontinued operations

792,184


2,329,395

Total assets

$

56,654,169

$

59,526,869

LIABILITIES, PREFERRED NONCONTROLLING INTEREST AND SHAREHOLDERS' DEFICIT






Liabilities:






Accounts payable

$

6,498,219

$

10,364,160

Accrued liabilities

11,472,795


10,223,388

Preferred noncontrolling interests dividends payable

177,623


195,212

Short-term debt

398,207


456,784

Current portion of long-term debt

4,828,974


5,023,048

Other current liabilities

1,349,586


1,052,543

Current liabilities from discontinued operations

1,394,521


839,791

Total current liabilities

26,119,925


28,154,926

Long-term debt, net of current portion

18,318,716


24,737,719

Deferred lease incentive

7,908,895


8,608,716

Other liabilities

6,380,263


5,424,313

      Total liabilities

58,727,799


66,925,674

Preferred noncontrolling interest

7,830,000


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; 17,273,180 and 17,263,842 issued and outstanding, respectively

1,727


1,726

Paid-in capital

19,900,781


19,321,267

Accumulated deficit

(33,718,357)


(37,265,044)

      Total Foundation Healthcare shareholders' deficit

(13,815,849)


(17,942,051)

Noncontrolling interests

3,912,219


1,843,246

      Total deficit

(9,903,630)


(16,098,805)

      Total liabilities, preferred noncontrolling interest and shareholders' deficit

$

56,654,169

$

59,526,869

FOUNDATION HEALTHCARE, INC.

 

Condensed Consolidated Statements of Operations
For the Three Months Ended September 30, 2015 and 2014
(Unaudited)





2015

2014

Net Revenues:






Patient services

$

31,765,408

$

26,183,803

Provision for doubtful accounts

(1,402,684)


(1,562,147)

      Net patient services revenue

30,362,724


24,621,656

Management fees from affiliates

1,217,108


1,352,909

Other revenue

1,017,134


1,450,021

      Revenues

32,596,966


27,424,586

Equity in earnings of affiliates

247,223


581,171

Operating Expenses:






Salaries and benefits

8,698,484


7,339,528

Supplies

7,115,559


6,748,785

Other operating expenses

12,445,063


10,655,907

Depreciation and amortization

1,345,340


1,320,527

      Total operating expenses

29,604,446


26,064,747

Other Income (Expense):






Interest expense, net

(221,881)


(324,700)

Other income

80,043


30,000

      Net other (expense)

(141,838)


(294,700)

Income from continuing operations, before taxes

3,097,905


1,646,310

Benefit for income taxes

—


—

Income from continuing operations, net of taxes

3,097,905


1,646,310

Income (loss) from discontinued operations, net of tax

34,744


(83,997)

Net income

3,132,649


1,562,313

Less:  Net income attributable to noncontrolling interests

2,617,821


1,208,648

Net income attributable to Foundation Healthcare

514,828


353,665

Preferred noncontrolling interests dividends

(175,646)


(199,502)

Net income attributable to Foundation Healthcare common stock

$

339,182

$

154,163

Earnings per common share (basic and diluted):






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

$

0.02

$

0.01

Income from discontinued operations, net of tax

0.00


0.00

Net income per share, attributable to Foundation Healthcare common stock

$

0.02

$

0.01

Weighted average number of common and diluted shares outstanding

17,271,513


17,182,473

FOUNDATION HEALTHCARE, INC.

 

Condensed Consolidated Statements of Operations
For the Nine Months Ended September 30, 2015 and 2014
(Unaudited)





2015

2014

Net Revenues:






Patient services

$

89,855,903

$

65,607,006

Provision for doubtful accounts

(4,001,230)


(2,799,237)

      Net patient services revenue

85,854,673


62,807,769

Management fees from affiliates

4,440,184


4,056,981

Other revenue

3,707,213


4,271,194

      Revenues

94,002,070


71,135,944

Equity in earnings of affiliates

978,295


1,752,284

Operating Expenses:






