Arcadia Resources, Inc. (OTC Markets: KADR), a leading provider of innovative consumer health care services under the Arcadia HealthCare? brand, today announced fiscal 2012 second quarter net revenues from continuing operations of $20.4 million and a net loss from continuing operations of $2.8 million, or $0.02 per share, which compares to net revenue from continuing operation of $20.9 million and a net loss from continuing operations of $1.5 million, or $0.01 per share, for the same period in fiscal 2011.
As previously reported and as further discussed below, the Company is in the process of selling its DailyMedTM Pharmacy segment. The Pharmacy segment has therefore been reflected as a discontinued operation in the Company's financial statements for fiscal 2012 and the prior year.
The Company has today filed its Quarterly Report on Form 10-Q with the Securities and Exchange Commission. The statements in this release should be read in conjunction with the Company's disclosures in its Form 10-Q.
Fiscal Second Quarter 2012 Results
The Company's Services segment, which includes Arcadia's home healthcare and medical staffing business, reported net revenues of $20.4 million for the 2012 fiscal second quarter, compared with $20.9 million the same period one year ago. Within the Services segment, home health care revenues increased by $0.4 million, or 2.5%, to $17.2 million from $16.8 million in the same period last year. Per diem medical staffing revenue also increased during the quarter from $2.7 million in the second quarter of fiscal 2011 to $3.0 million in the current year quarter. These increases were offset by a significant decline in travel nurse staffing revenue to $0.3 million in the current quarter, compared with $1.4 million during the second quarter of fiscal 2011 due to the loss of a large correctional facility customer. Gross margin within the Services segment was 29.6% compared with 30.0% in the first quarter a year ago. As previously reported and discussed further below, the Company is considering its options with respect to the Services segment, which may include sale or retention of this business.
Pharmacy segment revenues increased 17.6% to $4.6 million for the second quarter of fiscal 2012, compared to $3.9 million in revenues for the second quarter of fiscal 2011. Pharmacy gross margin was 15.5% in the second quarter of fiscal 2012 compared with 16.2% in the prior year period.
Second quarter results include a one-time charge of $0.6 million in connection with the settlement of a previously disclosed class action lawsuit in the State of California. One of the Company's subsidiaries has entered into a settlement agreement which is subject to the approval of the United States District Court for the Northern District of California.
Other Second Quarter Events
Certain of the events below have been previously disclosed on the Company's periodic filings with the Securities and Exchange Commission, including Current Reports on Form 8-K filed on September 2, 2011; September 19, 2011; October 5, 2011; October 12, 2011 and October 19, 2011.
During the second quarter certain of the Company's Services segment subsidiaries received notice from Comerica Bank that the borrowers under its credit facility were not in compliance with the subordinated debt covenant contained in the credit agreement as of July 31, 2011. Comerica continues to provide financing under the credit agreement and the parties are negotiating the terms of a forbearance agreement. This credit facility provides working capital financing to the Company's Services segment.
The Company also received notice from H.D. Smith Wholesale Drug Co. that the Company's PrairieStone Pharmacy, LLC subsidiary is in default under the line of credit facility used to finance the Company's DailyMed Pharmacy business. H.D. Smith, the Company and PrairieStone have entered into a forbearance agreement pursuant to which the Company has agreed to sell the Pharmacy segment and use the proceeds of the sale to pay H.D. Smith. In the event the Pharmacy segment is not sold, the Company will wind-down the Pharmacy segment business. The Company does not anticipate that the proceeds from a sale will be sufficient to satisfy the $5.0 million obligation owed to H.D. Smith as of September 30, 2011. H.D. Smith has agreed to accept the sale proceeds in full and complete satisfaction of its claims provided the sale proceeds are not less than $2.0 million.
Upon the sale or wind-down of the Company's Pharmacy segment, the Company's sole remaining operating business will be its Services segment. The Company continues to pursue the sale of its Services segment. In view of recent events, the Company is considering its options with respect to this business, which may include sale or retention of the business.
