KAD Arcadia Resources Common Stock

Arcadia Resources, Inc. (NYSE Amex: KAD), a leading provider of innovative consumer health care services under the Arcadia HealthCare℠ brand, today announced fiscal 2011 fourth quarter net revenues of $25.4 million and a net loss of $5.1 million, or $0.03 per share, which compares to net revenue of $24.1 million and a net loss of $19.2 million, or $0.12 per share, for the same period in fiscal 2010. For the full fiscal year ended March 31, 2011, the Company reported net revenues of $100.0 million and a net loss of $14.4 million, or $0.08 per share, which compares to net revenues of $98.1 million and a net loss of $31.1 million, or $0.19 per share, for fiscal 2010.

Fourth-Quarter and Recent Highlights

• Fiscal fourth quarter Pharmacy revenues increase 31% over the prior year period
• EBITDA loss from continuing operations narrowed to $1.9 million in fourth quarter compared to $4.1 million in the prior year period
• DailyMedTM agreement with WellPoint extended to 2015
• Company plans to sell its Services segment

For the fourth quarter of fiscal 2011, Arcadia reported net revenues of $25.4 million, compared with net revenues of $24.1 million for the same period last year. Earnings before interest, taxes, depreciation and amortization (EBITDA) from continuing operations were a negative $1.9 million during the fourth quarter, an improvement of 54% over the prior year quarter of negative $4.1 million.

Arcadia reported a net loss from continuing operations of $5.0 million, or $0.03 per share, in the fourth quarter of fiscal 2011, compared to a net loss from continuing operations of $19.1 million, or $0.12 per share, in the same period in fiscal 2010. The consolidated fiscal 2011 fourth quarter net loss, including discontinued operations, was $5.1 million, or $0.03, compared to a net loss of $19.2 million, or $0.12 in the fiscal fourth quarter in 2010. These consolidated results include one-time impairment charges of $2.5 million and $14.6 million taken in the fourth quarters of fiscal 2011 and fiscal 2010, respectively.

The Company said that its agreement with WellPoint has been extended for two additional years through 2015. “We are pleased to extend our DailyMed program with the WellPoint State-Sponsored Business as we work together to improve patient outcomes and reduce total medical spend for high-risk patients,” said Marvin R. Richardson, President & Chief Executive Officer.

The Company also said that as part of its on-going restructuring initiatives its Board of Directors has initiated a plan to sell its Services segment, which includes its Home Care and Medical Staffing business. The Company said it is actively engaged in the sale process which it expects to be completed during the second quarter of this fiscal year, subject to shareholder approval. “The sale of our Services segment is a further step in the financial restructuring and strategic repositioning of Arcadia,” Richardson commented. “This will allow the Company to focus its management and financial resources on expanding our growing DailyMed business.”

“As discussed in our third quarter earnings release and investor conference call, we are keenly aware of the need to both address our long-term debt maturing in April and provide the resources needed to profitably grow our Pharmacy business. Our focus during the fourth quarter has been on the restructuring actions needed to provide a solid foundation for future growth. We have engaged Lazard Middle Market LLC to advise the Board and assist us with these actions. The Company has identified several key steps in this restructuring plan, including the sale of its Services segment and additional capital investment in the pharmacy segment, and we are actively working to implement them,” said Richardson.

Fiscal 2011 Fourth Quarter Results

Arcadia reported $25.4 million in revenue from continuing operations during the quarter, up from $24.1 million during the same period a year ago. The Company’s gross margin from continuing operations was 27.3% during the fourth quarter, which is consistent with the same period a year ago.

Pharmacy: Pharmacy segment revenues increased 31.0% to $4.5 million for the fourth quarter of fiscal 2011, compared to $3.5 million in revenues for the fourth quarter of fiscal 2010. This revenue reflects the treatment of the Minnesota pharmacy, which was closed during the quarter, as a discontinued operation. Pharmacy revenues were largely driven by the Company’s DailyMed program and the continued roll-out of the program to high-risk Medicaid members in Virginia, California, Kansas and South Carolina.

