EX-99 2 fdnh-ex99_201411146.htm EX-99.1

Exhibit 99.1

Foundation HealthCare Reports
Third Quarter 2014 Financial Results

 

OKLAHOMA CITY, OK--(October 29, 2014) – Foundation Healthcare, Inc. (OTC Markets: FDNH), which focuses on the development and management of surgical hospitals and related ancillary services, announced today the Company’s financial results for the third quarter which ended September 30, 2014.

 

Highlights include:

 

·

Revenue of $27.4 million for the quarter; a 16% increase over the third quarter of 2013.

·

Adjusted EBITDA of $3.5 million for the third quarter of 2014, compared to $2.8 million in the prior year quarter, a 26% increase.

·

Debt refinancing resulted in a 41% decrease in interest expense compared to the third quarter of 2013.

·

Net income attributable to Foundation HealthCare of $354,000 for the quarter is the best operating result since the Graymark transaction in mid 2013.

 

“This was a very good quarter for Foundation Healthcare as we recorded a 15% increase in revenue at our majority owned hospitals compared to the third quarter of 2013; with a corresponding 22% growth in EBITDA at these hospitals,” stated Stanton Nelson, CEO of Foundation Healthcare, Inc. “In an industry faced with many challenges, we believe these results validate the growth strategy and fiscal discipline implemented at Foundation within the last 18 months. In addition, I continue to be very pleased with the job our clinical teams are doing as we again produced outstanding clinical results at our hospitals.  Patient care is always our number one priority and with our patient satisfaction results again exceeding 95%, our clinical teams should be commended.”

 

“Looking forward, the fourth quarter is typically one of the best quarters of the year for Foundation, and given the third quarter results, we are optimistic about the continued growth in revenue and EBITDA at our majority-owned facilities,” noted Mr. Nelson.

 

Third Quarter 2014 Financial Results:

Net revenues in the third quarter of 2014 were $27.4 million, up from $23.6 million in the third quarter of 2013.  Our net revenues are composed of patient services, management fees from affiliates, and other revenue less our provision for doubtful accounts.  Patient services revenue (net of the provision for doubtful accounts) increased $3.6 million, or 17%, to $24.6 million during the three months ended September 30, 2014 as compared to $21.0 million in the same period of 2013.  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 2013 were $44.4 million which included a one-time goodwill impairment charge of $20.8 million resulting from the transaction with Graymark.  Operating expenses during the third quarter of 2013, excluding this impairment charge were $23.5 million compared to $26.1 million in the third quarter of 2014.  This $2.6 million differential is due primarily to increased purchased services cost directly related to the increased net revenues generated from ancillary services such as laboratory and pharmacy.

 

Our operations resulted in net income attributable to Foundation Healthcare common stock of $0.2 million during the third quarter of 2014, compared to a net loss of $16.6 million during the third quarter of 2013.

 

Adjusted EBITDA of $3.5 million for the 2014 third quarter compared to $2.8 million in the third quarter of 2013

 

As of September 30, 2014, cash and cash equivalents totaled $3.6 million, compared to $1.9 million at June 30, 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: Wednesday, October 29th

Time: 4:30 p.m. Eastern time

Dial-In Number: (877) 300-8521

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: 10054950.  

About Foundation Healthcare

Headquartered in Oklahoma City, Okla., Foundation Healthcare, Inc. (OTCQB: FDNH) focuses on the development and management of surgical hospitals and the inclusion of ancillary service lines. These additional service lines, such as hyperbarics, sleep labs, intraoperative 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 and stock compensation minus extraordinary gain, net of tax.  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, the Company’s ability to continue growth in revenue and EBITDA at its majority-owned facilities 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
Chief Executive Officer
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,

 

 

2014

 

 

2013

 

 

2014

 

 

2013

 

Income (loss) from continuing operations, net of taxes

$

1,682,098

 

 

$

(20,859,729

)

 

$

12,878

 

 

$

(21,122,458

)

EBTIDA adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Plus: Interest expense, net

 

324,700

 

 

 

552,763

 

 

 

1,329,932

 

 

 