Salaries and benefits

24,354,308


22,317,768

Supplies

20,575,610


17,383,162

Other operating expenses

39,927,517


28,810,032

Depreciation and amortization

4,072,795


4,204,828

      Total operating expenses

88,930,230


72,715,790

Other Income (Expense):






Interest expense, net

(827,204)


(1,329,932)

Other income

65,161


30,840

      Net other (expense)

(762,043)


(1,299,092)

Income (loss) from continuing operations, before taxes

5,288,092


(1,126,654)

Benefit for income taxes

114,038


852,005

Income (loss) from continuing operations, net of taxes

5,402,130


(274,649)

Income (loss) from discontinued operations, net of tax

3,805,801


(333,296)

Net income (loss)

9,207,931


(607,945)

Less:  Net income attributable to noncontrolling interests

5,112,737


2,054,872

Net income (loss) attributable to Foundation Healthcare

4,095,194


(2,662,817)

Preferred noncontrolling interests dividends

(548,507)


(585,640)

Net income (loss) attributable to Foundation Healthcare common stock

$

3,546,687

$

(3,248,457)

Earnings per common share (basic and diluted):






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

$

(0.02)

$

(0.17)

Income (loss) from discontinued operations, net of tax

0.22


(0.02)

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

$

0.20

$

(0.19)

Weighted average number of common and diluted shares outstanding

17,258,727


17,016,318

FOUNDATION HEALTHCARE, INC.

 

Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2015 and 2014
(Unaudited)








2015

2014

Operating activities:






Net income (loss)

$

9,207,931

$

(607,945)

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

3,805,801


(333,296)

Income (loss) from continuing operations, net of tax

5,402,130


(274,649)

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






      Depreciation and amortization

4,072,795


4,204,828

      Stock-based compensation, net of cashless vesting

579,515


876,851

      Provision for doubtful accounts

4,001,230


2,799,237

      Equity in earnings of affiliates

(978,295)


(1,752,284)

      Changes in assets and liabilities:






            Accounts receivable, net of provision for doubtful accounts

(6,350,811)


(4,338,374)

Receivables from affiliates

632,705


(175,698)

Supplies inventories

(49,712)


(35,657)

Prepaid and other current assets

1,300,573


(1,489,956)

Other assets

(97,895)


(204,838)

Accounts payable

(3,865,959)


(1,791,968)

Accrued liabilities

1,249,407


3,810,422

Other current liabilities

297,043


(2,330,737)

Other liabilities

256,129


3,087,988

      Net cash provided by operating activities from continuing operations

6,448,855


2,385,165

      Net cash used in operating activities from discontinued operations

(2,394,061)


(454,338)

      Net cash provided by operating activities

4,054,794


1,930,827

Investing activities:






Purchase of property and equipment

(1,157,635)


(1,810,180)

Disposal of property and equipment

130,745


—

Proceeds from sale of equity investment

—


178,000

Distributions from affiliates

1,626,614


2,061,937

      Net cash provided by investing activities from continuing operations

599,724


429,757

      Net cash provided by investing activities from discontinued operations

8,388,233


—

      Net cash provided by investing activities

8,987,957


429,757

Financing activities:






Debt proceeds

4,995,966


29,092,552

Debt payments

(11,667,620)


(24,560,683)

Preferred noncontrolling interest dividends

(566,096)


(583,693)

Preferred noncontrolling interest redemptions

(870,000)


—

Distributions to noncontrolling interests

(3,043,748)


(2,879,989)

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

(11,151,498)


1,068,187

      Net cash used in financing activities from discontinued operations

—


(4,072,896)

      Net cash used in financing activities

(11,151,498)


(3,004,709)

Net change in cash and cash equivalents

1,891,253


(644,125)

Cash and cash equivalents at beginning of period

2,860,025


4,212,076

Cash and cash equivalents at end of period

$

4,751,278

$

3,567,951

Cash Paid for Interest and Income Taxes:






Interest expense

$

1,280,000

$

1,604,256

Interest expense, discontinued operations

$

—

$

168,733

Income taxes, continuing operations

$

—

$

3,255,623

SOURCE Foundation HealthCare