Pharmacy gross margin increased to 16.3% in the fourth quarter of fiscal 2011 from 11.0% in the fourth quarter of fiscal 2010. The year-over-year gross margin improvement was a result of several factors, including improved purchasing costs from the Company’s wholesale drug vendor and a higher level of service revenue compared with the prior year.

Services: The Company’s Services segment, which includes Arcadia’s home healthcare and medical staffing business, reported net revenues of $20.9 million for the 2011 fiscal fourth quarter compared to net revenues of $20.7 million for the fourth quarter a year ago. Within the Services segment, home health care revenues increased by $0.4 million, or 2.8%, to $16.9 million from $16.5 million in the same period last year. Per diem medical staffing revenue also increased during the quarter from $2.7 million in the fourth quarter of fiscal 2010 to $2.9 million in the current year quarter. These increases were partially offset by a 29.7% decline in travel nurse staffing revenue to $1.1 million in the current quarter, compared with $1.6 million during the fourth quarter of fiscal 2010 due to the loss of a large correctional facility customer. Gross margin within the Services segment was 29.7% compared with 30.0% in the fourth quarter a year ago.

Fiscal 2011 Annual Results

For the year ended March 31, 2011, net revenues from continuing operations increased to $100.0 million from $98.1 million in the prior year. Pharmacy segment net revenue of $16.7 million represented a 46.0% increase over the prior year. This increase in Pharmacy segment revenue was partially offset by a $3.3 million, or 3.8%, decline in Services revenue from $86.6 million in fiscal 2010 to $83.3 million in fiscal 2011.

Gross profit decreased by $0.4 million to $27.4 million, or 27.4% of net revenue, for fiscal year 2011, from $27.8 million, or 28.4% of net revenue, for the fiscal year 2010. Gross margin in the Home Care and Medical Staffing business was 30.0% for fiscal 2011 compared with 30.5% for fiscal 2010. Gross profit in the Company’s Pharmacy segment increased to $2.4 million for fiscal year 2011, compared to $1.4 million in fiscal year 2010. Pharmacy gross margins increased to 14.5% in fiscal 2011 compared to 12.4% in fiscal 2010.

EBITDA from continuing operations was a negative $9.0 million for fiscal 2011, compared with a negative $10.7 million in fiscal 2010.

The consolidated net loss from continuing operations decreased to $15.3 million, or $0.08 per share, in fiscal 2011 from $29.0 million, or $0.17 per share in fiscal 2010. The decrease in the loss was primarily due to improved operating results and lower corporate selling, general and administrative expense, as well as higher impairment charges taken in fiscal 2010 compared with fiscal 2011. The consolidated net loss, including discontinued operations, decreased to $14.4 million, or $0.08 per share, in fiscal 2011, from $31.1 million, or $0.19 per share, in fiscal 2010.

Capital Resources and Liquidity

At March 31, 2011, the Company had total cash plus line-of-credit availability of $4.2 million.

Arcadia reported negative cash flow from total operations of $11.2 million during fiscal 2011, compared to negative $5.9 million for fiscal 2010. The increase in negative operating cash flow during fiscal 2011 was primarily related to increases in working capital. The $6.9 million increase in working capital was the result of collections of receivables from previously discontinued operations during the prior year as well as a decrease in payables compared to the prior year.

The Company also announced that its audited financial statements for the fiscal year ending March 31, 2011, included in the Company’s Annual Report on Form 10-K filed June 28, 2011, contained a going concern qualification from BDO USA, LLC, the Company’s independent auditors. In its audit report, BDO stated that the Company’s recurring losses and net capital deficiency raise substantial doubt about the Company’s ability to continue as a going concern.

“We continue to manage our cash and liquidity very closely,” said Matthew Middendorf, Chief Financial Officer. “As part of our restructuring initiatives, we are exploring options that will provide additional short-term funding to support our Pharmacy business growth while at the same time address the long-term capital structure for the business,” Middendorf said.

