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Addus HomeCare Announces Fourth-Quarter 2016 Results

DOWNERS GROVE, Ill., March 6, 2017 /PRNewswire/ -- Addus HomeCare Corporation (ADUS), a provider of comprehensive home care services, today announced its financial results for the fourth quarter and year ended December 31, 2016.

For the fourth quarter, net service revenues increased 22.3% to $103.7 million from $84.8 million for the fourth quarter of 2015. Net income from continuing operations was $7.5 million for the latest quarter, up 144.9% from $3.1 million for the fourth quarter of 2015 and was $0.65 per diluted share, up 140.7% from $0.27 per diluted share. Adjusted net income from continuing operations per diluted share grew 34.4% to $0.43 for the fourth quarter of 2016 from $0.32 for the fourth quarter of 2015. (See pages 7 and 8 for a reconciliation of all non-GAAP and GAAP financial measures.)

For the year ended December 31, 2016, net service revenues rose 19.0% to $400.7 million from $336.8 million for 2015. Net income from continuing operations increased 5.1% to $11.9 million for 2016 from $11.4 million for 2015 and increased 2.9% to $1.05 per diluted share from $1.02 per diluted share. Adjusted net income from continuing operations per diluted share was $1.46 for 2016, up 19.7% from $1.22 for 2015. (See pages 7 and 8 for a reconciliation of all non-GAAP and GAAP financial measures.)

"Our financial results for the fourth quarter cap a very successful year for Addus," commented Dirk Allison, President and Chief Executive Officer of Addus. "Our revenue growth and expanded profit margins reflect our initiatives throughout 2016 to streamline Addus and refocus on driving profitable growth.

"Our efforts to improve organic growth are reflected in our 5.1% increase in same store revenues for the quarter compared to the prior year.  We launched process improvement and cost reduction initiatives that accounted for the majority of our fourth quarter margin improvement, highlighted by margin improvement of 360 basis points in net income from continuing operations to 7.2% and 260 basis points in adjusted EBITDA margin to 9.0%. We rebuilt our executive team and infrastructure, strengthening our ability to close, integrate, and support future acquisitions.  As a result, Addus is well positioned to drive incremental margin improvements and growth, both organically and through acquisition."

The Company's revenue growth for the quarter resulted primarily from the acquisition of South Shore in February 2016, as well as the increase in same store revenues.  Revenues reflected a 22.2% year-over-year increase in billable hours per business day, and revenues per billable hour rose 1.6%. The Company's revenue growth, combined with the favorable margin impact of the 2016 process improvement and cost reduction initiatives, generated 72.1% growth in adjusted EBITDA to $9.3 million for the quarter.

Addus completed 2016 with $8.0 million in cash, $24.1 million of bank debt and $79.7 million of availability under its revolving credit facility. Net cash used by operating activities for the fourth quarter was $31.7 million, largely due to the continuing volatility in the Company's accounts receivable with the state of Illinois.

Mr. Allison concluded, "Addus enters 2017 as a growing market leader in a highly fragmented but vital sector of healthcare. We have the management team, experience and resources to execute our growth strategies and to deliver high quality, cost-effective care.  We are enthusiastic about our future and our ability to deliver increased shareholder value."

Non-GAAP Financial Measures

The information provided in this release includes adjusted net income per diluted share, adjusted EBITDA and adjusted net service revenues, which are non-GAAP financial measures. The Company defines adjusted net income per diluted share as net income per diluted share, adjusted for M&A expenses, stock-based compensation expense, restructure charges and severance and other costs. The Company defines adjusted EBITDA as net income before interest expense, taxes, depreciation, amortization, M&A expenses, stock-based compensation expense, restructure charges and severance and other costs. The Company defines adjusted net service revenues as net service revenues 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 net income per diluted share to net income per diluted share, a reconciliation of adjusted EBITDA to net income and a reconciliation of adjusted net service revenues to net service revenues, in each case, the most directly comparable GAAP measure. Management believes that adjusted net income per diluted share, adjusted EBITDA and adjusted net service revenues 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 7, 2017, 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 49572841. A telephonic replay of the conference call will be available through midnight on March 21, 2017, by dialing (855) 859-2056 (international dial-in number is (404) 537-3406) and entering pass code 49572841.

