Arcadia Resources Announces Improved Fiscal 2011 Second Quarter Results

INDIANAPOLIS, Nov. 9, 2010 /PRNewswire-FirstCall/ -- Arcadia Resources, Inc. (NYSE Amex: KAD), a leading provider of innovative consumer health care services under the Arcadia HealthCare(SM) brand, today announced fiscal 2011 second quarter net revenues of $25.8 million and a net loss of $2.9 million, or $0.02 per share, which compares to net revenue of $25.1 million and a net loss of $4.1 million, or $0.03 per share, for the same period in fiscal 2010.

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"During our second quarter we continued to make substantial progress on a number of fronts," said Marvin R. Richardson, President and Chief Executive Officer of Arcadia.  "Importantly, we executed a new three year agreement with WellPoint's State Sponsored Business which aligns our interests with WellPoint's and ensures that DailyMed will continue to be a cornerstone of WellPoint's programs to improve their members' health and well-being.  Importantly, under our agreement with WellPoint, for the first time in our history, we recognized revenue attributable to our patient care services we provide as part of our DailyMed patient care program.  We believe this validates our core value proposition and looking forward our focus in our Pharmacy segment will be to continue to scale this business model with WellPoint and additional healthcare payors.  Our new agreement with Touchstone Health further validates the growing acceptance among payers regarding the value of our DailyMed program, and we look forward to our market introduction to Touchstone's members beginning in January."  

"From an operational stand point, our Pharmacy gross margins improved by 250 basis points compared to the first quarter, benefiting from our prime vendor agreement with H.D. Smith and our continued focus on reducing our drug cost. We made significant Pharmacy operational improvements that will streamline our enrollment process, increase efficiency and reduce costs.  We increased our active patient count by 6%, but more importantly we exited the second quarter with good momentum in our DailyMed business and entered our fiscal third quarter with a solid pipeline of enrollees.  Our announcement yesterday that we have started the launch our WellPoint program in Kansas continues that momentum."

"In our Services segment, we had another solid quarter with increased sales and continued improvement in the operating contribution.  We also continue to identify opportunities to reduce our SG&A expenses in all areas of our business," Richardson continued.

Fiscal 2011 Second-Quarter Results

Arcadia reported $25.8 million in revenue from continuing operations during the quarter, up slightly from $25.1 million during the same period a year ago.  The Company's gross margin from continuing operations was 27.3% during the second quarter, a decline of 1.3% from the same period a year ago.  The reduction in gross margin was driven by a shift in mix towards Pharmacy revenue, which has lower margins than the Company's Services segment.

Arcadia reduced its net loss from continuing operations to $3.1 million, or $0.02 per share, in the second quarter of fiscal 2011, compared to a net loss from continuing operations of $4.1 million, or $0.03 per share, in the same period in fiscal 2010.  The consolidated net loss, including discontinued operations, was $2.9 million, or $0.02, in the fiscal second quarter in 2011 compared to a net loss of $4.1 million, or $0.03 in the fiscal second quarter in 2010.

Segment highlights:

Pharmacy: Pharmacy segment revenues increased to $4.9 million for the second quarter of fiscal 2011, compared to $3.4 million in revenues for the first quarter of fiscal 2010, an increase of 44.1%.  Pharmacy gross margin increased to 15.6% in the second quarter of fiscal 2011 from 15.1% in the second quarter of fiscal 2010 and 13.1% during the first quarter of fiscal 2011.  Total prescriptions filled during the quarter were 96,800, a 62% increase over the same period last year.  The Company's DailyMed™ Pharmacy had 5,100 active patients at the end of the second quarter, compared to 4,800 active patients at the end of the first quarter of fiscal 2011, an increase of 6%.  Second quarter revenue was impacted by the implementation of a new Pharmacy software system in July, which included a change from 30-day to 28-day fill cycles, a reduction in the average number of prescriptions filled per patient, and an increase in generics dispensed as a percentage of total prescriptions filled.  The Pharmacy segment operating contribution improved by 12.4%, or $0.2 million, to negative $1.5 compared to the first quarter of fiscal 2011.

Services: The Company's Services segment, which includes Arcadia's home care and medical staffing business, reported net revenues of $20.9 million in the second quarter of fiscal 2011 compared to net revenues of $21.7 million for the first quarter a year ago.  Within the Services segment, home care revenues decreased by $464,000, or 2.7%, to $16.7 million from $17.3 million in the same period last year.  Medical staffing and travel staffing declined $314,000 to $4.1 million in the second quarter of fiscal 2011 compared to $4.5 million in the same period last year.  Compared to the first quarter of fiscal 2011, second quarter revenues increased 2.8% from $20.4 million to $20.9 million with increases in both home care and medical staffing.  Gross margin within the Services segment was 30.0% in the second quarter of fiscal 2011 compared to 30.8% in the same period last year.  The Services segment operating contribution improved by 30.0%, or $0.3 million, to $1.4 million compared to the first quarter of fiscal 2011.  Second quarter operating contribution in the Services segment was its highest since the second quarter of fiscal 2010.

The Company sold its former Catalog segment during the quarter and this segment is being reported as a discontinued operation for the fiscal year second quarter.

Capital Resources and Liquidity

Cash flow from operations during the second fiscal quarter improved by $1.5 million to negative $3.4 million compared to negative $4.9 million in the first fiscal quarter of 2011, inclusive of changes in operating assets and liabilities in each quarter of negative $1.1 million and negative $2.4 million, respectively.  

At September 30, 2010, the Company had total cash plus line-of-credit available of $2.5 million.  On November 2, 2010, the Company finalized a $5.0 million equity financing transaction whereby it sold 15,624,000 shares of common stock at $0.32 per share.  The Company expects to receive net proceeds after fees of approximately $4.5 million.  The additional cash will be used to fund and grow the DailyMed operations.  

The Company previously announced that it had entered into a new credit facility with Comerica Bank covering its Services segment.  The new agreement extends the maturity of the facility to 2012.

"With our existing cash availability, the additional cash raised through our equity financing, the extension of our Comerica facility, on-going operating contribution improvements, particularly in our Pharmacy segment, and additional cash proceeds from prior asset sales, we believe we have adequate cash resources to support the business until we achieve our plan to become cash flow positive," said Matt Middendorf, Chief Financial Officer.

Conference Call Information

Arcadia will conduct a conference call and simultaneous Internet webcast to review these financial results on Tuesday, November 9, 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 August 27, 2010.  A telephone replay will be available by dialing 1-877-660-6853 (for US-based callers) or 1-201-612-7415 (for international callers).  For telephone replay, callers must use Account number 286 and Conference ID number 359345.

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.

SOURCE Arcadia Resources, Inc.