Conference Call Information

Arcadia will conduct a conference call and simultaneous Internet webcast to review these financial results on Wednesday, June 29, 2011, at 11:00 a.m. Eastern Time.

To access the webcast, visit the Company’s website at www.arcadiahealthcare.com, 5-10 minutes prior to the start time and click on the webcast link. The Company’s press release, which contains financial information to be discussed in the presentation, will also be available on Arcadia’s website.

To participate in the live conference call, please dial 1-877-407-8031 (for U.S.-based callers) or 1-201-689-8031 (for international callers). The call can also be accessed (listen-only mode) via the Company’s web site at www.arcadiahealthcare.com through the “Investors” page.

A replay of the webcast will be available approximately one hour after the completion of the call and will be accessible at www.arcadiahealthcare.com until July 13, 2011. A telephone replay will be available by dialing 1-877-660-6853 (for US-based callers) or 1-201-678-7415 (for international callers). For telephone replay, callers must use Account number 286 and Conference ID number 374699.

Use of Non-GAAP Financial Information

In addition to reporting financial results in accordance with generally accepted accounting principles, or GAAP, Arcadia reports non-GAAP financial results. Arcadia’s management believes these non-GAAP measures are useful to investors because they provide supplemental information that facilitates comparisons to prior periods. Management uses these non-GAAP measures to evaluate its financial results, develop budgets and manage expenditures. The method Arcadia uses to produce non-GAAP results is likely to differ from the methods used by other companies and should not be regarded as a replacement for corresponding GAAP measures. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP results, which are attached to this release.

About Arcadia HealthCare

Arcadia HealthCare is a service mark of Arcadia Resources, Inc. (NYSE Amex: KAD), 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."

DailyMed™ Pharmacy dispenses a monthly cycle of a patient’s prescriptions, over-the-counter medications and vitamins, and organizes them into pre-sorted packets clearly marked with the date and time the medications should be taken. In the dispensing process, a DailyMed pharmacist reviews each patient’s medication profile and utilizes state-of-the-art medication therapy management tools in order to improve the safety and efficacy of the medications being dispensed. A DailyMed pharmacist provides routine communication with the patient, the primary care physician, caregivers and payers in order to maximize the pharmaceutical care administered. The DailyMed program improves patient care and drug utilization while reducing drug and hospitalization costs for private and government payers.

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

      ARCADIA RESOURCES, INC. CONSOLIDATED BALANCE SHEETS (in thousands)   March 31,

2011

 

2010 ASSETS Current assets: Cash and cash equivalents $ 2,136 $ 5,444 Accounts receivable, net of allowance of $1,897 and $2,614, respectively 12,049 11,960 Inventories, net 795 703 Prepaid expenses and other current assets 1,455 1,468 Current assets of discontinued operations   -       801   Total current assets 16,435 20,376 Property and equipment, net 1,253 1,476 Goodwill - 2,500 Acquired intangible assets, net 7,098 7,670 Other assets 345 412 Restricted cash 1,000 500 Assets of discontinued operations   -       262   Total assets $ 26,131     $ 33,196     LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities: Accounts payable $ 1,226 $ 2,826 Accrued expenses: Compensation and related taxes 2,792 3,145 Interest 35 82 Health insurance 756 463 Other 952 1,507 Fair value of warrant liability 285 1,499 Payable to affiliated agencies 616 1,076 Long-term obligations, current portion 189 939 Capital lease obligations, current portion 25 34 Current liabilities of discontinued operations   -       409   Total current liabilities 6,876 11,980 Lines of credit 11,504 7,774 Long-term obligations, less current portion 27,807 25,192 Capital lease obligations, less current portion   -       25   Total liabilities   46,187       44,971     Commitments and contingencies   STOCKHOLDERS’ DEFICIT Preferred stock, $.001 par value, 5,000,000 shares authorized, none outstanding - - Common stock, $.001 par value, 300,000,000 shares authorized; 193,162,544 and 177,918,044 shares issued and outstanding, respectively 193 178 Additional paid-in capital 151,436 145,381 Accumulated deficit   (171,685 )     (157,334 ) Total stockholders’ deficit   (20,056 )     (11,775 ) Total liabilities and stockholders’ deficit $ 26,131     $ 33,196       ARCADIA RESOURCES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FISCAL 2011 (in thousands, except for per share amounts)               Three Months Ended Year Ended June 30, 2010   September 30, 2010   December 31, 2010   March 31, 2011 March 31, 2011   Services $ 20,365 $ 20,930 $ 21,139 $ 20,894 $ 83,328 Pharmacy   4,041       3,918       4,220       4,534     16,713   Revenues, net 24,406 24,848 25,359 25,428 100,041 Cost of revenues   17,814       18,004       18,328       18,490     72,636   Gross profit 6,592 6,844 7,031 6,938 27,405  

