At the end of the quarter, Advocat had negative working capital of $61.5 million. $55.5 million of debt is classified as current because the company is not in compliance with its debt covenants and other cross-default provisions. Advocat has $33.7 million of debt that must be repaid or refinanced in the next 12 months.
On April 30, 2002, Advocat ended 13 leases with the former principal owners or affiliates of Pierce Management Group. The company will take an $800,000 write-down in the second quarter of 2002, representing the remaining net book value of these facilities. Advocat will end the leases on two more assisted living facilities with affiliates of Pierce on June 1, 2002.
Advocat’s revenue rates increased, but that was offset by a 6.5% decline in resident days. Management fees declined to $679,000 compared with $911,000 in the first quarter of 2001.
Total expenses rose 6.8% to $54.5 million. Operating expenses represented 86.0% of patient and resident revenues for the latest quarter compared with 81.5% in the first quarter of 2001. The increased costs were due primarily to increased professional liability costs and higher salaries and wages. Professional liability costs rose 136.3% to $4.8 million in the first quarter of 2002 compared with $2.0 million in the same quarter of 2001.
Advocat shares settled Wednesday at 12 cents.
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