Form 8-K

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 29, 2012

 

 

ADDUS HOMECARE CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-34504   20-5340172

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification Number)

 

2401 South Plum Grove Road, Palatine, Illinois   60067
(Address of principal executive offices)   (Zip Code)

(847) 303-5300

(Registrant’s telephone number, including area code)

N/A

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 2.02. Results of Operations and Financial Condition

On November 1, 2012, Addus HomeCare Corporation (the “Corporation”) issued a press release announcing its earnings for the fiscal quarter ended September 30, 2012. A copy of the press release is furnished as Exhibit 99.1 to this report.

In accordance with General Instruction B.2 of Form 8-K, the information in this Current Report on Form 8-K, including the exhibit, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

 

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On October 29, 2012, Daniel Schwartz, the Chief Operating Officer of Addus Healthcare, Inc. (“Addus HealthCare”), a wholly-owned subsidiary of the Corporation, informed Addus HealthCare of his intention to resign effective November 16, 2012. We expect Mr. Schwartz will execute a separation agreement on customary terms.

 

Item 7.01. Regulation FD Disclosure

On November 1, 2012, the Corporation announced that it is exploring strategic alternatives relative to its home health services business. A copy of the press release containing the announcement is attached as Exhibit 99.1

 

Item 9.01. Financial Statements and Exhibits

 

(d) Exhibits:

 

Exhibit

No.

  

Description

99.1    Press release of Addus HomeCare Corporation dated November 1, 2012.


SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

    ADDUS HOMECARE CORPORATION

Dated: November 1, 2012

  By:   /s/ Dennis Meulemans
  Name:   Dennis Meulemans
  Title:   Chief Financial Officer


Exhibit Index

 

Exhibit No.

  

Description

99.1    Press release of Addus HomeCare Corporation dated November 1, 2012.
Press Release of Addus HomeCare Corporation dated November 1, 2012

Exhibit 99.1

 

LOGO

Investor Contact:

Dennis Meulemans

Chief Financial Officer

Phone: (847) 303-5300

Email: DMeulemans@addus.com

Addus HomeCare Reports Third Quarter 2012 Results and Exploration of

Strategic Alternatives for the Home Health Division

Third Quarter Financial Highlights

 

   

Total net service revenues of $71.0 million.

 

   

Net income of $1.8 million, or $0.17 per diluted share.

 

   

Home & Community revenues of $59.6 million.

 

   

The Company is exploring strategic alternatives for its Home Health division and has engaged a financial advisor to assist in the process.

Palatine, IL, November 1, 2012—Addus HomeCare Corporation (Nasdaq: ADUS), a provider of home-based social and medical services focused on the elderly dual eligible population, announced today its financial results for the third quarter ended September 30, 2012.

Third Quarter Review

Total net service revenues for the third quarter of 2012 were $71.0 million, a 2.3% increase compared to $69.4 million in the prior year quarter. Net income, before considering the effect of $0.3 million, or $0.02 per diluted share, in severance related costs for the Home Health division was $2.0 million, or $0.19 per diluted share. Net income for the third quarter of 2011, before considering the $16.0 million goodwill and intangible asset impairment charge was $1.8 million, or $0.17 per diluted share.

Mark Heaney, President and Chief Executive Officer of Addus HomeCare, stated, “Our Home & Community segment continued to demonstrate positive growth during the third quarter and we continued to focus on performance improvements in our Home Health segment.”


Home & Community segment net service revenues for the third quarter of 2012 were $59.6 million, a 6.1% increase from the prior year quarter. Home & Community operating income, including depreciation and amortization but excluding corporate expenses, increased 10.7% to $7.5 million, or 12.6% of revenue, in the third quarter, compared to $6.8 million, or 12.1% of revenue, in the prior year quarter. This improvement was primarily due to an increase in average census and related billable hours, lower bad debt expense as well as a continued focus on cost control.

Home Health segment net service revenues for the third quarter of 2012 were $11.4 million, a 13.6% decrease over the prior year quarter. Home Health had operating income of $0.2 million, or 1.8% of revenues, before considering $0.3 million in severance related costs recorded in the third quarter and including depreciation and amortization but excluding corporate expenses, compared to operating income of $0.2 million, or 1.4% of revenues, in the prior year quarter.

