Foundation HealthCare Reports Third Quarter Financial Results

OKLAHOMA CITY, 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.

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.