1,575,535

 

Plus: Provision (benefit) for income taxes

 

 

 

 

961,105

 

 

 

(852,005

)

 

 

961,105

 

Plus: Depreciation and amortization

 

1,320,527

 

 

 

1,290,779

 

 

 

4,204,828

 

 

 

3,636,840

 

Total EBITDA adjustments

 

1,645,227

 

 

 

2,804,647

 

 

 

4,682,755

 

 

 

6,173,480

 

EBITDA from continuing operations

$

3,327,325

 

 

$

(18,055,082

)

 

$

4,695,633

 

 

$

(14,948,978

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBTIDA from continuing operations

$

3,327,325

 

 

$

(18,055,082

)

 

$

4,695,633

 

 

$

(14,948,978

)

Adjusted EBITDA adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Plus: Impairment of goodwill

 

 

 

 

20,847,608

 

 

 

 

 

 

20,847,608

 

Plus: Stock compensation expense

 

185,171

 

 

 

 

 

 

1,191,286

 

 

 

 

Total Adjusted EBITDA adjustments

 

185,171

 

 

 

20,847,608

 

 

 

1,191,286

 

 

 

20,847,608

 

Adjusted EBITDA

$

3,512,496

 

 

$

2,792,526

 

 

$

5,886,919

 

 

$

5,898,630

 

 

 


FOUNDATION HEALTHCARE, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

   

 

September 30,

 

 

December 31,

 

 

2014

 

 

2013

 

ASSETS

 

 

 

 

 

 

 

Cash and cash equivalents

$

3,567,951

 

 

$

4,212,076

 

Accounts receivable, net of allowances for doubtful

   accounts of $2,718,795 and $4,778,915, respectively

 

14,294,779

 

 

 

12,755,642

 

Receivables from affiliates

 

1,023,700

 

 

 

848,002

 

Supplies inventories

 

1,966,799

 

 

 

1,931,142

 

Prepaid and other current assets

 

6,091,756

 

 

 

4,302,885

 

Current assets from discontinued operations

 

174,964

 

 

 

518,629

 

Total current assets

 

27,119,949

 

 

 

24,568,376

 

Property and equipment, net

 

11,222,042

 

 

 

12,073,986

 

Equity method investments in affiliates

 

5,498,967

 

 

 

5,699,093

 

Intangible assets, net

 

9,595,917

 

 

 

11,138,621

 

Goodwill

 

973,927

 

 

 

973,927

 

Other assets

 

449,436

 

 

 

244,598

 

Other assets from discontinued operations

 

383,862

 

 

 

576,228

 

Total assets

$

55,244,100

 

 

$

55,274,829

 

LIABILITIES, PREFERRED NONCONTROLLING INTEREST

AND SHAREHOLDERS’ DEFICIT

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

Accounts payable

$

9,857,019

 

 

$

11,648,987

 

Accrued liabilities

 

8,024,252

 

 

 

3,914,915

 

Preferred noncontrolling interests dividends payable

 

197,358

 

 

 

195,411

 

Short term debt

 

253,530

 

 

 

5,664,827

 

Current portion of long-term debt

 

4,050,498

 

 

 

7,919,179

 

Other current liabilities

 

2,260,850

 

 

 

4,591,587

 

Current liabilities from discontinued operations

 

1,188,224

 

 

 

5,620,697

 

Total current liabilities

 

25,831,731

 

 

 

39,555,603

 

Long-term debt, net of current portion

 

23,843,579

 

 

 

10,031,732

 

Other liabilities

 

15,343,797

 

 

 

12,255,809

 

Other liabilities from discontinued operations

 

 

 

 

9,969

 

Total liabilities

 

65,019,107

 

 

 

61,853,113

 

Preferred noncontrolling interest

 

8,700,000

 

 

 

8,700,000

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

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;

    171,373,381 and 163,834,886 issued and outstanding, respectively

 

17,260

 

 

 

16,383

 

Paid-in capital

 

19,117,730

 

 

 

18,241,756

 

Accumulated deficit

 

(38,419,772

)

 

 

(35,171,315

)

Total Foundation Healthcare shareholders’ deficit

 

(19,284,782

)

 

 

(16,913,176

)

Noncontrolling interests

 

809,775

 

 

 

1,634,892

 

Total deficit

 

(18,475,007

)

 

 

(15,278,284

)

Total liabilities, preferred noncontrolling interest and shareholders’ deficit

$

55,244,100

 

 

$

55,274,829

 

 

 


FOUNDATION HEALTHCARE, INC.