Selling, general and administrative

9,519 9,370 8,683 8,831 36,403 Depreciation and amortization 286 304 310 480 1,380 Goodwill impairment   -       -       -       2,500     2,500   Total operating expenses 9,805 9,674 8,993 11,811 40,283   Operating loss (3,213 ) (2,830 ) (1,962 ) (4,873 ) (12,878 )   Other expenses (income): Interest expense, net 844 978 1,003 974 3,799 Change in fair value of warrant liability   642       (779 )     (541 )     (745 )   (1,423 ) Total other expenses   1,486       199       462       229     2,376     Loss from continuing operations before income taxes (4,699 ) (3,029 ) (2,424 ) (5,102 ) (15,254 )   Current income tax expense (benefit)   32       41       30       (70 )   33   Loss from continuing operations (4,731 ) (3,070 ) (2,454 ) (5,032 ) (15,287 )   Discontinued operations: Loss from discontinued operations (96 ) (83 ) (93 ) (192 ) (464 ) Net gain on disposal   787       259       228       126     1,400     691       176       135       (66 )   936     NET LOSS   (4,040 )   $ (2,894 )   $ (2,319 )   $ (5,098 ) $ (14,351 )   Basic and diluted net income (loss) per share: Loss from continuing operations $ (0.03 ) $ (0.02 ) $ (0.01 ) $ (0.03 ) $ (0.08 ) Income from discontinued operations   0.01       -       -       -     -   Net loss per share $ (0.02 )   $ (0.02 )   $ (0.01 )   $ (0.03 ) $ (0.08 )       Reconciliation of Net Loss from Continuing Operations to EBITDA from Continuing Operations: Net Loss from Continuing Operations $ (4,731 ) $ (3,070 ) $ (2,454 ) $ (5,032 )

 

$ (15,287 ) Current income tax expense (benefit) 32 41 30 (70 )

 

33 Interest expense, net 844 978 1,003 974

 

3,799 Change in fair value of warrant liability 642 (779 ) (541 ) (745 )

 

(1,423 ) Goodwill impairment - - - 2,500

 

2,500 Depreciation and amortization   286       304       310       480  

 

  1,380   EBITDA from Continuing Operations $ (2,927 )   $ (2,526 )   $ (1,652 )   $ (1,893 ) $ (8,998 )               ARCADIA RESOURCES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS FISCAL 2010 (in thousands, except for per share amounts)  