The Company has $30.0 million of unsecured debt that matures in April 2012 and, based upon information presently available, the Company does not anticipate that the proceeds from the business segment sales will be sufficient to satisfy these debt obligations.
The Company voluntarily delisted from the NYSE Amex effective September 6, 2011. Since that time, the Company's securities have been traded on the OTCQB Marketplace.
Capital Resources and Liquidity
At September 30, 2011, the Company had total cash plus line-of-credit availability of $1.4 million, compared to $2.5 million the same period a year ago.
Arcadia reported negative cash flow from total operations of $3.0 million during the six-month period ended September 30, 2011 compared to negative $8.3 million for the same period a year ago.
Since September 30, Comerica Bank has agreed to release $1.0 million of previously restricted cash to the Company to provide additional liquidity and funding for the Company's operations.
About Arcadia HealthCare
Arcadia HealthCare is a service mark of Arcadia Resources, Inc. (OTC Markets: KADR) and is a leading provider of home care, medical staffing and pharmacy services under its proprietary DailyMed program. The Company, headquartered in Indianapolis, Indiana, has 65 locations in 18 states. Arcadia HealthCare's comprehensive solutions and business strategies support the Company's vision of "Keeping People at Home and Healthier Longer."
Forward Looking Statements
Any statements contained in this release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21A of the Securities Exchange Act of 1934, as amended and otherwise within the meaning of court opinions construing such forward-looking statements. The Company claims all safe harbor and other legal protections provided to it by law for all of its forward-looking statements. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, estimates, uncertainties and other factors, which could cause actual financial or operating results, performances or achievements expressed or implied by such forward-looking statements not to occur or be realized, including our estimates of consumer demand for our services and products, required capital investment, competition, and other factors. Actual events and results may differ materially from those expressed, implied or forecasted in forward-looking statements due to a number of factors. Important factors that could cause actual results, developments and business decisions to differ materially from forward-looking statements are described in the Company's filings with the Securities and Exchange Commission from time to time, including the section entitled "Risk Factors" and elsewhere in the Company's most recent Annual Report on Form 10-K and subsequent periodic reports. Among the factors that could cause future results to differ materially from those provided in our press release are: (i) we cannot be certain or our ability to generate sufficient cash flow to meet our obligations on a timely basis; (ii) we may be required to make significant business investments that do not produce offsetting increases in revenue; (iii) we may be unable to execute and implement our growth strategy; (iv) we may be unable to achieve our targeted performance goals for our business segments; and (v) other unforeseen events may impact our business. The forward-looking statements speak only as of the date hereof. The Company disclaims any obligation to update or alter its forward-looking statements, except as may be required by law.
FINANCIAL TABLES FOLLOW
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ARCADIA RESOURCES, INC.  CONSOLIDATED BALANCE SHEETS  (in thousands) | ||||||||||||
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September 30, | March 31, | |||||||||||
2011 | 2011 | |||||||||||
ASSETS | (unaudited) | |||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | - | $ | 2,136 | ||||||||
Accounts receivable, net of allowance of $1,558 and $1,499, respectively | 10,851 | 10,620 | ||||||||||
Prepaid expenses and other current assets | 786 | 965 | ||||||||||