Condensed Consolidated Statements of Operations

For the Three Months Ended September 30, 2014 and 2013

(Unaudited)

 

 

2014

 

 

2013

 

Net Revenues:

 

 

 

 

 

 

 

Patient services

$

26,183,803

 

 

$

21,724,423

 

Provision for doubtful accounts

 

(1,562,147

)

 

 

(682,319

)

Net patient services revenue

 

24,621,656

 

 

 

21,042,104

 

Management fees from affiliates

 

1,352,909

 

 

 

1,460,163

 

Other revenue

 

1,450,021

 

 

 

1,048,381

 

Revenues

 

27,424,586

 

 

 

23,550,648

 

Equity in earnings of affiliates

 

616,959

 

 

 

1,448,898

 

Operating Expenses:

 

 

 

 

 

 

 

Salaries and benefits

 

7,339,528

 

 

 

6,974,734

 

Supplies

 

6,748,785

 

 

 

6,659,330

 

Other operating expenses

 

10,655,907

 

 

 

8,609,650

 

Impairment of goodwill

 

 

 

 

20,847,608

 

Depreciation and amortization

 

1,320,527

 

 

 

1,290,779

 

Total operating expenses

 

26,064,747

 

 

 

44,382,101

 

Other Income (Expense):

 

 

 

 

 

 

 

Interest expense, net

 

(324,700

)

 

 

(552,763

)

Other income (expense)

 

30,000

 

 

 

36,694

 

Net other (expense)

 

(294,700

)

 

 

(516,069

)

Income (loss) from continuing operations, before taxes

 

1,682,098

 

 

 

(19,898,624

)

Provision for income taxes

 

 

 

 

(961,105

)

Income (loss) from continuing operations, net of taxes

 

1,682,098

 

 

 

(20,859,729

)

Loss from discontinued operations, net of tax

 

(119,785

)

 

 

(196,705

)

Extraordinary gain, net of tax, attributable to Foundation Healthcare

 

 

 

 

4,872,746

 

Extraordinary gain, net of tax, attributable to noncontrolling interests

 

 

 

 

2,094,856

 

Net income (loss)

 

1,562,313

 

 

 

(14,088,832

)

Less:  Net income attributable to noncontrolling interests

 

1,208,648

 

 

 

2,402,532

 

Net income (loss) attributable to Foundation Healthcare

 

353,665

 

 

 

(16,491,364

)

Preferred noncontrolling interests dividends

 

(199,502

)

 

 

(121,414

)

Net income (loss) attributable to Foundation Healthcare common stock

$

154,163

 

 

$

(16,612,778

)

Earnings per common share (basic and diluted):

 

 

 

 

 

 

 

Net income (loss) attributable to continuing operations

    attributable to Foundation Healthcare common stock

$

0.00

 

 

$

(0.13

)

Loss from discontinued operations, net of tax

 

0.00

 

 

 

0.00

 

Extraordinary gain, net of tax, attributable to Foundation Healthcare

 

0.00

 

 

 

0.03

 

Net income (loss) per share, attributable to

    Foundation Healthcare common stock

$

0.00

 

 

$

(0.10

)

Weighted average number of common and diluted shares outstanding

 

171,824,731

 

 

 

162,703,399

 

Pro forma income information (Note 3):

 

 

 

 

 

 

 

Pro forma provision for income taxes

 

 

 

 

$

(1,008,978

)

Pro forma net income attributable to noncontrolling interests

 

 

 

 

$

2,401,087

 

Pro forma net income attributable to

    Foundation Healthcare common stock

 

 

 

 

$

(16,537,792

)

Pro forma basic and diluted net income per share

 

 

 

 

$

(0.10

)

 


FOUNDATION HEALTHCARE, INC.