Nine Month Review

Total net service revenues for the nine months ended September 30, 2012 were $209.2 million, a 2.3% increase compared to $204.5 million in the same prior year period. Net income, before considering the effect of $0.3 million, or $0.02 per diluted share, in severance related costs for the Home Health division was $4.1 million, or $0.38 per diluted share. Net income for the nine months ended September 30, 2011, before considering the $16.0 million goodwill and intangible asset impairment charge was $4.0 million, or $0.37 per diluted share.

Home & Community segment net service revenues for the nine months ended September 30, 2012 were $175.2 million, a 6.0% increase from the same prior year period. Home & Community operating income, including depreciation and amortization but excluding corporate expenses, increased 15.9% to $21.0 million, or 12.0% of revenue for the nine months ended September 30, 2012, compared to $18.1 million, or 11.0% of revenue, in the same prior year period. This improvement was primarily due to an increase in average census and related billable hours, lower bad debt expense as well as a continued focus on cost control.

Home Health segment net service revenues for the nine months ended September 30, 2012 were $34.1 million, a 13.1% decrease over the same prior year period. Home Health had an operating loss, including depreciation and amortization but excluding corporate expenses, of $1.3 million, or (3.9)% of revenues, compared to operating income of $1.7 million, or 4.4% of revenues, in the same prior year period. Home Health segment net service revenues for the nine months ended September 30, 2012 included an adjustment recorded in the first quarter of 2012 to estimates of accrued Medicare revenues totaling $0.9 million, which reduced profitability by $0.8 million.


Exploration of Strategic Alternatives

The Company has decided to explore strategic alternatives relative to its home health services business and has retained The Braff Group to assist in the process. There can be no assurance that this review process will result in a transaction or strategic alternative of any kind or of the potential timing or terms of any such transaction or strategic alternative. The Company does not intend to disclose developments or provide updates on the progress or status of this process unless it deems further disclosure is appropriate or required.

Chief Operating Officer to Leave

The Company announced today that Daniel Schwartz, Chief Operating Officer has accepted a senior position at another business not in competition with Addus and thus, has submitted his resignation effective November 16, 2012.

Mr. Heaney stated, “We appreciate Daniel’s contributions to Addus, especially with respect to his driving key operational and financial metrics. Daniel’s leadership has been valuable in positioning the Company for the future, and we wish Daniel the best in his future endeavors.”

Non-GAAP Financial Measures

The information provided in this release includes Adjusted EBITDA, a non-GAAP financial measure, which the Company defines as earnings before goodwill and intangible asset impairment charge, revaluation of contingent consideration, net interest (income) expense, taxes, depreciation, amortization, and stock-based compensation expense. The Company has provided, in the financial statement tables included in this press release, a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP measure. Management believes that Adjusted EBITDA is 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 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 report its 2012 third quarter financial results after the market close on Thursday, November 1, 2012. Management will conduct a conference call to discuss its results at 5 p.m. Eastern time on November 1, 2012. The toll-free dial-in number is (866) 383-7989 (international dial-in number is 617-597-5328), with the passcode: 63834295. A telephonic replay of the conference call will be available through midnight on November 9, 2012, by dialing (888) 286-8010 (international dial-in number is 617-801-6888) and entering the passcode 92502227.


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.

About Addus

Addus is a provider of a broad range of social and medical services in the home. Addus’ services include personal care and assistance with activities of daily living, skilled nursing and rehabilitative therapies, and adult day care. Addus focuses on serving the needs of the elderly dual eligible population. Addus’ consumers are individuals with special needs 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, commercial insurers and private individuals. For more information, please visit www.addus.com.

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. 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 expected benefits and costs of 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 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, 2012, and in Addus HomeCare’s Quarterly Reports on Form 10-Q, filed with the Securities and Exchange Commission on May 10, 2012 and August 9, 2012, 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. (Unaudited tables and notes follow)

# # #


ADDUS HOMECARE CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statements of Income and Cash Flow Information

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

(Unaudited)

 

      For the Three  Months
Ended September 30,
    For the Nine Months
Ended September 30,
 
     2012      2011     2012     2011  

Income Statement Information:

         

Net service revenues

   $ 71,006       $ 69,384      $ 209,211      $ 204,478   

Cost of service revenues

     50,687         48,373        149,832        144,303   
  

 

 

    

 

 

   

 

 

   

 

 

 

Gross profit

     20,319         21,011        59,379        60,175   

General and administrative expenses

     16,486         16,955        50,697        49,567   

Goodwill and intangible asset impairment charge

     —           15,989        —          15,989   

Gain on sale of agency

     —           —          (495     —     

Depreciation and amortization

     639         927        1,908        2,783   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total operating expenses