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 discretionary determinations by government officials, 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, lower than anticipated cost savings, estimation inaccuracies in future revenues, margins, earnings and growth, whether any anticipated receipt of payments will materialize 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 11, 2016, which is available at 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 provider of comprehensive personal care services, which are provided in the home. Addus' services provide assistance with activities of daily living and adult day care. Addus' consumers are primarily persons 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. At December 31, 2016, Addus provided personal care services to over 33,000 consumers through 114 locations across 24 states. 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,


2016


2015


2016


2015

Net service revenues

$  103,656


$    84,760


$  400,688


$  336,815

Cost of service revenues

75,000


62,567


294,593


245,492

Gross profit

28,656


22,193


106,095


91,323


27.6%


26.2%


26.5%


27.1%

General and administrative expenses

19,260


17,966


84,213


70,582

Depreciation and amortization

1,703


1,212


6,647


4,717

Total operating expenses

20,963


19,178


90,860


75,299









Operating income from continuing operations

7,693


3,015


15,235


16,024

Interest expense

572


258


2,332


786

Interest income

(2,766)


(23)


(2,812)


(47)

Other income

(80)


-


(206)


-

Income from continuing operations before
   income taxes

9,967


2,780


15,921


15,285

Income tax (benefit) expense from
   continuing operations

2,496


(271)


3,994


3,932

Net income from continuing operations

7,471


3,051


11,927


11,353









Discontinued operations:








   Income from Home Health Business,

      net of tax

97


270


97


270









Earnings from discontinued operations

97


270


97


270









Net income

$      7,568


$      3,321


$    12,024


$    11,623









Diluted net income per share:








   Continuing Operations

$        0.65


$        0.27


$        1.05


$        1.02

   Discontinued Operations

$        0.01


$        0.02


$        0.01


$        0.02









Weighted average number of common
  shares outstanding:








      Diluted

11,494


11,220


11,349


11,189









Cash Flow Information:

For the Three Months
Ended December 31,


For the Year Ended
December 31,


2016


2015


2016


2015

Net cash (used in) provided by operating activities

$   (31,734)


$     (4,680)


$        (743)


$      4,106

Net cash (used in) investing activities

(121)


(5,012)


(21,738)


(10,724)

Net cash (used in) provided by financing activities

422


(1,081)


26,390


(2,641)

Net change in cash

(31,433)


(10,773)


3,909


(9,259)

Cash at the beginning of the period

39,446


14,877


4,104


13,363

Cash at the end of the period

$      8,013


$      4,104


$      8,013


$      4,104






















































ADDUS HOMECARE CORPORATION AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(Amounts in thousands)

(Unaudited)



December 31,


2016


2015

Assets




Current assets




Cash

$      8,013


$      4,104

Accounts receivable, net

116,999


84,959

Prepaid expenses and other current assets

5,998


4,858





Total current assets

131,010


93,921





Property and equipment, net

6,648


8,619





Other assets




Goodwill

73,906


68,844

Intangible assets, net

15,413


10,351

Investment in joint venture

900


900

Deferred tax assets, net

3,153


1,825

Other assets

-


1,337

Total other assets

93,372


83,257





Total assets

$  231,030


$  185,797





Liabilities and stockholders' equity










Current liabilities






Accounts payable



$      4,486


$      4,748

Accrued expenses



42,603


35,082

Current portion of long-term debt, net of debt issuance costs



2,531


1,109

Current portion of contingent earn-out obligation



-


1,250

Total current liabilities



49,620


42,189







Long-term debt, less current portion, net of debt issuance costs



22,482


1,882

Total long-term liabilities



22,482


1,882







Total liabilities



72,102


44,071







Total stockholders' equity



158,928


141,726







Total liabilities and stockholders' equity



$  231,030


$  185,797

 

 

ADDUS HOMECARE CORPORATION AND SUBSIDIARIES

Key Statistical and Financial Data

(Unaudited)



For the Three Months
Ended December 31,


For the Year Ended
December 31,


2016


2015


2016


2015

General:








Adjusted EBITDA (in thousands) (1)

$      9,284


$      5,394


$    32,094


$    23,627

States served at period end

-


-


24


22

Locations at period end

-


-


114


119

Employees at period end

-


-


23,070


21,395









Home & Community:








Average billable census - same store (2)

32,855


32,471


32,803


32,630

Average billable census - acquisitions (3)