Three Months Ended

Year Ended June 30, 2009   September 30, 2009   December 31, 2009   March 31, 2010 March 31, 2010   Services $ 22,680 $ 21,709 $ 21,564 $ 20,682 $ 86,635 Pharmacy   2,250       2,518       3,220       3,461     11,449   Revenues, net 24,930 24,227 24,784 24,143 98,084 Cost of revenues   17,778       17,239       17,702       17,555     70,274   Gross profit 7,152 6,988 7,082 6,588 27,810   Selling, general and administrative 9,177 9,559 9,036 10,728 38,500 Depreciation and amortization 348 351 304 297 1,300 Goodwill impairment   -       -       -       14,599     14,599   Total operating expenses 9,525 9,910 9,340 25,624 54,399   Operating loss (2,373 ) (2,922 ) (2,258 ) (19,036 ) (26,589 )   Other expenses (income): Interest expense, net 838 846 934 753 3,371 Change in fair value of warrant liability - - (368 ) (611 ) (979 ) Other   -       -       -       30     30   Total other expenses   838       846       566       172     2,422     Loss from continuing operations before income taxes (3,211 ) (3,768 ) (2,824 ) (19,208 ) (29,011 )   Current income tax expense (benefit)   93       7       16       (87 )   29   Loss from continuing operations (3,304 ) (3,775 ) (2,840 ) (19,121 ) (29,040 )   Discontinued operations: Loss from discontinued operations (1,449 ) (540 ) (328 ) (286 ) (2,603 ) Net gain on disposal   180       169       15       193     557     (1,269 )     (371 )     (313 )     (93 )   (2,046 )   NET LOSS $ (4,573 )   $ (4,146 )   $ (3,153 )   $ (19,214 ) $ (31,086 )   Basic and diluted net income (loss) per share: Loss from continuing operations $ (0.02 ) $ (0.02 ) $ (0.02 ) $ (0.12 ) $ (0.17 ) Income (loss) from discontinued operations   (0.01 )     (0.01 )     -       -     (0.02 ) Net loss per share $ (0.03 )   $ (0.03 )   $ (0.02 )   $ (0.12 ) $ (0.19 )       Reconciliation of Net Loss from Continuing Operations to EBITDA from Continuing Operations: Net Loss from Continuing Operations $ (3,304 ) $ (3,775 ) $ (2,840 ) $ (19,121 )

 

$ (29,040 ) Current income tax expense (benefit) 93 7 16 (87 )

 

29 Interest expense, net and other 838 846 934 783

 

3,401 Change in fair value of warrant liability - - (368 ) (611 )

 

(979 ) Goodwill impairment - - - 14,599

 

14,599 Depreciation and amortization   348       351       304       297  

 

  1,300   EBITDA from Continuing Operations $ (2,025 )   $ (2,571 )   $ (1,954 )   $ (4,140 ) $ (10,690 )             ARCADIA RESOURCES, INC. CONSOLIDATED STATEMENTS OF CASH FLOW (in thousands)   Year Ended March 31, 2011       2010   Operating activities Net loss for the year $ (14,351 ) $ (31,086 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Provision for doubtful accounts 676 1,736 Depreciation and amortization of property and equipment 894 1,507 Amortization of intangible assets 571 722 Goodwill and intangible asset impairment 2,500 14,599 Non-cash interest expense 2,892 2,397 Gain on business disposals (1,400 ) (557 ) Amortization of debt discount and deferred financing costs 391 332 Change in fair value of warrant liability (1,423 ) (979 ) Stock-based compensation expense 1,315 1,758 Changes in operating assets and liabilities, net of business acquisitions: Accounts receivable (360 ) 3,895 Inventories 124 546 Other assets 125 558 Accounts payable (1,997 ) (596 ) Accrued expenses (733 ) (694 ) Due to affiliated agencies   (416 )       (19 ) Net cash used in operating activities   (11,192 )       (5,881 )   Investing activities Business acquisitions, net of cash acquired (164 ) (281 ) Proceeds from business disposals 1,532 9,498 Increase in restricted cash (500 ) (500 ) Purchases of property and equipment   (471 )       (574 ) Net cash provided by investing activities   397         8,143     Financing activities Proceeds from note payable, net of fees - 2,142 Proceeds from exercise of stock options 2 - Net borrowings (payments) on lines of credit 3,868 (3,550 ) Payments on notes payable and capital lease obligations (813 ) (7,175 ) Proceeds from equity financing, net of cash fees paid of $564 and $857, respectively   4,430         10,243   Net cash provided by financing activities   7,487         1,660     Net change in cash and cash equivalents (3,308 ) 3,922 Cash and cash equivalents, beginning of year   5,444         1,522   Cash and cash equivalents, end of year $ 2,136       $ 5,444