     17,125         33,871        52,110        68,339   
  

 

 

    

 

 

   

 

 

   

 

 

 

Operating income (loss)

     3,194         (12,860     7,269        (8,164

Interest income

     —           —          (128     —     

Interest expense

     407         548        1,365        1,929   
  

 

 

    

 

 

   

 

 

   

 

 

 

Total interest expense, net

     407         548        1,237        1,929   

Income (loss) from operations before taxes

     2,787         (13,408     6,032        (10,093

Income tax expense (benefit)

     990         (6,745     2,142        (5,616
  

 

 

    

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ 1,797       $ (6,663   $ 3,890      $ (4,477
  

 

 

    

 

 

   

 

 

   

 

 

 

Income (loss) per common share:

         

Basic and diluted

   $ 0.17       $ (0.62   $ 0.36      $ (0.42
  

 

 

    

 

 

   

 

 

   

 

 

 

Weighted average number of common shares outstanding:

         

Basic

     10,761         10,746        10,761        10,746   
  

 

 

    

 

 

   

 

 

   

 

 

 

Diluted

     10,773         10,746        10,764        10,746   
  

 

 

    

 

 

   

 

 

   

 

 

 

 

      For the Nine Months Ended September 30,  
     2012     2011  

Cash Flow Information:

    

Net cash provided by operating activities

   $ 9,336      $ 11,815   

Net cash used in investing activities

     (518     (777

Net cash used in financing activities

     (9,125     (10,557
  

 

 

   

 

 

 

Net change in cash

     (307     481   

Cash at the beginning of the period

     2,020        816   
  

 

 

   

 

 

 

Cash at the end of the period

   $ 1,713      $ 1,297   
  

 

 

   

 

 

 


Condensed Consolidated Balance Sheets

(Amounts in thousands)

(Unaudited)

 

     September 30, 2012      December 31, 2011  

Assets

     

Current assets

     

Cash

   $ 1,713       $ 2,020   

Accounts receivable, net

     71,400         72,368   

Prepaid expenses and other current assets

     8,602         8,137   

Deferred tax assets

     6,336         6,336   
  

 

 

    

 

 

 

Total current assets

     88,051         88,861   
  

 

 

    

 

 

 

Property and equipment, net

     2,852         2,490   
  

 

 

    

 

 

 

Other assets

     

Goodwill

     50,576         50,695   

Intangible assets, net

     6,787         8,044   

Deferred tax assets

     4,089         4,089   

Other assets

     347         513   
  

 

 

    

 

 

 

Total other assets

     61,799         63,341   
  

 

 

    

 

 

 

Total assets

   $ 152,702       $ 154,692   
  

 

 

    

 

 

 

Liabilities and stockholders’ equity

     

Current liabilities

     

Accounts payable

   $ 4,589       $ 5,266   

Accrued expenses

     33,081         29,313   

Current maturities of long-term debt

     1,902         6,569   

Deferred revenue

     2,020         2,145   
  

 

 

    

 

 

 

Total current liabilities

     41,592         43,293   
  

 

 

    

 

 

 

Long-term debt, less current maturities

     20,500         24,958   

Total stockholders’ equity

     90,610         86,441   
  

 

 

    

 

 

 

Total liabilities and stockholders’ equity

   $ 152,702       $ 154,692   
  

 

 

    

 

 

 


Segment Information (Unaudited)

 

     For the Three Months Ended September 30, 2012  
     Home & Community     Home Health     Corporate     Total  

Net service revenues

   $ 59,581      $ 11,425      $ —        $ 71,006   

Cost of service revenues

     44,520        6,167        —          50,687   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     15,061        5,258        —          20,319   

Gross profit percentage

     25.3     46.0       28.6

General and administrative expenses

     7,079        5,364        4,043        16,486   

Depreciation and amortization

     458        4        177        639   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     7,537        5,368        4,220        17,125   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

   $ 7,524      $ (110   $ (4,220   $ 3,194   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income percentage

     12.6     -1.0     -5.9     4.5
     For the Three Months Ended September 30, 2011  
     Home & Community     Home Health     Corporate     Total  

Net service revenues

   $ 56,157      $ 13,227      $ —        $ 69,384   

Cost of service revenues

     41,368        7,005        —          48,373   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     14,789        6,222        —          21,011   

Gross profit percentage

     26.3     47.0       30.3

General and administrative expenses

     7,382        5,914        3,659        16,955   

Goodwill and intangible asset impairment charge

     —          15,989        —          15,989   

Depreciation and amortization

     609        128        190        927   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     7,991        22,031        3,849        33,871   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