Condensed Consolidated Statements of Operations

For the Nine Months Ended September 30, 2014 and 2013

(Unaudited)

 

 

2014

 

 

2013

 

Net Revenues:

 

 

 

 

 

 

 

Patient services

$

65,607,006

 

 

$

56,211,160

 

Provision for doubtful accounts

 

(2,799,237

)

 

 

(2,409,733

)

Net patient services revenue

 

62,807,769

 

 

 

53,801,427

 

Management fees from affiliates

 

4,056,981

 

 

 

4,986,012

 

Other revenue

 

4,271,194

 

 

 

3,845,254

 

Revenues

 

71,135,944

 

 

 

62,632,693

 

Equity in earnings of affiliates

 

2,039,811

 

 

 

4,502,759

 

Operating Expenses:

 

 

 

 

 

 

 

Salaries and benefits

 

22,317,768

 

 

 

19,770,112

 

Supplies

 

17,383,162

 

 

 

16,993,555

 

Other operating expenses

 

28,810,032

 

 

 

24,513,007

 

Impairment of goodwill

 

 

 

 

20,847,608

 

Depreciation and amortization

 

4,204,828

 

 

 

3,636,840

 

Total operating expenses

 

72,715,790

 

 

 

85,761,122

 

Other Income (Expense):

 

 

 

 

 

 

 

Interest expense, net

 

(1,329,932

)

 

 

(1,575,535

)

Other income (expense)

 

30,840

 

 

 

39,852

 

Net other (expense)

 

(1,299,092

)

 

 

(1,535,683

)

Loss from continuing operations, before taxes

 

(839,127

)

 

 

(20,161,353

)

(Provision) benefit for income taxes

 

852,005

 

 

 

(961,105

)

Income (loss) from continuing operations, net of taxes

 

12,878

 

 

 

(21,122,458

)

Loss from discontinued operations, net of tax

 

(620,823

)

 

 

(196,705

)

Extraordinary gain, net of taxes, attributable to Foundation Healthcare

 

 

 

 

4,872,746

 

Extraordinary gain, net of taxes, attributable to noncontrolling interests

 

 

 

 

2,094,856

 

Net loss

 

(607,945

)

 

 

(14,351,561

)

Less:  Net income attributable to noncontrolling interests

 

2,054,872

 

 

 

1,522,445

 

Net loss attributable to Foundation Healthcare

 

(2,662,817

)

 

 

(15,874,006

)

Preferred noncontrolling interests dividends

 

(585,640

)

 

 

(720,621

)

Net loss attributable to Foundation Healthcare common stock

$

(3,248,457

)

 

$

(16,594,627

)

Earnings per common share (basic and diluted):

 

 

 

 

 

 

 

Net loss attributable to continuing operations

    attributable to Foundation Healthcare common stock

$

(0.02

)

 

$

(0.13

)

Loss from discontinued operations, net of tax

 

0.00

 

 

 

0.00

 

Extraordinary gain, net of tax, attributable to Foundation Healthcare

 

0.00

 

 

 

0.03

 

Net loss per share, attributable to

    Foundation Healthcare common stock

$

(0.02

)

 

$

(0.10

)

Weighted average number of common and diluted shares outstanding

 

170,163,181

 

 

 

162,703,399

 

Pro forma income information (Note 3):

 

 

 

 

 

 

 

Pro forma provision for income taxes

 

 

 

 

$

(1,240,455

)

Pro forma net income attributable to noncontroling interests

 

 

 

 

$

1,170,410

 

Pro forma net income attributable to

    Foundation Healthcare common stock

 

 

 

 

$

(15,801,321

)

Pro forma basic and diluted net income per share

 

 

 

 

$

(0.10

)

 


FOUNDATION HEALTHCARE, INC.