1,242


126


1,141


126

Average billable census total

34,097


32,597


33,944


32,756

Billable hours (in thousands)

5,934


4,930


23,088


19,556

Average billable hours per census per month

58.0


50.4


56.7


49.8

Billable hours per business day

91,288


74,697


88,460


75,214

Revenues per billable hour

$      17.47


$      17.19


$      17.35


$      17.22









Percentage of Revenues by Payor:








State, local and other governmental programs

66.0


77.3


70.4


77.7

Managed care organizations

30.7


18.8


26.1


18.3

Private duty

2.2


2.9


2.4


3.0

Commercial

1.1


1.0


1.1


1.0









(1)   We define Adjusted EBITDA as net income before interest expense, other non-operating income, taxes,
       depreciation, amortization, M&A expenses, stock-based compensation expense, restructure charges and
       severance and other costs. 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, 2015 by 273 and the
       twelve months ended December 31, 2015 by 540.


(3)   The average billable census in acquisitions of 554 and 592 for the three months and twelve months ended
       December 31, 2015, respectively, was reclassified to average billable census - same stores for comparability
       purposes.

 

 

ADDUS HOMECARE CORPORATION AND SUBSIDIARIES

Reconciliation of Non-GAAP Financial Measures

(amounts in thousands, except per share data)

(Unaudited)



For the Three Months
Ended December 31,


For the Twelve Months
Ended December 31,


2016


2015


2016


2015

Reconciliation of Adjusted EBITDA to
     Net Income: (1)








Net income

$      7,568


$      3,321


$    12,024


$    11,623

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

(97)


(270)


(97)


(270)

Net income from continuing operations

7,471


3,051


11,927


11,353

Interest expense

572


258


2,332


786

Interest income

(2,766)


(23)


(2,812)


(47)

Other non-operating income

(80)


-


(206)


-

Income tax (benefit) expense from
     continuing operations

2,496


(271)


3,994


3,932

Depreciation and amortization

1,703


1,212


6,647


4,717

M&A expenses

337


455


1,122


1,013

Stock-based compensation expense

(192)


412


1,072


1,573

Restructuring charges

(457)


-


4,787


-

Severance and other costs

200


-


3,231


-

IRS accrual

-


300


-


300

Adjusted EBITDA

$      9,284


$      5,394


$    32,094


$    23,627









Reconciliation of Net Income per Diluted
     Share to Adjusted Net
Income per
     Diluted Share: (2)








Net income per diluted share

$        0.65


$        0.27


$        1.05


$        1.02

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


-


-

Interest income from State of Illinois

(0.17)


-


(0.17)


-

Normalization of effective tax rate

(0.04)


-


(0.06)


-

M&A expenses per diluted share

0.02


0.03


0.07


0.07

Restructuring charges per diluted share

(0.03)


-


0.30


-

Severance and other costs per diluted share

0.01


-


0.20


-

Stock-based compensation expense per
     diluted share

(0.01)


0.03


0.07


0.10

Adjusted net income diluted share

$        0.43


$        0.32


$        1.46


$        1.22


 

 

ADDUS HOMECARE CORPORATION AND SUBSIDIARIES

Reconciliation of Non-GAAP Financial Measures (Continued)

(amounts in thousands, except per share data)

(Unaudited)



For the Three Months
Ended December 31,


For the Twelve Months Ended December 31,


2016


2015


2016


2015

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








Net service revenues

$  103,656


$    84,760


$  400,688


$  336,815

Revenues associated with the closure of
     certain sites

-


(596)


(1,076)


(5,068)

Adjusted net service revenues

$  103,656


$    84,164


$  399,612


$  331,747





(1)   We define Adjusted EBITDA as net income before interest expense, other non-operating income, taxes,
       depreciation, amortization, M&A expenses, stock-based compensation expense, restructuring charges and
       severance and other costs. 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 net income per diluted share as net income per diluted share, adjusted for worker opportunity
       tax credits, the IRS accrual, workers compensation, interest income from the State of Illinois, M&A expenses,
       normalization of the effective tax rate, stock-based compensation expense, restructuring charges and severance
       and other costs.  Adjusted net income per diluted 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 net service revenues 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 service revenues or any other measure of financial performance calculated in accordance
       with GAAP.

 

 

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