   $ 6,798      $ (15,809   $ (3,849   $ (12,860
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income, excluding impairment charge

   $ 6,798      $ 180      $ (3,849   $ 3,129   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income percentage,excluding impairment charge

     12.1     1.4     -5.5     4.5
     For the Nine Months Ended September 30, 2012  
     Home & Community     Home Health     Corporate     Total  

Net service revenues

   $ 175,160      $ 34,051      $ —        $ 209,211   

Cost of service revenues

     130,681        19,151        —          149,832   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     44,479        14,900        —          59,379   

Gross profit percentage

     25.4     43.8       28.4

General and administrative expenses

     22,072        16,209        12,416        50,697   

Gain on sale of agency

     —          —          (495     (495

Depreciation and amortization

     1,385        11        512        1,908   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     23,457        16,220        12,433        52,110   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

   $ 21,022      $ (1,320   $ (12,433   $ 7,269   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income percentage

     12.0     -3.9     -5.9     3.5
     For the Nine Months Ended September 30, 2011  
     Home & Community     Home Health     Corporate     Total  

Net service revenues

   $ 165,309      $ 39,169      $ —        $ 204,478   

Cost of service revenues

     123,221        21,082        —          144,303   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     42,088        18,087        —          60,175   

Gross profit percentage

     25.5     46.2       29.4

General and administrative expenses

     22,117        15,984        11,466        49,567   

Goodwill and intangible asset impairment charge

     —          15,989        —          15,989   

Depreciation and amortization

     1,828        385        570        2,783   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     23,945        32,358        12,036        68,339   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income (loss)

   $ 18,143      $ (14,271   $ (12,036   $ (8,164
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income, excluding impairment charge

   $ 18,143      $ 1,718      $ (12,036   $ 7,825   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income percentage,excluding impairment charge

     11.0     4.4     -5.9     3.8


Key Statistical and Financial Data (Unaudited)

 

    For the Three Months Ended September 30,     For the Nine Months Ended September 30,  
    2012     2011     2012     2011  

General:

       

Adjusted EBITDA (in thousands) (1)

  $ 3,972      $ 4,152      $ 9,456      $ 10,849   

States served at period end

        19        19   

Locations at period end

        117        120   

Employees at period end

        14,222        13,601   

Home & Community

       

Average census

    24,138        23,026        23,677        22,761   

Billable hours (in thousands)

    3,521        3,323        10,377        9,736   

Billable hours per business day

    54,169        51,127        54,298        50,716   

Revenues per billable hour

  $ 16.93      $ 16.90      $ 16.88      $ 16.98   

Home Health

       

Medicare admissions (2)

    2,008        2,233        6,168        6,826   

Non-Medicare admissions

    1,213        1,558        3,777        4,909   

Medicare revenues per episode completed

  $ 2,571      $ 2,426      $ 2,571      $ 2,494   

Percentage of Revenues by Payor:

       

State, local or other governmental

    82     80     83     80

Medicare

    11     12     11     13

Other

    7     8     6     7

 

(1) We define Adjusted EBITDA as earnings before goodwill and intangible asset impairment charge, revaluation of contingent consideration, net interest (income) expense, taxes, depreciation, amortization, and stock-based compensation expense. 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) Medicare admissions represents the aggregate number of new cases approved for Medicare services during a specified period.


      For the Three Months Ended
September 30,
    For the Nine Months Ended
September 30,
 

Adjusted EBITDA (1) (Unaudited)

   2012      2011     2012      2011  

Reconciliation of Adjusted EBITDA to Net Income:

          

Net income (loss)

   $ 1,797       $ (6,663   $ 3,890       $ (4,477

Goodwill and intangible asset impairment charge

     —           15,989        —           15,989   

Net interest expense

     407         548        1,237         1,929   

Income tax expense (benefit)

     990         (6,745     2,142         (5,616

Depreciation and amortization

     639         927        1,908         2,783   

Stock-based compensation expense

     139         96        279         241   
  

 

 

    

 

 

   

 

 

    

 

 

 

Adjusted EBITDA

   $ 3,972       $ 4,152      $ 9,456       $ 10,849   
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(1) We define Adjusted EBITDA as earnings before goodwill and intangible asset impairment charge, revaluation of contingent consideration, net interest (income) expense, taxes, depreciation, amortization, and stock-based compensation expense. 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.