Restricted cash | 1,000 | - | ||||||||||
Current assets of discontinued operations | Â | 1,967 | Â | Â | 2,714 | Â | ||||||
Total current assets | 14,604 | 16,435 | ||||||||||
Property and equipment, net | 218 | 313 | ||||||||||
Acquired intangible assets, net | 6,840 | 7,098 | ||||||||||
Goodwill | 1,073 | - | ||||||||||
Other assets | 101 | 345 | ||||||||||
Restricted cash | - | 1,000 | ||||||||||
Assets of discontinued operations | Â | 861 | Â | Â | 940 | Â | ||||||
Total assets | $ | 23,697 | Â | $ | 26,131 | Â | ||||||
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LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||||||
Current liabilities: | ||||||||||||
Outstanding checks in excess of deposits | $ | 649 | $ | - | ||||||||
Accounts payable | 800 | 715 | ||||||||||
Line of credit | 7,789 | - | ||||||||||
Accrued expenses: | ||||||||||||
Compensation and related taxes | 1,965 | 2,562 | ||||||||||
Interest | 70 | 35 | ||||||||||
Health insurance | 724 | 756 | ||||||||||
Other | 1,362 | 789 | ||||||||||
Fair value of warrant liability | 29 | 285 | ||||||||||
Payable to affiliated agencies | 716 | 616 | ||||||||||
Long-term obligations, current portion | 29,812 | - | ||||||||||
Capital lease obligations, current portion | - | 4 | ||||||||||
Current liabilities of discontinued operations | Â | 5,605 | Â | Â | 1,114 | Â | ||||||
Total current liabilities | 49,521 | 6,876 | ||||||||||
Line of credit | - | 7,129 | ||||||||||
Long-term obligations, less current portion | - | 27,807 | ||||||||||
Liabilities of discontinued operations | Â | - | Â | Â | 4,375 | Â | ||||||
Total liabilities | Â | 49,521 | Â | Â | 46,187 | Â | ||||||
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Commitments and contingencies | ||||||||||||
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STOCKHOLDERS' DEFICIT | ||||||||||||
Preferred stock, $.001 par value, 5,000,000 shares authorized, none outstanding | - | - | ||||||||||
Common stock, $.001 par value, 300,000,000 shares authorized; 193,340,669 shares and 193,162,544 shares issued, respectively | 194 | 193 | ||||||||||
Additional paid-in capital | 151,653 | 151,436 | ||||||||||
Accumulated deficit | Â | (177,671 | ) | Â | (171,685 | ) | ||||||
Total stockholders' deficit | Â | (25,824 | ) | Â | (20,056 | ) | ||||||
Total liabilities and stockholders' deficit | $ | 23,697 | Â | $ | 26,131 | Â | ||||||
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ARCADIA RESOURCES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except for per share amounts) | ||||||||||||||||||||
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Three Month Period Ended | Six Month Period Ended | |||||||||||||||||||
(Unaudited) | (Unaudited) | |||||||||||||||||||
2011 | Â | 2010 | 2011 | Â | 2010 | |||||||||||||||
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Revenues, net | $ | 20,427 | $ | 20,931 | $ | 40,860 | $ | 41,295 | ||||||||||||
Cost of revenues | Â | 14,385 | Â | Â | 14,651 | Â | Â | 28,750 | Â | Â | 28,913 | Â | ||||||||
Gross profit | 6,042 | 6,280 | 12,110 | 12,382 | ||||||||||||||||
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Selling, general and administrative | 7,715 | 7,293 | 14,524 | 14,623 | ||||||||||||||||
Depreciation and amortization | Â | 158 | Â | Â | 252 | Â | Â | 384 | Â | Â | 498 | Â | ||||||||
Total operating expenses | 7,873 | 7,545 | 14,908 | 15,121 | ||||||||||||||||
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Operating loss | (1,831 | ) | (1,265 | ) | (2,798 | ) | (2,739 | ) | ||||||||||||
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Other expenses: | ||||||||||||||||||||
Interest expense, net | 1,051 | 980 | 2,076 | 1,823 | ||||||||||||||||
Change in fair value of warrant liability | Â | (107 | ) | Â | (779 | ) | Â | (257 | ) | Â | (137 | ) | ||||||||
Total other expenses | Â | 944 | Â | Â | 201 | Â | Â | 1,819 | Â | Â | 1,686 | Â | ||||||||
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Loss from continuing operations before income taxes | (2,775 | ) | (1,466 | ) | (4,617 | ) | (4,425 | ) | ||||||||||||