Condensed Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2014 and 2013

(Unaudited)

 

 

2014

 

 

2013

 

Operating activities:

 

 

 

 

 

 

 

Net loss

$

(607,945

)

 

$

(14,351,561

)

Less:  Loss from discontinued operations, net of tax

 

(620,823

)

 

 

(196,705

)

Less:  Extraordinary gain, net of tax

 

 

 

 

6,967,602

 

Income (loss) from continuing operations

 

12,878

 

 

 

(21,122,458

)

Adjustments to reconcile loss from continuing operations

  to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

4,204,828

 

 

 

3,636,840

 

Impairment of goodwill

 

 

 

 

20,847,608

 

Stock-based compensation, net of cashless vesting

 

876,851

 

 

 

41,922

 

Provision for doubtful accounts

 

2,799,237

 

 

 

2,409,733

 

Equity in earnings of affiliates

 

(2,039,811

)

 

 

(4,502,759

)

Changes in assets and liabilities, net of acquisitions and extraordinary items

 

 

 

 

 

 

 

Accounts receivable, net of provision for doubtful accounts

 

(4,338,374

)

 

 

(6,360,666

)

Receivables from affiliates

 

(175,698

)

 

 

202,017

 

Supplies Inventories

 

(35,657

)

 

 

96,593

 

Prepaid and other current assets

 

(1,788,871

)

 

 

(684,284

)

Other assets

 

(204,838

)

 

 

400,415

 

Accounts payable

 

(1,791,968

)

 

 

202,838

 

Accrued liabilities

 

3,909,337

 

 

 

6,801,418

 

Other current liabilities

 

(2,130,737

)

 

 

1,016,176

 

Other liabilities

 

3,087,988

 

 

 

2,149,353

 

Net cash provided by operating activities from continuing operations

 

2,385,165

 

 

 

5,134,746

 

Net cash used in operating activities from discontinued operations

 

(454,338

)

 

 

(449,993

)

Net cash provided by operating activities

 

1,930,827

 

 

 

4,684,753

 

Investing activities:

 

 

 

 

 

 

 

Cash received in business acquisition

 

 

 

 

68,170

 

Purchase of property and equipment

 

(1,810,180

)

 

 

(3,478,983

)

Disposal of property and equipment

 

 

 

 

184,313

 

Sale of equity investment in affilliates

 

178,000

 

 

 

 

Cash received in extraordinary gain transaction

 

 

 

 

463,678

 

Distributions from affiliates

 

2,061,937

 

 

 

4,522,247

 

Net cash provided by investing activities from continuing operations

 

429,757

 

 

 

1,759,425

 

Net cash provided by investing activities from discontinued operations

 

 

 

 

200,000

 

Net cash provided by investing activities

 

429,757

 

 

 

1,959,425

 

Financing activities:

 

 

 

 

 

 

 

Debt proceeds

 

29,092,552

 

 

 

12,190,184

 

Debt payments

 

(24,560,683

)

 

 

(5,358,842

)

Common stock proceeds

 

 

 

 

375,000

 

Preferred noncontrolling interests proceeds

 

 

 

 

7,500,000

 

Preferred noncontrolling interests dividend

 

(583,693

)

 

 

(919,715

)

Redemption of preferred noncontrolling interests

 

 

 

 

(13,509,195

)

Distributions to noncontrolling interests

 

(2,879,989

)

 

 

(94,492

)

Distributions to member

 

 

 

 

(766,118

)

Net cash provided by financing activities from continuing operations

 

1,068,187

 

 

 

(583,178

)

Net cash used in financing activities from discontinued operations

 

(4,072,896

)

 

 

(294,039

)

Net cash used in financing activities

 

(3,004,709

)

 

 

(877,217

)

Net change in cash and cash equivalents

 

(644,125

)

 

 

5,766,961

 

Cash and cash equivalents at beginning of period

 

4,212,076

 

 

 

2,524,417

 

Cash and cash equivalents at end of period

$

3,567,951

 

 

$

8,291,378

 

Cash Paid for Interest and Income Taxes:

 

 

 

 

 

 

 

Interest expense

$

1,604,256

 

 

$

1,722,012

 

Interest expense, discontinued operations

$

168,733

 

 

$

39,408

 

Income taxes, continuing operations

$

3,255,623

 

 

$