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Income tax expense | Â | 25 | Â | Â | 40 | Â | Â | 41 | Â | Â | 73 | Â | ||||||||
Loss from continuing operations | (2,800 | ) | (1,506 | ) | (4,658 | ) | (4,498 | ) | ||||||||||||
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Discontinued operations: | ||||||||||||||||||||
Loss from discontinued operations | (931 | ) | (1,649 | ) | (2,055 | ) | (3,485 | ) | ||||||||||||
Net gain on disposal | Â | 540 | Â | Â | 259 | Â | Â | 727 | Â | Â | 1,046 | Â | ||||||||
 | (391 | ) |  | (1,390 | ) |  | (1,328 | ) |  | (2,439 | ) | |||||||||
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NET LOSS | $ | (3,191 | ) | $ | (2,896 | ) | $ | (5,986 | ) | $ | (6,937 | ) | ||||||||
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Weighted average number of common shares outstanding | 193,331 | 177,295 | 193,284 | 177,267 | ||||||||||||||||
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Basic and diluted net income (loss) per share: | ||||||||||||||||||||
Loss from continuing operations | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.03 | ) | ||||||||
Loss from discontinued operations | Â | - | Â | Â | (0.01 | ) | Â | (0.01 | ) | Â | (0.01 | ) | ||||||||
Net loss per share | $ | (0.02 | ) | $ | (0.02 | ) | $ | (0.03 | ) | $ | (0.04 | ) | ||||||||
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ARCADIA RESOURCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOW (in thousands) | ||||||||||||
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Six-Month Period Ended | ||||||||||||
September 30, | ||||||||||||
(Unaudited) | ||||||||||||
2011 | Â | Â | 2010 | |||||||||
Operating activities | ||||||||||||
Net loss for the period | $ | (5,986 | ) | $ | (6,937 | ) | ||||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||
Provision for doubtful accounts | 395 | 351 | ||||||||||
Depreciation of property and equipment | 268 | 348 | ||||||||||
Amortization of intangible assets | 258 | 286 | ||||||||||
Gain on business disposals | (727 | ) | (1,046 | ) | ||||||||
Non-cash interest expense | 1,412 | 1,392 | ||||||||||
Amortization of deferred financing costs and debt discounts | 201 | 190 | ||||||||||
Stock-based compensation expense | 218 | 753 | ||||||||||
Change in fair value of warrant liability | (257 | ) | (137 | ) | ||||||||
Changes in operating assets and liabilities, net of acquisitions: | ||||||||||||
Accounts receivable | (351 | ) | (260 | ) | ||||||||
Inventories | 390 | (437 | ) | |||||||||
Other assets | 261 | (413 | ) | |||||||||
Accounts payable | 765 | (1,274 | ) | |||||||||
Accrued expenses | (23 | ) | (536 | ) | ||||||||
Due to affiliated agencies | Â | 119 | Â | Â | (564 | ) | ||||||
Net cash used in operating activities | Â | (3,057 | ) | Â | (8,284 | ) | ||||||
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Investing activities | ||||||||||||
Business acquisitions, net of cash acquired | (358 | ) | (106 | ) | ||||||||
Proceeds from business disposal | 727 | 1,046 | ||||||||||
Purchases of property and equipment | Â | (93 | ) | Â | (411 | ) | ||||||
Net cash provided by investing activities | Â | 276 | Â | Â | 529 | Â | ||||||
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Financing activities | ||||||||||||
Net borrowings on lines of credit | 659 | 4,798 | ||||||||||
Payments on notes payable and capital lease obligations | (14 | ) | (784 | ) | ||||||||
Proceeds from exercise of stock options | Â | - | Â | Â | 1 | Â | ||||||
Net cash provided by (used in) financing activities | Â | 645 | Â | Â | 4,015 | Â | ||||||
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Net change in cash and cash equivalents | (2,136 | ) | (3,740 | ) | ||||||||
Cash and cash equivalents, beginning of period | Â | 2,136 | Â | Â | 5,444 | Â | ||||||
Cash and cash equivalents, end of period | $ | - | Â | $ | 1,704 | Â | ||||||
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Contacts:
Arcadia HealthCare
Matthew Middendorf, 317-569-8234 x 1022
Chief
Financial Officer
mmiddendorf@arcadiahealthcare.com